S Africa sells Vodacom stake for $2 bn to raise cash for power utility

The South African treasury has sold its entire stake in mobile phone operator Vodacom Group Ltd to state-owned pension fund manager for over 23 billion rand ($2 billion), to raise the cash needed to bail out struggling power utility Eskom Holdings SOC Ltd.

The treasury said the sale of its 13.91-per cent holding in Vodacom, which is majority owned by the UK's Vodafone Group Plc, to the Public Investment Corporation (PIC) was the most viable option to ''swiftly realise the proceeds and inject equity into Eskom to bolster the utility.''

It said the stake was sold at a 10-per cent discount due the large size of the deal.

"The pricing is based on market prices, based on the 30-day volume weighted average price," it said in a statement. "We are anticipating that the proceeds will be in excess of 23 billion rand that will be allocated to Eskom," the treasury said.

Indications of a possible sale of non-core government assets needed to finance a 23-billion rand rescue package for the beleaguered power utility surfaced last year. In an interview with Bloomberg TV a fortnight ago, the country's finance minister Nhlanhla Nene said a Vodacom stake sale could be done ''at an opportune time.''

Power crisis is a major factor dampening the economic growth in the continent's second-biggest economy, as the utility is struggling to operate its poorly-maintained and outdated power plants to meet the rising demand, often resulting in frequent power outages.

According to estimates, Eskom, reeling under severe financial and management problems needs overall 225 billion rand ($18 billion) to plug the gap including building of two new large power plants.

The government has cut its growth forecast for 2015 to 2 per cent from 2.5 per cent, further warning that deterioration in power situation could further reduce growth to 1 per cent.

Johannesburg-based Vodacom offers a range of telecommunication services and apart from South Africa, the company operates mobile networks in Tanzania, Mozambique, Lesotho and the Democratic Republic of Congo.

PIC, Africa's biggest fund manager, which manages majority of South African government employees' pension fund, already owns 3.19 per cent in Vodacom. Total assets under its management are about 1.4 trillion rand.

With the current transaction, PIC will become the company's second-biggest shareholder after UK's Vodafone, which owns 65 per cent of the South African mobile company.

PIC said increasing its stake in Vodacom would further assist the fund with portfolio diversification.

Daniel Matjila, its chief executive said: ''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. Telecommunications is one of the key drivers for both economic and social development.''