NewsSouthern AfricaSouth Africa: Vodacom sale to inject capital to the struggling power utility Eskom


Posted on Wednesday, 01 July 2015 12:21

South Africa: Vodacom sale to inject capital to the struggling power utility Eskom

By Crystal Orderson in Cape Town

The South African government has sold its 13.91 percent stake in mobile phone giant Vodacom to an employment fund for civil servants after months of speculation.

The stake was sold to Public Investment Corporation (PIC) on behalf of the Government Employees Pension Fund (GEPF) and R23 billion realised from the sale would be used to inject capital to the struggling power utility Eskom.

According to the government's 2015 Budget and 2014 medium term budget policy, an indication that funds would be raised through public companies to capitalise Eskom.

In June, Parliament passed the Eskom Special Appropriation Bill to enable the sale of the shares and the Eskom Subordinated Loan Special Appropriation Amendment Bill for the conversion of the subordinated loan into equity.

The Finance ministry 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.

With rolling electricity black outs impacting on the economy, Eskom is in need of a major cash injection and the sale of the Vodacom stake would bolster the struggling utility's bank balance.

Treasury says 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".

In addition to the allocation of R23 billion, government committed to converting to equity the R60 billion-subordinated loan that had previously been provided to Eskom.

Meanwhile, earlier this week the National Regulator of South Africa (Nersa) rejected Eskom's application to raise its electricity prices again this year.

According to the Confederation of Southern Trade Unions (Cosatu) electricity prices in South Africa had almost quadrupled since 2007 when the country first experienced power shortages.

NERSA rejected Eskom's application for a further electricity tariff over and above what NERSA had already allowed Eskom to cover the "unforeseen costs" it incurred during the Multi-Year-Price Determination 2 period.

Cosatu said that it did not want to see Eskom collapsing; but it wants management to perform.

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