Eskom may gain from state sell-off of Vodacom stake

The government is to sell its 13.9% stake in Vodacom - worth R25.7-billion - so it can use the cash to prop up its cash-guzzling state-owned companies, including Eskom and South African Airways.

"It is a step in the right direction, but quite a delayed one," said one head of a black investment company, who asked not to be named.

News emerged this week that the government had asked bankers to value the stake in preparation for a sale - cash which experts say could be diverted to help plug Eskom's R225-billion funding gap.

Finance Minister Nhlanhla Nene will give his mid-term budget speech this week, and is likely to divulge how cash for Eskom and SAA will be raised.

National Treasury officials said "cabinet has approved a package of measures aimed at strengthening Eskom's balance sheet. [They] include cost and operational efficiencies, injection of new capital, demand management measures and expanding the independent power producer programme."

When asked how this would be financed, Treasury said the government would leverage "non-strategic assets", and options to do this are being "explored".

A number of black empowerment companies are preparing themselves to snap up a stake in Vodacom, should a condition be attached that it be sold wholesale to black-owned companies. Vodafone, which owns 65% of Vodacom, may still have first right of refusal on those shares.

Bruce Main, a fund manager at Ivy Asset management, told Bloomberg that it would suit Vodafone to own more of the business, as it would drive growth in Africa. He said Vodafone may have realised that its "disjointed" ownership structure in Africa has given competitors an advantage.

There has also been talk that the government may even sell its 39% of Telkom.

But investment bankers say this seems a bridge too far since Telkom is showing signs of recovery.