South Africa Sells Vodacom Stake to Help Rescue Eskom

By Patrick McGroarty 

JOHANNESBURG--South Africa's government has sold its 14% stake in mobile operator Vodacom Group Ltd., raising around $2 billion in cash to help refinance the country's beleaguered state-owned power provider.

South Africa's Finance Ministry said on Wednesday that the shares were sold to the Public Investment Corporation, which oversees South Africa's $140 billion government pension fund.

The proceeds from the sale of the shares in Vodacom, 65%-owned by U.K.-based telecom group Vodafone PLC, will fund a $1.9 billion cash injection to Eskom Holdings Ltd., the ministry said, and help cover the conversion of a $5 billion government loan to the power provider into equity.

"These measures will further strengthen the company's balance sheet and will be complemented by cost reductions by Eskom," the ministry said.

Since late last year, a series of breakdowns at Eskom's outdated fleet of power plants has regularly plunged South African communities and factories into darkness. Economists say the frequent blackouts could drag economic output below 2% this year.

As a result, Eskom's credit rating has fallen into "junk" territory, and the company has had trouble financing its operations and paying for overdue maintenance. This week another arm of South Africa's government blocked Eskom from hiking electricity levies.

Write to Patrick McGroarty at [e-mail]

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