TechCentralTechCentral
    Facebook Twitter YouTube LinkedIn
    Facebook Twitter LinkedIn YouTube
    TechCentral TechCentral
    NEWSLETTER
    • News

      Jo’burg seeks private sector help to solve electricity crisis

      23 May 2022

      Nersa approves first 100MW private power projects

      23 May 2022

      Bernie Fanaroff – the scientist who put African astronomy on the map

      23 May 2022

      WhatsApp is dropping support for these older devices

      23 May 2022

      The load shedding prognosis for the week ahead

      23 May 2022
    • World

      Michael Dell becomes kingmaker in Broadcom, VMware deal

      23 May 2022

      Tencent’s Pony Ma airs rare frustration during China slowdown

      23 May 2022

      Is it time to buy bitcoin again?

      23 May 2022

      Chip giant ASML places big bets on a tiny future

      20 May 2022

      Musk moves to soothe investor fears over Tesla

      20 May 2022
    • In-depth

      Elon Musk is becoming like Henry Ford – and that’s not a good thing

      17 May 2022

      Stablecoins wend wobbly way into the unknown

      17 May 2022

      The standard model of particle physics may be broken

      11 May 2022

      Meet Jared Birchall, Elon Musk’s personal ‘fixer’

      6 May 2022

      Twitter takeover was brash and fast, with Musk calling the shots

      26 April 2022
    • Podcasts

      The rewarding and lucrative careers to be had in infosec

      23 May 2022

      Dean Broadley on why product design at Yoco is an evolving art

      18 May 2022

      Everything PC S01E02 – ‘AMD: Ryzen from the dead – part 2’

      17 May 2022

      Everything PC S01E01 – ‘AMD: Ryzen from the dead – part 1’

      10 May 2022

      Llew Claasen on how exchange controls are harming SA tech start-ups

      2 May 2022
    • Opinion

      A proposed solution to crypto’s stablecoin problem

      19 May 2022

      From spectrum to roads, why fixing SA’s problems is an uphill battle

      19 April 2022

      How AI is being deployed in the fight against cybercriminals

      8 April 2022

      Cash is still king … but not for much longer

      31 March 2022

      Icasa on the role of TV white spaces and dynamic spectrum access

      31 March 2022
    • Company Hubs
      • 1-grid
      • Altron Document Solutions
      • Amplitude
      • Atvance Intellect
      • Axiz
      • BOATech
      • CallMiner
      • Digital Generation
      • E4
      • ESET
      • Euphoria Telecom
      • IBM
      • Kyocera Document Solutions
      • Microsoft
      • Nutanix
      • One Trust
      • Pinnacle
      • Skybox Security
      • SkyWire
      • Tarsus on Demand
      • Videri Digital
      • Zendesk
    • Sections
      • Banking
      • Broadcasting and Media
      • Cloud computing
      • Consumer electronics
      • Cryptocurrencies
      • Education and skills
      • Energy
      • Fintech
      • Information security
      • Internet and connectivity
      • Internet of Things
      • Investment
      • IT services
      • Motoring and transport
      • Public sector
      • Science
      • Social media
      • Talent and leadership
      • Telecoms
    • Advertise
    TechCentralTechCentral
    Home»Opinion»Duncan McLeod»By all means, sell Telkom – but not like this

    By all means, sell Telkom – but not like this

    Duncan McLeod By Duncan McLeod24 August 2017
    Facebook Twitter LinkedIn WhatsApp Telegram Email
    Malusi Gigaba

    The revelation on Wednesday that finance minister Malusi Gigaba is considering selling a big chunk or possibly even all of government’s 39.3% in Telkom, at face value, is fantastic news.

    There is absolutely no reason for government to continue to hold onto a significant stake in the telecommunications operator — if there ever was one, which is debatable.

    On paper, now is the right time to sell the company. Under the leadership of CEO Sipho Maseko and chairman Jabu Mabuza, the company’s fortunes look better now than they have in many years.

    President Zuma’s disastrous eight years in office mean the chickens are coming home to roost

    The problem with selling distressed assets is they go for a song, raising almost nothing for the fiscus. Telkom is no longer a distressed asset — in fact, it is in such a strong position that it is taking the fight to its big mobile rivals, winning market share and giving them a serious headache. Consumers are loving it. Maseko’s praises should be sung from the hilltops.

