Allan Gray’s head of investment Andrew Lapping welcomed Net1’s decision to terminate the two-year consulting agreement with former CEO Serge Belamant that would have generated $50,000 a month in fee income for the disgraced executive.
Lapping described the move as a "positive development" as it saved costs and indicated the business was happy it did not need Belamant’s input.
Although Belamant, who was forced to retire at the end of May, will lose out on a very generous consulting fee, he will not be left penniless. Apart from the consulting agreement, the board announced at the time of his resignation that it had agreed to give him two lump sum payments worth a combined $8m.
In addition, it undertook to repurchase his Net1 shares for a value of $11m and pay him an additional $475,000 for his share options. In addition to the $19.5m, Belamant has a £3.3m house just outside London.
On Monday Net1’s board announced it had issued Belamant with a 90-day written notice to terminate his two-year consulting agreement with the company. The board said the company would not be making any termination payments to Belamant beyond the 90-day notice period.
Net1 chairman Christopher Seabrooke said the company had managed a smooth transition and believed there was limited value to continuing with the consulting agreement for a lengthy period. "We discussed our decision with Mr Belamant, who concurred with our conclusion. Our parting is cordial and we wish him success in his future endeavours after the remaining period of the consulting agreement with us."
Although Belamant is left with the bulk of the value from his termination agreement, the decision to end the consulting arrangement marks something of a change in the board’s attitude. Just days after announcing the terms of the termination new CEO Herman Kotze defended it, saying it was justified because Belamant had been forced to take early retirement.
Kotze said he had heard the shareholder complaints, but there were restraint of trade issues and the ownership of intellectual property that had to be considered.
Kotze was responding to comments by Allan Gray and the International Finance Corporation, Net1’s largest shareholders with 16% and 11% stakes respectively. At the time Allan Gray said it was outraged by the settlement. "We are very surprised that Belamant was able to negotiate such an extravagant deal after such broad public censure and believe that it is unjustified given current circumstances."
The generosity shown to Belamant was seen as a reflection of the weakness of the board, which had only three nonexecutive directors, each of whom had been on the board since 2005.
In June, Net1 announced the appointment of Alfred Mockett as an independent nonexecutive director. Mockett was nominated by the International Finance Corporation.