(MENAFN- The Post) RELATIONSHIPS between minority and majority shareholders are generally fraught with mistrust and bickering.
Minority shareholders often feel that dominant shareholders want to railroad crucial decisions on appointments, dividends, acquisitions and strategies. They believe, and sometimes justifiably so, that their voice doesn't carry much weight on the board of directors and in annual general meetings.
Majority shareholders, on the other hand, grumble that minority shareholders overvalue their importance and want to punch way above their weight. Some go as far as labelling minority shareholders squeaky wheels whose demands are disproportionate to their investment in the company.
Such disputes keep the courts busy with corporate lawsuits, some of which are strong enough to upend companies.
Matjato Moteane, Sekhametsi Investment Consortium's director, says he and his partners were alive to such pitfalls when the company bought 12 percent of Vodacom Lesotho in 2001.
'We knew these potential risks because there were a lot of case studies to learn from,' says Moteane who once served as Vodacom Lesotho's chairman.
'That is why from the onset we decided that we would build a partnership based on openness, frank discussions and trust.'
It is that spirit that has sustained the partnership between Vodacom and Sekhametsi for the past two decades.
Together they have built a M5 billion mobile network company with 1.6 million subscribers and controls 80 percent of the Lesotho market.
Moteane says it also helped that Sekhametsi understood that this was a long-term investment.
'We knew that we had to play our part to grow the company. We were always aware that dividends would be a result of the work we put in as Sekhametsi.'
It helped that Vodacom was amenable to Sekhametsi's suggestions on the composition of the board.
Under the shareholder's agreement Sekhametsi was entitled to two alternate directors on the board out of seven (7) non-executive directors.
So Sekhametsi had to have two pairs of directors who alternate on the board.
Moteane however says Sekhametsi negotiated that all four directors permanently sit on the board.
He is quick to add that this did not affect the voting matrix because the other pair would not vote and generally decisions of Vodacom Lesotho are made by consensus and mutual agreement.
Their role, Moteane explains, was to learn the business and keep abreast with developments in the company.
'The board was thus getting four Basotho Directors for the price of two. That brought diversity on the board and ensured that Vodacom had directors with intimate and local knowledge of the business.'
Two of those directors were business owners, one was an accounting officer while the other was a lawyer.
The arrangement also brought gender diversity to the board because most of the female directors were Sekhametsi's representatives.
Moteane says the fact that Sekhametsi also had the chairmanship 'helped create a sense of legitimate ownership'.
'Although we were a minority shareholder, we were leading the board. This meant that we had a strong voice in the strategic direction of the company'.
One of the most crucial decisions of the board was on the system to grow Vodacom's subscriber base.
That was back in 2003 when Vodacom had 50 000 subscribers and there was urgent need to expand the system's capacity
Moteane says Sekhametsi directors agreed to have a system that could carry two million subscribers. That this happened when the mobile network industry was still in its infancy is a reflection of the board's foresight and faith in the business.
The system adopted was centrally hosted in South Africa and serves all Vodacom's subsidiaries in Africa.
'That meant we were benefiting from a system with a huge capacity but low costs. That decision was based on sound business principles,' Moteane adds.
Around the same time Sekhametsi's representatives on the board participated in the Foreign Corrupt Practices Act (FCPA) training to enhance their understanding of international corporate governance rules and mitigate the risk of corruption.
Enacted by the United States Congress in 1977, the FCPA was a response to incidents of American companies making hundreds of millions of dollars through questionable payments to foreign government officials, politicians and political parties.
The law was meant to stop the bribery of foreign officials, restore public confidence in the integrity of the American business system, and promote stronger and more reliable foreign legal regimes.
Despite being a United States law, the FCPA has a massive global reach and implications for international companies.
Violations could lead to punitive fines and blacklisting that might ruin companies.
Moteane says the training helped the local directors understand international corruption and money laundering regulations.
'They brought that crucial knowledge to the board and helped make the necessary regulations to improve corporate governance practices.'
That training, he notes, 'was a clear indication of the value and ethical standard we wanted to bring to the table at Vodacom Lesotho and other companies in which Sekhametsi holds various stakes.
Another important intervention was to make sure that services provided to Vodacom Lesotho are aligned to the shareholding structure of the company. In simple terms this meant the Group would provide 80 percent worth of services to Vodacom Lesotho while the Basotho would provide 20 percent, as per the shareholding structure.
The Basotho 20 percent allocation is however not restricted to Sekhametsi.
'This applies to Basotho companies that have the necessary capacity and skills,' Moteane explains.
To that end, the board gets quarterly related party transactions reports on the procured services to ensure compliance to this agreed threshold.
'That meant that there was a clear expectation on how local companies would benefit from the business. That agreement has helped empower hundreds of local businesses.'
In 2017 the board decided to build the Vodacom Park. The building worth nearly M100 million is owned by Sekhametsi Properties, a subsidiary in which Sekhametsi Investment Consortium, owns 71 percent.
Because the land is leased from the State, the building also benefits the government through a rent-sharing agreement, ground rent and corporate taxes.
Moteane says this was a deliberate strategy to build a mutually beneficial relationship with the state and Basotho.
'It was possible to just buy the land and build but we thought it would be good to forge a partnership that benefits our country and the people.'
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