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Kenya: Why Give So Much to Dealers?
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Business Daily (Nairobi)
EDITORIAL
28 March 2008
Posted to the web 27 March 2008
As questions linger over the identity of Mobitelea which indirectly owns five per cent of Safaricom, dealers are up in arms demanding that more shares should be reserved for them.
As matters stand, the dealers will be allocated 130 million shares -1.3 per cent of the shares on offer - itself as controversial a privilege as the entry of Mobitelea.
For one, nobody knows how dealers for Safaricom are selected as the opportunities are not floated publicly as would be expected of a company seeking suppliers and distributorships of its products.
Presently, there are 300 dealers - running 1200 outlets - at the top of a food chain that hit Sh4.6 billion last year. That means over 400,000 shares are being reserved for each one of them; a position hard to justify in view of the anticipated oversubscription that will leave investors with far much less than the shares they have applied for. Just who these people, that the government is so keen to give priority ownership in a public company are is a matter worth adequate disclosure on.
Moreover, there is little to suggest that Safaricom sales would suffer were these dealers not shareholders; them being largely driven by the profit motive rather than any sense of loyalty.
Were the sale of scratch cards, other accessories and items from Safaricom to become unviable, they would be the very first to look for more rewarding undertakings.
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Their allocation also goes against recent divestiture experience which did not accord the same privilege to distributors of the corporations involved. In 1996 when Kenya Airways was floated, no block of shares was reserved for travel agents, tour operators and hotels.
For Mumias Sugar, another company that relies on an elaborate distribution network, no shares were reserved for them as attention focused on farmers as suppliers to the mill.
By virtue of the shadowy nature, the dealers are required more disclosures are needed before the dealers cart away shares that could potentially earn them billions in capital gains as soon as the shares are listed on June 9. The dealers had for now better be advised not to look a gift horse in the mouth.
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