Datatec in discussions over black investment
July 20, 2004
By Gugulakhe Masango
Johannesburg - Datatec, the country`s second-largest information technology (IT) services group, yesterday said it was in talks that would lead to the sale of equity stakes in its local businesses to black empowerment partners.
The local operations are RangeGate, which is a mobile services and solutions firm, and Westcon AME (Africa Middle East), a value-added networking distributor whose operations reflect those of Datatec`s US-based subsidiary Westcon Group.
Datatec`s international operations generate about 97 percent of its total revenue of $2.3 billion (R13.4 billion) and $23.8 million operating profit for the year to February.
The local operations contributed only 3 percent of the group`s turnover and operating profit.
David Pfaff, Datatec`s financial director, said the local businesses had started a process of bringing in an empowerment partner.
`We are talking to different parties interested in acquiring an equity stake in both of our local businesses at the moment,` he said.
Asked about the timeline on finalising the empowerment transactions, Pfaff said: `Its very difficult to put a deadline.`
The company sold its other local subsidiary, Affinity Logic, last July for R19 million to local software and computer services group UCS.
Johan Snyman, an IT analyst at First South Securities, said it made sense for Datatec to bring empowerment to its local operations given that 97 percent of its revenue was generated offshore.
He said empowerment should be at the level where partners would deal directly with the business.
Datatec`s competitor, Business Connexion, is already benefiting from empowerment. Dimension Data is expected to finalise soon its empowerment transaction with a consortium led by a former director-general in the communications department, Andile Ngcaba.
The IT companies with empowerment partners are benefiting from procuring businesses from the State Information Technology Agency, the state-owned IT procurement firm, and others will also see benefits once they strengthen their empowerment credentials.
The process of empowerment in the IT sector has been given impetus by the drafting of the information and communications technology sector empowerment charter.
The main focus of the charter is local operations, and there is speculation that even foreign firms may have to sell a stake in their South African businesses.
Datatec is a prime example of a company that was established in the country but now has all its assets based in the US and Europe.
Datatec lost 5c to close at R3.05 in Johannesburg yesterday. The software and computer services sector of the JSE Securities Exchange lost 1.76 percent.
Profile Group (Pty) Ltd. has taken care in preparing all information on this website, but does not accept any liability for errors or out-of-date information.
