[kictanet] Safaricom share sale on as court case flops

[alice]

Safaricom share sale on as court case flops

Published on October 4, 2007, 12:00 am

By Evelyn Kwamboka

The public sale of Sh30 billion worth of Safaricom shares is on after
a judge dismissed a case seeking to block it.

Three MPs allied to the Orange Democratic Movement had sought to stop
the initial public offer (IPO) of the leading mobile telephone
provider until the Privatisation Act 2005 is enforced.

The MPs also wanted the court to allow them to file an application
seeking to compel Finance minister, Mr Amos Kimunya, to appoint a date
for coming into force the Privatisation Act.

But on Wednesday, the judge said the case was incompetent after it
failed to enjoin Telkom-Kenya, which owns 60 per cent stake in the
company, and Treasury Permanent Secretary, Mr Joseph Kinyua, as
parties in the suit.

"Even if I were to toss a coin, it would be improper to exercise the
court's discretion in favour of granting a temporary stay (stoppage),"
High Court judge, Mr Justice Joseph Nyamu, said.

The judge indicated that just like in the referendum case of 2005, the
court would not restrain the public participation in the largest
public offer.

"The case before me has no legs and it cannot lift itself from the
threshold stage and crawl to the next stage for the above reasons,"
the judge ruled.

The MPs are Prof Anyang' Nyong'o (Kisumu Rural), Mr Omingo Magara
(South Mugirango) and Mr Mwandawiro Mghanga (Wundanyi).

But immediately after the ruling was delivered, the MPs' advocate, Mr
James Orengo, told the court he would appeal the decision.

MPs did not disclose material facts

The Safaricom IPO is expected to be the largest in local history. The
Government has said it would sell it next month to raise about Sh30
billion to help plug a Sh110 billion budget deficit for the current
financial year.

"It is not therefore in dispute that the IPO has serious financial
implications for the country," the court said.

The MPs had sought orders quashing the Government's decision, through
the Finance ministry, to offer to the public 25 per cent of Safaricom
shares, through an IPO at the Nairobi Stock Exchange until the
Privatisation Act 2005 is enforced.

They also wanted the court to allow them to file an application
seeking to compel Finance minister, Mr Amos Kimunya, to appoint a date
for the coming into force of the Privatisation Act.

The Government, through Telkom — where it owns 100 per cent stake —
has 60 per cent shares in Safaricom.

The court upheld that Safaricom was not a public entity only as
regards the Procurement and Disposal of Assets, but a corporate body.

Justice Nyamu said he could not grant the MPs any orders because they
were guilty of delaying the commencement of the proceedings against
Kimunya without explanation.

This, he said, was because the Privatisation Act 2005 was assented to
on October 13, 2005, yet the MPs were commencing the suit only two
months to the sale.

"Courts of law are not involved in policy and governance issues and
cannot hold to ransom public authorities and other bodies who must be
allowed to undertake their duties of good public administration
without undue delay," the judge said.

The case was also dismissed on the grounds that the MPs did not
disclose material facts despite the fact that one source of the
undisclosed information was available in Parliament.

The information touches on Kimunya's request to Parliament for the
approval of the list of the Privatisation Commission directors.

"There was nothing to stop the applicants from seeking an order for
the information to be provided at the threshold stage," said the judge.

No foul play

Justice Nyamu took issue with the MPs, saying some of them served in
parliamentary committees that must have taken part in the passage of
the Privatisation Act 2005.

"In a rigid separation of powers regime, they should not be allowed to
again have a second bite at the sherry," he said in a 69-page ruling.

He said it was absurd for the MPs to suggest that public companies be
restrained from selling their shares. He saw no problem with this
provided the sale complied with the Memorandum of Articles of
Association and other provisions of the Companies Act.

On the issue of the minister refusing to appoint a date when the Act
would be enforced, the court said Parliament gave Kimunya the
discretion to determine or appoint a commencement date.

"What the minister has done or is in the process of doing cannot be
said to be unreasonable and in my finding, it is well within his
discretion," said Justice Nyamu.

By way of an affidavit, Kimunya demonstrated to the court that he was
trying to put in place the necessary structures before commencement of
the Act.

The court said since the Act had not commenced, its provisions would
not regulate the sale of Safaricom shares.

"The minister is only concerned with policy and the necessary on the
issues of policy is done by Parliament," he said.

The court observed that as per the evidence before it, the issue of
accountability and transparency was well taken care of by the
Procurement Act and Regulations.

The court said there was no evidence of any foul play in the share
sale or undervaluation, and that the intention to offload the stock at
the bourse would be managed by experts.

Through its advocate, Prof Githu Muigai, Safaricom had argued that the
decision to list the shares was a policy decision with merit and the
court had no jurisdiction to intervene.

He said there was no connection between the alleged failure by Kimunya
to appoint a commencement date for the Privatisation Act 2005 and the
Safaricom IPO.

Muigai said there was also no legal basis for stopping the sale of shares.

"The applicants, as MPs, helped in incorporating transitional
provisions and having made their bed, they must lie on it," he argued.

On the State's part, Deputy-Solicitor General, Ms Muthoni Kimani, told
the court that Kimunya had not disregarded the law in disposal of
public assets.

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