The Public Investment Corporation (PIC) has vowed to block the re-election of a MultiChoice board member over questionable consultancy fees.
The continent’s biggest asset manager, which holds a 15% stake — and is the second-biggest investor in MultiChoice after French entertainment group Canal+, has slammed a decision to keep paying one of the pay-TV operator’s longest-serving board members, Jim Volkwyn, millions in advisory fees.
MultiChoice told online news platform TechFinancials this week that the controversial consultancy agreement with Volkwyn, who is up for re-election at the company’s AGM on Wednesday, will expire in 2028.This means that the agreement would have run for 10 years when it expires. The deal has netted Volkwyn over R10m since it started.
Renewal of the consultancy contract flies in the face of a commitment from board chair Elias Masilela to review such agreements.
Speaking to Business Times on Friday evening, PIC chairman David Masondo said, “If this is true [the extension of Volkwyn’s consultancy agreement], it would in my view be tantamount to breaches of corporate governance principles.”
“This conduct would raise questions about remuneration dealings within MultiChoice, a company facing commercial headwinds.“There have to be consequences where corporates are tone deaf and create structures that are used to undermine the principles of corporate governance. This is intolerable and undermines all the shareholders of MultiChoice,” Masondo said.
Volkwyn provides advice to the group CEO Calvo Mawela on a regular and extensive basis. The scope of [his] consultancy services is global in nature and involves advising on key group strategies
— MultiChoice
The deputy finance minister said the PIC would move to block Volkwyn’s reappointment to the board on Wednesday.“It would be unacceptable to support the appointment of such board members. We must all root out anything, regardless of how it is structured and presented, that undermines corporate governance in both the private and public sectors.”
A similar consultancy agreement with one board member, Kgomotso Moroka, was terminated in 2023, while Imtiaz Patel retired from the board as chair and was no longer eligible.
MultiChoice said on Friday it was not uncommon to enter into consultancy service agreements when a company requires skills, specialist knowledge and a commitment of time over and above normal board services, especially in specialised/niche sectors like pay-TV.“On the same basis, consulting agreements have been terminated where these services were no longer required,” it said.
In an interview with Business Times in April, Masilela said the contracts would be reviewed and likely be scrapped.“Everything has a sunset clause. These were legacy contracts that were necessary for the company because we know that when you employ board members, you employ people who are experts in their fields as it may be quicker to get an answer from them on a technical aspect rather than getting that from the outside, and that can take longer.”
Masilela said that “after a while, as things unfold and you no longer need the services, the [remaining] contract will be reviewed”.
On Friday, MultiChoice said that as a previous CEO of the video entertainment business under Naspers, Volkwyn has “great operational insights and experience involving the core linear video entertainment business, in particular as it relates to navigating macroeconomic challenges across the continent and managing changing consumer habits and big industry shifts (eg he was part of the move from analogue to digital pay-TV).”
Volkwyn has waived any entitlement to director and committee fees paid to non-executive directors, whose average fees range from R1m to R2m.
Explaining the consultancy arrangements in its 2022 annual report, MultiChoice said: “Volkwyn provides advice to the group CEO Calvo Mawela on a regular and extensive basis. The scope of [his] consultancy services is global in nature and involves advising on key group strategies. This agreement is complementary to his role as director and involves an annual fee for additional time and effort to provide global strategic input at an early stage of evaluating strategic direction.”
The company said it believed that leveraging Volkwyn’s local and international industry insights and skills was more beneficial than paying external consultants with limited insight into its operations.
“His in-depth understanding also provides us with a significant strategic advantage as we evaluate many opportunities to grow our business over the longer term,” MultiChoice added.
The pay-TV operator went further in its 2023 annual report, saying Volkwyn’s “in-depth understanding, stemming from nearly 40 years with the group, also provides us with a significant strategic advantage as we evaluate many opportunities to grow our business over the longer term”.
MultiChoice is in the process of being taken over by French group Canal+, which is the largest shareholder with a 45% stake, having spent €1.2bn (about R24bn) gradually acquiring the shares.
Canal+ would not comment on the upcoming AGM and the board’s remuneration. It has previously said the acquisition of MultiChoice would create a group with significant resources and scale to compete with US giants who are dominating the global video content market. The French entertainment giant has a presence in more than 50 countries across Europe, Africa and Asia.
MultiChoice is facing headwinds in its key markets amid high interest rates and currency devaluation. In the year to March, the group lost 9% of its base and is down to 15.7-million subscribers. In South Africa, 400,000 subscribers stopped paying for the service mainly due to intense load-shedding and high subscription prices, while in the rest of the continent it had 13% fewer customers, ending the year at 8.1-million. The company reported a loss and is said to be technically insolvent.
It will ramp up its insurance, internet, sports betting and streaming businesses to grow its top line as its traditional business is under pressure, with more than a million subscribers dumping the pay-TV provider.
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