The Big Cull
Shareholders in one of the country’s biggest empowerment deals will vote on Friday to “cash in” and abandon a consortium they accuse of “making a mockery” of BEE.
This comes a week before the much- anticipated listing of cellular network operator Vodacom.
Elephant Consortium, a shareholder in Telkom, stands to benefit by billions of rands in dividends when Vodacom goes public on May 18.
But a group of shareholders wants to use dividends from the listing to settle debts, before dividing the remaining proceeds and dissolving the Elephant Consortium.
The Telkom empowerment deal has faced a succession of inquiries since Elephant acquired an estimated R9-billion stake in the fixed-line operator in 2005.
Business Times has established that further investigations are now under way into a deal shrouded in secrecy.
They include a probe by the Government Employees Pension Fund into why the Public Investment Corporation (PIC) warehoused the consortium’s shares.
This week the shareholders, who three years ago instructed lawyers to unmask secret shareholders in the consortium, said the entire empowerment transaction has been shrouded in controversy and secrecy.
Business Times has established that:
Shares traded despite prohibition
- The ANC is a beneficiary within the Elephant Consortium;
- Former ANC treasurer-general Mendi Msimang and Alan Norman — a former banker with Absa bank, one of the funders of the Telkom deal — are alleged to control more than a million shares in the consortium; and
- Shares have been traded despite terms of the transaction stipulating that no trading can take place until May 2010.
Among those who have already cashed in is the ANC’s former head of the presidency Smuts Ngonyama, who has stopped attenfind the consortium’s board meetings.
On Friday, the Lion Trust — a consortium member — acknowledged that “a very small number of shares (not actually shares, but beneficial interests in the trusts) have traded since inception”.
Shareholders said the heads of two participating trusts — Andile Ngcaba of Lion and Gloria Serobe of Leopard Trust — had ignored repeated questions about the identity of secret beneficiaries.
The consortium’s shareholders include a string of former civil servants and politically aligned businessmen.
‘Empowerment of the worst kind’
The 15.1% stake in Telkom was bought from the US-based firm Thintana.
The deal became mired in controversy when it emerged that the PIC, which manages more than R750-billion in civil servants’ pension savings, had warehoused the shares to allow the Elephant Consortium time to raise cash.
At the time, trade union federation Cosatu criticised the deal and the PIC’s involvement as “empowerment of the worst kind”.
On Friday, one disgruntled shareholder said most stakeholders in Elephant were “sidelined” from the decision making.
“And the structure has intentionally been made complicated,” he said, adding that many shareholders were not even aware of the identity of financial advisors recently hired by the consortium to unravel the financial worth of the consortium and the value of the anticipated dividends.
“But we hope that these financial advisers will provide us with a solution on how we can sell the Vodacom shares and use the dividends to pay off the debt for the Telkom shares and penalties,” he said.
The shareholder said the consortium would now have to pay just over R1.2-billion to settle the debt on its Telkom shares.
“There are a number of complicated issues which we hope to address and deal with at the trustees board meeting on Friday,” he said.
Brandon Doyle, a member in the Lion Trust, said Vodacom’s listing would result in the consortium receiving Vodacom shares as part of the unbundling, and entitlement to a special dividend being paid by Telkom out of proceeds of the sale of 15% of Vodacom to Vodafone.
“Elephant will thereafter continue to hold listed Telkom and Vodacom shares, and will deploy all of the cash received to reduce its debt liabilities.”
But there are still questions over who the beneficiaries are and how much they will receive.
Bid to unmask secret stakeholders
Doyle, a former banker at Nedbank, one of the funders of the Telkom deal, said: “The Elephant Consortium has many thousands of beneficiaries.”
In 2006 several shareholders in the consortium instructed lawyers to unmask secret stakeholders and investigate whether anyone who benefited from the R9-billion deal had cashed in their shares.
Two of the stakeholders investigated were privately registered companies, Clidet 531 and Clidet 532, which have since changed names.
The sole director of both companies was Norman — a former senior executive at Absa’s corporate finance division.
Although he is no longer employed by the bank, Norman has been attending meetings of the consortium since 2006.
His presence at some of these meetings prompted stakeholders to ask who he represented and how he had switched from being a banker to a stakeholder representative.
The information sought via the legal investigation included:
- The names of all beneficiaries represented by the trusts;
- Whether anyone had ceded or disposed of their shares; and
- The present status of the entire empowerment deal.
The disgruntled shareholder said: “The secrecy surrounding it (Elephant Consortium) was immense. As hard as we tried, we were never able to pierce this shroud of secrecy and no information was ever provided to us. We finally gave up.
“You could try calling Gloria Serobe (Leopard chairman), but I expect that would not be a productive call.
“As for the Clidets (Clidet 531 and Clidet 532), I seem to recall we discovered that they had changed (names) last year. But I don’t think the shareholding has changed, just that there were two other entities created that they moved the shares into.”
Business Times has established that Norman, Msimang and ANC veteran Thandi Lujabe-Rankoe, who was SA’s high commissioner to Mozambique, registered two companies last year.
MMTB Investment Holdings was registered on January 8, and Norman, Msimang and Lujabe-Rankoe were appointed directors on January 24. But Norman and Rankoe resigned six months later, on July 24.
However, the three have now emerged as shareholders of Indoni Investments, a company they registered on May 27. While Msimang officially became a director on June 30, Norman and Lujabe- Rankoe became directors on July 1.
Both companies, MMTB Investment Holdings and Indoni Investments, are still active and share the same business premises in the Illovo business district, north of Johannesburg.
‘No clue what you’re talking about’
On Friday, however, Norman insisted he was not a director of either entity. “Not that I am aware of,” he said, adding that queries on whether the ANC held a stake should be directed to the party.
He said he was also unaware of shareholder unhappiness.
Leopard Trust’s Gloria Serobe also denied any such knowledge.
“I don’t have a clue as to what you’re talking about,” Serobe said, adding that she was “not aware” that the ANC was or had ever been a shareholder in the Elephant Consortium.
Telkom Shareholder discussion
Business Times
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