HILTON TARRANT: Shares in the R13.9bn MTN Zakhele broad-based black economic empowerment scheme, one of the most successful and largest ever in this country, become tradable on Monday.
Thulani Gcabashe is chairman of MTN Zakhele. Thulani, you are no doubt proud to be reaching this milestone. The three-year lock-in period is over in a number of days.
THULANI GCABASHE: Yes, indeed we are. It's not [been] an easy road, but it’s good to see that what was indicated three years ago is now coming to fruition.
HILTON TARRANT: And perhaps even more so. The scheme seems to have done a little bit better at this point in time than perhaps people had anticipated three years ago.
THULANI GCABASHE: Yes, I think those who bought shares three years ago will be very pleased. We are looking at substantial growth in the value, just using NAV per share. It was R20 at inception and, based on our mid-term results this year, it's already up at R104/share. That’s quite good growth.
HILTON TARRANT: Let’s take a step back and maybe look at how this scheme was set up. It has got exposure to MTN Group, which is listed on the JSE. How many shareholders are we talking about, how many participated?
THULANI GCABASHE: About 120 000, just a little over 120 000, mainly individuals, because we do cater for groups as well and black companies that qualify.
HILTON TARRANT: And if we go back three years, R20 a share back then, that would have been the participation amount; the debt would have accounted for the rest of the value. Has that predominantly been settled? Is there still more debt in the scheme?
THULANI GCABASHE: There remains debt. What has happened is we received dividends higher than projected, and that’s largely for two reasons. Firstly, the basic one, the performance of the MTN share, because we depend on that dividend. But secondly the…ratio has been increased over the last three years, so we've had some surplus cash in various years.
But we remain with an obligation to first deal with the debt, settle the debt, before paying dividends. And so what we've done is pay off the most expensive debt first. And, although we remain with debt, in fact we can’t really tell how long it will take to get the debt paid off because we depend entirely on the dividend that comes in from MTN. But we are quite optimistic that we’ll have substantially reduced it over the next few years.
HILTON TARRANT: As far as the shares are concerned, you’ve given us an indication of the net asset value as of June 30 2013. I'm not a financial adviser, you’re not a financial adviser, but a lot of people are scratching their heads and saying: what are these shares worth, what are they likely to trade at?
You have commissioned some independent analysis from some investment banks, including UBS, RenCap and RMB Morgan Stanley. What is the indicative range that they have given in their reports?
THULANI GCABASHE: We have an indicative range between R120 and R143. And we've actually put those reports up on the website so that interested investors can have a look and make an informed decision.
HILTON TARRANT: How will existing shareholders and even new investors who perhaps want to buy MTN’s Zakhele shares be able to trade? Is this going to be over-the-counter from Monday?
THULANI GCABASHE: Yes, it's an open account trading platform. You can access it via the website, but we also have a call centre that will register people and help them through the trading process where necessary. So those are the two means of trading.
HILTON TARRANT: A lot of detail available on the website – in fact, everything you need to answer.
THULANI GCABASHE: There’s a lot of detail on the website. What we've also done is hold roadshows, so we've been at it in five provinces already and we’ll be completing that in Gauteng tomorrow at Nasrec. There will be a roadshow held there. And these have largely served to answer people’s questions, but also we've used them as a chance to register. We've given opportunity to register to trade.
HILTON TARRANT: Based on these roadshows and based on the kind of engagements you are having with your shareholders, the type of activity you are seeing, is there pent-up demand in the market for trading to begin?
THULANI GCABASHE: Yes, we are crossing our fingers. We've tested the system and we think it will hold up with the volumes that will come. But clearly we do expect a lot of uptake. We think there is a lot of interest, calls that come, even directly to one as an individual. Of course, one can't really give any advice, but just the level of interest has been quite amazing.
HILTON TARRANT: Thulani, just looking ahead, the lock-in period ends on Monday as these become tradable. There is a big difference, though, between lock-in and tenure. The scheme still has some years to run.
THULANI GCABASHE: That’s right. So it’ll be trading allowed, but restricted to black individuals. That will remain for the next three years, so it's around the same time in 2016 that the share will be tradable to anybody who is interested in it.
HILTON TARRANT: And convert pretty much to the JSE share.
THULANI GCABASHE: Pretty much. Of course, we do have an obligation to pay off all the debt, so if there is any remaining at that point we will deal with that first.
On really what happens further down the road, both the board of MTN and the MTN Zakhele board are actually looking at options. We want to make sure we choose a path that will carry on creating value, one with the other, but down the line value. Once the debt is settled we will do that off the MTN share.
HILTON TARRANT: Thanks to Thulani Gcabashe. For more information, that website is www.MTNZ.co.za. The call centre number is 083 123 6869. We've spent a lot of time on that website, and every single piece of information you need is available there.