Move on unequal voting rights could hit Naspers
Reports that leading index provider MSCI is targeting companies with voting rights that favour select shareholders should worry almost every South African.
MSCI is reported to be considering reducing the weighting of companies that have unequal voting shares.
The company that springs to mind is Naspers, which is controlled through a structure that was put in place when the company was listed in the 1990s.
Far from being relaxed over the years, that structure was tightened after Jannie Mouton launched an almost successful bid for control in 2005. Unlisted A shares, which are held by a select group of parties, have 1,000 times the voting rights that listed N shares enjoy. This means Naspers’s control position is unassailable.
And it’s probably just the sort of place that a powerful Chinese company would be reasonably happy to rest a holding of 34%. The long relationship with chairman Koos Bekker must also help.
The fuss about Naspers’s control structure is understandable. It goes against most governance principles and was particularly irksome when used by the board at the 2017 annual general meeting to make it appear opposition to its controversial remuneration policy was not as steep as it actually was.
But any substantial interference with that control structure, or Bekker’s role in it, could disrupt Naspers’ valuable relationship with Tencent.
As one analyst said, the sale of 2% of Tencent might have demonstrated some shareholder freedom and generated more billions to pour into IT ventures, but it might also have stirred a hornet’s nest.
Analysts and shareholders will be eager to see the final results of chemicals group Omnia due to be released on Tuesday.
About 63% of revenue is earned in SA, with the remaining 37% mainly coming from the rest of Africa, Brazil and Australia. This means group earnings are heavily influenced by agriculture and mining cycles.
SA has suffered widespread drought in recent years. While this has eased in many parts of the country, crop production in the Eastern and Western Cape continues to be affected.
When it comes to mining, damaging policy moves by the government have nullified better global mineral commodities trade. This comes as the easing of the drought brought record maize harvests.
But excess maize production domestically and abroad raised maize stock levels, which led to weak export demand. Subsequent depressed maize prices meant that the profitability of farmers was squeezed, and this in turn led to margin pressure on fertiliser sales.
In the interim, SA’s poor GDP growth has buffeted the manufacturing sector, resulting in flat to declining sales of chemicals. Omnia is affected by all such peaks and troughs.
The group has finalised the acquisition of Oro Agri Opportunities for $100m. The US-based company makes nontoxic crop protection products, liquid fertilisers and soil conditioners.
Oro Agri operates in four major global agriculture regions and has production facilities in the US, Brazil and SA. This diversification should help Omnia stabilise market cycles.