Shilling set for fresh pressure as dividend payout season looms

Kenyan Shilling is expected to face fresh pressure against the dollar. [Wilberforce Okwiri, Standard]

The value of the Kenyan Shilling is expected to face fresh pressure against the dollar after recent gains, following the successful Eurobond buyback.

The fresh pressure is expected amid increased demand for greenbacks from a range of clients, traders said on Monday.

Kenyan firms, who count an array of foreigners as shareholders, usually buy dollars mid-year to pay annual dividends, adding to demand for dollars from importers in the energy and manufacturing sectors.

They include Safaricom which announced last week it will pay an interim dividend of Sh23.03 billion from next month.

“The board of Safaricom PLC is pleased to announce that at its meeting that was held on February 21, 2024, it was resolved to approve the payment of an interim dividend of Sh0.55 per ordinary share held amounting to Sh23.03 billion, for the year ending March 31,  2024,” said the telco.

“The interim dividend will be payable to shareholders on the register of members as at the close of business on March 15, 2024, and will be paid on or about  March 31, 2024.”

Safaricom is therefore expected to buy dollars equivalent to at least Sh9.2 billion in less than a month to pay foreign investors, including UK giant Vodafone and South Africa’s Vodacom.

Multinationals Vodacom Group Ltd and Vodafone Group Plc will share the gross payout of Sh9.2 billion for their combined 40 per cent interest in the Nairobi Securities Exchange-listed company. Safaricom is expected to announce a final dividend when it releases its results for the year ending March. The telecoms operator has a policy of paying out at least 80 per cent of net income as dividends.

Pressure from the Central Bank of Kenya (CBK) forced Safaricom to split its dividend payouts for the first time two years ago in the quest to shield the weakening shilling when the telecommunications firm seeks dollars for repatriation to foreign investors, it emerged earlier.

The National Treasury will be one of the biggest beneficiaries of the dividend announcement and will get a gross payout of Sh8 billion for its 35 per cent stake in the country’s most profitable firm.

The shilling has rallied to new highs in recent weeks against the dollar, raising fresh hopes of an end to a currency crisis involving the steep decline in its value, which has been causing negative ripple effects throughout the economy.

It hit a new high against the dollar on Friday, a week after Kenya booked billions from global investors to pay off an upcoming Eurobond - signalling easing inflation and lowering the cost of imported goods.

The strengthening of the local currency also sets up the country for a lower cost of electricity and reprieve from debt servicing distress.

CBK data showed the shilling exchanged at an average of Sh143.8538 against the dollar on Monday.