Telkom SA SOC Ltd. (TKG) said it asked suspended Chief Financial Officer Jacques Schindehutte to repay a 6 million rand ($555,000) loan used to buy shares because the transaction breached the terms of the Companies Act.
Telkom, Africa’s biggest fixed-line phone operator, lent Schindehutte the cash in late September so he could buy stock, Chief Executive Officer Sipho Maseko said on Nov. 18. Schindehutte would only be obliged to repay the zero-interest loan if he left the company, Pretoria-based Telkom said in a statement the same day. The CFO was suspended in October following the outcome of an investigation into unspecified allegations of misconduct, yet remains a Telkom employee.
The loan “was granted in a manner that was inconsistent with provisions of the Companies Act, making the transaction null and void,” Telkom said in an e-mailed statement today. “The board cannot and did not ratify the granting of the loan. Telkom therefore has an obligation to claim the loan back in order to rectify the situation.”
Schindehutte bought 243,700 Telkom shares for 5.96 million rand or 24.4523 rand each, the company said in an Oct. 2 statement. The stock is now trading at 33.30 rand, or 36 percent higher than what Schindehutte paid, amounting to a paper profit for the director of 2.16 million rand. The shares have risen almost 10 percent since the company said Jan. 10 it plans to fire 1,000 managers and reduce the workforce by about a third over five years.
“The interest-free loan has nothing to do with my suspension as I followed the correct procedure to seek approval for the loan,” Schindehutte said in an interview today. “I’ve now been told that the company was unable to ratify the loan as they had indicated to the market and I’ve been called upon to repay the loan. I will do that forthwith.”
Telkom said that in his capacity as CFO Schindehutte was responsible for the provision of loans to directors and personally oversaw the payment to himself.
“Having now been advised that the loan was void, the CFO has a fiduciary duty to repay the loan to the company,” Telkom said in the statement. “We are confident that Mr Schindehutte will act in the best interests of the company and repay the loan.”
Maseko said in a December interview he would have preferred not to have probed Schindehutte’s alleged misconduct.
“If we were not listed no one would know about this, we would have managed it pretty quietly,” Maseko said. “It started off as a whistle-blowing, which the company then duly investigated. I, for one, wasn’t keen to investigate it.”
To contact the reporter on this story: Christopher Spillane in Johannesburg at email@example.com