Vodacom: ANC's elephant hunt
For investors, cellphone users and citizens baffled by the last weekend’s attempt to torpedo the stock exchange listing of Vodacom, an Elephant shaped answer is now appearing.
The ANC and its alliance partners in the SACP and union federation Cosatu have for months been fretting that former members of the governing party would use the listing to cash in on their involvement in the controversial Elephant Consortium, and ultimately to fund the breakaway Congress of the People (Cope).
The consortium was formed to take advantage of an empowerment deal that handed it 7% of Telkom, massively enriching key ANC figures, several of whom are now closely associated with the Cope breakaway.
Among them are former ANC spin-doctor Smuts Ngonyama and Wipcapital boss Gloria Serobe. Former director general of the Department of Communications Lyndall Shope-Mafole, who is now a senior Cope leader, was an important player in the regulatory discussions that lead to government approval for the listing. Another senior Wipcapital and Cope figure is Wendy Luhabe, who is married to Mbhazima Shilowa, one of the Cope’s founders and deputy presidents.
The deal, which went ahead last week after the failure of an eleventh hour court challenge by communications regulator Icasa and Cosatu, sees Telkom offload a 15% stake in the cellphone giant to United Kingdom-based Vodafone (now a 65% shareholder) for R22,5-billion.
Telkom’s remaining 35% share was unbundled to its shareholders, including Elephant.
A simple calculation shows that the listing of Vodacom has unlocked more than half of the Elephant Consortium’s investment in Telkom, which it cannot trade until 2011, enabling members to realise substantial benefits two years ahead of schedule.
The consortium’s 2% share in Vodacom is worth just less than R1,7-billion and its dividend payments from Telkom R692-million. The total, R2,3-billion, exceeds its 7% shareholding in Telkom, which is valued at R2,2-billion.
It is that pool of assets which so exercised the ANC and the alliance ahead of the elections, and which many in the communications sector and the party believe was behind Icasa’s last-minute decision to reverse itself, and try to block the listing.
Documents doing the rounds in ANC circles, and discussions with sources close to the process suggest that there is considerable unhappiness that Cope rather than the ruling party might see the benefits of the deal.
The documents, which the Mail & Guardian has seen, allege that Serobe and Ngonyama borrowed money against the payouts they were expecting from the Vodacom transaction to fund Cope’s election campaign.
“They borrowed heavily to fund Cope’s campaign using the Vodacom shares and dividends as leverage,” claimed an ANC source, echoing the document.
The M&G understands that SACP chief and Higher Education Minister Blade Nzimande has also raised the issue of Cope’s windfall from the Vodacom listing in alliance circles.
Some alliance members believe that with Cope having lost momentum during the elections, a further blow to its funding from the Elephant Consortium would kill the party.
Serobe, however, described the allegations as “mad” and “crazy”. She said she had no access to Vodacom shares or dividends, as Wiphold was the shareholder in Elephant, not she.
Another consortium insider argued that, given the debts owed to the financiers of the original Telkom deal, the windfall would not be as substantial as some in the ANC believed.
The consortium owes R2,8-billion of the deal’s financing costs, this person said. After the dividends paid by Telkom are ploughed back, the debt will stand at around R1,3-billion.
Cosatu president Sdumo Dlamini said this week that the labour federation had a list of individuals from both Cope and the ANC who would benefit from the deal.
Regardless of which party benefited, he said “we view this as looting and are prepared to fight it until the end”.
The Telkom empowerment deal has been mired in controversy since Elephant acquired its 7% Telkom stake in 2005, particularly over a decision by the state pension fund manager, the Public Investment Corporation, to warehouse consortium shares until Elephant directors found funding for the deal.
One ANC source said Cosatu had criticised the deal when it initially took place because individuals too close to the centre of power—at the time Thabo Mbeki—were being enriched.
Asked whether political interference by the ANC or government might explain Icasa’s about-face, he said he would not be surprised, adding: “Whether you will find fingerprints is another story.
“Sure it was about the individuals close to the centre, but it was also the fact that it was individuals not groups. More people should be empowered by such deals” said the source.
He added that “Smuts and Gloria were too close to the centre”.
Icasa has gone to ground, refusing to answer questions from the M&G last week.
It was not only prominent Cope figures who stood to benefit, however. Other beneficiaries include former ANC treasurer Mendi Msimang, Dali Mpofu and Mafika Sihlali, former SABC chief executive and head of legal services respectively. Former Department of Communications director general Andile Ngcaba, and ANC veteran Thandi Lujabe-Rankoe are also on the list.
