Vodacom: ANC’s elephant hunt

For investors, cellphone users and citizens baffled by last weekend’s attempt to torpedo the stock exchange listing of Vodacom, an Elephant shaped answer is now appearing.

The ANC and it alliance partners in the SACP and union federation Cosatu have for months been fretting that former members of the governing party would use the listing to cash in on their involvement in the controversial Elephant Consortium, and ultimately to fund the breakaway Congress of the People (Cope).

The consortium was formed to take advantage of an empowerment deal that handed it 7% of Telkom, massively enriching key ANC figures, several of whom are now closely associated with the Cope breakaway.

Among them are former ANC spin doctor Smuts Ngonyama and Wipcapital boss Gloria Serobe.  Former director general of the department of communications Lyndall Shope-Mafole, who is now a senior Cope leader, was an important player in the regulatory discussions that lead to government approval for the listing.  Another senior Wipcapital and Cope figure is Wendy Luhabe, who is married to Mbhazima Shilowa, one of the Cope’s founders and deputy presidents.

The deal, which went ahead this week after the failure of an eleventh hour court challenge by communications regulator Icasa and Cosatu, sees Telkom offload a 15% stake in the cellphone giant to United Kingdom-based Vodafone (now a 65% shareholder) for R22,5-billion.  Telkom’s remaining 35% share was unbundled to its shareholders, including Elephant.

A simple calculation shows that the listing of Vodacom has unlocked more than half of the Elephant Consortium’s investment in Telkom, which it cannot trade until 2011, enabling members to realize substantial benefits two years ahead of schedule.

The consortium’s 2% share in Vodacom is worth just less than R1,7-billion and its dividend payments from Telkom R692-million.  The total, R2,3-billion, exceeds its 7% shareholding in Telkom, which is valued at R2,2-billion.

It is that pool of assets which so exercised the ANC and the alliance ahead of the elections, and which many in the communications sector and the party believe was behind Icasa’s last-minute decision to reverse itself, and try to block the listing.

Documents doing the rounds in ANC circles, and discussions with sources close to the process suggest that there is considerable unhappiness that Cope rather than the ruling party might see the benefits of the deal.

The documents, which the Mail & Guardian has seen, allege that Serobe and Ngonyama borrowed money against the payouts they were expecting from the Vodacom transaction to fund Cope’s election campaign.

“They borrowed heavily to fund Cope’s campaign using the Vodacom shares and dividends as leverage,” claimed an ANC source, echoing the document.

The M&G understands that SACP chief and Higher Education Minister Blade Nzimande has also raised the issue of Cope’s windfall from the Vodacom listing in alliance circles.

Some alliance members believe that with Cope having lost momentum during the elections, a further blow to its funding from the Elephant Consortium would kill the party.

Serobe, however, described the allegations as “mad” and “crazy”.  She said she had no access to Vodacom shares or dividends, as Wiphold was the shareholder in Elephant, not she.

Another consortium insider argued that, given the debts owed to the financiers of the original Telkom deal, the windfall would not be as substantial as some of the ANC believed.

The consortium owes R2,8-billion of the deal’s financing costs, this person said.  After the dividends paid by Telkom are ploughed back, the debt will stand at around R1,3-billion.

Cosatu president Sdumo Dlamini said this week that the labour federation had a list of individuals from both Cope and the ANC who would benefit from the deal.

Regardless of which party benefitted, he said “we view this as looting and are prepared to fight it until the end”.

The Telkom empowerment deal has been mired in controversy since Elephant acquired its 7% Telkom stake in 2005, particularly over a decision by the state pension fund manager, the Public Investment Corporation, to warehouse consortium shares until Elephant directors found funding for the deal.

One ANC source said Cosatu has criticized the deal when it initially took place because individuals too close to the centre of power – at the time Thabo Mbeki – were being enriched.

Asked whether political interference by the ANC or government might explain Icasa’s about-face, he said he would not be surprised, adding: “Whether you will find fingerprints is another story.

“Sure it was about the individuals close to the centre, but it was also the fact that it was individuals not groups.  More people should be empowered by such deals” said the source.

He added that “Smuts and Gloria were too close to the centre”.

Icasa has gone to ground, refusing to answer questions from the M&G this week.

It was not only prominent Cope figures who stood to benefit, however.  Other beneficiaries include former ANC treasurer Mendi Msimang, Dali Mpofu and Mafika Sihlali, former SABC chief executive and head of legal services respectively.  Former department of communications director general Andile Ngcaba, and ANC veteran Thandi Lujabe-Rankoe are also on the list.

However the Elephant insider told the M&G that Ngonyama had sold his Telkom shares before the election.

“Some of the shareholders have already sold their shares,” said the insider. “Smuts sold his shares two to three weeks after the deal was consummated.”

The insider claims that Ngonyama’s shares were housed in the secretive companies Clidet 531 and Clidet 532.  These recently had their names changed to MMTB Investment Holdings and Indoni Investments.

The Sunday Times reported earlier this month that Alan Norman, a former Absa banker involved in the deal and later a dealmaker for the ANC under Msimang, had emerged as the sole director of Clidet companies and had a stake in both new entities.

Norman, Msimang and Rankoe have served as directors of MMTB and Indoni, which allegedly control at least a million Telkom shares.

“Alan Norman bought Smuts shares that were housed in Clidet Companies,” said the insider, adding that Ngonyama had received a “healthy sum” of R6-mllion to R7-million for facilitating the deal.

However Dlamini told the M&G this week that Ngonyama had receive R100-million for his role in facilitating the Elephant Consortium deal and that this money was used to form Cope.

The insider said shares were never transferred to the ANC.  This had caused considerable unhappiness.

Some in the tripartite alliance have criticized the Cabinet’s endorsement of the Vodacom sale, with accusations that Shope-Mafole pushed the deal through.

Shope-Mafole said the decision to approve the deal was taken at a sensitive time, just before the elections, and that there were several cabinet meetings about the deal.

“It was dealt with extensively.”

She said she had no idea if there had been political interference in the deal, but admitted that she was surprised that Icasa had changed tack so late.

Shope-Mafole did not want to comment on Icasa’s ability to resist political pressure.  “I don’t want to second-guess what they would have done,” she said.

Cope spokesperson Phillip Dexter said Ngonyama would not comment on the activities of the Elephant Consortium.

ANC treasurer general Matthew Phosa said: “We are not in a position to comment as we have not received any briefing on this matter.  There is certainly nothing in the ANC’s books that relates to this deal.”

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