MTN Group’s shareholders might have welcomed the appointment of a new CEO to head Africa’s largest telecoms company, but in South Africa, where race still influences every sector of society and where the company got its start, the fact that it was a white man was viewed by many as a step backward.
Contemporary South Africa is still dealing with the vestiges of apartheid, a system of racial segregation that favored white South Africans at the expense of other groups. Despite the policy ending 22 years ago with a transition to democracy, the country’s corporate leadership still does not yet reflect its diversity. A 2015-2016 report by the Commission for Employment Equity report (pdf) showed that white South Africans still dominate the top tier of management, despite only making up 9% of the population. A majority are men. This lack of change, particularly at top management levels, has caused great consternation in the country.
On June 20, MTN Group named Rob Shuter, a 48-year-old white South African, as the company’s new CEO, replacing Zimbabwe-born Sifiso Dabengwa. Dabengwa stepped down in November last year after Nigerian authorities imposed a record fine on MTN for failing disconnect unregistered SIM cards. The company reached a settlement with Nigerian regulators earlier this month to pay the $1.2 billion fine ($1.7 billion before Nigeria’s recent currency float).
The Black Management Forum, an organization supporting non-white managers and businesses, called Shuter’s appointment a “squandered” opportunity to further transformation, a phrase used from the boardroom to the sports field to describe the broad process of deliberately increasing the number of black people in key positions to right apartheid’s wrongs.
“This appointment by MTN contributes to the steady decline in the number of black South Africans at the leadership helm in companies,” the forum said in a statement. “It is disheartening to note that these decisions are made by the Board of Directors with the majority of black people and under black chairmanship.”
MTN’s largest shareholder, the Public Investment Corporation, echoed the lobby group’s criticism. The 105-year-old investment management firm, Africa’s largest, is wholly owned by the South African government and manages assets worth $119 billion.
“The PIC would have preferred a black CEO,” Daniel Matjila, the CEO of the Public Investment Corporation, said in an interview with Business Day, conceding that it was the board’s prerogative to appoint senior management. The investment corporation has been championing increased diversity in the top leadership of South African companies listed on Johannesburg Stock Exchange.
MTN defended itself against the criticism by giving a statistical breakdown of diversity within the company, which is based in 16 African countries. South Africans make up 22% of MTN’s staff compliment of 21,000. Of that group, 85% are categorized as “Historically Disadvantaged South Africans”—meaning non-white South Africans who were deprived under apartheid and whose appointment is encouraged under the country’s umbrella policy of affirmative action, called Black Economic Empowerment. This policy scores companies based on the number of black people and women they list as shareholders or managers, as well as their internal diversity development programs. Companies with high scores are preferred for government contracts.
MTN also pointed out its public shareholder’s scheme, MTN Zakhele, is specifically aimed at giving previously disadvantaged South Africans access to the Johannesburg Stock Exchange. MTN Zakhele has yielded a compound annual return of 29% since 2010, compared to the ordinary share yield of between 18.4% and 17.5%, MTN said.
“Whilst transformation will always be important, innovation and strategic flexibility are equally critical given the global nature of the firm and the disruptive technological changes that are sweeping through the telecoms sector,” the MTN Group said in a statement.
MTN also might not have had a huge pool of candidates to pull from in its search for an experienced manager capable of overseeing a staff sprawled across Africa, leading MTN’s digital convergence and restoring the company’s financial footing after nearly being derailed by a massive fine.
With a background in finance and mobile, over four years as head of Vodafone Netherlands and just about a year leading Vodafone’s Europe cluster, Shuter is widely seen by analysts as a good fit.
But Duma Gqubule, a researcher with the Center for Economic Development and a transformation consultant, described MTN’s defense as “hogwash,” saying the company could have found a suitable black candidate from within its ranks or our outside.
“The idea with transformation is that when you reach a critical mass—which is not precisely defined—of black people in your management you will not need employment equity policies, the process will propel itself. But MTN is very far from that,” he said.
The telecoms industry is relatively new in South Africa and should have a racially diverse pool of qualified candidates, Gqubule argued. He points to MTN South Africa’s current CEO as an example. Mteto Nyati was an engineer with experience at Microsoft South Africa and IBM who joined MTN in 2014 and became the head of MTN South Africa last year.
Gqubule believes its time enforce a quota system on South African companies to ensure transformation, or face a still excluded and increasingly frustrated non-white majority.
Outside of South Africa, where the majority of South Africa’s subscribers live, the CEO’s race is unlikely to matter. Few African countries have the same fraught relationship with race that South Africa has. Shareholders also might prefer MTN focus on getting the company back on track, even if it’s at the expense of pursuing South Africa’s national transformation goals in the offices of its top management.