The potential splitting of Kenya’s top telco, Safaricom, remains a major concern in the financial sector, with the Central Bank of Kenya (CBK) insisting on separating M-Pesa from the parent company.

The potential splitting of Kenya’s top telco, Safaricom, remains a major concern in the financial sector, with the Central Bank of Kenya (CBK) insisting on separating M-Pesa from the parent company.

In a press briefing on Wednesday, CBK Governor Kamau Thugge revealed that the bank of last resort would follow up on discussions between the Safaricom board and the National Treasury regarding the matter.

“On the issue of Safaricom and M-Pesa, I said Safaricom would have discussions with the National Treasury on this matter and I’ll have to follow up on where they are on that specific issue,” he replied to a query from journalists on the issue.

CBK had proposed two years ago the separation of M-Pesa mobile money from Safaricom to increase transparency and enhance regulatory oversight.

However, the Nairobi Securities Exchange (NSE)-listed company has been delaying the separation, citing the tax liability the multi-billion-shilling telco would face if M-Pesa were to separate from the parent company. As a separate financial entity, M-Pesa would be required to comply with financial sector regulations, promoting ethical and legal operations.

The separation might also involve complex tax implications, but it could lead to more favourable tax treatment for each entity individually, depending on the tax structures applicable to telecommunications versus financial services.

In 2020, Safaricom CEO Peter Ndegwa stated that the company would not separate M-Pesa from Safaricom unless it was in the interest of their customers or shareholders.

Earlier this year, Thugge reiterated that the regulator remains committed to the separation of the companies and is engaging with the National Treasury and the Safaricom board to expedite the process.

Following a post-Monetary Policy Committee (MPC) briefing last year, CBK revealed that a Sh75 billion tax liability resulting from the split is hindering the separation. The bank indicated plans to meet with Safaricom’s board to address the unsettled tax issue. “We have arranged to meet with the board of Safaricom in the near future. The Treasury also needs to be involved in this particular case. One of the factors that has been delaying the delinkage of M-Pesa mobile money from the rest of Safaricom is the tax liability, which is fairly significant, in the order of roughly Sh75 billion, and what to do with it,” Thugge said at a media briefing.

He said he believes a separation is necessary and that CBK should oversee M-Pesa.

CBK had planned negotiations between the Treasury and Safaricom’s leadership, focusing on getting the government to waive the tax liability.

 However, this poses a challenge, as the government has reduced tax waivers to boost domestic resource mobilization and cut the budget deficit.