South Africa: Black ownership commission investigating Nokia and MTN for possible violations
11 August 2017
MTN Group and Nokia are under investigation for the potential violation of laws dictating the ownership of companies in South Africa.
The Broad-Based Black Economic Empowerment (B-BBEE) Commission, which promotes the “effective participation of black people in [South Africa’s] economy”, is investigating the companies for potential “non-compliance with the Codes of Good Practice… relating to the B-BBEE ownership structures.”
MTN and Nokia could each face fines of as much as 10% of their annual turnover if “there are adverse findings against them”, according to the commission. In this eventuality, the companies would have 30 days to respond “before the B-BBEE Commission makes the findings final.”
With regard to MTN, the commission is aiming to establish “whether the MTN Zakhele and the MTN Zakhele Futhi B-BBEE schemes meet the requirements for black ownership elements and comply with the B-BBEE Act.”
MTN’s Zakehele Futhi scheme is an investment vehicle launched in September 2016 which grants eligible members of the South African public the right to apply for up to 123,416,819 shares in it. It is aimed at empowering the country’s black population and replaced its similar predecessor MTN Zakhele.
In Nokia’s case, the commission wants to “determine whether the B-BBEE ownership transaction involving the employee trust and Sekunjalo Investment Limited through specific entities (resulting in 26% black ownership), and the subsequent change in black ownership (resulting in 31.28% black ownership) by Sekunjalo Investment Limited, comply with the B-BBEE Act”.
Currently, the commission is conducting probes into 17 different companies. It notes that “it is allowed to initiate an investigation on its own initiative and this often happens as a result of a tip-off.”
Companies in violation of the act face fines, while individuals can be imprisoned for up to ten years. In addition, firms can be blocked from receiving government contracts for ten years, and any existing deals they may have with state-owned entities or government departments are subject to cancellation. However, the commission can permit alternative means of resolving disputes, but has not disclosed these methods.