Safaricom headquarters on Nairobi’s Waiyaki Way. PHOTO | DIANA NGILA Pressure from the Central Bank of Kenya (CBK) has forced Safaricom #ticker:SCOM to split its dividend payouts in the quest to shield the weakening shilling when the telecommunications firm seeks dollars for repatriation to foreign investors, it has emerged.
Safaricom in February announced its first ever interim dividend of Sh0.45, more than three months after announcing a six percent drop in profit, pounded by the impact of the coronavirus crisis.
People familiar with the matter in the currency market and at Safaricom say the CBK’s push for the operator to split the shareholder payout was one of the key factors for the firm to break its tradition of making a single dividend payment in August or September.
“Safaricom has to buy dollars from the market then repatriate the dividends. The dollar demand associated with this dividend payout is usually high. So this year CBK forced Safaricom to split the dividend to save the shilling from weakening,” said a banker who requested not to be identified.
“Safaricom’s growing dividend payout is now rattling the CBK. The CBK wants to avoid a repeat of last year’s pressure on the shilling when Safaricom went to the market for about $250 million to repatriate dividends.”
Safaricom last year declared a dividend of Sh1.40 a share, pushing its total payout that was made before end of August to Sh56.09 billion.
It had to buy dollars equivalent to Sh28.8 billion in less than a month to pay foreign investors, including UK giant Vodafone and South Africa’s Vodacom.
This rattled the market on heightened demand for dollars that led to the weakening of the shilling against the US currency.
The shilling weakened from Sh107.28 units to the dollar mid-July to Sh108.56 units in August 20, with traders linking the fall to dollar demand from Safaricom.
The local currency has also been under pressure against the dollar for most of this year after earnings from the crucial tourism sector collapsed due to the coronavirus crisis.
This has prompted the central bank to pump in dollars and stabilise the shilling on a number of occasions as well as review the demand side of the market like purchase of dollars by firms such as Safaricom.“CBK discomfort with one huge payout in August is one of the reasons cited for the Sh18 billion interim dividend announced in February. The business was also seeing improved financial performance,” said a source familiar […]
