A Cabinet committee has changed its tune regarding a plan to sell its full R13-billion stake in Telkom to fund the recapitalisation of South African Airways (SAA) and the SA Post Office, it was revealed at the mini budget last Wednesday.
By selling state-owned assets, Treasury aims to avoid breaching its expenditure ceiling by R3.9bn. This comes after its decision to bail out SAA with a R10bn appropriation and R3.7bn recapitalisation of the Post Office.
The change in tune follows Cabinet’s realisation that the opportunity cost of losing its 39.75% stake in Telkom would be too great.
Now, Cabinet is looking at selling departmental assets and expects a cash windfall from its release of 2.6MHz broadband frequency.
Treasury director general Dondo Mogajane told media on Wednesday that they can’t simply ditch all their Telkom assets. “Telkom is a well-performing share, contributing R900m to R1bn in dividends every year,” he said. “It is important that we hold on to that as much as we can.”
Later, Finance Minister Malusi Gigaba revealed in his mini budget speech that government has “decided to dispose of a portion of government’s Telkom shares, with an option to buy them back at a later stage”.
Hang on to Telkom
In an interview with Fin24 following the speech, Mogajane said government owns many assets which are not being used, which can be sold to limit the amount of Telkom shares they sell.
“We are currently looking throughout the whole of government,” he said. “We are engaging with Public Works, we are engaging with the Department of Rural Development in terms of assets that we have.
“Once we have identified all of those, we will make recommendations to the (Cabinet) committee, which will make these hard decisions to sell based on the quantum of what’s needed.”
This Cabinet committee comprises Gigaba, Economic Development Minister Ebrahim Patel, Public Enterprises Minister Lynne Brown, Telecommunications Minister Siyabonga Cwele and Science and Technology Minister Naledi Pandor.
“Our ceiling, as the books indicate, will be breached by R3.9bn, so we will be looking for assets that will clear that by March 31, so that we remain within the ceiling, even for the current year,” said Mogajane.
“For the MTF (medium-term fiscus), we have confirmed that we will not breach the ceiling and that is the commitment we have made.”
Regarding the release of broadband frequency, Treasury said in its mini budget that “the bulk of additional spectrum is ready to be allocated immediately, without requiring the migration of existing spectrum users to digital television”.
“The delay in allocating telecommunications spectrum constrains growth across the economy. Lack of radio frequency limits the ability of businesses to deploy new technologies and contributes to the high cost of broadband,” it said.
“A well-designed spectrum auction can promote transformation and improve competition as new participants enter the market.
“Universal service conditions can improve access for low-income households. And a competitive auction can sharply reduce data costs.”
By Matthew le Cordeur for Fin24