Vodacom to land R5bn government contract

Mobile-phone giant Vodacom has reportedly secured a tender to supply more than a million SA government employees for four years.

Johannesburg - Vodacom, Africa’s largest mobile-phone company by market value, has won an estimated R5 billion contract with the South African government as the National Treasury seeks to cut costs, according to three people familiar with the matter.

The tender is to supply as many as 1.3 million government employees for four years starting on September 15, said the people, who asked not to be identified as details of the deal haven’t yet been made public. If 400 000 government employees take up the service, the contract will be worth as much as R5 billion over the duration of the deal, one of the people said.

“Vodacom is honoured by the National Treasury’s decision to appoint us as a partner to government to deliver on the all-important task of enabling government to connect and communicate efficiently,” Chief Executive Officer Shameel Joosub said in emailed comments on Wednesday, without providing detail of the contract. “Our substantial investment in infrastructure and innovative capability will now be at the disposal of the state.”

The decision is intended to save the National Treasury money and have a reliable telecommunications supplier, according to one of the people. Finance Minister Pravin Gordhan said in his budget speech in February that the reduction of government costs is a priority. The state could save R25 billion a year through “belt tightening”, he said, including R500 million from changing cellphone policies.

Shares rise

For Vodacom, the deal will help increase its number of customers who pay for voice and data on a monthly basis, rather than on so-called pay-as-you go deals. The Johannesburg-based company had 35.1 million South Africa subscribers at the end of June, of which 30.1 million were lower spending, pre-paying customers.

Vodacom is 65 percent owned by Newbury, England-based Vodafone Group. The shares gained 1.2 percent by the close in Johannesburg on Wednesday, valuing the wireless carrier at R232 billion.

The stock rose 1.2 percent to R155.85 in Johannesburg on Wednesday, the highest level since August 18, and compared with a 0.6 percent slump in the FTSE/JSE Africa All Share Index.

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