Cloud over MTN/Shanduka deal

The latest edition of Finweek magazine.
The latest edition of Finweek magazine.

Johannesburg - 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 ultra-high 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 influence over both boards and now the revelation of the personal relationship between the respective CEOs, do raise serious additional questions about governance around the transaction.

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 [JSE:MTN], 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 first 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 group chairman, Cyril 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 conflict 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 conflict 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 conflict 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.”

*Bruce Whitfield is a senior financial journalist at Finweek magazine. Follow him on Twitter @brucebusiness.

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