Vodacom opts for outsiders
By allocating 45% of R7,5bn shares to Royal Bafokeng and Thebe Investment, Vodacom sent a message to squabbling would-be investors.
POLITICAL figures squabbling for a slice of Vodacom’s lucrative R7,5bn black economic empowerment shares have been shafted, with the operator naming two far less controversial consortiums as the winning candidates.
Political shenanigans have stolen headlines on the deal, leading to insinuations that the cellular operator would divvy up the shares between well-connected characters rather than benefiting the masses.
On Friday Vodacom issued a short but significant statement, where the real story lay not in what it said, but in what it omitted.
Of the R7,5bn shares allocated for empowerment, 45% will go to Royal Bafokeng Holdings and Thebe Investment Corporation.
This means that it has rejected bids from political heavyweights including former national director of public prosecutions Bulelani Ngcuka, former presidential adviser Moss Ngoasheng, former environment minister Valli Moosa, former African National Congress bigwig Saki Macozoma and former MP Nkenke Kekana.
A source close to the deal says ditching the politically power-packed groups was not an intentional snub, but they had simply not made the grade.
“There was always speculation about the people who were vocal, but there were always other bidders on the short list. These two groups came out the strongest in all the criteria,” the source says.
Ousted bidder Sipho Pityana has to agree: “Royal Bafokeng and Thebe are established empowerment players and they are coherent black entities rather than what we were, which is a bickering crowd.” Pityana says he would have made the same decision himself to eject his own Amandla Omoya consortium.
“Vodacom has run this properly and with integrity and we lost because we lost sight of the bigger picture and were bickering.”
Vodacom CEO Alan Knott-Craig said that the two bidders named as its strategic partners were chosen through a comprehensive process. As strategic investors they needed to be broad-based black groups able to “contribute meaningfully” to the business by playing an important role in transformation, skills and capacity-building programmes.
Vodacom’s empowerment deal will divide shares worth R7,5bn in three directions, with Thebe and Royal Bafokeng taking 45% of that, Vodacom’s South African staff sharing 25%, and Vodacom’s black business partners and the black general public sharing 30%.
It is not yet clear whether Thebe and Royal Bafokeng will share their allocated tranche worth R3,37bn equally, or if one will receive more than the other.
The battle for shares grew ugly when the Amandla Omoya consortium began to splinter after reaching a short list of five bidders. A core group within the consortium was Mowana 5M, bristling with industry-experienced technicians, entrepreneurs, lawyers and regulators and led by Kekana, a former head of Parliament’s communications committee.
Other groups within Amandla Omoya included the one led by Ngcuka, Ngoasheng, Moosa and Pityana. Mowana first sought shares in Vodacom three years ago, and has spent more than R10m on its now-abortive bid.
After being short-listed it disrupted the process by demanding to be reconsidered in isolation, saying the amount of shares to be allocated was too small to split between the entire consortium.
On Friday Kekana said that Mowana would have received too few shares to justify its efforts, so he was not distraught at losing. “We could have added a lot to Vodacom with the calibre of our people and their vast experience in telecoms, but the economics didn’t stack up. It was also marred by politics and we are entrepreneurs who want to do business that is not muddied by politics, so we are happy to walk away.”
Knott-Craig has been at pains to ensure Vodacom transformation benefits thousands, not just a political elite or already enriched businessmen. Its empowerment had to be sustainable and credible and provide long-term benefits to the country as a whole, especially to lower-income groups, he said.
Its own staff — of every colour — will share equity worth R1,87bn to ensure they benefit from Vodacom’s success and to protect its sustainability by helping it retain and develop its staff.
The public offer will let any black citizen acquire shares in Vodacom SA, an unlisted subsidiary of the group. Vodacom is SA’s largest cellular operator with 24-million customers. Analysts calculate the group as a whole is worth at least R150bn, with Vodacom SA generating 95% of profit.
Since that values Vodacom SA at about R142,5bn, the empowerment tranche of R7,5bn accounts for only about 5% of its shares.
The cap of R7,5bn was fixed by its joint shareholders, UK-based Vodafone and Telkom, after an empowerment charter drawn up by the hi-tech sector cited that as a feasible sum for black investors to afford. However, the size of empowerment deals has ballooned since, so Vodacom may complete this deal only to come under new pressure to lift its black ownership.
Knott-Craig describes Thebe Investment as a pioneer of broad-based empowerment. Its main shareholder is the Batho Batho Trust, a community-based body promoting social and economic development. Its investments include 17,77% of building materials company Safic Holdings and its chairman is Vusi Khanyile, head of finance for the African National Congress before he started Thebe.
Royal Bafokeng Holdings is the investment arm of the Royal Bafokeng Nation, a community of 300000 in North West.
The holding company manages the commercial assets of the nation for the sustainable benefit of the community.
Its R24bn in assets include 13,4% of Impala Platinum, 55% of MB Technologies and 12,5% of Metair Investments. In the past decade it has spent R2bn from its returns on roads, schools, clinics and other amenities. Its chairman is Kgosi Leruo Molotlegi, king of the Royal Bafokeng Nation.
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