Jacob Zuma tops list of “worst executives of 2015”

South Africa based Financial Mail magazine has named the Rainbow Nation’s President, Jacob Zuma, as number-one on a list of ten worst executives this year.

According to the magazine, “Zuma didn’t appreciate the state of the economy he inherited from successive ANC governments and their finance ministers. Instead, he has managed to completely run out of money.”

The list also includes former MTN Nigeria’s CEO, Sifiso Dabengwa, who quit his job recently after the Nigerian telecoms regulator fined the telco giant US$5,2bn for failing to deactivate unregistered Sim cards.

Check out the entire list below.
1. Jacob Zuma, President: Not even paying attention

by Peter Bruce
Towards the end of the 1990s, Fortune magazine carried a cover with the arresting title “Why do CEOs fail?”It came at a time when several big heads in American business had fallen. Typically for Fortune, its cover story was thoughtful and exhaustive and it usefully ended with one single conclusion.

It wasn’t that the marketing manager had been over-promoted or that the competition had outsmarted him or her. Rather, it was because CEOs got distracted. It was because they failed to implement the strategy they had initially created.

President Jacob Zuma is the runaway winner of our worst leaders of 2015 list because, mainly, he doesn’t pay attention to what matters.

Zuma didn’t appreciate the state of the economy he inherited from successive ANC governments and their finance ministers. Instead, he has managed to completely run out of money.

Some 60% of the national budget today finances the public sector wage bill or welfare payments; the budget deficit has widened to more than 4% of GDP; and the country pays around R600m every working day to service the debts he has run up.

In the coming year SA bonds (our debt) are likely to be junk-rated and many of the foreign institutions that hold them will have to sell them, causing even further weakness and making them even more expensive to pay off.

Last week, he betrayed an entire generation of young South Africans by firing a competent finance minister, Nhlanhla Nene, who had declined to entertain the financial entreaties of a friend who not only runs his personal foundation, but SA Airways as well.

Dudu Myeni, along with the heads of many critical institutions whom the president has the power to hire and fire, is an incompetent.

Within two days, Zuma’s action had wiped R169bn off the market value of the JSE, weakened the banks index by 18,5%, and slashed 9,3% off the rand/dollar exchange rate. No other CEO in the country came close to matching this remarkable blunder for sheer value destruction.

Of course, the full extent of Zuma’s betrayal is not yet apparent but it will come in the form of rapid inflation and a currency barely capable of buying us out of trouble. Those young people will find it infinitely harder to lead the better lives the ANC has promised them as a result.

The problem with this CEO is that he does have a strategy to which he has committed — but he has largely ignored his own National Development Plan.

Instead, hours after firing his finance minister last week and appointing a complete novice, David van Rooyen, to the job, he sped to a gathering of African business leaders and told them how he really felt about modern economics.

“I am not a businessman or professor,” he said. “But I am rebelling against [the idea that] what determines the value of a commodity is the law of supply and demand. I am against this definition. The value of a commodity is the labour time taken in production of that commodity. That’s what determines the value of a commodity.”

As never before, this makes it clear that the president lives in a parallel universe.

And he has become a menace to his own country, his party and his cronies. Fortunately, he has been weakened by this tawdry episode.

The fact that he reversed the appointment of Van Rooyen and replaced him with Nene’s predecessor, Pravin Gordhan, may be a relief to any thinking South African, but it is little compensation for the long-term damage done to the economy by his rash actions.

2. Dudu Myeni: SA Airways: Invisible co-pilot?
by Nicky Smith

Dudu Myeni: SA Airways
Dudu Myeni’s reign as the chair of SA Airways belongs in textbooks on business practices and governance as a case study of what an independent nonexecutive director should not do.

Wringing every drop of influence she could from her close relationship with President Jacob Zuma, she has cut through CEOs, two boards and executive management teams and three ministers with breathtaking speed — and no consequences.

Such has been the destruction she has wrought that Zuma, extraordinarily, explained in the second week of December that the firing of Nhlanhla Nene as finance minister had nothing to do with Nene’s opposition to Myeni’s Airbus plans at SAA.

“SAA receives directives from the minister of finance and works under the guidance of that ministry. No member of the SAA board is above the minister of finance or can operate outside of the mandate and direction provided by the minister of finance and the national treasury,” the presidency said. The statement is astonishing in how it goes on to deny the well-worn allegation that Zuma and Myeni have a romantic relationship and a love child.

