eBusiness Weekly
Golden Sibanda
South Africa headquartered Old Mutual Plc has explained circumstances leading to the impending separation with its Zimbabwean chief executive (CEO) Peter Moyo, revealing that the relationship with the executive had become untenable due to serious conflict of interest issues.
The financial services group, the parent firm of Zimbabwe’s largest financial services group, Old Mutual Zimbabwe said Moyo unduly pocketed a R30 million rand dividend, out of a total payout of R105 million, from an investment firm he founded and in which Old Mutual holds shares.
Old Mutual said Moyo received ordinary dividends in 2018, amounting to R30,6 million despite his co-owned firm, NMT Capital Investments, owing it significant amounts on account of its preference shares rights.
According to the South African Companies Act, dividends to preference shareholders should be paid before those due to ordinary shareholders.
NMT Capital is a South Africa investment holding company, which has actively concluded, managed and grown investments since the group’s inception in 2002. Old Mutual holds 20 percent preference share stock in the investment firm.
Moyo, who has been at the helm of the Johannesburg Stock Exchange listed financial services behemoth for two years following his recruitment in 2017 as head of Old Mutual markets in 2017, was on June 17 given notice of termination of employment over the matter, which he denies.
The Zimbabwean executive was the founding chief executive at NMT when he was initially recruited as the CEO of Old Mutual Emerging Markets.
South African reports say Moyo is the “M” in NMT, and the other initials belong to Sango Ntsaluba, the executive chair, and Thabiso Tlelai, a hotel and property executive who heads the Don Group.
“These dividends were declared in breach of Old Mutual’s rights as a preference shareholder, since arrear preference dividends were unpaid and, at the time of the second dividend declaration, the preference capital was redeemable,” Old Mutual said.
The JSE financial services giant said the preference share capital remains unpaid. Moyo chaired the board meeting of NMT Capital at which the second ordinary dividend of R105 million was declared.
While Old Mutual claims it had not been paid for its investment, which was due, Moyo said the insurer had received R23 million in ordinary dividends and an additional R20 million in preference dividends.
Reports from South Africa say NMT was initially supposed to repay the preferential capital invested by Old Mutual in July 2010, but the two parties agreed to roll the investment over a couple of times. Moyo said NMT started talks with Old Mutual to roll it over again in 2018.
Conflict of interest
Old Mutual said Moyo’s conflicting interest in NMT was declared upon his employment and was governed by a specific protocol in addition to general obligations tied to his employment contract.
The group said matters came to a head when in the latter half of 2018, when the Old Mutual Plc Related Part Transaction Committee (RPTC), a committee of independent board directors, requested a report on Moyo’s related part transactions and discovered gross anomalies.
“One of the concerns raised involved two declarations of ordinary dividends by NMT Capital during 2018 totalling R115 million. The resultant benefit and his own personal investment vehicle was R30,6 million.” This, Old Mutual said, was ultra vires standing rules regarding its entitlement and Moyo’s job contract.
Moyo denial
Moyo vehemently rejected these claims and has said all transactions were done in the open with Old Mutual’s awareness.
“At all times, Old Mutual had a separate director on the NMT board. Importantly, he voted for all these dividends. It is therefore difficult to understand any conflict when Old Mutual was party to these decisions through this director’s representation,” said Moyo.
Before the relations soured, the matters were investigated and reported to the RPTC in February, which referred the matter further to the Old Mutual Corporate Governance and Nomination Committee a month later.
This was followed by engagement, through members of the RPTC and Old Mutual’s legal counsel, NMT Capital and Moyo personally in an effort to secure information relevant to the events, but Old Mutual said the board could get satisfactory explanations.
“The board has not been provided with an acceptable explanation why, in clear contravention of the relevant preference share agreement with Old Mutual as well as Mr Moyo’s employment obligations, ordinary dividends were declared whilst debt to Old Mutual was outstanding,” Old Mutual said.
“On 23 May 2019, the board discussed these matters at length and considered its options, noting its duties towards stakeholders. The board came to the conclusion there was material breakdown in trust and confidence in Mr Moyo.”
After reaching this conclusion, Old Mutual said, the board engaged Moyo regarding the possibility of agreed separation, but no agreement could be thrashed out. It was then that the group suspended the CEO. The JSE listed group said Moyo’s conduct since his suspension; contradict his fiduciary duties to Old Mutual, his contract of employment as well as his suspension terms.
Managed separation
NMT executive chairman Sango Ntsaluba told SA media this week that it might be best for the two firms to review their shareholder relationship and start talking about a “managed separation”.
