Donna Block and Mungo Soggot
South Africa’s premier empowerment group, New Africa Investments Limited (Nail), is expected to a undergo a top-level boardroom shake-up in the wake of the debacle surrounding an attempt by directors to award themselves a R136-million share option bonus.
Market sources said this week that the company’s two founding directors, Nthato Motlana and Jonty Sandler, are expected to leave the group. Both men are believed to have secured handsome exit packages of about R100-million each. It is understood they initially asked for as much as R250-million, a request which was torpedoed by some of the group’s major institutional shareholders.
The two men’s departure would be perceived as a much-needed changing of the guard where Nail’s management is concerned. Sandler, and to a lesser extent Motlana, are seen as the masterminds behind the highly controversial share option scheme, perceived by shareholders as a reflection of a high- handed, arrogant management style.
After a flurry of publicity about the scheme – which would have netted Nail’s top four directors about R34-million each – the company’s minority shareholders expressed sufficient outrage to persuade the directors to drop the proposal on the eve of its annual general meeting last week.
The controversy stemmed from about R136- million worth of share options that were declared as one of Nail’s assets in the company’s 1997 annual report. The company then quietly prepared to transfer the share options to the four executives, which it would have asked shareholders to vet last week.
Rumours about Sandler’s departure started circulating after the tense shareholders’ meeting last week. Nail released a cautionary announcement this week, warning shareholders that “negotiations have started on the group’s shareholding and management structure”. It is understood that the final terms of the outgoing directors’ departure were discussed early this week.
Sandler’s and Motlana’s departure would entrench the position of the company’s respected MD, Dikgang Moseneke, who was one of the directors in line for a cut of the R136-million windfall. Moseneke was, however, happy to admit that the scheme, which was hatched in 1997, had been an error of judgment. “It has been a salutary lesson,” Moseneke said. He effectively signalled a rift between himself and his colleagues, saying that if he had been privy to the scheme – he joined only after the shares were earmarked for the directors – he would have done things differently.
“Judgment is something that eludes people … anybody … from time to time,” he told the Mail & Guardian last week, adding: “There could have been fuller disclosure and I wasn’t at the time managing director. Once I took the helm, I made sure they went through every step that was legally necessary and the outcome of that was this debate in public.”
If the two men leave, Moseneke’s right-hand man will be former SABC chief Zwelakhe Sisulu, who is expected to run the group’s media interests. Its other main holdings are in the financial services sector.
If rumours about Sandler’s and Motlana’s exit packages are to be believed, they will merely confirm fears that the two men have perpetuated the impression that many empowerment companies have focused more on the enrichment of a small elite than on the people they are supposed to empower.
It is understood that former Nail deputy chair Cyril Ramaphosa bagged considerably less when he left last year. It is believed he pocketed less than R5-million.
Investors’ ire has mainly focused on Sandler, with large institutional shareholders reportedly insisting that his departure be a prerequisite to any restructuring of the group.
Nail’s “pyramid” shareholder structure has been the subject of much debate. Most of the power is vested in the top directors, with the majority shareholders holding non-voting shares. These non-voting shares were essential to the inception of Nail and other empowerment groups – institutions which supplied the start-up capital agreed to cede control as part of their contribution to black empowerment.
Analysts argue that Nail has, over the past few years, become a fully fledged empire with subsidiaries that should be allowed to stand on their own and not be shackled to the top- heavy pyramid structure.
It is understood Motlana was very keen for the non-voting share – which he considers his brainchild – to remain for at least 10 years.