South Africa risks becoming a “failed nation state” unless the government resolves challenges including an energy crisis, corruption and extreme unemployment, said MTN Group’s CEO on Monday.
The pan-African telecommunications group said load shedding lopped R695-million off its earnings before interest, tax, depreciation and amortisation last year. Eskom has imposed up to almost 12 hours of power cuts every day this year, prompting companies to spend money on power generators.
President Cyril Ramaphosa last month declared a state of disaster to deal with the energy crisis that’s curbing economic growth.
It’s not just blackouts. The government also needs to create jobs to reduce the unemployment rate from 32.7% and improve state-owned Transnet’s lack of capacity to ship goods that’s stymieing plans by miners to expand.
“We have time, but the time is now to act very, very decisively around these crisis issues that the country is facing,” CEO Ralph Mupita said in a briefing with journalists. The state of disaster gives the country “a unique opportunity to accelerate efforts to secure the resilience of critical national infrastructure such as telecommunications”, he said.
Still, MTN increased its full-year dividend to shareholders by 10% to R3.30/share as revenue and profit rose. The board again anticipates paying a minimum ordinary dividend of at least R3.30/per share this year, MTN said.
“The macroeconomic environment and regulatory restrictions in passing through high inflation are again becoming a short-term drag to what still looks like an interesting long-term growth story,” said Peter Takaendesa, head of equities at Mergence Investment Managers. “MTN management has executed very well on what they can control.”
MTN’s shares, which have risen 6.8% this year, slumped 3.8% as of 9.54am in Johannesburg.
The company has R22-billion of cash and is keen to repay part of its US$450-million of Eurobonds early, Mupita said in an interview. “MTN has a strong liquidity position of about R60-billion,” he said.
The company plans to use the stash to accelerate its network roll-out, and consider mergers and acquisitions, said Mupita. MTN concluded a towers deal in South Africa last year and sold part of its Nigerian unit in a public offer, which contributed about R12-billion to the group’s strategy of paying down group debt and unlocking additional value by 2025.
African telecoms operators have been working on unlocking value from different parts of their businesses, including towers, fibre and their fast-growing fintech operations.
MTN said it has received offers for minority investments in its fintech business from potential strategic partners. It expects to conclude talks about the future of the unit by mid-May 2023. The firm also plans to separate its fibre business by 2024. – © 2023 Bloomberg LP