If there was any doubt that government meddling is an impediment to Telkom’s sustainability and a drag on South Africa’s competitiveness, it should be removed by communications minister Dina Pule’s downright irresponsible behaviour at the AGM in Midrand last Wednesday.

Several days before the AGM, government, which holds a direct 39,8% stake in Telkom, had submitted a proxy vote in terms of which it had (apparently) supported the motions on the agenda, including the election or reelection of nonexecutive directors.

However, somewhere between the submission of the proxy vote and the AGM, Pule apparently changed her mind, vetoing the election of Sibusiso Luthuli, Sibusiso Sibisi, Nomavuso Mnxasana and Younaid Waja as directors.

The decision to vote against the reelection of Luthuli, who is CEO of the Eskom pension and provident fund and who has been a director of Telkom for six years, was a particular surprise. Luthuli was expected to fill the vacancy left by former chairman Lazarus Zim, who stepped down at the AGM.

Pule also appears to have voted against two new share incentive schemes for Telkom senior management, a move that could affect the company’s ability to retain top talent.

But it’s her rejection of four of the directors — at least some of whom, I’m told, had not been given the courtesy of being told their election would not be supported by government — that has private shareholders in Telkom worried. What was Pule’s intention? Does she want to install acolytes on the board? Or was she sending a message about who’s the boss to CEO Nombulelo Moholi?

On Monday, no doubt in reaction to criticism of her conduct in newspaper editorials, Pule issued a rambling statement. “Our decisions at the recently concluded Telkom AGM were informed by government’s view that corporate governance and appropriate management of state-owned companies cannot be left to just any interpretation of our expectations.” This appears to signal a more interventionist approach in Telkom.

In the statement, Pule says government is “now focused on enhancing and protecting Telkom’s share value while balancing that with the objectives of providing affordable connectivity to all South Africans”. She also says any solution “must be underpinned by the creation of a balance between contributing to delivering the socioeconomic development objectives of this country, while simultaneously facilitating a fruitful and commercially viable existence for Telkom”.

That might sound innocuous but it isn’t. Either Telkom is a private enterprise competing for clients in a free market or it’s a state-owned utility whose mandate is to provide services to all South Africans, even if that means sacrificing profit to get there. Telkom cannot be both; and expecting this of it is unfair to the company and its private shareholders.

Government’s interference in Telkom continues to damage the company. Cabinet’s recent rejection of a proposed deal to sell 20% of its equity to Korea’s KT Corp has made it difficult for Telkom to improve its credit rating and its borrowing capacity, according to ex-chairman Zim, who called the rejection of the deal “tragic”.

Pule says government is “learning from other countries that have gone through such wide-ranging telecoms liberalisation processes”. If it was, it would sell its remaining stake in Telkom, craft legislation that ensures maximum and efficient competition in the sector, and ensure regulations make it as easy and affordable as possible for all operators to build networks and serve consumers. That approach, not government’s meddling in business, is the only way South Africa will ever make meaningful progress in bridging the digital divide. — (c) 2012 NewsCentral Media