While the Democratic Alliance was “cautiously optimistic” following government selling its 13.91% stake in Vodacom to the Public Investment Corporation (PIC), the party had a number of concerns regarding the nature of the transaction.
“The DA is cautiously optimistic about the perceived shift in policy by National Treasury in relation to the funding of distressed state-owned entities (SOE’s), with reports today suggesting Treasury is considering ring-fencing and selling certain non-core assets owned by Eskom,” appropriations spokesperson Malcolm Figg said in a statement.
“We strongly believe the solution to the financial woes of Eskom and other SOE’s, the ANC government’s supposed champions of economic growth, lies in the strategic sale of assets and establishment of public private partnerships – rather than increasing the burden on ordinary South Africans.”
However, the DA had a “myriad of concerns” and Figg said he would write to Finance Minister Nhlanhla Nene requesting answers to the following questions:
- What was the final sale price, per share sold, and total revenue realised;- What was the nature of the “market sounding exercise” undertaken by government prior to the sale;
- Who were the “numerous organisations” that presented proposals for raising the funds to be allocated to Eskom;
- What other assets were identified as suitable for disposal;
- Did this “closed sale” result in the largest possible revenue amount being raised.
Benefits not clear
Figg said since the sale was done to raise revenue, Treasury’s justification for selling state-owned assets to a state-owned entity did not hold water.
“It is not clear what the so-called ‘added benefit of keeping the shares within the broader family of public sector-related institutions’ entails,” he said.
“The minister must explain what this public benefit actually is… and assure the public and the millions of government employees whose pension funds are managed by the PIC that this transaction was sound and above board, and the PIC was not bullied or coerced into this deal.”
Earlier on Wednesday, the National Treasury said government had sold its Vodacom stake to help fund the R23-billion allocation to Eskom.
‘Market sounding exercise’
The move comes after energy regulator Nersa on Monday rejected Eskom’s request for a further 9.58% increase in electricity tariffs.
“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.”
Treasury did not disclose a deal value, but based on Vodacom’s market capitalisation on the JSE on Tuesday, the stake is valued at R28.7 billion.
According to the statement, the government considered a wide range of options including the sale of listed shareholdings it holds directly, the disposal of listed stakes held indirectly through development finance institutions, the sale of government’s unlisted shareholdings in state-owned companies or their subsidiaries, the ring-fencing and sale of assets held by state-owned firms and the sale of other assets, such as property, owned by the state.
“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.”
“As previously indicated, the proceeds from the sale will be used to finance the R23 billion allocation to Eskom. 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 said.
Eskom Special Appropriation Bill
Last week, Eskom came one step closer to receiving R23 billion and converting its R60 billion subordinated loan into equity, after the National Council of Provinces passed the two bills tabled by Nene.
The Treasury said on Wednesday that these measures would further strengthen Eskom’s balance sheet and would be complemented by cost reductions by Eskom and the utility applying for tariff adjustments through the normal regulatory processes.
Parliament passed the Eskom Special Appropriation Bill to enable the appropriation and the Eskom Subordinated Loan Special Appropriation Amendment Bill for the conversion of the subordinated loan into equity.