Not a Mutual friend
The IDC is cagey about its funding to Moyo’s investment company, of which Old Mutual is a preference shareholder
Three months into the gripping boardroom spat between Old Mutual and its former CEO Peter Moyo, it’s safe to say nobody is emerging with their reputations enhanced.
The fiasco first began in May, when Old Mutual’s board suspended Moyo due to a "material breakdown of trust and confidence". Then, in June, Moyo was fired, but the high court ordered he be reinstated — only for him to be fired again last week.
It’s an ordeal that has cost Old Mutual shareholders R19.8bn so far. But even though shareholders like Allan Gray have begged the warring parties to sort it out, it’s only getting messier by the day. Moyo has now launched another urgent action, claiming Old Mutual is in breach of the constitution.
Even the Industrial Development Corp (IDC) — which says it loaned Moyo’s private company a sum of R33.6m — does not emerge well from this sorry saga.
IDC head of corporate affairs Zama Luthuli would not comment on the terms of the funding provided to Moyo’s investment company, NMT Capital, details of which first emerged in June in Old Mutual’s response to Moyo’s legal challenge of his dismissal. The IDC funding makes another appearance in the letter to shareholders released by Old Mutual last week.
All that the IDC would say in response to the FM’s request for clarity was that it had funded a special purpose vehicle wholly owned by NMT Capital. "The funding amount was about R33.6m, suffice to add that the terms of the funding are subject to a confidential agreement between the IDC and the client," said Luthuli.
The Old Mutual board seemed as concerned about NMT Capital’s failure to service its IDC obligation as its failure to service Old Mutual’s own exposure to Moyo’s private company. In the letter to shareholders the board describes a rather cavalier approach by NMT Capital to its obligations. An NMT Capital meeting chaired by Moyo opted to pay out a R105m dividend to ordinary shareholders — Old Mutual is a preference shareholder — while ignoring the R157m guarantee due to the IDC.
"This NMT Capital guarantee to the IDC was apparently settled in November 2018, pursuant to a written agreement in terms of which a large proportion of the outstanding debt to the IDC was apparently written off," Old Mutual told its shareholders.
If true, this is a damning indictment of both NMT Capital and the IDC, which did not immediately respond to a request for confirmation. The discrepancy between the R33.6m and R157m is unexplained, but it inevitably prompts recollections of the IDC’s controversial loan to Gupta-controlled Oakbay in 2010, which was converted to what proved to be valueless Oakbay shares in 2014. In November 2017, then economic development minister Ebrahim Patel said the IDC would go to court to get its R293m from Oakbay.
This week NMT Capital’s Sango Ntsaluba told the FM he could not respond to a request for comment on Old Mutual’s statement about the funding. "I’m unfortunately not in a position to respond to your inquiry as this matter is or could be, I’m advised, before the courts. Second, as NMT we are bound by confidentialities," said Ntsaluba.
NMT Capital, which was founded by Moyo, Ntsaluba and Thabiso Tlelai, holds investments in a variety of companies.
Old Mutual has held a 20% stake in NMT for years and has invested almost R300m in various NMT companies. It has also provided preference share funding to Moyo’s family trust. NMT’s central role in the "the breakdown in the required mutual trust and confidence" between Moyo and the board resulted from the NMT decision to make the hefty dividend payments to its shareholders at a time when it owed money to Old Mutual and the IDC.
As for the Old Mutual board, it is looking remarkably flat-footed; going to court is always a bit of a lottery but a tighter case might have allowed for a remedy less shockingly disruptive than Moyo’s return to take up the high-profile job.
And whatever the South Gauteng High Court might have ruled, the board of Old Mutual is evidently determined that Moyo will not be returning to the well-paying job he held for just two years. Not only has the insurance giant issued a second notice terminating his employment, it has airbrushed him out of its website. In a move somewhat reminiscent of the Soviet Union days, Moyo has disappeared from the pictures of directors and executives on the Old Mutual website; you have to dig into the annual report archives to find any reference to him.
Oh, that it were that easy to make him disappear. Last week’s letter from the board seems designed to prepare shareholders for what could be a long battle. "Old Mutual has not initiated the litigation with Mr Moyo and is unfortunately not able to bring it to an end of its own accord," said the board. But, and here’s the all-important consideration, "The board cannot discharge its fiduciary duties without opposing claims where this is in the interests of stakeholders."
Highlighting the difficult road ahead, one of its institutional shareholders told the FM it would strongly oppose any attempt to pay Moyo for a quick settlement.