The Kenyan high court on Tuesday ruled that the government’s sale of a 15% stake in Safaricom to Vodacom was unconstitutional, null and void, and ordered the shares to be returned to the state.
Vodacom, which had taken control of the block trade on 30 June, said it will review the judgment, lodge an appeal with the court of appeal and apply for a stay pending the outcome. The company added that it would not comment further while the matter is before the courts.
What the sale involved
The transaction saw the Kenyan government sell just over six billion Safaricom shares at KSh34 per share, raising KSh204.3-billion. The proceeds were placed in the National Infrastructure Fund, a state-owned investment vehicle. By buying out Vodafone International Holdings’ remaining interest in Vodafone Kenya, Vodacom lifted its effective holding in Safaricom from 35% to 55%, turning Safaricom from an equity-accounted associate into a consolidated subsidiary.
The court found that the government failed to provide the public with sufficient information about the buyer and the terms of the deal, breaching constitutional requirements for public participation in the disposal of a state asset of this size. It also criticised the lack of clarity around the ring-fencing of the sale proceeds.
Vodacom’s shares on the JSE dropped sharply after the judgment was released, falling to R151, almost four percent below the previous close, before recovering to finish the day at R156, down 0.6%. The quick rebound suggests investors are pricing in a possible stay of the order or doubt the practical reversal of a settled block trade.
For South African investors and other telecom groups, the case underlines the importance of transparent public consultation when governments sell strategic assets. Similar scrutiny has appeared in other cross-border deals in the region, where regulators are increasingly demanding clear documentation of buyer identity and the use of proceeds.
What remains uncertain is whether the appeal will succeed and whether a stay will be granted. Until the legal process is finalised, Vodacom’s control of Safaricom and the associated financial guidance remain in flux.
The ruling lands at an awkward moment for Vodacom’s growth strategy. Safaricom’s consolidation was the centrepiece of Vodacom pitching itself to investors as a genuine pan-African telecom group rather than a South Africa-first operator with minority stakes abroad, and a forced unwind, even a partially successful one, would reopen exactly the balance-sheet and consolidation-accounting questions that a completed deal was supposed to close. Cross-border regulatory risk of this kind is a live theme for South African companies expanding north of the border this year, not a one-off: it echoes the same public-participation and disclosure standards regulators across the region are increasingly holding foreign acquirers to. Until Kenya’s court of appeal rules on the stay application, Vodacom’s own financial guidance for the Safaricom business carries a genuine asterisk that was not there a week ago, and shareholders modelling the group’s earnings should treat the consolidated numbers as provisional rather than settled.
What makes the court’s reasoning notable beyond this one deal is the specific ground it ruled on: not the price paid or the commercial logic, but the adequacy of public disclosure about the buyer and the deal terms before a state asset changed hands. That is a procedural failure, not a valuation dispute, and procedural failures are generally easier to cure through a redo of the disclosure process than commercial disputes are to unwind. Whether Kenya’s government opts to rerun the public-participation process rather than fight the ruling outright will say as much about the deal’s political durability as the appeal itself.
South African companies with existing or planned stakes in East African telecoms, banking or infrastructure assets have a direct stake in how this plays out, well beyond Vodacom itself. A ruling that a government sale of a strategic asset can be unwound years after the fact over a disclosure defect, rather than a substantive legal flaw in the transaction, raises the bar every future cross-border acquirer in the region will need to clear before treating a deal as genuinely closed.
