1 July 2015
The government has sold its 13.91% stake in Vodacom to the Public Investment Corporation (PIC), which acts on behalf of the Government Employees Pension Fund (GEPF).
The cash from the sale will be used to finance the R23-billion allocation to Eskom, according to the National Treasury. “This gives expression to the commitment made in the 2015 budget and the 2014 Medium Term Budget Policy Statement that funding of state-owned companies would be in a deficit neutral manner,” the Treasury said this morning.
The move comes after the National Energy Regulator of South Africa (Nersa) on Monday rejected Eskom’s request for a further 9.58% increase in electricity tariffs.
“Last week, Parliament passed the Eskom Special Appropriation Bill to enable the appropriation and the Eskom Subordinated Loan Special Appropriation Amendment Bill for the conversion of the subordinated loan into equity,” the Treasury added.
It did not disclose the deal value, but based on Vodacom’s market capitalisation on the JSE on 30 June, the stake is valued at R28.7-billion.
The National Treasury and the Department of Telecommunications and Postal Services worked together on the transaction. It said that before the decision on the sale was taken, the government sounded out the market, with several organisations presenting proposals for raising the funding to be allocated to Eskom.
“The government considered a wide range of options including the sale of listed shareholdings it holds directly, the disposal of listed stakes held indirectly through development finance institutions, the sale of government’s unlisted shareholdings in state-owned companies or their subsidiaries, the ring-fencing and sale of assets held by state-owned companies, and the sale of other assets, such as property, owned by the state.”
The sale of the Vodacom stake was the most viable option to raise funds quickly to inject equity into Eskom. This was crucial to bolster the utility while still ensuring the government could deliver on its strategic objectives, said the Treasury.
It added: “The PIC’s offer to [the] 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.”
In addition to the allocation of R23-billion to Eskom, the government committed to converting to equity the R60-billion subordinated loan given to Eskom previously. It said this would further strengthen the utility’s balance sheet. Cost reductions by Eskom, and applying for electricity tariff adjustments would complement these moves.