Telkom’s impressive new chairman

Given constant government interference in Telkom and the need for first-rate leadership and solid corporate governance, it’s crucial the company has a strong and independent chairman to lead its board. Thankfully, it appears to have found just the right person in Jabu Mabuza. By Duncan McLeod.

Impressive. That’s the adjective that seems most appropriate in describing Telkom’s new chairman. Jabu Mabuza, a taxi driver turned business mogul, has very quickly identified the challenges facing Telkom and recognised the need to mend the breakdown in relations between management and government while at the same time sending a clear message that he won’t tolerate government imposing a strategy on the troubled telecommunications operator.

Telkom needs all the help it can get. Abused for years by poor management decisions and undermined by government, it’s facing an enormous challenge as margins shrink and competition bites. Political interference — most recently communications minister Dina Pule’s reckless intervention at the company’s annual general meeting (AGM) — is destabilising the business, with group CEO Nombulelo Moholi tendering her resignation earlier this month. She’s Telkom’s fifth CEO in seven years. This instability is the last thing the company needs as it struggles to remain relevant in a competitive telecoms marketplace.

So, the appointment of a strong chairman, who appears to be prepared to be unbendable in defending good corporate governance, is welcome news. Mabuza, who also heads Business Unity South Africa and who was CEO of Tsogo Sun until 2011, replaces the respected Lazarus Zim, who bowed out at the AGM.

This week, just days after being appointed as chairman, Mabuza made it clear he wouldn’t buckle to government demands, insisting that he views the state as just one of Telkom’s shareholders. Government owns a 39,8% direct stake in Telkom. Its pension fund administrator, the PIC, has a 10,9% stake.

He also made it clear that it is not government’s role to devise a strategy for Telkom. Rather, its role is to create policies that provide certainty to business.

Pule has put forward a number of proposals to cabinet on Telkom’s future. It’s not clear when cabinet will make a decision, though it’s fair to assume that nothing will happen before the ANC’s elective conference in December.

“The way I see it is the day shareholders give you a strategy, they may as well come and run the business,” Mabuza said on Monday. He’s right, of course. But his challenge will be convincing the politicians — Pule in particular — of this fact. Pule has said Telkom will play a pivotal role in government’s plans to have everyone in South Africa connected to broadband by 2020. The company’s private shareholders worry that this will mean further interference and an expectation that it will roll out services into areas that don’t make financial sense.

Given Pule’s intervention at last month’s AGM — and the fact that Telkom’s management team was not aware that the minister would vote against the election or re-election of four of the company’s nonexecutive directors — it’s obvious that a breakdown in relations has occurred, Mabuza said.

Wisely, he said his approach to government would not be confrontational. He said, too, that government’s socioeconomic goals did not necessarily run counter to the expectations of private investors. “You can do good business, eat well and sleep well,” he said. “All business wants is policy certainty so that we all know that this is the policy framework in which we will operate. Policy certainty for us is critical.”

Crucial, too, is finding and appointing a strong CEO to replace Moholi as soon as possible and ensuring that the instability at Telkom doesn’t claim more scalps among top management. Mabuza has just taken on one of the toughest board assignments in corporate South Africa. He’s off to an encouraging start.  — (c) 2012 NewsCentral Media

• Duncan McLeod is editor of TechCentral; this column is also published in Financial Mail