Kenya High Court: Safaricom Share Sale Nullified as Unconstitutional

• Kenya's High Court has declared the government's 15 percent sale of Safaricom shares unconstitutional and illegal.
• The ruling mandates the restoration of the divested shares to state ownership.
• The court found the government entered into sale agreements with Vodafone Group Plc on December 3, 2025, before completing policy and parliamentary approvals.
• Violations included non-compliance with Section 87A of the Public Finance Management Act and a lack of public participation.
• The Sh204.3 billion proceeds from the sale were not tied to specific projects, and parliamentary approval could not cure these procedural breaches.

This ruling establishes a significant precedent for future government divestiture processes in Kenya, underscoring the critical importance of strict adherence to public finance laws, constitutional mandates for public participation, and parliamentary oversight.

Kenya's High Court has delivered a landmark ruling, declaring the government's partial sale of its stake in Safaricom PLC both unconstitutional and illegal, effectively nullifying the transaction. This significant decision mandates the immediate restoration of the divested shares to state ownership. A three-judge bench, comprising Justices Francis Gikonyo, Roselyne Aburili, and Tabitha Ouya, found that the process surrounding the government's 15 percent divestiture of its Safaricom shares was riddled with violations of the Constitution and various statutes governing public finance, capital markets, procurement, and competition.

The court specifically highlighted a critical procedural misstep: the government had already finalized agreements for the sale of its Safaricom shares before completing the necessary policy frameworks and securing parliamentary approval. These agreements included a share purchase agreement set at Sh34 per share and a separate dividend rights purchase agreement, both entered into with Vodafone Group Plc on December 3, 2025. This premature commitment to the sale, prior to fulfilling legal and constitutional prerequisites, formed a central pillar of the court's adverse findings, underscoring the imperative for strict adherence to due process in state asset transactions.

A core aspect of the High Court's judgment centered on the government's failure to comply with Section 87A of the Public Finance Management Act during the partial divestiture of its Safaricom shares, despite the National Assembly having granted its approval. The bench explicitly stated that parliamentary endorsement could not rectify fundamental breaches within the sale process. These breaches included a notable absence of public participation, alongside instances of misrepresentation and the concealment of material information from relevant stakeholders, rendering the Safaricom divestiture unconstitutional in Kenya.

Furthermore, the court scrutinized the government's plan for the Sh204.3 billion expected proceeds from the Safaricom share sale, finding it deficient. The judges determined that these substantial funds were not earmarked for specific projects, as required by law. The policy documents presented were deemed overly broad, lacking the necessary detail to specify the exact projects, their associated costs, and their intended locations. Merely depositing the funds into the National Infrastructure Fund was insufficient, the court concluded, as this action did not constitute the ring-fencing of money for particular, defined initiatives. The ruling thus emphasized the stringent requirements for transparency and accountability in managing public funds derived from state asset sales, effectively deeming the Vodafone Safaricom share agreement illegal due to these procedural and financial planning deficiencies.

This ruling establishes a significant precedent for future government divestiture processes in Kenya, underscoring the critical importance of strict adherence to public finance laws, constitutional mandates for public participation, and parliamentary oversight. The court's decision serves as a powerful reminder that even with parliamentary approval, procedural irregularities and a lack of transparency can render state asset sales null and void. It reinforces the principle that the government must follow due process meticulously, ensuring that all legal and constitutional requirements are met before entering into agreements for the sale of public assets.

The judgment represents another setback for President William Ruto's Kenya Kwanza administration, highlighting the judicial scrutiny applied to major government financial transactions. For legal professionals advising on state asset sales or involved in transactions with state-owned entities, this ruling necessitates a thorough review of due diligence processes. It underscores the imperative to mitigate risks of nullification by ensuring comprehensive compliance with all regulatory frameworks, particularly those pertaining to public finance and citizen engagement. The restoration of Safaricom shares to state ownership reaffirms the judiciary's role in upholding constitutional governance and protecting public interest in significant economic undertakings.

This ruling sets a critical precedent for government divestiture processes in Kenya, emphasizing strict adherence to public finance laws, constitutional requirements for public participation, and parliamentary approval. Lawyers advising on state asset sales or involved in transactions with state-owned entities must review due diligence processes to mitigate risks of nullification based on procedural irregularities and lack of transparency.

Source: Original reporting via The Standard