Finance minister Malusi Gigaba said on Wednesday that government will sell a “portion” of its 39.3% stake in Telkom to ensure the fiscal expenditure ceiling is not breached.
“We have decided to dispose of a portion of government’s Telkom shares. We do not take this decision lightly, but we have had to in order to maintain the credibility of the expenditure ceiling,” Gigaba said in parliament, where he was delivering the 2017 medium-term budget policy statement.
He did not say how much of government’s stake in Telkom it plans to sell, or to whom. However, he did say government will have the option to buy back the shares at a later date.
The announcement comes just two weeks after Telkom withdrew a cautionary announcement it had issued in late August over speculation that government could sell its 39.3% stake in the company to bail out South African Airways, suggesting the operator may have been unaware that Gigaba would announce the sale plan in the speech.
Telkom’s shares have come under pressure in recent months over speculation that government was considering offloading its stake to help rescue SAA. The shares fell more than 4% on Wednesday after Gigaba’s remarks.
“Telkom is not aware of any current decision taken by the government with regards to its shareholding,” it said in the statement to shareholders and issued on the JSE’s stock exchange news service on 12 October.
Recent reports had suggested that Gigaba had been keen for the Public Investment Corp to buy government’s stake in Telkom, but that the PIC has baulked at the idea of buying the entire stake because of the risk of such a large exposure to one company.
A Telkom spokesman on Wednesday told TechCentral that the company cannot comment on decisions by shareholders.
In Wednesday’s speech, Gigaba said sluggish economic growth has caused a significant reduction in the tax revenue outlook and that this has significantly eroded government’s fiscal position.
“Tax revenue is projected to fall short of the 2017 budget estimate by R50.8bn in the current year, the largest downward revision since the 2009 recession,” the minister said. “At the same time, additional appropriations of R13.7bn (are needed) to recapitalise SAA and the South African Post Office. These have been partially offset by use of the contingency reserve. A shortfall of R3.9bn remains. To ensure the expenditure ceiling is not breached, we have decided to dispose of a portion of government’s Telkom shares.”
Gigaba said the consolidated budget deficit will widen to 4.3% of GDP in 2017/2017, against a budget target of 3.1%. — © 2017 NewsCentral Media