Kenya: stock safari

The much-anticipated initial public offering of semi-privatised mobile telecoms provider Safaricom will finally go ahead, starting Friday and closing April 23.

The IPO will see the government sell off a 25% stake, with 10 billion shares being offered at 5 Kenyan shillings ($0.08) per share -- valuing the company at about $3.1 billion.  Despite the recent instability in Kenya, interest in the IPO is not anticipated to be a problem, as Safaricom is one of the most profitable businesses in East Africa and telecoms is a sector that should continue to see rapid growth.  Domestic investors from the East African Community will have 6.5 billion shares set aside, plus a further 2 billion, in case of overwhelming interest.  The IPO will also nearly double the number of shares on the Nairobi Securities Exchange, currently 14 billion.

The success of the IPO will be seen as a bellwether of prospects for Kenya's economic recovery, following the post-election violence.  The share price was discounted by about 14%, according to the government -- which could presage a 10-20% shortfall in Kenya's 2008 GDP compared to 2007.  Nevertheless, the government desperately needs the resources that the IPO will generate to fund the budget, and had even tried to hurry the sale through ahead of the elections in December. As such, a successful IPO will bolster fiscal position of the fragile power-sharing government, which is being formed after the February 28 peace deal was passed into law this week.