MTN Zakhele shareholders promised interest on share payouts

MTN Zakhele shareholders, who are yet to receive proceeds from cashing in their shares after the Black Economic Empowerment (BEE) scheme expired in November 2016, will be awarded interest on delayed proceeds.

On Monday, Moneyweb reported that shareholders, who have elected to receive cash for their Zakhele shares, have been waiting for nearly two months for their share proceeds after the BEE scheme expired.

The most affected shareholders were those who chose the option of taking cash for their shares compared with the other two options, which include a combination of converting a portion of their Zakhele shares into MTN Group shares and taking cash or reinvesting their shares into a newly-launched BEE scheme called MTN Zakhele Futhi.

Zakhele is the BEE scheme of telecommunications giant MTN Group that was launched in 2010. Zakhele’s only asset was its 4% shareholding in MTN.

Sydney Mhlarhi, the director of investment holding firm Tamela, which is the adviser to the Zakhele scheme, confirmed that shareholders that didn’t receive their share proceeds “are being paid interest on the amounts due”.

According to a Zakhele circular, the majority of shareholders were supposed to be paid by December 13. However, several shareholders have refuted this, as they are still waiting for what is due to them.

Mhlarhi said outstanding payments would be made before the end of February 2017.  He attributed the reason for the delayed payouts on shareholders who have not verified their bank accounts (as part of the Financial Intelligence Centre Act) despite the call for the verification process before the BEE scheme expired last year. “The decision to verify banking details was made entirely for the protection of shareholders who may have closed or changed their bank accounts during the life of the scheme.”

It’s understood that shareholders will be paid the interest as per the terms and conditions on the shares transaction platform Link Market Services, where the proceeds have been earning interest while waiting to be disbursed.

Concerns around the interest on proceeds have been raised by several shareholders, some who are MTN customers.

As one shareholder, who elected to reinvest his shares into Zakhele Futhi scheme, asked: “It is disturbing to read that they [MTN] expect to conclude all payments by the end of February. What happens to the interest shareholders are owed on this money [since December]? Surely it will have been sitting in an account somewhere earning interest while waiting to be disbursed?”

Mhlarhi said 84% of shareholders, who have elected to receive cash, have been paid to date. There were under 93 000 shareholders remaining when the scheme matured. Most shareholders elected to receive cash, with over 80 000 choosing this option with the least number of shareholders (3 221) choosing to convert their Zakhele shares into MTN Group shares. Some shareholders chose more than one option.

Although the structure of BEE share schemes is often complicated with restricted trade in shares for a prolonged period, shares are priced at hefty discounts and have limited liquidity, the real impact comes when shareholders receive dividends or capital.

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