Vodacom sale shortchanges taxpayers
Sometimes the pace of news in SA is so hectic that important items come and go without making a ripple. One such item was the sale of government’s stake in Vodacom earlier this month. This sale was welcome, instructive and worrying all at the same time.
It was welcome because government really should not have a direct interest in an industry in which it is an ongoing policy maker, for the very obvious reason that conflicts of interest inevitably result. Government is, of course, the overall policy maker in all industries, but the problem is acute in telecoms, which is still in a nascent phase. Government already has a huge stake in the industry as the largest shareholder of Telkom. So, as a step in the right direction, selling down its Vodacom stake is welcome.
The sale was instructive because it took place really on behalf of the state electricity provider, Eskom. The cash fillip provides national treasury with a way to fund SA’s ailing power utility without increasing national debt. That’s welcome too. Yet it was instructive that the sale took place at a 10% discount to Vodacom’s market price. Prices have not been precisely disclosed, but taxpayers probably lost about R3bn on the transaction.
Treasury claims the discount was necessary because of its size and that the price was comparable to the price offered by several institutions. This may or may not be true. The obvious fact, however, is that government was selling under pressure, so buyers were able to price that desperation into the sale.
The sale is worrying because the buyer, the Public Investment Corp, immediately started selling the stake down. So far the sales have been small, but still they contradict the corporation’s statement that the purchase was aimed at achieving portfolio diversification as well as risk mitigation. Clearly, the intention was actually to make a quick buck. That might be good news for the PIC, and state pensioners. Good luck to them.
But it underlines just how egregiously taxpayers have been short-changed.