PIC slams MTN’s R23m resignation payment to Dabengwa – pendulum swings back

Capitalism works best when those providing the funds take a keen interest in how their money is being used. And when the overall system has a firm moral undertone. Just how far the South African business establishment has strayed from these requirements is reflected in the way MTN reacted to its Nigerian disaster. To its eternal credit, those who manage the public sector retirement fund have called “enough.” It is not just locally where the managerial plundering of shareholder funds has reached an extreme. The PIC is supporting a global trend which has seen the pendulum shift away from excessively remunerated professional managers. Its lead is sure to be picked up by local managers of private sector retirement funds who are slowly realising that there is a world of difference between the value of entrepreneurs who actually create wealth (Joffe, Saad, Motsepe, Bekker, Koseff, Mouton, etc) and the professionals who are just custodians. – Alec Hogg

By Loni Prinsloo and Renee Bonorchis

(Bloomberg) — The Public Investment Corp., Africa’s largest money manager, described as “excessive” a payment made to former MTN Group Ltd. Chief Executive Officer Sifiso Dabengwa, who resigned after a record Nigerian fine.

Packets of MTN sim cards sit for sale at a roadside kiosk in Lagos, Nigeria. Africa's largest wireless operator remains in negotiations with Nigerian regulators over a $5.2 billion fine for failing to comply with an order to disconnect customers with unregistered phone cards, according to a person familiar with the matter. Photographer: George Osodi/Bloomberg
Packets of MTN sim cards sit for sale at a roadside kiosk in Lagos, Nigeria. Africa’s largest wireless operator remains in negotiations with Nigerian regulators over a $5.2 billion fine for failing to comply with an order to disconnect customers with unregistered phone cards, according to a person familiar with the matter. Photographer: George Osodi/Bloomberg

“PIC has communicated to MTN management its strong opposition to what we see as gross misuse of shareholder funds,” the Pretoria-based fund manager said in an e-mailed response to questions on Monday. “Management and the board of MTN should be held accountable for actions taken under their watch.”

Dabengwa’s 23.7 million-rand ($1.6 million) payout equates to almost three years’ basic salary and took his total 2015 remuneration to 40.6 million rand, Johannesburg-based MTN said in the company’s annual report published on Monday. Michael Ikpoki, the former head of the operator’s Nigeria unit, who also left after Nigerian regulators imposed the $5.2 billion penalty, was awarded 17.3 million rand in compensation. MTN’s share price has declined 25 percent since the fine — later reduced to $3.9 billion — was made public in October.

Islamist Insurgency

The PIC, which manages the bulk of the South African government’s pension fund money, is MTN’s biggest shareholder with a 13 percent stake in the continent’s largest wireless operator, according to data compiled by Bloomberg. It has almost 2 trillion rand in assets under management.

The two executives were rewarded even after they resigned to take responsibility for the Nigeria penalty, which equates to about three years of MTN’s earnings before interest, taxes, depreciation and amortization in the country. The penalty was imposed on the company for missing a deadline to disconnect 5.1 million subscribers that the government had deemed to be unregistered in Nigeria, which is tightening security as it battles an Islamist insurgency.

Phuthuma Nhleko, the former CEO who returned as executive chairman to resolve the Nigeria crisis after Dabengwa resigned, was paid 5 million rand for work from Nov. 9 until the end of the year. His contract runs until May 9, indicating a total payout of 17.5 million rand for six month’s work. He may also be due a bonus when his contract expires, according to the annual report. The company expects to name a new CEO by end June.

Shares Fall

MTN and Nhleko have yet to settle the fine, despite hiring former U.S. Attorney General Eric Holder to represent the company and making a 50 billion naira ($251 million) down payment. In March, the wireless operator proposed a $1.5 billion package that included cash, government access to its wireless network and an offer to buy Nigerian sovereign debt. While the offer hasn’t been formally rejected, negotiations are not currently underway, Nigeria Minister of Communications Adebayo Shittu said April 20.

MTN shares fell 2.6 percent to 143.59 rand in Johannesburg, its biggest decline in almost three weeks, valuing the company at 265 billion rand.

“I am sure shareholders are not happy to pay out exorbitant golden parachutes to management that were asked to leave because they were incompetent,” Michael Treherne, a money-manager at Vestact Ltd., which holds MTN stock, said by phone. However, the payout to Dabengwa may be the cheapest option if Nhleko can resolve the fine in MTN’s favor, he said.

Nigeria is the biggest of MTN’s 22 markets across Africa and the Middle East, with about 61 million subscribers.

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