The Internet really has changed everything. More for my profession than most others. Apart from the havoc it has wrought on the old media models, the web has also made research a hundred times easier. Young journalists wouldn’t believe the lengths previously required to access stuff downloaded in seconds today. Having come from the old school, it never ceases to amaze’s me what you can discover in a few hours with old annual reports and SENS statements. Everything makes sense with hindsight. Even something so curious as the suspension of a highly rated CFO at a State Owned Enterprise. Trust you’ll be as fascinated as I was by the tale of Telkom, the Koreans, Jacques Schindehutte and the SOE’s new Dream Team. – AH
By Alec Hogg*
We all love watching a good scrap. Especially in public. Telkom’s freshly suspended CFO Jacques Schindehutte has promised to give us one.
Within an hour of Thursday’s announcement, Telkom’s share price had dropped 4%.That afternoon, Schindehutte was full of fight. He’d been offered the option of leaving quietly, he told me. But wouldn’t.
Why should he resign, he asked? For one thing it’s not in his nature. Anyone who knows him, knows that much. For another, he’d like “them” to prove what has done wrong.
The suspension letter he received, Schindehutte claims, was designed to “scare me into resigning”. It didn’t. He won’t roll over just because someone wants him to.
So Telkom’s new Dream Team, of which Schindehutte is obviously not a member, faces a stern test.
Former CEO Pinky Moholi went quietly. So did chairman Lazarus Zim. Ditto, for the most part anyway, eight of the 11 non-executive directors.
But former banker Schindehutte is proving to be a different kettle. Very uncorporate. Primarily because has resources. Enough F-You money to allow the luxury of righteous indignation.
A chartered accountant, he joined Absa in 1999 from Transnet to head the Group Finance department. Six years later Schindehutte was promoted to the main board shortly after his pal Steve Booysen leapfrogged deputy CEO Rupert Pardoe to the top job.
In November 2008, shortly before Maria Ramos made the same Transnet to Absa switch, the banking group’s top executives signed Retention Agreements. Three months later Booysen negotiated an immediate payout of R22m when Ramos took his job. Schindehutte departed, to the day, when benefits from the Retention Agreement kicked in for him. Putting the cherry on top for Absa’s well-remunerated financial director.
Hefty bonuses pushed his package to R14m in 2008 and R9.2m in 2009. When he left at the end of February 2010, the Retention Agreement provided a R9m termination payment with another R1.5m in lieu of six months’ leave.
Add in his stash of ABSA shares worth almost R50m when he left the bank, and Schindehutte, at 51, had clearly achieved financial independence. He subsequently accepted non-executive directorships at JD Group and Avusa. But another full-time job looked unlikely.
Then Telkom came calling.
His “great chemistry” with Moholi saw him becoming her CFO in August 2011. Encouraged, no doubt, by a signing-on bonus of R4.5m and the R5m guaranteed salary. Plus their shared belief Telkom needed foreign expertise.
Ten weeks after Schindehutte joined, Telkom announced it had opened talks to bring in Korea’s KT Corporation as a strategic partner. Central to the idea was the Koreans injecting cash of R3.6bn for a 20% stake – buying around 100m shares at R36.06 each.
In the months that followed, a series of updates published on the Stock Exchange News Service confirmed progress. Maholi and Schindehutte were enthusiastic. But investors never bought their story. Despite the supposed R36.06 underpin, Telkom’s share price kept falling.
Seven months after the initial announcement, the two companies said they had agreed terms. Excepting that because of Telkom’s lower share price, the Koreans were now only prepared to inject R2.6bn for their 20%.
The proposed deal carried four conditions precedent. The critical one being approval by the SA Government, Telkom’s biggest shareholder at 39%.
On May 30, three weeks after terms were disclosed, Cabinet said no. Telkom remained hopeful, announcing it would re-engage the politicians. Government didn’t budge. Nine months after talks began, Telkom management finally threw in the towel.
Chairman Lazarus Zim was first to fall on his sword, announcing he would step down halfway through his recently signed two-year contract. Two other non-executive directors soon followed. On November 5 last year, Telkom’s CEO Moholi handed in her required six-month notice.
With hindsight, it’s now clear that Telkom’s management blundered. They were way out of step with their major shareholder.
Jacob Zuma’s Cabinet, guided by recommendations of the National Development Plan, had eventually decided to grasp the nettle. It now regards Telkom to be a strategic national asset. Something which needed was fixing, not selling. And it was never going to abdicate that responsibility to foreigners.
Instead, Cabinet decided to draft in the best the local market could offer. First to be pressed into national service was President of Business Unity SA, Jabu Mabuza. The SABMiller-trained executive became Telkom’s chairman on November 16.
Mabuza is proving an inspired choice. Within a month he’d gathered around him arguably the most potent directorate yet assembled at one of SA’s State Owned Enterprises.
From telecoms Mabuza drew in former MTN marketing tzar Santie Botha and ex-SA head of Cisco Systems Clive Fynn. From banking Les Maasdorp and Louis von Zeuner. Plus actuary Fagmeedah Petersen; Anglo American SA head Khanyisile Kweyama and chartered accountant Kholeka Mzondeki.
All of them achievers in the toughest of schools, the marketplace. Not the usual loyal cadres deployed into comfortable retirement.
This new board regarded the appointment of a suitable CEO its primary task. And pulled off a coup by convincing Vodacom SA chief executive Sipho Maseko to throw in his lot. The erstwhile head of BP took Telkom’s reins in April with former British Telecoms EMEA head Brian Armstrong as his effective deputy.
Two months later, re-inforcing the Cabinet’s serious intent, National Planning Commission member Miriam Altman came aboard as Telkom’s Head of Strategy.
For his part, Schindehutte has showed that he likes the new approach. After all, in July and September he went into the open market to buy Telkom shares worth R7m.
The former banker’s problem, though he no longer fits in. He doesn’t like Maseko. The feeling is mutual. He is alienated from the new team. And now reasons are being found to send him away.
Maholi and Schindehutte saw Telkom’s salvation in a deal with the Koreans. When that fell apart, Maholi had the good manners to leave. Schindehutte, by contrast, refuses to go without a fight.
All of which is a terrible shame. It’s inevitable he will eventually leave. Corporates don’t retain executives the rest of the team doesn’t want. No matter how good they might be at their jobs.
Schindehutte doesn’t need to hang in there for the money. Telkom’s Dream Team doesn’t need the distraction of a long legal battle. SA’s telecoms sector has suffered needless postponements of its destiny for far too long. A successful Telkom is a key part of that. Let’s hope sanity prevails. Soon.
*Alec Hogg, a writer and broadcaster, is the founder of Moneyweb. He now runs biznewz.com. The Undictated column appears first in Business Day on Mondays.
