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Complexity and incomprehensibility

The type of activity that gives capitalism a bad name – a look at Naspers, Prosus, Sanlam and Steinhoff.
A high court was given this past weekend to make sense of a 2 000-page Steinhoff document that was probably designed never to make sense to ‘outsiders’. Image: Daniel Acker/Bloomberg

Naspers and Prosus didn’t quite dominate investor interest last week but they did soak up a lot of it. Of course that’s probably inevitable given the size of Naspers/Prosus and the fact that whenever it coughs we all get the investment equivalent of Covid.

The companies’ response to the unprecedented letter from 36 asset managers was unhelpful given that it was generally a repeat of all that has been said in the past. Perhaps the boards are to be admired for their consistency, or criticised for carrying on regardless.

For the past 20 years Naspers has been a story of the utter randomness of investment; proof that great rewards can be earned on the basis of little more than good luck, which includes being in the right place at the right time and knowing the right people.

The Naspers executive who actually tracked down Tencent left Naspers shortly after he found what was almost an unknown entity; not for him the hundreds of millions of rands that were picked up merely by dint of being an executive or just a director of a company that owned the single largest stake in one of the world’s most valuable companies.

The 36 asset managers who took the unprecedented step of writing to the Naspers board are rightly concerned by the utter incomprehensibility of the group’s remuneration policy.

How is it possible that Naspers/Prosus executives enjoy hugely generous remuneration packages merely because someone – who no longer has links to Naspers – did a lot of smart and hard work 20 years ago?

If that doesn’t make a complete mockery of Naspers/Prosus remuneration policy, cobbled together at huge expense every year, nothing will; but it seems these people will continue to carry on regardless.

This is precisely what gives capitalism a bad name.

Meanwhile the Chinese government continues to tighten its grip around its leading tech giants – primarily Alibaba and Tencent. Reports that Beijing has passed a data security law to strengthen its control over digital information comes as a bit of a surprise as most people had assumed the Chinese government had unfettered access to whatever data was collected by its tech giants. But the news should remind us that there may come a day when the enormously contrived structure that underpins foreign investment in China’s tech sector crumbles under the weight of that contrivance.

Sanlam

On a sort of related matter Sanlam’s AGM seemed a straightforward enough event so it was difficult to understand why it took the group 48 hours to release the results of the voting. Perhaps the exodus of executives has reached its secretarial department.

It’s a little difficult not to suspect something of concern is going on within this august institution when the third divisional CEO within a few weeks announces his departure.

The latest is Robert Roux who is CEO of Sanlam Investment Group and has been with the group for over 22 years.

Sanlam CEO Paul Hanratty tried, very unconvincingly, to persuade us there was nothing untoward. He told News24 the departures are just a function of executives wanting to do something different and not a sign of any instability or that the top team are not seeing eye to eye. So, all that money they were paying to retain these executives all those years has been a waste. What a surprise.

But getting back to Naspers; perhaps the 36 asset managers should take a closer look at the ties between Sanlam and the Naspers control structure.

And the pension funds being managed by Sanlam should also be asking questions, while of course acknowledging that you should never look a gift horse in the mouth.

Does Sanlam still own shares in Wheatfields, Nasbel and/or Keeromstraat Beleggings? If so, who votes them – the Sanlam board or fund managers?

And how is it that while the majority of minority Naspers shareholders vote against Naspers’s remuneration every year, the ‘private’ shareholders vote 100% in favour. If Sanlam features among these ‘private shareholders’, how does it justify its stance on the remuneration policy?

Does Sanlam perhaps have information that encourages it to believe the Naspers executives add value to Tencent and therefore justify some of their remuneration?

Perhaps before he heads off into the sunset, Roux could answer these and other questions – some Naspers-related, some not.

Steinhoff

Finally, Steinhoff. Last week’s action in the Western Cape High Court was as fascinating as it was incomprehensible.

Thank goodness for Judge Lee Bozalek who gave voice to all those people trying to make sense of Steinhoff’s quirky deal-making.

Does anybody who did not earn a fee from the restructuring proposal actually understand how the cashless loan from Lux Finco to Steinhoff actually works?

It’s a shocking piece of accounting and legal work, and the increasingly obtuse attempts to explain it to Bozalek during last week’s court action proved just how shocking it was.

It was difficult not to feel enormous sympathy for the judge who was given a weekend to make sense of a 2 000-page document that was probably designed never to make sense to ‘outsiders’.

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Yet people still continue to invest in Steinhoff despite all this, because, moneeey. I’d avoid Steinhoff as I’m sus and won’t invest in them for ethical reasons. I do feel sorry for the judge having to do deal with data dump.

Capitalism will always have a good name. This type of activity give these companies a bad name.

Ann Crotty, the seasoned business journalist, is now touching on old and well covered-up big business shenanigans. Paragraph 3 under the Sanlam story – I am rather sure that these dinosaur big corporates make use of a behind the scenes “cross vote-pooling agreement” Ann, whereby the designated Sanlam voter will always support the Naspers agenda and the designated voter on behalf of the Naspers control entities will always support the Sanlam agenda. Check the AGM minutes or voting results going as far back as possible and not once did these dinosaurs oppose a single vote of the other party.

In turn as well, they will have preferred priority access to any new gross-investment-opportunity before it goes to the market. A wholly cooperation agreement of sorts, though it smacks of competition colluding, make a mockery of corporate governance and is off course very unhealthy to say the least, but it is what it is. Weak men supporting other weak men. There are no balls around any more to stand up against these type of cover-up shenanigans.

Thanks Ann Crotty… you are touching some sensitive points… please continue to dig deeper… it makes me think it may be true that “absolute power corrupts absolutely…” The longer I am alive the more I realise that being part of a mafia and using bullying tactics can get your quite far in the business world… the kind of world where people are literally afraid to speak out about things. Who needs to read novels if the real world is this interesting? The way I understand it, Naspers ordinary shareholders have no real influence on the company? Very clever indeed. So the 36 asset managers were merely venting frustrations, which I suppose is good for mental health.

End of comments.

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