MTN Zakhele-Futhi scheme 'inconsistent with B-BBEE aims'
The broad-based BEE (B-BBEE) commission on Thursday found that mobile operator MTN’s black economic empowerment scheme, Zakhele-Futhi, does not comply with the objectives of the Empowerment Act on the basis of a number of restrictions placed on black shareholders.
The government commission on empowerment says this finding follows an investigation of a complaint lodged in 2017 against MTN Group.
MTN launched the empowerment scheme in 2016 valued close to R10 billion, making subscribers of the scheme 4% shareholders in MTN.
It was intended to afford qualifying black individuals and groups the opportunity to apply for shares at a discounted rate.
But according to the B-BBEE commission, the restrictions and limitations placed on the black shareholders are at odds with the requirements for ownership in the codes of good practice.
It adds that following concerns about the scheme relating to compliance with the ownership scorecard, informed by its mandate under the B-BBEE Act, the commission had several correspondence and engagements with MTN regarding the contents of this ownership transaction to exclude speculations regarding its non-compliance with the B-BBEE Act.
According to the commission, this process led to a formal investigation to determine whether the MTN Zakhele and Zakhele-Futhi schemes meet the requirements for black ownership elements in compliance with the B-BBEE Act.
“The commission found that the black ownership held through MTN Zakhele-Futhi is contrary to the objectives of the B-BBEE Act and further that the MTN Zakhele-Futhi, as a broad-based ownership schemes, did not comply with the rules in Annexe 100 (D) of Statement 100 of the Codes of Good Practice,” reads the statement by the commission.
The commission has issued remedial recommendations to address the defects identified in the MTN Zakhele-Futhi scheme.
These include changes to the governing documents, such as the memorandum of incorporation and the relationship agreement concluded in respect of MTN Group and Zakhele-Futhi to grant black shareholders effective rights, control, participation and economic benefits in respect of their stakes.
Further, specific officials and members of the board of MTN are required to undergo training on B-BBEE and corporate governance. This training must be extended to fiduciaries of MTN Zakhele-Futhi as the shareholders representing the multitudes of black participants who subscribed to the shares, at the cost of MTN.
Meanwhile, MTN has responded saying it takes note of the BEE commission’s announcement that MTN’s voluntary remedial actions have addressed concerns raised by the commission regarding its Zakhele-Futhi scheme.
“We appreciate the commission’s acknowledgement that 'on the basis of the cooperation demonstrated by MTN, the commission issued its final findings which included remedial recommendations to be implemented by MTN, which in the view of the commission will address the concerns raised.'”
It adds that MTN remains confident that the MTN Zakhele-Futhi scheme meaningfully advances empowerment, conforms to the relevant B-BBEE legislation applicable to MTN, promotes the ultimate objectives of that legislation, and that the terms and structure of the MTN Zakhele-Futhi scheme are reasonable and commercially justifiable.
However, it adds, MTN recognises that empowerment is a journey and remains committed to advancing transformation, and it is in that spirit that in engagements with the commission, MTN in good faith voluntarily offered to effect certain enhancements to the MTN Zakhele-Futhi scheme, which were materially in line with the issues the Commission had raised.