The R1-billion joint venture between Econet Wireless and IT giant Altech finalised last month is likely to go down as one of the year’s biggest deals — and a surprise beneficiary stands poised to take a handsome stake.
It has emerged that African National Congress spokesperson Smuts Ngonyama is part of a broad consortium in advanced negotiations to buy between 15% and 20% of the newly formed electronic and telecoms giant.
The news is likely to ratchet up a debate in the ANC on the growing trend of the party’s officials to double as corporate executives.
The consortium’s deal has been delayed by an international tug-of-war that has developed between Econet and Vodacom for Econet Nigeria.
Econet holds 5% of the Nigerian company and is battling to raise its stake to 33% and prevent Vodacom from buying the majority interest.
The consortium, Genesis Telecom, has been in negotiations since last year to acquire a minority stake in the R1-billion Econet/Altech joint venture.
Altech has invested $70-million in the new company, with Econet, founded by Zimbabwean entrepreneur Strive Masiyiwa, reciprocating by contributing its operations in countries including Nigeria, Botswana, Lesotho, Kenya and a licence it holds in New Zealand.
Masiyiwa confirmed to the Mail & Guardian that Genesis was intended to be part of the joint venture when it was announced. The M&G understands that Genesis failed to come up with capital to fund its stake — between 10% and 15% — when its funder, the Industrial Development Corporation (IDC), developed concerns about the Nigerian dispute.
Genesis’s application to the IDC was well advanced. The IDC, the state finance company, had gone as far as conducting a due diligence in Nigeria, but decided to put the application on hold pending the outcome of an international arbitration between Econet and Vodacom.
The M&G, however, understands that Genesis may now raise the capital elsewhere. Two international banks are apparently keen to assist the consortium.
The IDC’s intended involvement in the deal may also be problematic. Ngonyama’s business partners are linked, through other business interests, to IDC’s CEO, Khaya Ngqula.
ANC provincial officials and national leaders who spoke to the M&G this week said the involvement of influential ANC office bearers in business was “dangerous” and “tricky”.
There is no code barring ANC office bearers from getting involved in businesses. But party officials say an informal debate is taking place within the ANC about the matter. There are those who feel that office bearers should only focus on their party mandate.
“I think that if a person like Ngonyama wants to go into business, he should quit his political post and focus on that. At the moment Ngonyama represents the face of the ANC wherever he goes and this could give him unfair advantage in the business sector,” a Gauteng ANC official said.
Ngonyama this week dismissed the concerns. “There is nothing wrong with my involvement in business. I am a private citizen in this country and I have a right to get involved in business … I am part of the ANC national executive committee and that issue has never been raised.”
He said his involvement in Genesis was not a secret. “I did not try to hide my name in the consortium.”
Ngonyama is linked to Genesis through a company called Crestwave, of which he is a director. Other directors include Makhaka Rubushe, Lungisa Mbuli and Misheck Mbewe. The three are all partners of IDC boss Ngqula in a separate company — Mqikela Investments — which has interests in the gaming industry in the Eastern Cape.
Ngqula will leave the IDC at the end of October and will have to recuse himself from any decision to fund Genesis’s stake. IDC spokesperson Neo Sowazi said a decision had not yet been made.
Ngonyama’s Crestwave holds a seven percent stake in Genesis, which includes several other empowerment investment companies. The company is represented on the Genesis board by Mbewe, who said: “Crestwave was formed to pursue a private investment opportunity in telecommunications in a West African country in partnership with other privately owned South African companies.”
Both Econet and its partner Altech, Masiyiwa said, have agreed to bring Genesis on board. He said his company was not aware of the involvement of Ngonyama in Genesis. “They [Genesis] told us that there are many groups in Genesis. We do not know the people in those groups.”