    It’s the wrong time to privatise state-owned assets when they are in trouble. It’s far better to turn them around, and then hive them off, ensuring the private investors that are brought in contribute meaningfully to the fiscus, in the process hopefully avoiding tax increases or even allowing for tax relief. South Africa desperately needs a well-managed programme of privatisation.

    Black hole

    The possible sale of Telkom — revealed in a secret cabinet document leaked to the Democratic Alliance — is being considered to raise money to throw into the black hole that is the national airline, South African Airways.

    (That the DA was given this document is testimony to the fact that the ANC is a house divided. Secret documents are being leaked to the opposition, providing insight into the shambolic state of the ruling party. But that’s another story.)

    So, Gigaba has a R10bn-plus hole to plug at the floundering SAA, which has been mismanaged for years under the watch of chairwoman Dudu Myeni, a close friend of President Jacob Zuma.

    The concern is government is selling a good asset — using good money — to prop up an airline that should have been privatised years ago (and, of course, that shouldn’t have been allowed to be driven into the ground in the first place by incompetent managers).

    But there’s a bigger issue here. Gigaba, facing a crisis over SAA, appears to be caught like a deer in the headlights, unsure about what to do. This is symptomatic of a finance minister out of his depth and, worse, a government that is failing.

    Government already chased away Korea’s KT Corp, sending a terrible message to foreign investors that the country is not open for business

    If Gigaba simply starts selling government’s Telkom shares on the open market, it could prove disastrous for the telecoms operator’s shareholders. Not properly managed, the company’s share price could be decimated as the state dumps its holding.

    Far better would be to sell the stake to someone through a managed process, led by advisers. But sell it to who?

    Government already chased away Korea’s KT Corp, sending a terrible message to foreign investors that the country is not open for business. If there are potential foreign buyers, now is the time to ask them to step forward. But is this government prepared to sell the stake to a foreign company? Remember, it was the ANC government that almost scuppered Vodafone’s acquisition of Telkom’s stake in Vodacom, sending the rand tumbling at the time. Sanity, thankfully, eventually prevailed.

    Local buyer?

    Who locally could buy the stake? That’s far from clear. It’s unlikely the Competition Commission would permit one of Telkom’s big rivals to buy it. It’s not in consumers’ interests for that to happen as it would concentrate the market into the hands of three players.

    But Gigaba, desperate for money to prop up an airline that has been ruined by his government, faces having his hand forced. The last thing he wants to — or should — do is to expand the budget deficit even further than it’s already stretched to bail out a bankrupt airline. He needs money from somewhere. Are there other options? Maybe. Government’s already sold a chunk of its stake in Vodacom to fund another state-owned disaster, Eskom. The Public Investment Corp, which invests public servants’ pension money, bought that stake. Maybe it will be asked to get involved again.

    Whatever he decides to do, Gigaba can’t be rash about it. President Zuma’s disastrous eight years in office mean the chickens are coming home to roost. And the finance minister is in the unenviable position of having to try and fix some of the mess. The wrong decisions now could make things even worse.  — (c) 2017 NewsCentral Media

    • Duncan McLeod is editor of TechCentral
    Dudu Myeni Duncan McLeod Jabu Mabuza Jacob Zuma Malusi Gigaba SAA Sipho Maseko Telkom top
    Share. Facebook Twitter LinkedIn WhatsApp Telegram Email
    Previous ArticleMotsepe seeks to shake up SA banking with fintech play
    Next Article Telkom to offer free mobile video, audio streaming

    Related Posts

    Shock as Mustek CEO David Kan dies

    19 May 2022

    A proposed solution to crypto’s stablecoin problem

    19 May 2022

    Everything PC S01E02 – ‘AMD: Ryzen from the dead – part 2’

    17 May 2022
    Add A Comment

    Comments are closed.

    Promoted

    Vodacom champions innovation acceleration in Africa

    23 May 2022

    Kyocera answers top 10 questions on enterprise content management

    23 May 2022

    Fast-rising fintech Bankingly closes $11m investment round

    20 May 2022
    Opinion

    A proposed solution to crypto’s stablecoin problem

    19 May 2022

    From spectrum to roads, why fixing SA’s problems is an uphill battle

    19 April 2022

    How AI is being deployed in the fight against cybercriminals

    8 April 2022

    Subscribe to Updates

    Get the best South African technology news and analysis delivered to your e-mail inbox every morning.

    © 2009 - 2022 NewsCentral Media

    Type above and press Enter to search. Press Esc to cancel.