Revealed: Vodafone’s Vodacom plans new mega ‘black shareholders only’ deal

As an elite connected to South Africa’s President Jacob Zuma reaps the benefits of black economic empowerment, there is a new drive to increase black participation in the economy. Laws obliging companies to have black shareholders have been a key strategy for some time, though the government would like to see bigger chunks of listed entities shift to black hands. New guidelines point telecommunications companies towards black ownership of at least 30%, including a significant weighting in female hands. Bloomberg reports that Vodafone’s Vodacom is considering a deal that would be one of the country’s biggest-ever in terms of redistributing public company shareholder wealth to black hands. Vodacom’s YeboYethu empowerment listing in 2008 resulted in not far off 90 000 shareholders acquiring a stake of just over 3% in the large mobile network. While it is a nice idea in principal, BEE laws are deterring many entrepreneurs from building their businesses in South Africa – hence a shift by many to globalise operations. Large BEE deals also detract attention from the major issues holding back true empowerment and economic progress for all: the rampant corruption, financial irregularity and cronyism that has come to characterise ANC rule. – Jackie Cameron 

By Loni Prinsloo

(Bloomberg) – Vodafone Group Plc’s South African unit is considering the sale of a R15 billion ($1.1 billion) stake in what would be one of the country’s biggest-ever deals aimed at boosting black participation in the economy, according to two people familiar with the matter.

A logo sits on display outside the headquarters of Vodacom Group Ltd. in Johannesburg, South Africa, on Monday, May 18, 2015. Photographer: Dean Hutton/Bloomberg

Vodacom Group Ltd. plans to buy back part of the 12.47 percent stake owned by the government’s pension-fund manager, the Public Investment Corp., said the people, who asked not to be identified because the deliberations are private. The shareholding could then be listed as a separate entity restricted to black investors, they said. Negotiations with the PIC are ongoing and an outcome is expected in coming months, said one of people.

“Vodacom is committed to delivering on the ideals of black economic empowerment and continue to explore a variety of options with the primary objective of broad-based inclusivity,” a spokesman said in e-mailed comments, without directly commenting on whether such as a transaction is being considered. “Any transaction of this nature will be conducted through a well-governed, highly transparent process.”

Replacement Program

The deal would help South Africa’s market leader in terms of mobile subscribers to comply with a government initiative to help compensate those discriminated against during apartheid. Under new guidelines effective Nov. 7, telecommunication companies should aim to be 30 percent black owned, a third of which must be held by black women. With Vodacom’s existing black empowerment deal coming to an end in 2018, the company plans to put together a replacement program in line with the new policy, said one of the people.

Vodacom shares rose 0.6 percent to 151.95 rand as of 9:08 a.m. in Johannesburg on Thursday, valuing the company at R226 billion.

“It may be more optimal for Vodacom to buy its own shares back from the PIC and to implement a black empowerment offering with all the requisite groups” rather than a direct sale by the PIC, said Soria Hay, director of Bravura Capital in Johannesburg, which helps facilitate black economic empowerment transactions. 

PIC chief executive officer Dan Matjila

The PIC, which manages government worker pensions and is Africa’s biggest money manager with R1.86 trillion in assets, acquired the Vodacom stake from the government in 2015. The Pretoria-based company has considered previous sales to consortiums of prominent black business people, one of which included former senior Vodacom executive Romeo Kumalo.

Double Down

Vodacom’s new empowerment program would be double the size of the R7.5 billion plan that ends next year. Beneficiaries of that fund include employees and black-owned investment companies Royal Bafokeng Holdings and Thebe Investment Corporation who can sell their shares when the program ends. Cross town rival MTN Group Ltd. started a R9.9 billion empowerment plan at its South African unit last year that boosted its black ownership to more than 30 percent.

The governing African National Congress has pledged to ensure the country’s black majority secures a bigger stake in the economy as it seeks to claw back support lost in the wake of a succession of scandals implicating its leader, President Jacob Zuma. Many black South Africans are growing impatient at the slow distribution of wealth in an economy where whites still earn more than blacks and dominate the boards of most businesses.

“Radical economic transformation remains at the core of our economic strategy,” Zuma said at a rally this month to mark the ANC’s 105th anniversary. “More decisive steps must and will be taken to promote greater economic inclusion and to advance ownership and control and real leadership of the economy by black people.”

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