Telkom sale still controversial

Johannesburg, 06 May 2005

The sale of a 10.1% stake in Telkom to a consortium headed by former communications director-general Andile Ngcaba may have provided the market with some certainty about the stake, but the deal remains controversial.

The Public Investment Corporation`s (PIC`s) decision to stipulate that Ngcaba`s Elephant Consortium must find a way to distribute a 3.37% Telkom shareholding to broad-based empowerment beneficiaries is regarded by most as praiseworthy.

This has been interpreted to signify the PIC has recognised that the consortium does not have a broad enough empowerment base and wants to be certain the deal benefits not only those who some critics have referred to as "the already empowered few".

However, at current share prices, the 6.7% retained by the Elephant Consortium is itself worth more than R4 billion - which lends credence to the argument that empowerment is little more than a pyramid, with the few at the top taking the lion`s share of the benefits, and the benefits getting smaller and smaller as you go down the pyramid.

And there are those who argue that as the money at the top generates even more money, the gap between the rich and the poor becomes wider, with those truly needing empowerment still longing for the crumbs that may or may not come their way.

That`s just plain capitalism under the name of empowerment, the critics say.

When it was first announced last year that the Elephant Consortium would buy the stake, trade union umbrella body Cosatu condemned the deal, saying it "will do nothing to help the overwhelming majority of South Africans and it epitomises the very worst form of so-called 'black empowerment`, which benefits only a tiny elite".

But the Ngcaba affair has also raised other questions that go beyond mere empowerment. And these have yet to be settled to the satisfaction of all parties.

When it was first announced that the Elephant Consortium would buy the stake, there were cries of outrage stemming from the fact that Ngcaba formerly held the top post in the communications department.

Cosatu has said in the past that Ngcaba`s involvement raises fundamental questions about the involvement of former and present government and political leaders in share buying schemes.

This is a point that has not yet been settled, and the fact that ANC spokesman Smuts Ngonyama, who brokered the original deal, is also a shareholder, has only exacerbated concerns of people close to government taking stakes in private entities.

Related story:
PIC sale boosts Telkom share