State sells Vodacom stake to fund Eskom

Shares sold to PIC in bid to finance R23-billion allocation to power utility

THE government has sold its 13.91% stake in Vodacom to the Public Investment Corporation (PIC) for an as yet undisclosed sum but sufficient to finance its promised R23-billion allocation to Eskom.

The Vodacom share price reacted positively to the news including the announcement yesterday that the Competition Commission would recommend its R7-billion merger with Neotel to the Competition Tribunal. After opening at R139 a share it shot up to R144.53 in mid-morning trade.

The Treasury said in a statement yesterday a number of funding options were considered, with the sale of the government’s stake in Vodacom the most viable as it would ensure a swift realisation of the proceeds. This would bolster Eskom, while allowing the government to continue to deliver on its strategic objectives, the Treasury said.

On the price paid for the Vodacom shares, Treasury spokeswoman Phumza Macanda said it was based on market prices, namely the 30-day volume weighted average price.

“We are anticipating the proceeds will be in excess of the R23-billion that will be allocated to Eskom,” she said. “There was a discount of 10% based on the fact it’s such a large transaction.”

The Treasury said: “The PIC’s offer to government was in line with pricing quoted by other institutions when taking into account the large size of the stake and also provided the added benefit of keeping the shares within the broader family of public sector related institutions.”

The state-owned PIC, which is the investment manager for the Government Employees Pension Fund and is Africa’s biggest fund manager, already holds 3.19% of Vodacom. The acquisition of the government’s 13.9% stake could make the PIC the largest shareholder after Vodafone, the UK operator that owns 65% of SA’s biggest cellular provider.

The Treasury said it would work with the Department of Telecommunications and Postal Services in executing the transaction.

Various options were considered before deciding on the sale of the Vodacom shares.

These included the sale of listed shareholdings held directly by the state, the disposal of listed stakes held indirectly through development finance institutions, the sale of the government’s unlisted shareholdings in state-owned companies or their subsidiaries, the ring-fencing and sale of assets held by stateowned companies and the sale of other assets, such as property.

Finance Minister Nhlanhla Nene has indicated previously the R23-billion will be paid to Eskom in three tranches, with the first being R10billion. This funding will have no effect on the government’s fragile budget deficit.

The Treasury approached about 20 financial institutions, mainly banks, to assist it with identifying which nonstrategic state-owned assets should be sold to raise the R23billion needed by Eskom.

The approach took the form of a “market sounding” in which the financial institutions presented options of assets that could be sold and the strategies that could be used.

The R23-billion funding comes in addition to the conversion of a R60billion subordinated loan into equity, which was approved by the National Assembly last week and which still has to get the green light from the National Council of Provinces before being signed into law by President Jacob Zuma.

Nene’s announcement comes in the wake of the refusal by the National Energy Regulator of SA to approve Eskom’s application for a tariff increase, which would have raised an additional R25.8-billion for the year to end-April 2016. — BDlive