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MTN employees demand answers over R4.3bn BEE deal

Samuel Mungadze
By Samuel Mungadze, Africa editor
Johannesburg, 17 Oct 2019
Phuthuma Nhleko, MTN Group chairman.
Phuthuma Nhleko, MTN Group chairman.

Telecoms group MTN has chosen to remain mum as current and former employees circle around the company, demanding answers over an empowerment transaction.

The employees are now heading to court after alleged failed attempts to get information from MTN regarding an employee ownership scheme implemented a decade ago.

At the core of the dispute is the allocation of dividends derived from the unbundling of the scheme worth more than R4 billion.

The employees, who are going by the moniker Tsunami Group, claim that in late 2002, company Newshelf 664 purchased 309 million shares in MTN at R13.89 a share, or R4.3 billion in total.

The Alpine Trust – which was headed by five MTN executives, including MTN Group chairman Phuthuma Nhleko and former CEO Sifiso Dabengwa – held Newshelf’s shares on behalf of the scheme’s 3 260 beneficiaries.

The Alpine Trust aimed to allocate 75% of the benefits to black MTN employees. But beneficiaries of the scheme have claimed the trust reduced the amount originally allocated to them without explaining its process.

The Tsunami Group claims the capital distribution to them remains incomplete and suspect.

Over the course of “several years”, and “many queries”, the employees claim they have to date been denied a full accounting by MTN.

Common law rights

According to documents seen by ITWeb, the Tsunami Group has since sought the expertise of a leading national expert in financial accounting and tax, professor Harvey Wainer, who has confirmed to the employees’ attorney that the information supplied to them by the trust is too limited to verify whether MTN had, in fact, “short-changed” the applicants.

When approached by ITWeb, MTN initially agreed to comment on the allegations last week but on Tuesday afternoon, after four days of consultations, Karen Byamugisha, senior specialist: external communications at MTN, in an e-mail said: “The matter is sub judice and we therefore have no further comments.”

The employees insist they have no choice but to vindicate their common law rights as capital beneficiaries. They want an order that forces MTN to give a detailed account of “the true capital, investments, income and expenditure of the trust; or interdictory relief to secure their rights pending an action for statement and debatement.”

The Tsunami Group is accusing MTN’s chairman and six other directors of “continuing breach of their common law duty to account; together with the dereliction of their duty of impartiality, including avoidance of conflicts of interest; and their duty of due diligence in maintaining prudent oversight of investments.

“It’s been a journey of about three years since we decided to pursue this matter legally. A group of current and ex-MTN employees decided to group themselves and start a class-action against MTN, Newshelf 664, the Alpine Trust and its directors. It’s been 10 years since this exploitation of employees and breach of BEE rules by MTN and its trusted partners,” reads the group’s statement.

Heads of arguments

Now, the Tsunami Group says this is “not complex as they make it out to be as we have the right to this information as beneficiaries of the Alpine Trust; it is clear why they would not want us to have a view of the financials as it would expose them, to say the least”.

According to the group, in July 2019 its legal team concluded and filed heads of arguments, which were sent Fluxmans Attorneys, which is representing the trust. “This effectively meant that the respondent had 10 court days to file their opposing practice note and heads of argument, and to date, they have been avoiding to file the same.”

The Tsunami Group says on 2 August, they claimed to have not received the e-mail sent to them on 18 July, drafted by their attorney (name known to ITWeb).

“From here on, it has been a comedy of excuses. The chairman of the Alpine Trust, Paul Jenkins, requested to meet with our attorney on a without prejudice basis and without the requested financials.

“Our legal team viewed this as a meeting that would bear no fruit if the financials were not going to be presented and Prof Weiner, being part of the team. Therefore, the meeting request was rejected if the necessary documents were not going to be availed.”

Further, the Tsunami Group alleges MTN is using delaying tactics with the hope the complainants run out of funds and interest.

“Well, we are not going to run out of any of these; we have prepared for such, and we have seen it so often in South African courts,” reads the statement.

Another battle

This is the second time the leading telco on the continent has been accused by its employees of negotiating “empowerment deals in bad faith”.

At the beginning of August, ITWeb reported that employees working in MTN shops had expressed fears that the company intended to “dupe them into joblessness without proper consultation” through a proposed “black empowerment” transaction.

The company denied this, stating its objective with the project is not to close stores, but to rather increase, not only the company’s store footprint, but also its BBBEE ownership of MTN stores.

“The plan will see MTN increasing its number of stores in the coming two years, creating businesses for new owners and new job opportunities for new store employees. The opportunity for staff to apply to become a store owner is not a once-off opportunity,” Jacqui O’Sullivan, executive for corporate affairs at MTN, said at the time.

The Communication Workers Union dismissed the telco’s empowerment argument, saying: “MTN tabled its embarrassing transformation plan on BBBEE, where in all their franchised stores only one African happens to own their store.”

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