East African Business Week (Kampala)
31 March 2008
Nairobi — Kenyan authorities on Friday ignored a brewing storm over shadowy owners of Mobitele's 5% stake in profitable mobile phone firm, Safaricom and proceeded with the launch of its initial public offer as earlier planned.
The IPO gives residents of East Africa a chance to own a small piece of the largest company in East Africa. President Mwai Kibaki, while launching the sale invited residents of the East African Community to share in the purchase, saying it would provide an ideal medium of distributing wealth.
This is the second time Kenya has invited East Africans to its capital market after the simultaneous budget readings last year.
"It is my wish therefore to invite Kenyans both local, regional and the Diaspora to take advantage of this investment opportunity and take part in the success story that we have collectively created," Kibaki said at the launch. He cautioned the Capital Markets Authority (CMA) to crack down on dishonest stock brokerage firms and ensure market stability and integrity.
He said although the economy has had tremendous growth in recent years, certain new challenges had emerged in the process and that only combined efforts of stakeholders would be able to handle it.
The President warned brokers against speculating with people's savings. "As custodians of people's wealth, they should not gamble with the lifetime savings of the wananchi," he said.
Two stock brokerage firms, Francis Thuo and Partners and Nyagah Stock Brokers have collapsed within six months of each other, threatening to sink with them millions of shillings in investor's money respectively.
The closure of the leading two firms with thousands of clients has shocked the market, prompting calls for the Capital Markets Authority and the trading systems to be overhauled.
This, coupled with the clamour against the IPO over the controversial Mobitelea share-holding, have brewed further controversy in the market.
Finance minister, Mr. Amos Kimunya told reporters at the launch that the transaction process had been followed legally through the Cabinet and the Privatisation Secretariat, rejecting accusations of back-door under-dealings.
Safaricom, expected to be the country's biggest single IPO ever to be handled by the Nairobi Stock Exchange (NSE) has drawn the wrath of politicians who accused transaction advisors, Morgan Stanley and Dyer and Blair Investment Bank of setting a lower than usual price.
Dyer and Blair/Morgan Stanley's joint managing director, Mr. Mohamed Hassan earlier defended the transaction, saying the IPO had been regularly priced to allow as many as possible retail investors to participate in the sale of the shares of Safaricom, to be sold at Ksh5, per share.
The Orange Democratic Movement (ODM), which previously opposed the sale of Safaricom until the Privatisation Commission is put in place, had accused the government of contravening the Privisation Act by failing to seek the parliamentary approval.
However, Kimunya said the sale of Safaricom has been cleared through cabinet approval, initially granted for the sale of its original parent firm, Telkom Kenya, which held the 60% stake on behalf of the government before the recent share transfer.
The officials say Morgan Stanley, one of the world's leading investment bankers, had undertaken an evaluation of Safaricom's assets and arrived at the price of Ksh5 in line with international best-practice.
Kenya's retail investors are expected to take a lead in applying for the shares, whose trade is expected to begin on June 9. The image share registrars for the Safaricom IPO, said the shares would have been credited to the accounts of the potential investors by then.
ODM Secretary-General Prof. Anyang Nyong'o, a fierce critic of the transaction, has accused the government of hatching a scheme to benefit "ghost owners" of the disputed 5% stake.
"This poses the danger that ghost owners will now be unjustly enriched," Nyong'o reportedly told a news conference in Nairobi on Tuesday.
Meanwhile, the transaction advisors and receiving banks for the IPO have put in place plans to receive the shares through online applications.
Citibank managing director, Mr. Ade Ayeyemi told journalists, "No efforts would be spared to ensure that East Africa's largest listing succeeds to the benefit of Kenya and the region".
The Privatisation Commission has jointly with Citibank, put in place a system of receiving the online applications for shares, which will also allow potential shareholders without electronic accounts to get shares allocated to them.
Additional reporting by Geoffrey Kamali and Cedric Lumiti
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