The past year has been a relatively quiet one for empowerment deals in the information and communications technology (ICT) sector. The industry has gone into something of a holding pattern as it waits for the long-delayed ICT charter to be finalised in accordance with the department of trade & industry's codes of good practice, which were finished in early February.
Roger Dawes, executive director of the Electronics Industries Federation, is closely involved in the process of harmonising the charter with the codes of good practice. He says delays in getting the codes and charter finalised have caused a great deal of frustration in the industry.
Dawes told the FM in mid-February, soon before Top Empowerment Companies went to print, that he hoped the process would be fast-tracked and completed within a matter of months. He said pressure to have the charter finished was also coming from communications minister Ivy Matsepe-Casaburri.
Dawes said he did not believe that big changes would have to be made to the final draft of the ICT charter to bring it in line with the codes.
With the final charter expected in the next few months, 2007 is shaping up to be a much more interesting year than 2006 as companies in the sector ensure they are compliant with all aspects of the charter.
Most IT and telecom companies have already concluded equity deals in one form or another in the past few years, though industry analysts say many could do a lot more to meet other empowerment requirements.
There is still one deal to come, though, which will overshadow all others this year - Vodacom's proposed empowerment transaction.
This deal will see its two shareholders, Vodafone of the UK and (possibly) fixed-line operator Telkom, each of which holds 50%, selling equity worth about R7,5bn in the cellular operator. Rand Merchant Bank is advising Vodacom on the deal.
Vodacom management has been tasked with submitting proposals to the group's board - in other words, to Telkom and Vodafone - which it was hoping to do sometime in March.
Vodacom Group chief of mergers & acquisitions Nku Nyembezi-Heita is overseeing the proposed transaction. Group CEO Alan Knott-Craig said in February that a large number of applications had been received from empowerment entities interested in taking part in the deal.
Telkom, which already has strong empowerment credentials (it has previously been named SA's top empowerment company though it has slipped in the past two years), says it plans to step up its efforts to transform itself and exert its influence in the broader ICT sector to force others to transform faster, too.
Lawrence Maswabi, group executive for procurement services at Telkom, told the FM in early February that the company hoped to have announced what he described as "breakthrough empowerment initiatives" by the end of March. "It will involve US suppliers who have been giving us problems coming to the party on the ownership side." Telkom CEO Papi Molotsane promised last year, in an interview with the FM, that he would put pressure on multinational IT and telecom equipment suppliers to sell equity in their SA operations to black shareholders.
Most suppliers have strongly resisted such proposals in the past. But Telkom has tremendous power to influence the course of empowerment, not only in the ICT sector, but across all business sectors, through its procurement spend. In the year to March 2006, it spent R9,5bn on procurement.
But US multinationals have long complained that it is not possible for them to sell equity because US laws, aimed at stamping out corporate malfeasance in the wake of the Enron and WorldCom scandals, as well as other rules and regulations, prevent them from doing so.
Maswabi says Telkom is close to reaching a meaningful agreement with these companies that would allow for equity participation by black shareholders, making it possible for them to be operationally involved in the businesses.
"We will be insistent on real equity," Maswabi says. "We will go further than the ICT charter demands of us in this regard."
Telkom also wants to work with international suppliers to foster and support local manufacturing enterprises - companies that do basic assembly of small components and repair work.
Telkom already provides a lot of work to Molapo (formerly known as Telkom Workshops but now owned by black shareholders). Molapo does most of the repair work to the company's technical equipment. Another area where Telkom wants to work with multinationals is in training graduates.