In the past two years Myeni has directly stopped two large funding deals that were vital for the airline’s survival. She has changed terms of agreements worth billions of rand without any input from her executives, and for years has routinely undermined executives and intimidated others without consequences. Her lack of understanding or appreciation of the limits of her office as a nonexecutive director is shocking, more so as she was a member of the Institute of Directors and a founding member of the Black Business Council.

Nene’s opposition to Myeni’s alternative proposal for the Airbus swap deal that would save billions is not the only reason he was fired but was likely a big part of it.

Her appointment to the SAA board should have set off alarm bells since she had been in the newspapers before for interfering in the day-to-day affairs of the Mhlathuze Water Board in Richards Bay, disposing of executives and imposing her will.

In 2012 a selection panel for the Mhlathuze Water Board rejected her as a candidate for the board. It said she would “bring instability back into the board and was at the centre of the current crisis and disharmony”.

Yet she was hired — a move largely attributed to her relationship with Zuma.

3. Sifiso Dabengwa, MTN: A fine old time
by Thabiso Mochiko

Sifiso Dabengwa, MTN
This year could well go down as MTN’s worst ever — more so for its CEO, Sifiso Dabengwa, who quit after the Nigerian Communications Commission fined the group US$5,2bn for failing to deactivate unregistered Sim cards. The share price plummeted, resulting in huge losses for investors. The fine has since been reduced to $3,9bn and is due to be paid at the end of this month. MTN is still negotiating with the Nigerian regulator.

A former MTN Nigeria CEO, Dabengwa could be credited for building the Nigerian business when the telecom operator was awarded a licence there 14 years ago. But his tenure will be remembered for the way the group handled news of the fine. MTN informed the market about it only after the Nigerian media got wind of the fine. Nigeria is the group’s biggest market, with 62m subscribers. For years MTN has been telling the market about the challenges in that country, but news of the latest fine also outed MTN as a serial offender against regulatory requirements.

JM Busha head of equities Farai Mapfinya says Dabengwa failed on several counts, not only because of the Nigerian debacle. There were also operational cracks across the group, which a CEO should have had a handle on. MTN hugely underinvested in the SA network and the gap between it and Vodacom continued to widen. MTN SA went through a protracted strike and “we didn’t get a sense of his presence or leadership through it all”.

Though the buck stops with the group CEO, the MTN Nigerian CEO and the unit’s regulatory head also left the company.

The fine forced the group’s executive chairman, Phuthuma Nhleko, to implement a new structure aimed at strengthening operational oversight, leadership, governance and regulatory compliance across its 22 operations in Africa and the Middle East.

But aside from the fine, since Dabengwa took over as CEO three years ago MTN has shown strong growth despite regulatory and competition challenges in many markets. Analysts expect a rerating of MTN’s share price next year.

4. Martin Winterkorn, VW: At no personal cost
by David Furlonger

Martin Winterkorn
It’s one thing to oversee one of the world’s most respected companies while its reputation is being trashed. It’s another to watch as inaction costs tens of billions of euros and threatens the livelihood of thousands of employees.

But then to walk away with millions of euros safely in your own pocket, all the while claiming ignorance of the biggest industrial cheating scandal in a generation, takes a particular kind of lousy leadership.

For a while, it seemed MD Martin Winterkorn could do no wrong at German car maker Volkswagen. Sure, he had a bad-tempered public spat with chairman Ferdinand Piech this year over leadership succession, but through his demanding management style VW challenged, and occasionally surpassed, Toyota as the world’s biggest auto maker.

But it all fell apart when it was discovered that VW had been lying to governments and customers all over the world about exhaust emissions from its diesel vehicles.

Engineers had installed a computer “cheat” device to temporarily reduce emissions during regulatory testing.

Besides seeing billions wiped off its share value, VW faces the loss of further billions in fines and possibly years of litigation from misled customers.

Winterkorn is OK, though. Having claimed throughout that it all happened without his knowledge, he finally bowed to pressure to resign — though not at any personal loss. He walked away with an initial pension pot of €28,5m, with the possibility of even more recompense later.

