Government sells Vodacom stake to fund Eskom allocation

Posted On Wednesday, 01 July 2015 15:43 Published by
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National Treasury has announced that government has sold its stake in Vodacom to the Public Investment Corporation (PIC) to raise funds for a R23 billion allocation to Eskom.

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“Government has sold its 13.91% stake in Vodacom to the Public Investment Corporation (PIC), acting on behalf of the Government Employees Pension Fund (GEPF) … the proceeds from the sale will be used to finance the R23 billion allocation to Eskom,” said Treasury on Tuesday.

Treasury said 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 also ensuring government was still able to deliver on its strategic objectives”.

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 and the Department of Telecommunications and Postal Services worked together in executing the transaction.

“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.

“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 and also provided the added benefit of keeping the shares within the broader family of public sector-related institutions,” it said. In addition, to the allocation of R23 billion to Eskom, government is committed to converting to equity the R60 billion subordinated loan that had previously been provided to Eskom.

Treasury said these measures will further strengthen the company’s balance sheet and will be complemented by cost reductions by Eskom and the utility applying for tariff adjustments through the normal regulatory processes. The National Energy Regulator of South Africa (NERSA) this week announced its decision to decline Eskom’s most recent tariff increase application.

 

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