MTN gets wish with finance rules change

Johannesburg, 30 Oct 2002

Cellular group MTN and its rival Vodacom are among the local companies that stand to gain as restrictions on the outflow of capital are relaxed.

Finance minister Trevor Manuel yesterday told Parliament that the allowance for South African corporations investing elsewhere on the continent would be increased from the current R750 million, to R2 billion with immediate effect. The allowance has also been expanded to include top-up funding on existing investments.

Such changes had been expected for some time but were delayed while the Commission of Inquiry into the rapid depreciation of the rand concluded its work.

The news was immediately welcomed by the MTN Group, which has identified its roughly R2 billion in unhedged offshore debt as one of the most important issues it faces. Much of the debt is due to massive capital investments into the relatively new MTN Nigeria venture and is denominated in dollars.

"The announcement enables MTN to improve our capital structure by reducing our dollar exposure to more acceptable limits," said CEO Phuthuma Nhleko in a statement shortly after Manuel`s speech.

Shareholders and analysts have also long been concerned about the company`s offshore debt and the impact currency fluctuations could have while billions are poured into Nigeria.

However, the company has throughout remained optimistic that it would receive special permission to move funds offshore if the controls were not relaxed, citing SA`s political commitment to African development.

Fellow operator Vodacom has also invested in African countries such as the Democratic Republic of Congo and recently won a cellular licence in Mozambique.