5. Chris Coombes, Sovereign Foods: Feathering their nests

by Marc Hasenfuss

Chris Coombes, Sovereign Foods
Chris Coombes can probably take a bow for preventing a slaughtering of shareholder value at this Uitenhage chicken business. As CEO, Coombe s runs a tight ship and has successfully fattened Sovereign Food Investments’ margins with a smart value adding strategy that secures valuable space in a large supermarket chain.

Remembering that Sovereign only six years ago was lumbered with a heavy debt load and faced hostile takeover on two fronts, Coombes has done an admirable job (even restoring decent dividends).

While Coombes and his senior management team do deserve a pat on the back, they arguably did not deserve a performance bonus that ravaged earnings. Sovereign officially did not meet its original performance criteria on which bonus payments would be based. But no problem, the board — without shareholder approval — simply altered the performance gauge to ensure management qualified for performance bonuses. The consequent payment to management shaved a hefty 50c/share off earnings.

The fact that executives, and especially Coombes, were not big shareholders on Sovereign also suggested top management and investors were not in the same boat. Sovereign has since proposed a restructuring to placate shareholders — involving a clearer remuneration policy and an executive equity buy-in. But Coombes has badly blemished his solid operational track record by participating in what appears to be unwarranted corporate largesse.

The CEO can redeem himself only if he sets an example to his fellow directors and managers by paying back the money.

6. Robbie Venter, Altron: Breaking up
by Larry Claasen

Robbie Venter, Altron
Altron CEO Robbie Venter is probably longing for a quick end to what has been a difficult year.

The broad-ranging technology group, created by Venter’s father Bill, has been knocked in key areas. Poor sales forced it to shut down its video-on-demand unit, Altech Node, and it decided to dispose of Powertech Transformers because of a slowdown in orders from Eskom.

Altron also decided to sell the subscriber list of its cellphone service provider, Altech Autopage, to the cellular network operators. The deal will bring in R1,5bn but it also means surrendering a revenue stream.

With little going in the group’s favour it was not really surprising that revenue was down 7% to R13,29bn and earnings before interest, tax, depreciation and amortisation (Ebitda) had collapsed 69% to R241m for the half-year to August. It incurred a headline earnings per share loss of 64c and its Ebitda margins fell from 5,5% to 1,8%.

Altron is in a difficult spot and by the company’s own admission it will take some doing to sort itself out. It plans to reduce its headcount, is looking for equity partners for its noncore businesses, and will focus on its strengths in the IT and telecommunications space.

If it succeeds in making the changes, it will be a very different group. “Altron’s future state will be a smaller, more agile group that is focused on its core IT assets. It will be a stable base from which to grow,” says Venter.

7. Bongani Mbindwane, Platfields: Where is he?
by Charlotte Mathews

Bongani Mbindwane, Platfields
Platfields CEO Bongani Mbindwane has proven as elusive as the Scarlet Pimpernel. Little hope that shareholders, who have been holding suspended shares at 2c each for the past 2½ years, might be able to question him. Chubekile Ntloko, the mother of his child, said in court papers in July that even private investigators could not trace him as she attempted to pursue him for overdue maintenance payments.

Shareholders might have been hoping to hear from him at some point about the company’s financial position and the results of drilling in its prospecting areas. After all, the most recent published financial statements, which painted a dire position, covered only the year to February 2013. There was some mention two months ago of a rescue package from a new investor, but nothing materialised.

The fact that a provisional liquidation order was served on the company in October but that no-one at Platfields was aware of it comes as no surprise to observers.

In September, Platfields’ sponsors said the executive directors had given notice they would resign at the next AGM. Since the most recent AGM, held in December 2012, there has been no opportunity for shareholders to hold the directors accountable. For them to resign would be a technicality; there isn’t the slightest chance for them to be re-elected.

What makes the elusiveness of the CEO even more noteworthy is his previous optimism. "Our business plan is engineered for growth and for mining the resources we hold," he told journalists in 2010.

8. Johan Enslin, Lewis: Not-so-easy chairs
by Rob Rose

Johan Enslin, Lewis
As a former shopfloor salesman from Kimberley, Johan Enslin could never have expected the horror ride he’s had this year as CEO of 81-year-old retailer Lewis. And it’s not even the usual things that you’d imagine would be keeping Enslin awake — like rocketing bad debts and customers not paying for the furniture they bought.

