The man who heads the likely empowerment component of the proposed second national fixed-line phone operator is the ex-bureaucrat who helped saddle South African Airways with the overpriced United States executive Coleman Andrews.
Kennedy Memani chairs Nexus Connexion, which was this week recommended by the Independent Communications Authority (Icasa) as the empowerment group to get a 19% stake in the second network operator, or SNO. The new phone company is to be licensed later this year to compete with Telkom.
But Memani is a man hounded by controversy. As a special adviser to then minister of public enterprises Stella Sigcau and later to then Transnet MD Saki Macozoma, he played a central role in negotiating Andrews’s employment contract when the American became chief executive of SAA in 1998.
The contract was terminated for R232-million when serious questions about Andrews’s supposed turnaround of SAA emerged.
Memani was also linked to Bain, the controversial consulting group that Andrews appointed to advise SAA on its restructuring and fleet upgrade. Notoriously, Bain recommended Boeing, which resulted in the acquisition of a fleet of 737-800s, aircraft now considered to be unsuitable and which will be replaced by an Airbus fleet.
XKM & Associates, Memani’s consultancy, teamed up with Bain to win two lucrative contracts for the restructuring of state agencies: the State Information Technology Agency and the South African Revenue Service (Sars). But Memani fell out with Bain over the division of fees after Sars stopped paying his part of the consortium, citing the ”inability” of Memani’s company ”to provide staff who make a meaningful contribution”.
Memani last year sued Bain for R22,5-million. In turn, a senior partner at Bain reportedly threatened to expose Memani’s role in the Andrews saga unless he dropped the suit.
There are also questions about whether Nexus Connexion will fulfil the requirement of broad-based empowerment, which was the rationale for selecting a separate empowerment component to the SNO.
Icasa, while recommending Nexus over six competitors on Wednesday, ordered Nexus to widen its shareholding by offering a staggering 40% of its shares to other stakeholders. It gave the consortium 60 days to prove it could raise at least R1-billion in financing.
Shareholders were not inclined to risk their own money and the consultants pointed out that the funding proposals meant that ”banks will be making the profits for the next 15 years and not the minority empowerment shareholders”.
No applicant met the requirement to prove it could raise the capital necessary for its stake and no applicant fully met disclosure requirements of their ultimate beneficial shareholders.
Both failings are potential grounds for other bidders to challenge the award and it seems likely that Icasa’s demand that Nexus broaden its empowerment base is, at least in part, designed to allow losing bidders a slice of the action.
Notwithstanding the gaps in all the bids, Nexus emerged clearly as the leader, scoring above average in most of the selection criteria.
Aside from Memani, who personally holds 4%, two other key players are his longtime business partner Eugene Ruiters (4%) and former head of restructuring at Transnet Sango Ntsaluba (2%).
Ntsaluba was one of the directors removed from the SAA board after the Andrews saga.
Moses Mayekiso, whose management of the investment arm of the South African National Civics Organisation is mired in controversy, is another prominent individual shareholder.
The largest single shareholder in Nexus is Nozala Investments (10%), a women’s empowerment group led by Salukazi Dakile-Hlongwane.
Other larger shareholders include two union investment companies, Nehawu Investment and Sadtu Investment Holdings, with 5% each.
Additional reporting by Stefaans Brummer