Statement by Jeff Radebe, Minister of Public Enterprises
Pretoria, 17 November 2000
Government's accelerated restructuring programme of State-Owned Enterprises (SOEs) announced in November 1999, underpins our endeavour to ensure macroeconomic stability for our country. We indicated that our focus would be on the Big four SOEs - Telkom, Transnet, Eskom and Denel. The rational for this focus was to make an effective impact in the critical sectors of our economy.
In August 2000, we unveiled a policy framework emphasising the benefits of restructuring and outlining our approach to competition and regulation, corporate governance and explicit objectives guiding the restructuring programme. Enhancing the competitiveness of SOEs, creating a wider ownership in the South African economy, attracting foreign direct investment, mobilising private sector capital and expertise, and promoting fair competition were among these objectives. Government reaffirmed its commitment to unlocking shareholder value and positioning the SOEs as centers of excellence in the global marketplace.
The contribution these state assets can make to developing our economy needs to be strengthened in order to fulfil the unambiguous need to redress the legacies of apartheid, widespread poverty and unemployment. The goal of restructuring, therefore, is to contribute to sustainable economic and social development through a mixed economy that is responsive to market incentives within a framework of socially integrated institutional mechanisms.
As part of maximising shareholder value, we have committed ourselves to contributing to the reduction of public sector borrowing thereby release resources for social delivery and spending on infrastructure.
We believe that the restructuring of major SOEs such as Telkom will not only unlock the much needed resources for social development, but will also lead to an injection of private sector capital, technology and expertise into the economy.
As we have said before, the Telkom IPO represents a significant landmark equity market transaction in the restructuring of SOEs and paves the way for other transactions of a similar nature. This IPO is therefore an important vehicle for South Africa to take its rightful place in the global economic market place, and will position Telkom as a global player in a rapidly developing industry and in the new economy.
The Global Co-ordinators shall be responsible for all preliminary planning and preparatory work necessary for the successful execution of the Telkom listing. This will include the following:
For the execution phase the Global Co-ordinator will advise on the following:
To execute a transaction of this magnitude, Government set out to appoint a Global Co-ordinator and hence the Request for Proposals (RFP) issued on 11 August 2000. Government was pleased to have attracted 10 bids from leading global investment banks with extensive experience in IPO's.
The selection process was underpinned by Government's determination to maintain and sustain clarity, efficiency and integrity in the IPO process. Although we announced on 23 October 2000 that the process would be complete by the end of November 2000, we are pleased that we are ahead of schedule. The Department of Public Enterprises made every effort to ensure that the process was robust and rigorous. Appropriate checks and balances were in place to enable government to delivering a selection process that was beyond reproach.
The selection process started with the appointment of an independent audit firm, KPMG, which was present from the opening of the bid documents to the completion of the selection process. The audit firm observed the Phase One selection process and satisfied themselves that the scoring process was based on a robust assessment of the proposals using the evaluation criteria outlined in the RFP. The outcome of Phase One of the selection process was announced on 23 October 2000 with five bidders short-listed for Phase Two of the selection process.
The five short-listed bidders were invited to make presentation to a selection panel comprising of senior officials from the Departments of Public Enterprises, Communications and the National Treasury. Due to the combined efforts of officials from these departments, we are in a position to announce the outcome of the selection process ahead of schedule. The Global Co- ordinator selected is subject to negotiating the detailed terms of engagement.
The selection panel in Phase two came to the conclusion that Government's objectives in the Telkom IPO will be optimised by appointing joint Global Co- ordinators. The choice of two Global Co-ordinators will expose Government to a wider range of options, and will ensure broader investor base and penetration. Furthermore, two Global Co-ordinators will expose Government to wider research capacity and sale teams. We are also of the view that the winning bidders have complimentary strengths in the European and North American equity and capital markets.
Government is of the view that all the bidders were competent enough to manage this transaction, however any competitive process will always have winners and losers. Government is therefore pleased to announce the two winning bidders, who will execute the Telkom IPO as joint Global Co-ordinators.
The winning bidders are led by Deutsche Bank and J P Morgan.
The Department of Public Enterprises has already established the institutional mechanism in government to project manage the Telkom IPO and any subsequent transactions. Preparations are already in advance in the IPO Office for the Telkom listing. With the appointment of the policy advisor on Telecommunication sector, Government is confident that the policy and regulatory framework will be in place well in advance to the listing. Finally I would like to express my gratitude to the three Department - my Department, National Treasury and Communications for the professional and efficient manner in which the first phase of this transaction has been conducted. The real work can now begin.