South Africa sells 13.9% Vodacom stake to fund Eskom
South Africa’s government has sold its 13.91% stake in Vodacom to Public Investment Corporation (PIC) to help raise 23 billion rand ($1.9 billion) for state-owned utility Eskom.
The proceeds from its sale of Vodacom, 65%-owned by UK’s Vodafone, will strengthen Eskom’s balance sheet and help fund the conversion of a $5 billion government loan to the company into equity.
The move comes after the country’s regulator Nersa rejected Eskom’s request for a price increase in electricity tariffs. The power utility faces an estimated funding gap to 2018 of up to 200 billion rand ($16 billion).
The government said it considered a wide range of options including the sale of listed shareholdings it holds directly and the disposal of listed stakes held indirectly through development finance institutions.
"In arriving at a decision to dispose of its stake in Vodacom to the PIC, the government undertook a market sounding exercise where numerous organisations presented proposals for raising the funding to be allocated to Eskom,” said the government’s National Treasury.
"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.”
The Treasury did not disclose the value of the deal but based on Vodacom’s market capitalisation on the Johannesburg Stock Exchange it would have raised approximately 28.7 billion rand ($2.34 billion).