Rational Alternative: The “know F-Alls” whose ignorance destroys wealth
Last week's column for the Financial Mail generated a lot of heat. Especially the part towards the end criticizing the Naspers directorate for agreeing an open-ended deal with its brilliant CEO Koos Bekker which has netted him R14.5bn so far. The magazine's space restrictions made it difficult to record the other side of the argument – that Bekker had alternative options in PayTV elsewhere in the world after the 1997 Nethold split with Richemont; and had this gifted entrepreneur not been given a highly incentivized package, Naspers would not have been able to retain his services. And the JSE's biggest success story of the modern era would never have happened. – AH
By Alec Hogg*
One of my favourite autobiographies is actor David Niven's Bring On The Empty Horses. Especially Mike Curtiz's classic line after Niven and co-star Errol Flynn chuckled once too often at the Hungarian director's poor English.
"You lousy bums, you and your stinking language," Curtiz shouted, "you think I know f*#k nothing, well let me tell you – I know F*#K ALL!"
South Africa has been cursed with an abundance of Curtiz clones. These are the most dangerous of our species. Individuals whose inability to grasp the complexities of life lead them to adopt vast swathes of assumptions. So ensuring they simplify things to a point where they "know" answers to problems which baffle the rest of humanity.
HF Verwoerd of the Apartheid Solution was one. PW Botha of Total Onslaught fame another. Sadly, the curse didn't end when democracy arrived. Rewarding thousands of loyal cadres has created an army of "know f-alls" occupying positions of enormous responsibility.
Executive management at the Johannesburg Metro provides the obvious contemporary example.
After last week's electricity supply sabotage, it has emerged that for years Metro managers turned a blind eye as technicians dallied during working hours to supplement their wages with overtime. The well-fed supervisors simplistically figured if the Metro could afford it and ratepayers were none the wiser, why rock the boat?
Now that the financial squeeze is on, these worthies wonder why overpaid technicians resort to blacking out chunks of the city at the flick of a sub station switch.
South Africa's National Development Plan risks becoming a similar casualty.
Years of research and long hours by some of the country's best brains produced a brutally honest blueprint that might just shake the country out of its economic lethargy.
Trouble is, the NDP is apparently too complex for garden-variety politicians. Instead of admitting they, too, have limitations, these "know f-alls" are forcing a dumbing down of the NDP to a level they can absorb. That requires eliminating many complex economic and social aspects so critical for the Plan to have any chance of success.
The illness of taking decisions without truly knowing what you're doing is not limited to the public sector.
Nobody can argue that Naspers CEO Koos Bekker hasn't done an exceptional job. He transformed a sleepy newspaper business into a cash cow Pay-TV operation with substantial stakes in the hottest Internet companies in China (TenCent) and Russia (Mail.ru).
At the time when he offered the group his services for share options only – no cash salary or bonus – the Naspers directors must have thought they were onto a good thing.
Clearly, they directorate had never read a word of Warren Buffett. Or conducted even the most superficial research into the true cost of equity. Today they know only too well it is the most expensive currency on earth.
Their oversight transformed Bekker into one of the wealthiest people on the continent.
The Naspers Group annual report states that on December 14 last year, Bekker's family trust paid R125m to take ownership of 4.688m Naspers shares (R26.70 each).
At the current share price of R890, Bekker's paper profit on that award, the final tranche of an agreement made in 2002, is a touch over R4bn. Together with earlier options exercised he now owns a total of 16.376m Naspers shares worth a staggering R14.5bn. And all of them earned in lieu of salary.
Good luck to Bekker. He backed himself and won huge. But shame on a board who never applied rational thought to the potential consequences of their decision.
* Alec Hogg, a financial writer and broadcaster, founded Moneyweb. He runs biznewz.biz