South Africa’s reputation as a business-friendly economy is in tatters, thanks to a bid to block a R22.5-billion foreign investment — and the biggest listing on the stock exchange this year.
The Independent Communications Authority of SA (Icasa) and the country’s trade union federation Cosatu will this morning launch an urgent interdict to stop the listing of Vodacom, scheduled for tomorrow.
The listing, which now hangs in the balance, follows state-controlled Telkom,’s sale of 15% of Vodacom to UK telecommunications giant Vodafone for R22.5-billion.
Icasa shocked the markets on Friday when it reversed an earlier decision to approve the deal. The rand weakened by 3% immediately after the announcement. Rand slumps on Vodacom setback
The Vodafone deal values Vodacom at R150-billion, which would make it the seventh-biggest company on JSE.
In March the deal was approved by Telkom shareholders, who include government, before being approved by the Competition Commission. Icasa also gave the deal the nod, saying the deal did not need its approval, but suddenly changed its mind on Friday - less than a week after Zuma was inaugurated.
This despite several international road shows by President Jacob Zuma and senior ANC leaders, where they promised investors that it will be business as usual under his presidency.
Analysts have expressed dismay at the news, saying it sent the wrong message to investors. It sends a strong message that SA 'closed for investment'. The message that is sent is that SA does not offer a predictable, stable business environment.
ICT analyst Lindsey McDonald said the move would be viewed as meddling by the new government.
Analyst Dobek Pater said he was unsure about Icasa’s motives. “This is possibly a case of the new government applying pressure to block the deal.”
The deal, which would add to a growing list of leading South African companies to have relocated or sold big stakes to foreign investors in recent years, has been a hot political topic and is seen by business as a first test of the new government led by Jacob Zuma, president, which took office this week.
Blocking the listing less than 24 hours before it was due to go ahead would deal a huge blow to South Africa's credentials as an investor-friendly emerging market and intensify fears of renewed union power under new president Jacob Zuma.
Cosatu, which regards Zuma as a political ally, has long opposed the deal on the grounds that it threatens jobs and cedes control of a key South African company to a foreign firm.
Investors in South Africa are watching the new government’s first moves, especially after the appointment of senior trade unionists to economic policymaking positions – partly a response to the slow pace of poverty reduction under previous governments.
The rand fell as much as 3 percent amid fears that it was an early indication of the unions and the left wing of Zuma's ruling ANC being able to sway policy in Africa's biggest economy.
LATEST NEWS UPDATES
Vodacom threatened with boycott May 17 2009 21:04
The courts stopped Cosatu's objection to the R22.5bn listing of Vodacom dead in its tracks but the union is already plotting a consumer boycott.
Vodacom listing gets go-ahead May 17 2009 23:12
A judge has ruled against Cosatu's action to block Vodacom's listing, with government also taking sides against the labour movement.
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