Publications
Partners
Johannesburg - South Africa will probably first sell its stake in a Vodafone unit as it disposes of state assets to raise funds for power plants needed to stoke economic growth, five people familiar with the matter said.
The government owns 13.9% of the Vodafone-controlled company, which is worth about R28bn at its current share price.
The state doesn’t deem the stake as strategic because of its size and a sale will probably not face opposition from labour unions, said the people, who include bankers and a person familiar with the government’s thinking, asking not to be identified because the deliberations are private.
READ: SA to sell assets to raise R10bn for Eskom
South Africa also owns 39.8% of fixed-line phone company Telkom and some land.
Finance Minister Nhlanhla Nene said in September that the government will sell assets so that it can give state power utility Eskom R20bn in assistance as well as increasing guarantees of its bonds. The electricity provider is facing a R225bn funding shortfall as it builds power plants to try and keep pace with demand and end a programme of load shedding.
The first cash injection of R10bn will be expected by about June, Nene told Bloomberg TV Africa in a January 22 interview. While the Treasury has yet to appoint financial advisers for asset sales, it has gauged the opinion of bankers on the planned sale, the bankers said.
Vodacom pared an earlier gain of 1% and traded 0.1% lower at R134.22 as of 12:46 in Johannesburg. The stock has gained 4.5%this year, compared with a 2.7% increase on the FTSE/JSE Africa All Share Index.
Telkom difficulties
The country could raise more than R86bn from the sale of publicly traded assets as well as real estate, Barclays said in a research note on January 13. This includes assets owned by the Industrial Development Corporation, such as shares of Sasol and Kumba Iron Ore.
“The IDC is a state equity that runs government’s agenda in terms of investment and assisting the economic development,” Nene said in a January 30 interview. “We are talking to all departments where there might be state-owned equity,” he said, declining to comment further.
The IDC has previously said that they have no plans to sell the stakes.
READ: IDC rules out asset sale to rescue Eskom
Vodafone, which owns 65% of Vodacom, is reluctant to buy the government’s stake in the phone company because it’s comfortable with its holding, according to two people with knowledge of the situation, who asked not to be identified because the company hasn’t made a public comment. Vodafone spokesperson Ben Padovan declined to comment.
Telkom, SAA
Telkom would be a difficult asset for the government to sell as a transaction would probably face opposition from labour unions as the company is already trying to cut jobs, the bankers said. A transaction could also be opposed by antitrust regulators, they said.
MTN has considered taking a stake in Telkom, according to three people familiar with the negotiations. Jacqui O’Sullivan, a spokesperson for Telkom, wasn’t immediately available for comment. Telkom shares were little changed at R69.69, while MTN rose 2.1% to R206.36.
READ: SA asset sales may raise R86bn - Barclays
The country’s last major asset sale was in March 2003, when it sold 25% of Telkom for R3.9bn. The government disposed of 20% of South African Airways to Swissair in 1999 and bought it back in 2002 when the European carrier went bankrupt.
SAA, which announced losses of R2.5bn and the cancellation of its Beijing route on January 30, may also be sold with the carrier in preliminary talks with China-based airlines about acquiring an equity stake, according to a separate person familiar with the matter.
Tlali Tlali, a spokesperson for South African Airways, declined to comment.
