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MTN Zakhele shares have more than tripled in value

Over-the-counter trade to start next year.

JOHANNESBURG – Some trekked by foot, others caught a taxi and some came by car to the Sandton Convention Centre. Some were young professionals, others gogos. But all came to attend the MTN Zakhele annual general meeting (AGM), to find out if they would be paid dividends, and how their investment in one of South Africa’s largest black shareholder schemes is doing.

Many of the 500 investors present were hungry for financial literacy requesting workshops to help them understand the issues they needed to vote on and possibly empower them to invest in other companies.

Several asked for the summarised annual report and notice of the AGM to be translated into a language they could understand, another asked for the report to be turned into a comic strip; a third for the jargon to be simplified.

One Gogo illustrated the need for financial education when she asked if she dies will her kids get paid out. Chairperson Thulani Gcabashe told her that her shares would transfer to her kids but will only be tradeable next year.

When the third last resolution was being voted on, two investors asked for clarity on how the voting works and what the word abstain means?

Gcabashe highlighted that all these services would cost money and that a balance needed to be found in paying down debt and educating shareholders.

In an interview with Moneyweb after the event, he said the board would need to budget for more education.

On the dividends front, Gcabashe said none would be paid but that decision could change once the board assesses future prospects.

These include paying down debt, considering options for refinancing its debt and then seeing what dividends could be paid going forward. But when we start paying it needs to be sustainable, he said.

MTN Zakhele came into existence in November 2010 offering shares to 120 000 black investors (see slide 1). It raised money through the issue of ordinary shares to the black public as part of the MTN Zakhele offer (ii) a donation from MTN (iii) notional vendor finance from MTN and (iv) the issue of A and B preference (pref) shares to BFC investors (funders), such as banks.

In a slide show at the AGM, it said the funds raised were used to (i) pay for the transaction costs (ii) subscribe for new MTN shares and (iii) buy MTN shares from the state’s investment house, the Public Investment Corporation.

The investment scheme owed debt on its pref shares, A and B.

The good news is that MTN Zakhele has settled its debt on the B prefs but still needs to pay R1.4bn on A (see slide 2).

Also shareholders will be able to start trading the shares over the counter (OTC) from November 24 next year among themselves until 2016 when they will be able to trade in the open market.

Asked what platform the company would use, Gcabashe said he had a board meeting this morning (Friday) on the issue and that a decision would be taken early next year.

He also acknowledged that the investment company would have to start educating its investors well before they can trade OTC to avoid the pitfalls other black shareholder schemes have seen.

MTN Zakhele’s net asset value (NAV) as at December 31 was at R6.1bn.

If you divide the NAV by the number of shares in issue it equates to R75 a share, an almost fourfold increase in the value of these shares from when investors bought it at R20 apiece in November 2010 (see slide 3).

Further guidance on how MTN Zakhele is doing will be released in a week or two when its interim results are out.


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