The South African government announced on Wednesday that it has sold its 13.91-percent stake in telecommunication company Vodacom so as to salvage cash-strapped electricity utility Eskom.
The sale of the Vodacom stake was the most viable option for ensuring that the government was able to swiftly realise the proceeds and inject equity into state-owned Eskom to bolster the utility while simultaneously ensuring the government was still able to deliver on its strategic objectives, the Department of Telecommunications said.
The stake was sold to the Public Investment Corporation (PIC), acting on behalf of the Government Employees Pension Fund (GEPF).
In arriving at a decision to dispose of its stake in Vodacom to the PIC, the government undertook a market sounding exercise where numerous organisations presented proposals for raising the funding to be allocated to Eskom, according to the department.
As previously indicated, the profits from the sale will be used to finance the 23-billion-rand (about 184-million-US-dollar) allocation to Eskom, the department said.
It said this gives expression to the commitment made in the 2015 Budget and the 2014 Medium Term Budget Policy Statement that funding of state owned companies would be in a deficit neutral manner.
Last week, Parliament passed the Eskom Special Appropriation Bill to enable the appropriation and the Eskom Subordinated Loan Special Appropriation Amendment Bill for the conversion of the subordinated loan into equity.
South Africa has been suffering from a worsening shortage of electricity supply due to Eskom's poor management.
Eskom, which provides more than 95 percent of the country's electricity, is on the verge of bankruptcy as it is struggling to keep the lights on.
In addition to the allocation of the 23 billion rand to Eskom, the government has committed to converting to equity the 60- billion-rand (about 480-million-US-dollar) subordinated loan that had previously been provided to Eskom.
These measures will further strengthen the company's balance sheet and will be complemented by cost reductions by Eskom and the utility applying for tariff adjustments through the normal regulatory processes, the department said.
On Monday, the National Energy Regulator of South Africa (NERSA) declined Eskom's most recent application for electricity price hike and has indicated the regulatory processes that should be followed by Eskom in applying for any future adjustments.