Vodacom’s CEO, Alan Knott-Craig, who was in London to terminate the deal, told the Financial Times that the decision to withdraw from Nigeria is a blow to our expansion plans, but there was a breach of trust, and I decided we could not expose the company any further.
According to the FT, the alleged breach of trust centers on Vee’s decision in March to approve payments totaling approximately $3m to three brokerage companies. Vee directors held directorships in two of the companies.
Behind the scenes it seems that Vodacom’s management was told by shareholders last week to walk away from Nigeria, where it had just signed a five-year management contract with Vee Networks.
The management deal with Vee Networks, Nigeria’s second largest mobile operator, involved Vodacom executives running the Vee Networks business as a lead-up to a $200m takeover.
The shareholders had apparently insisted the board of Vodacom cut its ties with Africa’s biggest market as they had become uncomfortable with corruption allegations that were constantly being leveled against the company. This was despite the fact that Vodacom had conducted extensive due diligence which found that earlier payments negotiated in 2002 to brokers that helped Vee raise capital from the Nigerian state governments, were not illegal.
After this, Knott-Craig then ordered that no further payments be paid out. But on March 22, just a week before the management agreement came with Vodacom came into force, Vee’s chairman Oba Otudeko approved the $3m March payments, according to a letter seen by the FT.
We had a clear understanding, but Vee chose to pay without telling us, said Knott-Craig in the Financial Times. When we discovered they had signed the management deal after making those payments, it was the trigger for us to leave Nigeria. We shall not be going back there for the foreseeable future.
Mthembu had been widely tipped to take over the top job at Vodacom next year, but according to a source close to the Nigerian deal, Mthembu was sacked because he did not tell Vodacom’s board that he had uncovered irregular payments made by Vee Networks to the governors of three Nigerian states before Vodacom entered into its management contract.
Apparently, the politicians had returned their commissions after Mthembu threatened to pull out of the deal. But this was not enough for Vodacom’s shareholders, who after an inquiry, recommended that his contract be terminated.
