The commission started a probe into the scheme in 2017 and presented its findings yesterday.
MTN launched the MTN Zakhele-Futhi Scheme, valued at R9.9billion, in September 2016 after it wound down the old scheme that was launched in 2010.
The old scheme, MTN Zakhele, ran into issues around delays in payouts to shareholders.
MTN Zakhele-Futhi acquired a 4percent equity in MTN at a 20percent discount, making the black participants who subscribed to the MTN Zakhele-Futhi scheme indirect shareholders in MTN.
The commission said that it had based its findings on a number of restrictions and limitations placed on the black shareholders, which it believed were at odds with the requirements for ownership in the Codes of Good Practice.
“The commission has issued remedial recommendations to address the defects identified in the MTN Zakhele-Futhi scheme, which include changes to the governing documents, such as the memorandum of incorporation and the relationship agreement concluded in respect of MTN Group and MTN Zakhele-Futhi, to grant black shareholders effective rights, control, participation and economic benefits in respect of their stake,” the commission said.
The commission also recommended that the black shareholders be able to exercise their rights as the shareholders to nominate representation on the board of MTN; to remove the veto rights that MTN has in respect of the trickle dividend and the general dividend that would flow to black participants; for MTN Zakhele-Futhi to appoint its own chairperson of the board and board members, who need not be MTN appointees/nominees, among other things.
The commission also said the board of MTN were required to undergo training on B-BBEE and corporate governance, which training must be extended to fiduciaries of MTN Zakhele-Futhi at the cost of MTN.
“MTN is also expected to develop and submit a compliance programme to ensure future compliance with the B-BBEE Act, and to seek prior advice from the commission in respect of any ownership scheme they may wish to implement in the next two-year period,” it said.
The commission said MTN had demonstrated co-operation and willingness to remedy the defects identified by the commission and it would monitor the implementation of the recommendations issued.
The MTN Group said yesterday that it had taken note of the B-BBEE commission's findings on its scheme.
“We appreciate the commission's acknowledgement that on the basis of the co-operation demonstrated by MTN, the commission issued its findings, which included remedial recommendations to be implemented by MTN, which in the view of the commission will address the concerns raised,” MTN said.
Peter Takaendesa, a portfolio manager at Mergence Investment Managers, said it was a key principle of investing that all shareholders must be able to vote and, therefore, have some level of influence on how the company is governed.
“What complicates many B-BBEE schemes is that in most cases many of the beneficiaries do not have sufficient funding to purchase the shares outright and complicated financing schemes have to be arranged.
“In some cases, the company itself has to be involved in funding the B-BBEE scheme and it is through those arrangements that the scheme may fail to meet some of the requirements of the relevant regulations,” Takaendesa said.