No, what really made 2015 an annus horribilis for Lewis was the fact it was caught out cheating its customers by charging “unemployment insurance” to customers who were self-employed or retired. When the National Credit Regulator took Lewis to task for breaching the National Credit Act, Lewis initially acted defensively. It then grudgingly decided to refund R67,1m to customers whom it had “missold” insurance, apparently through “human error”.

But as its share price got hammered, Lewis took it all rather personally. At its AGM in August, chairman David Nurek rounded on the company’s chief critic, Dave Woollam, who had embarrassed the company repeatedly, launching a blistering personal attack on him. Woollam had the last laugh, though, when the company revealed in October that it would be “restating its financials” after reviewing its accounting practices — one of the issues Woollam had raised. This restatement saw its net asset value drop by R375m, while its after-tax profit fell by R33m for the year to March.

Perhaps more pertinently, Lewis now faces a rocky ride because one of its crucial income streams comes from levying “credit insurance” on customers, essentially requiring them to take out insurance to cover their debt in case they die. New draft rules suggest the cost of credit life insurance will be capped at R4,50 per R1000 — nearly half what Lewis charges.

9. Hlaudi Motsoeneng, SABC: Dodgy newsmaker
by Penelope Mashego

Hlaudi Motsoeneng, SABC
Corporate warlord he may not be (as his lawyer has asserted), but controversial newsmaker he certainly is.

Hlaudi Motsoeneng, the SA Broadcasting Corp’s COO, has kept the SABC in the news with his extravagant salary increases and never-ending court proceedings.

Famously, he has called for the broadcaster to carry at least 70% “positive news”.

He has contributed to what is arguably the worst financial state the public broadcaster has been in: it turned a R358m profit last year into a R395m loss for the year to March 2015. At the same time his salary shot up to R3,7m from R2,8m, while R33m was lost in “irregular and wasteful” expenditure, a probe by auditors SekelaXabiso found.

Motsoeneng’s disciplinary hearing, which was open to the public, centred on charges of “gross dishonesty, gross misconduct and abuse of power”.

It was alleged that he lied about passing matric; unilaterally increased the salaries of some staffers; and created a new position for another. He pleaded not guilty to the charges.

On Saturday evening advocate Willem Edeling, who was chairing Motsoeneng’s disciplinary hearing, handed down his controversial judgment clearing him of all charges. Motsoeneng is now expected to return to work, the broadcaster says.

Motsoeneng enjoys the support of communications minister and ally of the president, Faith Muthambi, who endorsed his appointment as COO despite the public protector recommending he be suspended and disciplined.

Motsoeneng, the SABC and Muthambi are appealing a court decision to have his appointment as COO set aside. He has also approached the constitutional court to challenge a supreme court of appeal ruling that the public protector’s report is binding.

10. Peter Matlare, Tiger Brands: More haste, less speed

by Sikonathi Mantshantsha

Peter Matlare, Tiger Brands
After a rushed and ill-fated foray into Nigeria three years ago, Tiger Brands has now thrown in the towel and exited its 65,7% Dangote Flour Mills investment.

It says it has reached agreement to sell the stake back to Dangote Industries for R700m. This follows a string of operating losses under outgoing CEO Peter Matlare, as well as a full impairment of the R1,6bn acquisition price and subsequent investments equal to the purchase price.

“In addition, Tiger Brands will assume and settle outstanding debt guaranteed on behalf of Tiger Brands Consumer Goods (the new name of Dangote Flour Mills), amounting to R400m.”

Selling the stake back to Dangote, controlled by Africa’s richest man, Aliko Dangote, means Matlare has cleaned up his mess before leaving this month. He was appointed in 2008.

Prior to the Dangote dalliance, Tiger Brands acquired biscuit company Deli Foods and 49% of UAC Foods, also in Nigeria. It will hold on to those. Matlare also took the company into important markets like Ethiopia and Kenya, but the poor due diligence studies have come back to haunt him. In 2008, it bought a controlling interest in Kenya’s Haco Industries and it acquired Cameroonian chocolate manufacturer Chococam. In Ethiopia it acquired East African Group in 2011.

This year Tiger Brands has spotted corruption by its staff in Kenya and operational losses abound in Ethiopia.

These failings have humbled Matlare, who admitted to Business Day in May last year that Tiger Brands’ misfortunes in Nigeria had taught it “not to be hasty when pursuing growth opportunities in Africa. We have learnt some important lessons.”