South Africa Raises About $2 Billion for Eskom from Vodacom
South Africa sold its entire stake in Vodafone Group Plc’s African unit for about 25 billion rand ($2 billion), raising funds for state-owned power utility Eskom Holdings SOC Ltd. amid a countrywide electricity shortage.
The 13.91 percent holding in Vodacom Group Ltd. was sold to the state-owned Public Investment Corp., Africa’s largest money manager, at a 10 percent discount to the 30-day average price, the National Treasury said in e-mailed statements on Wednesday. That means the government agreed to a sale price of about 25 billion rand, or 2.8 billion rand below the market value, according to data compiled by Bloomberg.
“The sale of the Vodacom stake was the most viable option for ensuring that government was able to swiftly realize the proceeds and inject equity into Eskom to bolster the utility,” 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.”
South Africa has worked out a 23 billion-rand bailout package for Eskom, which is building new plants to resolve the power shortage in the continent’s most-industrialized nation. The utility has a 225 billion-rand cash-flow shortfall and has been carrying out scheduled blackouts every other day this year as demand exceeds supply from aging power stations.
Vodacom shares traded 2.8 perc12 ent higher at 142.56 rand at the market close in Johannesburg, the highest since May 18. The stock is up percent this year, compared with a 4.3 percent gain on the FTSE/JSE Africa All-Share Index. On Tuesday, the company was granted provisional approval by South Africa’s Competition Commission to buy Internet provider Neotel Pty Ltd. for 7 billion rand.While the government isn’t on a “campaign to sell state assets,” the cabinet will conduct a review of corporate investments to determine if it wants to retain them, Finance Minister Nhlanhla Nene told reporters in Pretoria, the capital.
“We are on a campaign to make sure that what we have is what the state needs in order to pursue its development agenda but at the same time that we do not hang onto something that is not core to the government’s function,” he said.
South Africa holds a direct stake of just under 40 percent in fixed-line phone company Telkom SA SOC Ltd. The state also owns shares in companies including Kumba Iron Ore Ltd., Sappi Ltd. and Life Healthcare Group Holdings Ltd. through the Industrial Development Corp.
Nene has pledged to provide Eskom with financial support in a way that doesn’t undermine the nation’s budget to avoid the risk of a credit-rating downgrade. The government is seeking to narrow the fiscal shortfall to 2.5 percent of gross domestic product in the year through March 2018 from an estimated 3.9 percent this year.
The PIC, which manages government workers’ pension money, becomes Vodacom’s largest shareholder after Newbury, England-based Vodafone. Vodacom has more than 61 million customers across Tanzania, Lesotho, Mozambique, the Democratic Republic of Congo and South Africa.
“Vodacom is a well-managed blue-chip South African company with credible exposure in the rest of Africa and strongly underpinned by its corporate governance practices,” PIC Chief Executive Officer Daniel Matjila said in a statement. “Telecommunications is one of the key drivers for both economic and social development.”
Vodacom has “a constructive relationship” with the PIC, which has been a shareholder since the company started trading in Johannesburg in 2009, spokesman Richard Boorman said in an e-mailed statement.