Overview
In a landmark judgment delivered by a three-judge bench of the High Court of Kenya at Milimani (Tony Gachoka & Others v. The Cabinet Secretary, National Treasury & Others, Pet. E051 of 2026 consolidated with E831 & E836 of 2025), the court struck down the National Treasury’s proposed divestiture of a 15% equity stake in Safaricom PLC.
The Court issued orders of certiorari quashing Sessional Paper No. 3 of 2025, setting aside the National Assembly's approval of March 31, 2026, and ordering the immediate restoration of the 15% shareholding to the Government of Kenya on behalf of the public.
The Anatomy of the Transaction
Under Sessional Paper No. 3 of 2025, the State sought to sell 6,009,814,200 shares at KES 34 each to raise KES 204.3 billion, alongside a KES 40.2 billion monetization of future dividend rights on its retained 20% stake. The stated objective was to mobilize non-tax revenue for critical infrastructure via the National Infrastructure Fund.
While the State argued that the sale was lawful under Section 87A of the Public Finance Management Act (PFMA) and excluded from the general Privatization Act, public-interest petitioners challenged the transaction on multiple grounds: constitutional revenue-raising limits, flawed public participation, severe asset undervaluation, national security, and non-compliance with merger control frameworks.
Key Findings
Statutory Anchoring vs. Public Finance Safeguards (Articles 201 & 206)
The Court recognized Section 87A of the PFMA as the applicable statutory mechanism for selling shares in government-linked corporations. However, it held that statutory compliance cannot circumvent constitutional thresholds. Depositing proceeds into a generalized fund without ring-fencing for specific, costed, and localized capital projects failed the test of fiscal prudence under Article 201.
Public Participation and Material Non-Disclosure (Articles 10 & 118)
The Court found that public participation was rendered cosmetic and illusory. The Executive conducted no prior public participation before formulating the policy. More critically, while Sessional Paper No. 3 named South Africa’s Vodacom Group as the buyer, the State had already executed binding transactional instruments on December 3, 2025, with a distinct entity—Vodafone Kenya Limited—which expressly disclaimed essential public undertakings. Withholding these core agreements denied the public and Parliament meaningful engagement.
Arbitrary Valuation & Intergenerational Equity (Article 201(c))
The Court ruled the transaction failed the rationality test after uncovering that the State pre-fixed the KES 34 price in the Transaction Advisor’s initial terms of reference before commissioning the valuation. Converting perpetual dividend streams into a single upfront cash receipt without durable, identifiable capital replacement violated intergenerational equity.
National Security & Regulatory Oversight (Articles 31, 238 & Competition Act)
Transferring an effective 55% majority foreign-controlled stake in strategic infrastructure—which anchors the IEBC’s election transmission and national payments ecosystem—without a National Security Impact Assessment violated Article 238. Furthermore, because the transaction constituted an unapproved takeover scheme not formally cleared by the Competition Authority of Kenya (CAK), it lacked legal effect under Section 42(3) of the Competition Act.
Key Takeaways for Corporate & Public Practice
Substance Over Form in Public Transactions: State asset monetization cannot be treated as an ordinary private block trade; statutory authorizations remain strictly subordinate to the governance and transparency standards of Article 10 and Article 201.
Integrity of Public Participation: Public consultation is not an exercise in post facto ratification. Material variations in acquiring entities or terms of engagement will vitiate approvals granted on incomplete disclosures.
Regulatory Rigor: Strategic corporate transactions involving public assets must comply proactively with merger notifications, capital market regulations, and data sovereignty safeguards.