Govt to sell portion of Telkom

Duncan McLeod

Finance Minister Malusi Gigaba said yesterday that government will sell a “portion” of its 39.3% stake in Telkom to ensure the fiscal expenditure ceiling is not breached.

“We have decided to dispose of a portion of government’s Telkom shares. We do not take this decision lightly, but we have had to in order to maintain the credibility of the expenditure ceiling.”

He didn’t say how much of government’s stake in Telkom it plans to sell, or to whom. He did say government will have the option to buy back the shares at a later date.

The announcement comes just two weeks after Telkom withdrew a cautionary announcement it issued in late August over speculation that government could sell its 39.3% stake in the company to bail out SAA, suggesting the operator may have been unaware that Gigaba would announce the sale plan in the speech.

Telkom’s shares have come under pressure in recent months over speculation that government was considering offloading its stake to help rescue SAA. The shares fell more than 4% yesterday after Gigaba’s remarks.

“Telkom is not aware of any current decision taken by the government with regards to its shareholding,” it said in a statement to shareholders on October 12.

Recent reports suggested Gigaba had been keen for the Public Investment Corporation (PIC) to buy government’s stake in Telkom, but that the PIC has baulked at the idea of buying the entire stake because of the risk of such a large exposure to one company.

In his speech, Gigaba said sluggish economic growth has caused a significant reduction in the tax revenue outlook and that this has significantly eroded government’s fiscal position.

“Tax revenue is projected to fall short of the 2017 budget estimate by R50.8bn,” the minister said. “Additional appropriations of R13.7bn [are needed] to recapitalise SAA and the SA Post Office. These have been partially offset by use of the contingency reserve. A shortfall of R3.9bn remains. To ensure the expenditure ceiling is not breached, we have decided to dispose of a portion of government’s Telkom shares.”

This article first appeared on TechCentral