However the Elephant insider told the M&G that Ngonyama had sold his Telkom shares before the election.
“Some of the shareholders have already sold their shares,” said the insider. “Smuts sold his shares two to three weeks after the deal was consummated.”
The insider claims that Ngonyama’s shares were housed in the secretive companies Clidet 531 and Clidet 532. These recently had their names changed to MMTB Investment Holdings and Indoni Investments.
The Sunday Times reported earlier this month that Alan Norman, a former Absa banker involved in the deal and later a dealmaker for the ANC under Msimang, had emerged as the sole director of Clidet companies and had a stake in both new entities.
Norman, Msimang and Rankoe have served as directors of MMTB and Indoni, which allegedly control at least a million Telkom shares.
“Alan Norman bought Smuts shares that were housed in the Clidet Companies,” said the insider, adding that Ngonyama had received a “healthy sum” of R6-million to R7-million for facilitating the deal.
However Dlamini told the M&G last week that Ngonyama had received R100-million for his role in facilitating the Elephant Consortium deal and that this money was used to form Cope.
The insider said shares were never transferred to the ANC. This had caused considerable unhappiness.
Some in the tripartite alliance have criticised the Cabinet’s endorsement of the Vodacom sale, with accusations that Shope-Mafole pushed the deal through.
Shope-Mafole said the decision to approve the deal was taken at a sensitive time, just before the elections, and that there were several Cabinet meetings about the deal.
“It was dealt with extensively.”
She said she had no idea if there had been political interference in the deal, but admitted that she was surprised that Icasa had changed tack so late.
Shope-Mafole did not want to comment on Icasa’s ability to resist political pressure. “I don’t want to second-guess what they would have done,” she said.
Cope spokesperson Philip Dexter said Ngonyama would not comment on the activities of the Elephant Consortium.
ANC treasurer general Mathews Phosa said: “We are not in a position to comment as we have not received any briefing on this matter. There is certainly nothing in the ANC’s books that relates to this deal.”
Cosatu targets Vodacom
Cosatu is threatening a nationwide strike in protest against cellular giant Vodacom’s listing on the JSE and the sale of Telkom shares in Vodacom to British-based Vodafone.
The listing, which followed Telkom’s R22,5-billion sale of 15% of Vodacom to Vodafone, is the biggest recorded by the JSE this year.
Business has welcomed the deal, but Cosatu believes it will result in job losses and that it was intended to benefit a few individuals linked to the Congress of the People (Cope).
The federation bases its objection on the fact that public hearings were not held to give interested party, including the unions, an opportunity to make representations.
Cosatu president Sdumo Dlamini said this week that Cosatu was considering serving a strike notice under section 77 of the Labour Relations Act at Nedlac to put pressure on Vodacom and Telkom to reconsider.
Cosatu has also warned it will launch a nationwide boycott of Vodacom products and services.
“We understand there are contracts in place, but if we want to protect the interests of the working class and black economic empowerment, we have to climb that mountain. We will not rest until we reach an amicable solution which benefits workers and the company,” said Dlamini.
He lambasted North Gauteng Judge John Murphy for rejecting Cosatu’s application for an urgent interdict to stop the listing of Vodacom and the sale of Telkom shares in Vodacom to Vodafone.
“It is disturbing that the judge conceded that Cosatu had a legitimate right to apply for such an interdict and that it might well have a good case for the public consultation on the Vodacom deal,” Dlamini said.
“Yet he considered that the potential damage done to Cosatu by being denied the right to be consulted as less than the potential financial damage to the respondents—Telkom, Vodacom and Vodafone—if he interdicted the deal.
“It was a victory for money over people. Cosatu was not just applying on its own behalf but to protect the interests of Vodacom workers and all South Africans.”
Dlamini argued the Telkom/Vodacom deal would set a precedent for other state assets to be sold off to foreign companies.
He said Vodafone was retrenching thousands of workers in Britain and was likely to do the same in South Africa.
However, former communications director general Lyndall Shope-Mafole said that when the Cabinet was considering the deal, Telkom and Vodacom had given an undertaking that no retrenchments would result from it.
Shope-Mafole said Cosatu had been involved in deliberations over the deal and that she had personally organised a workshop with the Communications Workers Union in Irene.