Former director general of communications Andile Ngcaba, African National Congress head of the presidency Smuts Ngonyama, and the Public Investment Corporation (PIC) will all do very nicely out of a deal to transfer 15,1% of Telkom to empowerment groups — but the benefits will be more widely spread than Ngcaba initially envisaged.
Jim Myers, an American national and former Telkom executive, has been confirmed as the largest white beneficiary of the black empowerment deal, as reported in the Mail & Guardian last year
The PIC, which has been ”warehousing” the R9-billion stake since November last year, announced on Thursday that it would be selling just less than half of the 83,5-million shares, or 6,7% of Telkom, to the Elephant Consortium led by Ngcaba and Wiphold CEO Gloria Serobe.
The PIC will make a profit of R1,5-billion, thanks to the appreciation of Telkom shares and the price it has extracted from the consortium. It will also hang onto a third of the stake, or 5% of Telkom, for its own portfolio.
The remaining 3,3% will be transferred to a broad-based consortium yet to be assembled.
The deal attracted intense controversy when it was first announced last year, with the Congress of South African Trade Unions (Cosatu) lambasting the use of government pension funds to ”grease the wheels” of elite empowerment.
But the women’s wing of the South African Democratic Teachers Union (Sadtu) has emerged as a beneficiary of the deal. Sadtu is a Cosatu affiliate. Ngcaba’s role attracted particular scrutiny, with concern focusing on the apparent revolving door between the government and the private sector.
During his tenure at the Department of Communications Ngcaba was the chief architect of Telkom’s privatisation, and critics said he now stood to accrue massive private wealth as a result of policies he had designed.
As chairperson of IT giant Didata, a major competitor of Telkom, he also appeared to have sharp commercial conflicts of interests.
Despite a 33% reduction in his stake, Ngcaba and other associates, including Dali Tambo, will hold roughly 2,3% of Telkom before financing costs are deducted — a stake worth about R1,4-billion at current prices.
He benefits through the Lion Consortium, which owns one half of Elephant. Ngcaba holds 70% of Lion, with the other 30% set aside for a broad-based group.
Ngonyama and other prominent individuals are shareholders through Buffalo, which is led by Wiphold, and includes several smaller players.
Ngonyama is among the more controversial beneficiaries. He had previously told various newspapers, including the M&G, that he helped facilitate the deal but was not sure how he would be compensated, if at all. It is now clear that he is one of a group of ”strategic individuals” within the Buffalo consortium.
”I participated [in initial negotiations] and went back to my responsibilities [at the ANC], but the group has decided to recognise me as part of the Buffalo consortium,” he said on Thursday.
Ngonyama acted as a go-between during the period when the Serobe consortium was competing with Ngcaba for the stake.
Said Serobe: ”The worst you can do to a black person is give him something minor. So whatever it is, it will be meaningful.”
Ngonyama said he was not sure what role he would play, or exactly what his shareholding would be. He expected to learn the details shortly.
Initial indications of Ngonyama’s involvement were greeted with outrage by the ANC’s alliance partners, with Cosatu general secretary Zwelinzima Vavi accusing him of participating in the ”parasitic accumulation of capital”.
As the M&G reported in December, other prominent players in the Buffalo consortium are Dali Mpofu, who is leading the development of an empowerment charter for the technology and communications sector, and Barend Hendriks, a Cape Town-based businessman with strong links to the ruling party.
Myers, the Texan who together with Ngcaba was closely involved in the partial privatisation of Telkom and its listing on the JSE Securities Exchange, is in, despite initial PIC queries about his inclusion. Elephant initially attempted to justify his involvement on the basis that the consortium would control one of the two ”golden shares” that granted the government, and Thintana — effectively Myers’s former employer — control of Telkom.
But the conflicts of interests arising from his involvement in the second network operator, combined with the fact that he is not a South African (and not black either) are likely to raise post-deal debates.
The total size of the stake going to individuals in Buffalo has also been trimmed back in favour of the relatively broad-based Wiphold, apparently at the PIC’s behest. The company — which has a broad base built into its shareholding — now gets 40% of the Buffalo stake, according to sources familiar with the restructuring of the consortium. That is more than double the 18% originally set aside for it, and amounts to 1,4% of Telkom.
African Venture Partners (AVP), a Johannesburg investment firm run largely by expatriate Americans, is also a participant. AVP’s Colin Clarke confirmed that the company held a stake, but he would not say whether the 12% of Buffalo it originally planned to acquire remained unchanged.