Telkom SA Deal 'Boosts COPE War Chest'

Mergers, Acquisitions and Financial Results

The South African Communist Party (SACP) has called for Telkom's deal with Vodafone to be cancelled, saying the manner in which it was put together was not illegal but highly unethical.

The party also criticised communications department director-general Lyndall Mafole-Shope, now a leading member of the African National Congress (ANC) breakaway group, Congress of the People (COPE), for rushing the deal through.

The SACP thought the proceeds of the deal were funding the war chest of COPE, SACP general secretary Blade Nzimande said last week after his party's central committee meeting at the weekend.

"We also call on the government to reverse the scandalous Telkom Christmas gift of Vodacom shares to private shareholders at a cut-price rate, and the selling of these to Vodafone. In particular, the role of the director-general in the department of communications, and of the former ANC presidency spokesperson Smuts Ngonyama and his Elephant Consortium, in this ripping off of what was once a national asset, requires close scrutiny.

"We believe that some of the proceeds of this hurried fire sale are finding their way into the war chest of the Shikota gang of three," Nzimande told reporters.

Last month Telkom posted interim results showing R13bn of its R29.8bn revenue came from its 50% Vodacom stake. The mobile operator contributed almost half of Telkom's R6,6bn operating profit by generating R3.2bn of the total. Once Telkom sells 15% of Vodacom to joint shareholder Vodafone and unbundles the other 35% to its own shareholders, it will post far lower figures.

SACP deputy general secretary Jeremy Cronin questioned the haste, saying that the communications department was notoriously slow at transformation. "We have good reason to believe, but cannot prove, that the proceeds will go to the Shikota gang of three. But our concerns are not narrowly confined to Shikota and we are on record about fattening up state-owned enterprises and then rushing through fire sales," he said.

But Ngonyama dismissed the SACP's call saying it was nothing but a "smear campaign. They are wasting their time, they can investigate but will find nothing. This is a smear campaign against COPE by the SACP and it is consistent with their destructive campaign about anyone who disagrees with them. "

Ngonyama said Elephant Consortium bought the shares at market value from an overseas investment company so it was not even a black empowerment deal. Asked whether the SACP had concrete evidence of the allegations, Nzimande said it was public knowledge that Ngonyama benefited from Telkom shares sold at next to nothing.

"Telkom shareholders are not going to benefit. This deal has been done behind the backs of South Africans. Vodacom was the cash cow for Telkom. There is definitely more to this deal than meets the eye," he said. He also said Telkom's sale to Vodafone amounted to selling off the "family silver".

Business Day