MTN Zakhele: Where there is a will there is a way

When the MTN Zakhele trading platform opens on the 25th of November 2013, it is expected to project phenomenal success of the BBBEE scheme even as limited by its restricted trading platform. A price of about R100 per MTN Zakhele share is possible.

Coming alongside a sea of failed empowerment deals, due to inefficient funding structures, the MTN Zakhele story carries an important message: Where there is a will there is way.

MTN Zakhele’s initial investors entered the scheme at R20 a piece which represented 20% of the total value of the MTN Group shares. The balance was covered through a combination of preference shares, MTN donation and MTN vendor finance.

The idea was to position this cocktail of a security, MTN Zakhele, favourably to earn more equity via MTN Group share price appreciation and retirement of debt. All dividend received has been applied on retiring debt. The structure has worked like a charm.

MTN Zakhele Structure

MTN Zakhele Structure. Source MTN

Reports from the chairperson of the MTN Zakhele board, Thulani Gcabashe show this. At the end of the 2012 financial period, Gcabashe reported that the MTN share price has performed well putting the scheme firmly in the money. “When MTN Zakhele acquired the shares, the cost was based on a price of R107.46 per share…”

By 31 December 2012, the MTN share price had increased to R177.60…” Gcabashe added that “Dividends received from MTN have increased meaningfully over the years”. This allowed the scheme to retire a significant portion of its debt.

“The MTN dividends received during April 2012 and September 2012 exceeded the obligations under the preference share funding arrangements,” said Gcabashe.  This enabled the Company to fully settle the Class B preference share balance in April 2012, which was originally R720 million. The dividends due to both the Class A and Class B preference shares were also settled”.

The Company also started partially settling the MTN Notional vendor finance (NVF) funding in September 2012…”

That was for the period ended December last year. The MTN Group share price has since appreciated further and is now flirting with R200/share. The interim dividend for the six months ended June is now in the mix.

Three independent analyst reports can be said to agree on one thing. The scheme can so far be declared a phenomenal success.

A report by UBS says “Our estimates suggest a fair value per Zakhele share of R137”.

We derive a fair value for MTN Zakhele of R137/share, based on the 4% stake it holds in MTN Group (and using our Group target valuation of R390bn). This is less the outstanding NVF and Preference A shares, to drive an implied equity value of R11.1bn for MTN Zakhele, with 80m shares outstanding”.

However UBS had a caution. “The look-through value may be limited. We do not consider that the MTN Zakhele OTC instrument will necessarily provide a particularly helpful look-through valuation for MTN Group, given the likely relative illiquid nature of the instrument. Nonetheless the initial price on the 25th November and the instrument’s trading patterns thereafter may be worth tracking.”

A report from RMB Morgan Stanley says “From an offer price of R20 per [MTN] Zakhele share in 2010, the mathematical underlying value has increased 7x to over R140 due to higher dividends and the appreciation of MTN shares”.

Adds the RMB Morgan Stanley report “[MTN] Zakhele shares will be subject to their own market dynamics including potential discounts for limited liquidity”.

A report by Renaissance Capital addresses a pertinent issue. The report says “We believe MTN Zakhele shareholders would like to know whether to hold their shares or perhaps sell them and instead acquire common MTN shares”

The report adds that “Compared with an issue price of R20/share, MTN Zakhele’s NAV advanced to R96.67/share by end-2012, or implied capital appreciation of 182%. On a comparative basis, the MTN share has appreciated by 71%. At this stage, our preference would be for MTN Zakhele shareholders to retain their shares for the duration of the Empowerment Period (which ends on 24 November 2016).”


It is important to note, as actually noted in all three analyst reports quoted here, that the indicated valuation of MTN Zakhele is largely academic. The actual trading price will be partly determined by the limited trading platform of the shares.

  • Hats off to MTN for a truly empowering scheme which to me is miles ahead in comparison to other schemes that matured in the not too distant past.. One would expect the Department of Trade & Industry to evaluate all previously finalised financial empowerment schemes and produce a comprehensive report which will benefit all & sundry in terms of progress that has been made so far in the empowerment of the previously disadvantaged. The true value of the MTN scheme can be measured by the degree to which MTN goes out of it`s way in seeking out and empowering masses as opposed to in house company schemes which accommodate their employees plus a few well connected individuals. In some instances well connected already wealthy individuals continue to rake in huge numbers of heavily discounted empowerment shares meant to uplift those financially disempowered not so wealthy individuals.

    MTN has come up with newer schemes on three occassions which speaks volumes of it`s commitment to empowerment as opposed to some companies that did only one scheme in order to qualify as BEE compliant companies. Some schemes were outright failures and only served to disempower those who were targeted for empowerment. The DTI should chase those companies who have so far failed to come up with their own schemes. That this last scheme from MTN is regarded as a phenomenal success can be attributed to it`s honest endeavour to do the correct thing and in the process promote stability in our country..

  • […] This question is better handled by a qualified investment professional. This piece may help your decision. MTN Zakhele: Where there is a will there is a way […]

  • I fully agree with you about the commitment of MTN to empowerment. They are clearly transparent and other companies must follow in their footsteps.
    Goverment should support MTN instead of backing CELL C and Telkom who didn’t do anything to help wiht BEE…VIVA MTN VIVA!!!

  • I like it but my question is that what is the closing date for the mtn share becuase I want to buy it

    1. @Hazel,
      The answer to your question is 24th November 2016. Currently we are in the 2nd phase of the scheme. If you desire to buy any MTN Zakhele shares you have to phone 0831236869 and the Consultants will assist you to register provided you qualify..

  • Hi I want to buy shares so I want to know that starting from how much per share?

  • If you sell your shares what will happen in your share account

  • hi i have been trying to register online since the day o got the sms but nithing happens we you call the 0831236869 number it is forever busy and the support email does not help either i need to know how my money has grown sothat i can put more or sell please help


  • still waiting for advice

  • hi
    can you answer the question which was ask by the customer who invested R3000 from the first zakhele because i am unable to do the dividend. than i can be able to do my R2000 from the first zakhele. i am little bit worried when you told us about that the shared did very well but it doesn’t look ok because if one did R2000 and get R4000 interested is that the one you talk about it.

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