What does Septem­ber re­ally earn?

Shares de­liv­ered to in­flate the Telkom CE’s to­tal pack­age to R27m

Finweek English Edition - - Companies & Markets - SIKONATHI MANTSHANTSHA

AF­TER TWO YEARS at the helm of Telkom, CE Reuben Septem­ber has been re­warded with free shares worth R8,1m in terms of a re­straint of trade agree­ment he en­tered into with South Africa’s telecom­mu­ni­ca­tions gi­ant. Septem­ber has taken de­liv­ery of 58 369 shares is­sued at an av­er­age R139/ share at the time of the grant (but now worth R113/share). He’s been at the helm of Telkom since April 2007, first as act­ing CE be­fore be­ing ap­pointed full time in Novem­ber of the same year.

The R8,1m Septem­ber re­ceived in Telkom shares adds to the R19,1m he was paid for run­ning Telkom in the year to March 2008.

Ex­plain­ing that pack­age at an AGM in Septem­ber last year, Telkom chair­man Shirley Lue Arnold said a “large part” of it was re­lated to a re­straint of trade agree­ment Telkom had en­tered into with its new CE.


The 2008 an­nual re­port states Septem­ber’s pack­age as a ba­sic re­mu­ner­a­tion of R2,4m (in­clud­ing R1,4m he was paid as act­ing CE), a per­for­mance bonus of R3,4m and “fringe and other ben­e­fits” of R13,2m.

Arnold said at the AGM that was a “one­off cost” as­so­ci­ated with a re­ten­tion bonus and a re­straint of trade. She said the agree­ment merely sought to bring the pub­lic util­ity in line with other listed com­pa­nies’ best prac­tice. How­ever, no ref­er­ence was made to any shares be­ing part of the agree­ment (Septem­ber al­ready held 7 155 shares last year), pos­si­bly mis­lead­ing share­hold­ers about his re­mu­ner­a­tion pack­age. That pushes Septem­ber’s re­mu­ner­a­tion for the 2008 fi­nan­cial year to more than R27m, a record for any Telkom ex­ec­u­tive.

Septem­ber’s pre­de­ces­sor – Papi Molot­sane – was paid a to­tal R12m dur­ing 2008 (the year he left) and R3,9m the pre­vi­ous year, while Sizwe Nx­as­ana was paid R6,6m in 2006. Pre­vi­ously, Telkom’s CEs didn’t en­ter into any re­straint of trade agree­ment.

The re­straint of trade agree­ment can also be blamed for the surge in Telkom’s re­mu­ner­a­tion costs for its direc­tors, from R7m in its 2007 fi­nan­cial year to R35,8m. That was the case even though its net prof­its fell 8,2% to R8,1bn.

Telkom didn’t re­spond to our writ­ten ques­tions un­til well af­ter the stip­u­lated dead­line, mean­ing that mi­nor­ity share­hold­ers are still in the dark as to what ex­actly their CE is paid. All its me­dia divi­sion would say is that it doesn’t com­ment on the re­mu­ner­a­tion pack­ages of direc­tors and re­ferred Fin­week to the com­pany sec­re­tary, who promised to re­spond in writ­ing.

It would be in­ter­est­ing to know if the R8,1m worth of shares Septem­ber re­ceived is in­deed a “one-off cost” in ad­di­tion to the other “one-off cost” Arnold told share­hold­ers about. Why did Telkom not men­tion the shares in Septem­ber’s pack­age in its an­nual re­port?

New Clicks’ Michael Har­vey sold 317 000 of his shares in the re­tailer, rais­ing R5,1m. Har­vey’s sale adds to a se­ries of share sales by New Clicks’ direc­tors since Jan­uary 2008. Over that pe­riod they recorded a net sale of 1,61m shares (at be­tween 1382c and 1650c/ share), hav­ing bought only 35 200 shares. The direc­tors’ trades re­veal well-timed trans­ac­tions, as the av­er­age prices recorded for the sale of shares are higher than New Clicks paid since May 2006, when it bought back and delisted a to­tal of 64,5m shares at an av­er­age price of 1362c/share, ac­cord­ing to the com­pany’s in­vestor re­la­tions depart­ment.

New Clicks’ re­tail ex­per­tise also shows in its De­cem­ber trad­ing up­date, is­sued in Jan­uary, which showed re­tail sales in­creased by 11,1% for the four months to end De­cem­ber 2008. That in­cludes a 13,1% jump in turnover at toi­letries and small house­hold re­tail arm Clicks. “The strong value of­fer in Clicks con­tin­ues to ap­peal to con­sumers who are un­der fi­nan­cial pres­sure,” is what New Clicks had to say about its ex­pe­ri­ence in the smaller items it sells. It said grow­ing re­turn on eq­uity by 35% to 40% re­mains its strate­gic ob­jec­tive.

Else­where, construction com­pany Sany­ati Hold­ings’ Rowan Crowie do­nated over 1,1m shares to pre­vi­ous em­ploy­ees of Ruth­con, which is now part of Sany­ati. Crowie held 50% of Ruth­con be­fore its sale to Sany­ati. “Dur­ing the ne­go­ti­a­tions, and in­cluded in the pur­chase and sale agree­ment was that the ven­dors would set up a trust and do­nate ap­prox­i­mately 3m shares to the pre­vi­ous em­ploy­ees of the com­pany,” says Sany­ati group fi­nan­cial di­rec­tor, Marc Krouse. He says de­lays in set­ting up the trust and “re­solv­ing all the le­gal and tax­a­tion is­sues” are the rea­son the shares have only just been trans­ferred.

Two In­vestec direc­tors, Hen­drik du Toit and Bradley Tap­nack, sold a com­bined R8,3m worth of the banker’s shares, both in Jo­han­nes­burg and Lon­don.

At min­ing com­pany Me­torex, Al­bert Bar­renechea and deputy chair­man Robert Still sub­scribed for R29m worth of shares at the claw­back of­fer price of 200c/share. The of­fer wasn’t fully sub­scribed and the un­sub­scribed 34m shares were al­lo­cated to the com­pany’s ma­jor share­hold­ers, among which are the Pub­lic In­vest­ment Cor­po­ra­tion, Stan­lib As­set Man­age­ment and Corona­tion As­set Man­age­ment.


Reuben Septem­ber

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