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According to Vodacom Group, the transaction is pending approvals from the Johannesburg Stock Exchange, the National Telecom Regulatory Authority of Egypt and Egypt’s Financial Regulatory Authority (FRA).
At a recent general meeting, the minority shareholders gave the Vodafone Egypt transaction a vote of confidence and supported resolutions for the acquisition to take place.
A total of 99% of votes were cast in favour of the transaction, while 99.58% of votes went in support of the consideration of shares and 99.58% of votes backed a special resolution granting authority to issue consideration shares to sellers.
However, because this is a related-party transaction, Vodafone did not vote at the meeting.
Vodacom Group says the transaction will be funded through the issuance of 242 million new ordinary shares valued at R135.75 ($8.8) per share and $548m in cash. Vodacom aims to conclude the acquisition before March.
An important milestone
The Group’s CEO Shameel Joosub says: “This is an exciting and important milestone for Vodacom as the acquisition of Vodafone Egypt will be transformational in our evolution from a telco to a ‘techco’.”
It [Vodafone Egypt] will be one of the big operations for Vodacom in Africa.
“This is a transaction that presents significant diversification and growth opportunities for our shareholders. With over 80% of Egypt’s 100 million population unbanked, Vodacom sees enormous potential to leverage our financial services platforms, global partnerships and best practices in a significant market.”
Pater, the analyst, explains that Vodafone and Vodacom developed a strategy some time ago. “[…] Vodacom is going to become the Africa operation and Vodafone would be focusing on other markets – predominantly Europe and a bit of Asia, India being the most prominent one,” he says.
“They’ve [Vodafone and Vodacom] been moving in that direction. Vodacom acquired shares in Safaricom a couple of years ago. It [Vodacom] is also part of the new Ethiopia consortium, led by Safaricom, that won the second national licence last year. A second licence has been issued in that market for national operations. Vodacom has also effectively taken over business enterprise services in Ghana. [It] provides the management and oversees that,” Pater tells The Africa Report.
The Egypt transaction is part of that group strategy. Vodacom is going to purchase shares owned by Vodafone in Vodafone Egypt. In doing so, operations across Africa will be reporting to Vodacom. Vodacom, in turn, will report into Vodafone. “It [Vodafone Egypt] will be one of the big operations for Vodacom in Africa,” Pater says.
Vodafone, which owns 60.50% of Vodacom, has shifted its efforts to Europe and Asia.
- The Public Investment Corporation, on behalf of the Government Employees Pension Fund, owns 13.54% of the Vodacom Group, making it the second-biggest shareholder, followed by YeboYethu Investment Company with its 6.23%.
- Institutional investors – including, among others, BlackRock Advisors and the Vanguard Group – control the remaining 15.76%.
Strength by markets
As a mobile operator, Vodacom Group is present in a handful of markets, including South Africa, Lesotho, the Democratic Republic of the Congo (DRC) and Tanzania. It has a presence in Kenya and Ethiopia through its shareholding in Safaricom and within the Safaricom-lead consortium in Ethiopia.
“As a majority shareholder in Egypt, one of the big markets in Africa, Vodacom will benefit from that […],” Pater says.
In addition to mobile licences, Vodacom has about 10 business operations across Africa, including markets, such as Nigeria, where Vodacom is not a mobile operator.
“In the greater scheme of things, it [Nigeria] is a small market, but it can grow because the business environment across Africa is going to start maturing to greater use of information and communications technology (ICT),” says Pater.
The increased demand for ICT business solutions is “partially expedited by the Covid-19 scenario. Like everywhere else, companies are increasingly taking up cloud services and also relying a lot more on IT to drive efficiencies”, said Pater.
“Egypt, from that perspective, has potential as a big business market for Vodacom. Obviously, [when Vodacom becomes] … a majority shareholder, it [Vodafone Egypt] will account for more than half of the revenue. It will certainly be very positive for Vodacom’s income statement,” Pater says.
Moreover, “[Vodacom] has been missing a big market, which MTN has. MTN is Nigeria’s biggest operator. MTN generates about a third of its group revenue out of Nigeria. It’s a key market. Egypt can also become a similar market for Vodacom, although Vodacom does have a strong position in South Africa. At the moment it [South Africa] remains its [Vodacom’s] biggest market,” says Pater.
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