Man­ag­ing con­flicts

Finweek English Edition - - INSIDE - Bruce Whit­field brucew@fin­week.co.za

Phuti Ma­hanyele, the CEO of Shan­duka, the Cyril Ramaphosa-run in­vest­ment com­pany, which last month bought a sig­nif­i­cant mi­nor­ity stake in MTN Nigeria, is in a ro­man­tic re­la­tion­ship with Si­fiso Dabengwa the pres­i­dent and CEO of MTN. MTN is the 78.8% con­trol­ling share­holder of the West African busi­ness.

The cou­ple share a home in the ul­tra­high net worth Jo­han­nes­burg en­clave of Sand­hurst. The na­ture of their per­sonal re­la­tion­ship is rel­e­vant in the con­text of a grow­ing list of po­ten­tial con­flicts of in­ter­est and gov­er­nance ques­tions emerg­ing from Shan­duka’s ac­qui­si­tion, from third par­ties, of a sig­nif­i­cant mi­nor­ity stake in the Nige­rian sub­sidiary.

MTN has ac­tively sought to dis­tance it­self from the trans­ac­tion as it says it was not in­volved in ei­ther the sale or pur­chase of the shares. How­ever, Ramaphosa’s inf lu­ence over both boards and now the rev­e­la­tion of the per­sonal re­la­tion­ship be­tween the re­spec­tive CEOs, do raise se­ri­ous ad­di­tional ques­tions about gov­er­nance around t he t rans­ac­tion. MTN de­clined to com­ment on the per­sonal re­la­tion­ship be­tween the CEOs but did not deny its ex­is­tence.

Former trade union­ist Ramaphosa, now Africa’s 36th rich­est res­i­dent ac­cord­ing to

Forbes mag­a­zine and re­cently touted as a po­lit­i­cal front-run­ner for the post of deputy pres­i­dent at the ANC’s Man­gaung con­fer­ence, is ex­ec­u­tive chair­man of Shan­duka and is listed by MTN as its in­de­pen­dent non-ex­ec­u­tive chair­man.

Shan­duka, which owns 0.45% of MTN Group, an­nounced late last month that it had made a $335m in­vest­ment in MTN Nigeria. Dabengwa was CEO of the Nige­rian busi­ness from 2004 to 2006 and would thus have an in­ti­mate work­ing knowl­edge of the op­er­a­tions and in­vest­ment po­ten­tial. MTN dis­closed in Oc­to­ber that sub­scriber num­bers across its Africa and Mid­dle East net­work were within a hair’s breadth of 183m. Its sin­gle largest mar­ket is Nigeria, which has more than a quar­ter of all group sub­scribers – nearly twice the num­ber it has in South Africa.

Shan­duka has not dis­closed the size of its MTN Nigeria hold­ing but the per­cent­age stake is be­lieved to be in high sin­gle dig­its. The sub­sidiary has other mi­nor­ity in­vestors, in­clud­ing lo­cal Nige­ri­ans and domestic fi­nan­cial in­sti­tu­tions, but shares are also traded OTC (over the counter).

Shan­duka’s nearly R3bn in­vest­ment, through its Mau­ri­tian sub­sidiary, is the com­pany’s big­gest out­side SA to date. Shan­duka it­self is 25% owned by the China In­vest­ment Cor­po­ra­tion, which last year paid $226m for a quar­ter of the com­pany valu­ing it around $1bn.

Ma­hanyele told Sum­mit Tele­vi­sion that the deal was like any other rou­tine trans­ac­tion in that Shan­duka had been ap­proached by Stan­dard Char­tered and an­other ad­viser in Nigeria on be­half of third par­ties. MTN says due process was fol­lowed in terms of the share­hold­ers agree­ment of MTN Nigeria in which the third party shares were f irst of­fered to other lo­cal Nige­rian mi­nor­ity share­hold­ers in terms of a pre-emp­tive rights of­fer. When they de­clined, and in ac­cor­dance with the process, the shares were of­fered to and de­clined by MTN In­ter­na­tional, a wholly- owned sub­sidiary of MTN Group.

“MTN g r oup c ha i r man, Cyri l Ramaphosa, was not party to the dis­cus­sions re­lat­ing to the waiver of MTN In­ter­na­tional’s pre-emp­tive rights and re­cused him­self from the vote on the rel­e­vant MTN group board res­o­lu­tion. The Group thus re­jects spec­u­la­tive com­men­tary which sug­gested that there may have been a conf lict of in­ter­est in the trans­ac­tion,” said Paul Norman, MTN group chief HR and cor­po­rate af­fairs of­fi­cer.

The per­sonal re­la­tion­ship be­tween Ma­hanyele and Dabengwa brings a new layer of com­plex­ity to the way in which the deal was con­sum­mated and raises is­sues on fu­ture gov­er­nance.

“The trans­ac­tion is just one el­e­ment of this ques­tion, the big is­sue is how the conf lict will be man­aged into the fu­ture,” says An­sie Romhalo, CEO of the In­sti­tute of Direc­tors.

MTN said in a writ­ten re­sponse to how gov­er­nance around the trans­ac­tion would be man­aged in the light of the per­sonal re­la­tion­ship be­tween the CEOs: “MTN Group man­ages conf lict of in­ter­est in ac­cor­dance with the re­quire­ments of the Com­pa­nies Act No71 of 2008. Where direc­tors have a per­sonal fi­nan­cial in­ter­est in re­la­tion to mat­ters that are un­der the con­sid­er­a­tion by the Board, the na­ture of such in­ter­est is dis­closed and the rel­e­vant mem­ber/s are re­cused from the sec­tion of the meet­ing where such mat­ters are dis­cussed.”

Cyril Ramaphosa

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