Selling Vodacom and Telkom the quickest way to help Eskom

·15 Jan 2015

Barclays says that government’s sale of its stake in listed telcos Vodacom and Telkom would be the quickest way to raise money for ailing power utility, Eskom.

Bloomberg reported that government could raise as much as R86 billion from the sale of assets, citing financial service group, Barclays.

In a research note by the lender, it said that South Africa may sell land and real estate as well as shares in companies including a 14% stake in Vodacom and 40% of Telkom.

Taking the market caps of the two companies, government would be able to raise a combined R41.5 billion through Telkom (R14.9 billion) and Vodacom (R26.6 billion).

“The government is going down this path reluctantly, with its back against the fiscal wall, and it remains wedded to the idea of a ‘developmental state’ in which state-owned enterprises are used to further a host of social and economic development objectives,” Barclays said.

National Treasury reportedly said in September 2014 that “it would dispose of non-strategic assets to provide capital for Eskom”.

The parastatal continues to struggle to keep the lights on with continued load shedding warnings in January, while financially, it is looking for R20 billion from government to pay for its monthly diesel bill which currently exceeds R1 billion.

According to Bloomberg, the disposals would be the first significant sales by the state in more than a decade, having sold a 25% stake in Telkom in 2003, for R3.9 billion.

The last major asset sale was in March 2003, when the state sold 25 percent of Telkom for R3.9 billion.

On Monday Eskom CEO Tshediso Matona reportedly told stakeholders that a single unforseen event could send the country into a national blackout, which would then take weeks to repair.

Matona also warned of further load shedding from next week.