Pioneering empowerment company Worldwide Africa Investment Holdings, traditionally a discreet player in a game dominated by high-profile individuals, is having to deal with intense scrutiny as its assets expand and public attention focuses on two of its founders: South African Airways CEO Khaya Ngqula and MTN chief Phutuma Nhleko.
Ngqula is the focus of attention as questions are raised about the extent to which he used his position at the Industrial Development Corporation to build this wealth. Firm backing from Minister of Public Enterprises Alec Erwin has seen Ngqula’s star continue to rise, despite questions about his approach to corporate governance.
Eleven years of savvy deal-making and unusually good access to finance have seen Worldwide amass close to R4-billion in assets, with Ngqula and Nhleko each holding a stake conservatively estimated at R100-million.
Nhleko is seen as very much the prime mover behind Worldwide, and some close to the company say they have been disappointed by the extent to which his MTN job has absorbed his attention. “Khaya is very much a passive investor, and always has been,” one banker said.
Existing investments include a 51% share in the electronics group Plessey, financial services investments housed in subsidiary Worldwide Capital and, perhaps most importantly, valuable oil interests, including a stake in Engen and Uhambo, the fuel giant that will be created if competition authorities approve a merger between Engen and Sasol.
Worldwide is cagey about its ownership structure, which has changed since Ngqula and Nhleko created it in partnership with Wiseman Nkuhlu and financial services executive Max Maisela in 1994. After initially agreeing to respond to questions from the Mail & Guardian, Worldwide had not done so at press time.
But the little publicly available information suggests that Ngqula and Nhleko each owns a little more than 10% of the company, with smaller portions held by Maisela, chief executive Thumi Xuma and chairperson TL Skweyiya.
Nkuhlu, who now heads the Nepad Secretariat, was ousted in 1996 when major financial services houses first took an interest in Worldwide, with Sanlam, Old Mutual and Nedcor buying 40% of the company.
About 41% of voting shares are under black control, according to documents filed with the Competition Tribunal as part of a merger application. The balance now appears to be held by Standard Bank, Old Mutual and Sanlam.
Standard Bank bought into Worldwide in February, paying R20-million for a 26% stake in Khatuma, the vehicle that holds Nhleko’s and Ngqula’s Worldwide shares. It also injected another R140-million in redeemable preference share finance (effectively a loan backed by equity), which Khatuma then used to buy out the 12,5% of Worldwide that Nedcor had acquired in 1996, and a 1,1% stake owned by Nedcor executive Lot Ndlovu.
Standard Corporate and Merchant Bank’s (SCMB) Ben Kruger says the deal was intended shore up Worldwide’s empowerment credentials, which had become diluted through several rounds of capital raising. “We took a small equity stake, but that was because it had to be equity finance or the deal wouldn’t work.”
SCMB, where Nhleko once worked, has long been one of Worldwide’s key financiers, handling its purchase of oil company Zenex, and later the transaction with Engen, after which it retained a small direct equity stake.
Kruger did not want to comment on the valuation implied by the deal, but cautioned that Worldwide’s large asset base had been acquired in highly leveraged transactions.
But if Khatuma needed R140-million to buy 13,6% of the company, then the transaction puts a value of R1-billion on Worldwide.
This suggests that many of Worldwide’s assets are still heavily encumbered by debt, despite the fact that it was among the first to draw significant empowerment financing.
In 1998 the company took a controversial R130-million loan from the IDC to increase its stake in Plessey from 26% to 51%. Worldwide and Didata paid R1,6-billion for the company.
Ngqula, who was CEO of the IDC at the time, said he had played no role in helping to secure the funding and had recused himself from considerations of the investment by the corporation. But some executives at the IDC are still bitter about the deal. Critics say it was a pure equity trade that did little to grow investment in the economy.
The IDC’s Dante Mashile says the corporation’s approach to empowerment has changed since 1998, with deals now including workers trusts and other broad-based elements.
“It should also be noted that we have funded strategic BEE acquisitions of large companies driven by entrepreneurs. We also consider all transactions in the BEE landscape from mergers and acquisitions to expansionary BEE with the focus on job creation and broad based empowerment,” he said.
One financier who helped arrange several Worldwide deals told the M&G it would be unfair to suggest that Ngqula and Nhleko had relied solely on access to government-backed finance. Not only did Sanlam, Old Mutual and Nedcor all help inject capital in 1996, he pointed out, but Nhleko and, to a lesser extent, Ngqula, brought to the table some “compelling opportunities”. “I would have funded them out of my own pocket if I could have, they had some sweet deals,” he said.
Worldwide was able to ride out heavy turbulence in the telecoms and IT sectors during the late 1990s, he suggested, thanks to hedging strategies implemented by Nhleko.
The company remains active in financial services too, most recently buying a 10% stake in derivatives and asset management house Cadiz for R55-million last year.
But the focus is clearly oil. Industry figures and government officials are divided over how much value the empowerment partners in Engen’s mega-merger with Sasol stand to gain.
Worldwide also owns an effective 64% in Afric Oil, which will get 12,5% of Uhambo if the merger goes through.
The attention created by Nhleko’s role at MTN, Ngqula’s controversial stewardship of SAA, and the merger, is proving unsettling for a very private company. “Some of their stars are shining a little too brightly at the moment. Worldwide would like to play it down,” said one source close to the company. That looks increasingly unlikely.