The initial public offering (IPO) in South African telecommunications company Telkom (TKG) raised R3,9-billion rand, but in US dollar terms this was less than $500-million, of which only half is expected to come from offshore. This prompted Standard Corporate and Merchant Bank (SCMB) senior treasury economist Goolam Ballim to say it was the signal that the Telkom IPO gave out to the world, rather than the actual flows, that were important.
“The size of the money coming in is not significant, rather it is the signal that the government is giving to the investment community that is important. In my opinion, the government was giving away a crown jewel at a discount, but it is necessary to do this, so as to show the world that it is committed to privatisation and is not beholden to narrow sectoral interests such as the trade unions,” Ballim told I-Net Bridge.
“The other signal is that it is committed to free markets and socioeconomic redress, as shown by the discount offer to previously disadvantaged individuals. The impact on the rand will be negligible, as the proceeds will be sterilised by the South African Reserve Bank and, in any event, we are seeing large inflows from other sources,” Ballim said.
Data released on Monday showed South Africa had a record balance of payments surplus last year of R37,5-billion, or 3,4% of gross domestic product (GDP) of R1 099 trillion.
The record surplus follows a surplus of R5,182-billion in 2001 after a R5,114-billion surplus in 2000 and a massive R25,865-billion surplus in 1999.
The large BOP surplus in 2002 was one of the reasons why the rand strengthened by more than 75% against the US dollar, from a worst level of R13,86 per dollar on December 20, 2001, to a best level of R7,8752 per dollar on Tuesday. – I-Net Bridge