MultiChoice shenanigans need to be interrogated
The collapse of Steinhoff has widely been exposed as South Africa's worst corporate governance failure. While the Zondo commission dealt with failures of state-owned enterprises as a result of state capture, the private sector has largely escaped scrutiny, especially on why Steinhoff failed and its negative impact on the pension funds managed by the Public Investment Corp (PIC).
As such, the announcement by the MultiChoice board to rescind the appointment of its chair-designate, Elias Masilela, to assume a newly created role of deputy chair has raised a lot of red ags. The key question is why the current chair, Imtiaz Patel, who has been at the helm of MultiChoice since 2018, did not retire at the end of March. The decision to extend his tenure to oversee the multibillion-rand transaction with French broadcaster Canal+ seems odd as Masilela has also been on the MultiChoice board since 2018 and does not need Patel to babysit him over a transaction that may take many years to approve given the restriction of 20% ownership of local broadcasters.
The independent board announced by MultiChoice cannot justify creating the role of deputy chair to help them adjudicate the merits of the transaction. This raises the question why the chair is not retiring after the controversial consultancy deal of earning over $1.1m that was designed for selected board members. This arrangement should have sparked a huge outcry over why a nonexecutive chair can earn more that most of his peers such as Mcebisi Jonas of MTN or Saki Macozoma of Vodacom.
The Zondo commission raised questions over the dealings by MultiChoice to gets its hands on SABC archives during Hlaudi Motsoeneng's tenure. The company had to make written representations to justify its role in the SABC deal. The reality is that MultiChoice has faced some serious questions over corporate governance under the leadership of Patel, making it odd to suddenly not want him to retire due to the Canal+ transaction.
Section 64 of the Electronic Communications Act states that a foreigner may not, whether directly or indirectly, exercise control over a commercial broadcasting licensee; or have a nancial interest or an interest either in voting shares or paid-up capital in a commercial broadcasting licensee exceeding 20%. Not more than 20% of the directors of a commercial broadcasting licensee may be foreigners. As a 40% shareholder, Canal+ should be taking the public into its con dence as to how it's going to circumvent the ownership issues that will impact this transaction and corporate governance challenges facing MultiChoice.
MultiChoice terminated the consultancy agreement with its independent director advocate Kgomotso Moroka when investors raised concerns about her earning R1.5m for various services. The then lead independent director, Jim Volkwyn, who also has a consultancy agreement for "professional advisory services", earned R5.1m. Ironically, he chaired the meeting that approved the appointment of Masilela as deputy chair and inexplicably extended the appointment of Patel as chair inde nitely. Speculation that this consultancy agreement renders these directors con icted is not far fetched and raises concerns over their independence in the Canal+ transaction. Can they make decisions that are not for their own personal benefit?
These corporate governance failures should be challenged by the relevant authorities, who should also not turn a blind eye on the consultancy agreements that have prevented boards from working in the best interests of the companies they serve. As the old adage of who will guard the guardians goes, this deal is pointing to possible corporate governance failures at MultiChoice that may need telecoms regulator Icasa and the competition authorities to question the independence of the board members.
"South African is facing a range of corporate governance failures that cannot be whitewashed. We need the PIC to play its role as an activist shareholder to ensure that the board of MultiChoice is held accountable
South African is facing a range of corporate governance failures that cannot be whitewashed. We need the PIC to play its role as an activist shareholder to ensure that the board of MultiChoice is held accountable. The notion that the private sector is run better than SOEs is misplaced as these consultancy agreements will not pass any legitimate scrutiny if these are acts of cronyism against the interest of shareholders.
The failure of Steinhoff should be a lesson that a company's performance does not mitigate the undermining of dissenting voices such as investors and interested parties such as the Institute of Independent Directors of South Africa. The issue of BEE shareholders for the mooted transaction is a deal breaker that will need regulatory clarity by the highest courts to deal with the issue of foreign ownership of a crown jewel