ECONOMY: Strong Public Interest in South Africa’s Telcom

By IPS Correspondents Reprint | | Print |

Anthony Stoppard

JOHANNESBURG, Jan 23 2003 (IPS) - It may not have been a referendum on South Africa’s economic policy, but the government is taking surprisingly strong public interest in its plans to sell part of the state-owned telecommunications company, Telkom, as an endorsement of its plans to restructure and privatise state companies.

At least a million South Africans have registered their interest in buying shares when government lists the state-owned telecommunications company on the Johannesburg Securities Exchange (JSE) and the New York Stock Exchange.

The date for the listing will be announced next week.

The South African Minister of Public Enterprises, Jeff Radebe, says the ”phenomenal” response to the Telkom Initial Public Offering (IPO), indicated ”a real thirst” for financial and investment knowledge among ordinary South Africans. ”This is a resounding vote of support for our broad programme of restructuring,” he added. He was speaking at a press briefing on preparations for the initial public offering, on Tuesday.

Government has run into strong opposition to its relatively conservative economic policies – especially its plans to sell-off parts of a number of state-owned enterprises – from its political ally, the 1.8 million strong Congress of South African Trade Unions (COSATU). The labour federation is vehemently opposed to privatisation – on the grounds that it will result in job cut in the companies.

The federation also argues that government should continue to control utilities that provide essential services to South Africans not private companies who may price services out of the reach of the poor as they squeeze people for profits.

COSATU has already called three general strikes to protest government’s privatisation policy with limited success. This week, the federation warned that it would continue with its opposition to government’s economic policy, despite planned talks between the two about how best to create jobs and boost the South African economy..

Government insists that its privatisation programme is a vital part of its efforts to give black South Africans, who were generally excluded from the country’s economy under apartheid, a stake in the wealth of the country.

”We can state with confidence that our programme to ensure the active involvement of non-traditional investors has succeeded,” says Radebe.

Government ran a widespread communications campaign to get people to register for the listing, which included courses to introduce people to how businesses and financial and investment markets work.

As part of the country’s efforts to economically empower black South Africans, a number of big private companies have launched schemes to get them to invest in the country’s stock exchange. These schemes have generally been well-received.

The listing of Telkom includes a dedicated offer targeting historically disadvantaged individuals in South Africa. In fact, government had to do some fancy foot-work after a predominantly white, professional union, Solidarity, objected to state plans to give black South African access to shares through preferential arrangements. The union argued that wealthy black South Africans should not receive preferential access to the shares.

After discussions between government and Solidarity, state shifted the emphasis of the preferential arrangements to cater for the country’s poor – the majority of who are black. In return, Solidarity dropped a threatened court action against the government scheme. ”We are confident that there will be no discrimination on the grounds of race and that poor people of all races will be able to benefit from the Telkom share offer,” said Solidarity Union spokesperson, Kallie Kriel.

The selling-off of state-owned assets is also a vital part of government plans to boost the country’s economic growth and improve the lot of poor South Africans, by allowing it to raise funds for social expenditure, without increasing its debt. However, critics of the privatisation policy point out that government has already earmarked some of the proceeds from privatisation for reducing the national deficit, and not for increasing spending on social services.

Officials from the South African Department of Public Enterprises have refused to be drawn on how much government may raise through the listing of the telecommunications company. Economists expect government to raise as much as R6 billion (686 million U.S. dollars) for its stake in Telkom, when the listing goes ahead.

Besides its telecommunication company, government has also announced plans to sell-off parts of state transport corporation, Transnet; power company, Eskom; and arms manufacturer, Denel.