NCBA Group investors who take up shares of South African lender Nedbank in its cash-and-stock swap buyout offer will face a higher tax charge on dividends and risk of foreign currency losses when repatriating their earnings from Johannesburg.
Nedbank announced its tender offer for a 66 percent stake in NCBA last Wednesday, proposing to pay for 80 percent of the offered shares through a stock swap and the remaining 20 percent in cash at a rate of Sh2,100 for every 100 shares.
The swap component will see the Kenyan bank’s shareholders receive 4.02994 Nedbank shares for every 100 NCBA shares they hold, although those whose holdings are not large enough to secure them at least 200 Nedbank shares will be paid fully in cash.
By taking up Nedbank shares, the NCBA shareholders, some of whom were not paying dividend taxes owing to large holdings via corporate vehicles, will now be earning their returns under a jurisdiction that will charge them higher withholding taxes as foreign investors.
Dividends paid by South Africa-based companies to foreign persons or entities are subject to a withholding tax charge of 20 percent, but due to a double tax agreement, the applicable rate for Kenyans is 10 percent.
This is, however, double the withholding tax of five percent levied on dividend payouts in Kenya to locals and citizens of the East African Community (EAC) partner states. Local companies holding more than 12.5 percent equity in the dividend-paying firm are exempt from this withholding tax.
Meanwhile, dividends paid to foreign investors in Kenya are subject to withholding taxes of between 10 and 15 percent.
Nedbank usually pays dividends twice a year, with the most recent being an interim payout of 10.28 rand per share for the half year to June 2025. The South African bank’s dividends are paid in foreign currencies such as the euro and the dollar to foreign investors.
For Kenyan shareholders of the bank, there is a possibility of exchange losses (or gains) when the payout is being converted to the hard currencies from rands, and further when the earnings are converted to shillings back in Kenya.
This is similar to the exchange risk faced by foreign investors in Kenya when they are repatriating dividends and proceeds of share sales.
The latest NCBA shareholder filings, dated December 31, 2025, show that there were two investment vehicles with holdings above 12.5 percent, making them exempt from tax on dividends.
They are First Chartered Securities Limited (14.94 percent) and Enke Investments Limited (13.2 percent), which are respectively associated with the families of the late former Central Bank of Kenya (CBK) governor Phillip Ndegwa and Kenya’s first President Jomo Kenyatta.
Other top 10 investors in the bank —all of them investment vehicles or nominee accounts— hold between 1.58 percent and 10.55 percent stakes in the bank, taking the total holding of these top shareholders to 72.94 percent.
Nedbank said that shareholders holding 71.2 percent of the total number of issued NCBA shares have signed an irrevocable undertaking to accept the offer in respect of their pro-rata entitlement, and also to participate in excess applications in case the tendered shares do not hit the 66 percent threshold at the first time of asking.
Under the terms of the offer, an investor will need to hold at least 9,400 NCBA shares to qualify for the stock swap, given the minimum conversion threshold of 200 Nedbank shares, while meeting the 80-20 split between stock and cash compensation.
NCBA had 11,912 shareholders with holdings of between one and 500 shares as of December 2025, according to regulatory filings, while another 13,389 investors had portfolios ranging from 501 to 5,000 shares. The filings show that 1,853 of the bank’s shareholders held between 5,001 and 10,000 shares.
Although these shareholders account for 91.4 percent of the NCBA’s total investor base of 29,626, they hold just 2.53 percent of the bank’s 1.65 billion issued shares.
Converting NCBA shares into Nedbank stock is thus likely to be uneconomical for a majority of the shareholder base. The remaining 34 percent of NCBA shares will also continue to trade publicly on the Nairobi Securities Exchange (NSE).
Nedbank, however, said if it is not granted an exemption from the requirement to make a mandatory offer for all of NCBA’s shares by May 31, 2026, its bid will change to an offer for the whole bank.
