CellC’s arrogance reeks of baas-and-boy-relationships in fronting

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By Pinky Khoabane

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The arrogance of CellC towards its BEE  partner exemplifies the baas-and-boy-relationships that have come to characterise BEE deals.

The story of the domestic worker who is a major shareholder in an organisation that she knows nothing about, has no control over and from which she receives none of the customary benefits due to shareholders has become legendary since the advent of South Africa’s democracy. This phenomenon is called fronting. It is the rampant scourge in which white companies, required by law to promote Black people if they want to benefit from government tenders, resort to simply using names of black people instead of finding real shareholders with whom to share the economic spoils of the New South Africa.

Once this blatant fraud became so widespread that government officials demanded to see the BEE partners, white companies involved in this unlawful practice turned to Black shareholders who they could use purely as tokens with which to collect the tender and discard thereafter. In these cases, the BEE partner remains on the fringes of the business while the white partner runs the operation on their own.

That has come to be the norm in fronting which is why the arrogance of CellC towards its BEE partners, given that some of the members include high profile individuals, comes as a shock. After all, shareholders of CellSAF, the BEE partner, include the very vocal anti-Zuma campaigner, Mathews Phosa, MK Veterans, SANTACO and other groupings from around the country. What this tells you is that this baas-and-boy mentality in BEE deals has no bounds.

Once the Saudi-based Oger Telecoms got its hands on the CellC licence, the black component in the deal was treated with contempt; corporate governance principles were flouted and agreements reached at the time the BEE partner sold 15% of its original 40% stake were simply thrown out of the window.

It is simply is inconceivable that CellC has not held a board meeting in six years effectively denying CellSaf its rightful 25% representation. The point that cannot be denied is that the third mobile licence was granted for purposes of giving blacks a stake in the industry. At the time, CellSaf acquired 40% and later sold a 15% which left it with an outright 25% debt-free and unencumbered stake in 3C – CellC’s holding company.

CellSaf was to retain its protection as a minority shareholder and the number of directors on the board of CellC was to remain the same. What has occurred instead is that the majority shareholder shut the door on the BEE partners, effectively running the business on their own. In its latest show of contempt, the CellC board has entered into a recapitalisation plan with Blue Label Telecoms without consulting its BEE partner. Apart from giving Blue Label Telecoms 45% stake in the company, the deal will see 10% go to six white men at a fee of R2000, while at the same time, diluting the stake of the BEE partner to 7%.

It’s simply preposterous that anybody who lives in South Africa today, with the outcry for radical economic transformation at its levels, could accept that the vehicle for which broad based economic empowerment was devised, will now go to a bunch of whites – with six of them holding a bigger stake than that of the original Blacks for which the licence was intended.

It is inconceivable that such a deal – which exemplifies the height of corporate greed –  should be allowed. CellSaf, in its decision to use its full might to fight this case, must be supported by all progressive South Africans who embrace the notion of a just and peaceful country in which all share in its wealth. Black South Africans have been patient while they wait for the crumbs from their masters’ table but that patience will run out. Deals of the nature of the CellC/Blue Label transaction will push South Africa towards the precipice of a revolt.

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