South Africa's Broad-based Black Economic Empowement (B-BBEE) Commission said on Thursday a probe initiated in 2017 into mobile communications company MTN's Zakhele-Futhi scheme had found it to be contrary to the objectives of the B-BBEE Act.
In a statement, the commission said it had issued remedial recommendations to address the defects identified in the scheme, including changes to governing documents such as the memorandum of incorporation and the relationship agreement, to grant black shareholders effective rights, control, participation and economic benefits in respect of their stake.
MTN launched the scheme in September 2016 to replace an existing one that was lapsing in November that year. The initiative, valued at R9.9 billion, was intended to afford qualifying black investors the opportunity to apply for shares in MTN Zakhele-Futhi, which in turn would acquire approximately four percent equity in MTN at a 20 percent discount, making the black participants indirect shareholders in the company.
The commission said after concerns were registered about the scheme relating to compliance with the ownership scorecard, it had engaged MTN over the contents of the transaction, leading to a formal investigation.
"The commission found that the black ownership held through MTN Zakhele-Futhi is contrary to the objectives of the B-BBEE Act and further that the MTN Zakhele Futhi as a broad-based ownership schemes did not comply with the rules ... of the Codes of Good Practice," it said.