Government sells Vodacom stake to help Eskom

The government has sold its 13.91% stake in Vodacom [JSE:VOD] to the Public Investment Corporation (PIC) to help fund the R23bn allocation to Eskom, National Treasury said in a statement on Wednesday.

The move comes after energy regulator Nersa on Monday rejected Eskom’s request for a further 9.58% increase in electricity tariffs.

“In arriving at a decision to dispose of its stake in Vodacom to the PIC, government undertook a market sounding exercise where numerous organisations presented proposals for raising the funding to be allocated to Eskom.”

Treasury did not disclose a deal value, but based on Vodacom’s market capitalisation on the JSE on Tuesday, the stake is valued at R28.7bn.

According to the statement, 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 ringfencing and sale of assets held by state-owned firms and the sale of other assets, such as property, owned by the state.

“The sale of the Vodacom stake was the most viable option for ensuring that government was able to swiftly realise the proceeds and inject equity into Eskom to bolster the utility while simultaneously ensuring government was still able to deliver on its strategic objectives.

“As previously indicated, the proceeds from the sale will be used to finance the R23bn allocation to Eskom. 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,” Treasury said.

Last week, Eskom came one step closer to receiving R23bn and converting its R60bn subordinated loan into equity, after the National Council of Provinces passed the two bills tabled by Finance Minister Nhlanhla Nene.

The Treasury said on Wednesday these measures will further strengthen Eskom’s balance sheet and will be complemented by cost reductions by Eskom and the utility applying for tariff adjustments through the normal regulatory processes.

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 PIC’s offer to government was in line with pricing quoted by other institutions when taking into account the large size of the stake. It also provided the added benefit of keeping the shares within the broader family of public sector-related institutions, Treasury said.

According to the statement, National Treasury and the Department of Telecommunications and Postal Services worked together in executing the transaction.


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Government sells Vodacom stake to help Eskom