MTN Zakhele chairman Thulani Gcabashe admits he has no idea when trading in shares will resume

MTN Zakhele is sticking to its story that “unprecedented demand” knocked over its share trading system. And says this alone is the reason for the aborted listing of the BEE shares owned by 120 000 investors,  not that it erred in choosing an inexperienced service provider. Or the fact that during its two days of trading MTN Zakhele transacted fewer than a third the number of MTN shares that trade in a morning on the JSE. Long ago a wise man told me when wrong, promptly admit it. There was little of that in today’s interview with MTN Zakhele chairman Thulani Gcabashe. He continues to take counsel from advisors who put the former Eskom CEO into the embarrassing position he now occupies. Bottom line: Gcabashe and his board have no idea when trading will resume. But he promises to update us on Thursday. – AH  

To watch this CNBC Power Lunch video click hereThulani Gcabashe - MTN

ALEC HOGG:  After suspending the trading of its shares last week MTN Zakhele stated that the trading would resume today.  However, a tweet over the weekend and confirmation this morning from Tamela, the company project managing the trading, revealed that a decision will only be made on when trading begins again, on Thursday – no trading happening today.  Thulani Gcabashe, chairman of MTN Zakhele, joins us now on the line to clarify the situation.  So nothing’s happening today, Thulani.  What are you likely to be announcing on Thursday – the beginning of trading or just a date?

THULANI GCABASHE:   Good afternoon Alec, we are in the process of having tests conducted – stress testing – especially on the loads, because that’s where the problems really come in.  We just felt that we needed to make sure the system was far more robust and stable before resuming trade.  We thought this was in the best interest of all those who wish to trade. The issue that has arisen is that we had unprecedented volumes.  Just in the first two days that we were open, over 200,000 shares were traded, there were 92,000 calls to the call centre in just those two days, and 47,000 visits to the website.  The issues is concurrent users all logged in at the same time, trying to trade, and it’s that capacity that we’ve been trying to deal with.

ALEC HOGG:   I guess the real question – and I have been writing about this on biznewscom – is why go with an untested operation – Velocity?  Why not use the guys who have been doing this, and will be doing it again next week, for an equally sized BEE share operation (Welkom Yizani)?

THULANI GCABASHE:   Yes, well sometime last year we went into the market to get some proposals and we had a consortium led by Link Market Services, of which Velocity is a part, and we also had another provider.  The value that was offered at the time that we looked at it clearly favoured Link Market Consortium.  Not only that…  Link Mark Services already has the share transfer business and the best judgment was that they were the team to go with.

ALEC HOGG:   Are you sorry about that now?

THULANI GCABASHE:   Well, they are experienced.  I don’t want to give you the wrong impression.  Velocity does operate platforms around the world.  Their headquarters is in Toronto, with operations in UK, Canada, Australia, and South Africa but not on the retail side. So they are a credible player.  The difficulties we’re having are just the unprecedented volumes.  We feel that we can get the system to handle a much higher volume of concurrent users without being too slow or ending up having to shut down.  It’s a performance issue under high volumes.  That’s really what we’re trying to cater for.

ALEC HOGG:   What happens to those people who placed orders ahead of the suspension?

THULANI GCABASHE:   Two things: those whose trades were actually concluded have been settled and that money is in the account.  Of course, there are those who put in offers or were selling…those we’re going to have to contact because I think when we do reopen they will have the choice to either withdraw their trades or reinstate them.  We clearly have an obligation to communicate with them before this happens.

ALEC HOGG:   Thulani, I hear what you’re saying about unprecedented demand, but I was just looking at my screen here and MTN today – it’s not even  lunchtime – has traded 600,000 shares on the JSE.  Your system couldn’t manage 200,000 in two days.  Surely, there’s something very serious going on there if that knocks it over? THULANI GCABASHE:   Well clearly, we’re an over the counter platform as opposed to the JSE and again, even that was assessed ahead of time.  Should we be on the JSE board or should we go the OTC route?  We took advice and the best advice we’re getting is that for the kind of market we’re dealing with, it would be better if we have an OTC system.  There’s also the view that liquidity might be better on the over the counter system.  We did take advice on what we thought was the better way to go. ALEC HOGG:   Are there any penalty clauses for the service provider?  The service going down has clearly had reputational damage for you. THULANI GCABASHE:   Well, I think we have the right people looking at all of that.  I don’t think it’s anything we can enter into at this point.  We’ve asked them to focus on just giving us a stable robust platform that will handle a high number of concurrent users, and we’ve allowed enough time.  We also have an audit firm that will be stress testing and going through all of that very carefully.

ALEC HOGG:   So bottom line: when is it likely to be ready to trade again?

THULANI GCABASHE:   As we’ve said, we think we’ll be in a position to communicate that on Thursday, so I would really appeal – and I do thank people for their patience – we are really sorry for the inconvenience, but we would like to announce when we have certainty and that would be around Thursday we believe.

ALEC HOGG:   Thulani Gcabashe – the chairman of MTN Zakhele.

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