Zuma risks falling out with COSATU in the Vodacom listing

PRETORIA (Reuters) – A South African court threw out on Sunday a bid by powerful trade union federation COSATU to block Monday's listing of mobile phone company Vodacom, one of the country's largest stock exchange debuts.

"I am not going to issue an interdict to COSATU," Judge John Murphey told the High Court in Pretoria. "I dismiss the application with costs."

COSATU said it was "disappointed and angry" at the decision, which will allow British mobile phone giant Vodafone

to increase to 65 percent its stake in Vodacom, the largest mobile operator in Africa’s biggest economy.

The trade union group, which regards new President Jacob Zuma as a political ally, urged consumers to boycott Vodacom, which some analysts have valued at 70 billion rand.

"The fight goes on. We shall use all possible legal means to prevent the sale of this South African company and to protect the jobs of the workers," COSATU spokesman Patrick Craven told reporters outside the court.

Vodacom said it welcomed the decision and looked forward to the listing as planned.

Halting the deal on its eve would have dealt a huge blow to South Africa’s credentials as an investor-friendly emerging market and intensified fears of resurgent union clout under ANC leader Zuma, inaugurated as president on May 9. 

An injunction would also have hit the rand since Vodafone has already brought 20.5 billion rand into the country to buy a 15 percent stake in Vodacom, the latter’s lawyers told the hearing.

The listing is the final part of a plan by fixed-line operator Telkom to get rid of its 50 percent stake in its mobile subsidiary, jointly owned by Vodafone.

Under the plan, Vodafone agreed to buy a 15 percent stake from Telkom, giving it a controlling 65 percent holding. Telkom will then distribute its remaining 35 percent to shareholders.

‘NO CASE’

COSATU and the South African Communist Party (SACP), officially part of the ANC-led government, have long opposed the deal on the grounds it threatens jobs and cedes control of a major South African company to a foreign corporation.

However, government lawyer S.A. Celliers said the Zuma administration stood by what had been agreed with Vodafone, and said COSATU’s attempt to scupper the deal was going nowhere.

"The prima facie case is not there to stop the listing," Celliers told the court. "There isn’t a case to start with."

The SACP also urged Vodacom customers to express their disapproval at the "scandalous act" by switching to other networks.

"Gone are the days when narrow transactions would be undertaken in the interest of the parasitic bourgeoisie," it said. "We have entered an era where it must be people first."  

The ruling leaves major question marks over the Independent Communications Authority of South Africa (ICASA), the industry watchdog, which said in April the deal did not need its approval — before suddenly changing its mind on Friday.

The rand fell as much as 3 percent after ICASA’s shock announcement amid fears it was an early sign of the unions and the left wing of Zuma’s ruling ANC flexing their muscles.

The opposition Democratic Alliance attacked ICASA’s volte face and its demand for public hearings as a "direct assault on any attempt to encourage foreign investment in South Africa."

"To behave in such a ham-fisted fashion sends precisely the wrong signal to foreign investors," said the party, which came a distant second to the ANC in last month’s election.