South African Black Economic Empowerment (BEE) group Shanduka has been warned by a legal expert they could face challenges in its agreement to buy a minority stake in MTN Nigeria.
HumanIPO reported onFriday the Shanduka Group had acquired a minority stake in MTN Nigeria worth US$355 million, but the deal has come under scrutiny since Shanduka founder, politician and trade unionist Cyril Ramaposa is also the current chairperson of the MTN group, which owns 78.83 per cent of MTN Nigeria.
Now another challenge faces the holding company in the form of possible corporate breaches regarding the purchase of the minority stake. A legal expert has warned Shanduka it may face problems with its agreement complying with new local Nigerian and international legislature.
South Africa faces increasing pressure as a signatory to the Organisation for Economic Co-operation and Development (OECD) to take action against companies for the behaviour of its subsidiaries or agents as well as to comply with international laws overseeing corruption.
“While South Africa has not been actively taking action against companies, it is under pressure from the international community to take a stronger stance on corruption and accountability,” Steven Powell, forensic expert from Edward Nathan Sonnenbergs, told Tech Central.
Powell added that even though Shanduka is unlisted with the OECD, it needs to investigate its target acquisition company to avoid buying into a company that may be involved with corrupt activities.
Shanduka could find itself being held accountable if it buys into an entity guilty of corruption in terms of the regulations to the Companies Act, which was introduced last year.
According to Powell, most unlisted companies are unaware of the “far-reaching and onerous” requirements that come with the Companies Act, especially with regards to a company’s responsibility in preventing corruption, of which increases as the stakeholding grows.
“Companies need to ensure they have complied with OECD obligations even when it comes to the subsidiaries or investments,” said Powell added focus on Africa and developing countries by the international community is increasing.
The US has legislation that holds investors responsible for the actions of the companies they choose to invest in. In line with this, the US is considering taking action against MTN for its conduct in Iran after the Turkish network provider Turkcell filed a federal lawsuit in Washington that alleges MTN used bribery to enter Iran and stole the licence from Turkcell.