SA firms keep Swazi king in regal splendour

13 July 2014 - 02:02 By Malcolm Rees

South African firms are helping to prop up Swaziland's King Mswati III, funnelling hundreds of millions of rands to an entity that the monarch uses to finance his lavish lifestyle.

With an estimated fortune of R2-billion and 13 wives, Africa's last absolute monarch reigns supreme over one of the world's poorest countries.

The 46-year-old's spending habits are legion, including buying a fleet of luxury cars and a $3-million (about R32-million) Maybach limousine for his birthday in 2012. Last year, his entourage blew millions when it booked 38 rooms at the five-star Taj Hotel in Cape Town for a conference on poverty in Africa.

US think-tank Freedom House says 66% of Swazis are unable to meet their basic food needs and 29% of children under five are nutritionally stunted.

Yet, South African blue chip companies - including MTN, sugar company Illovo, Johann Rupert's investment firm, Remgro, Sun International and SABMiller - have all brokered cosy relationships with the monarch.

These companies have either given large chunks of the shares in their Swazi businesses to Mswati directly or to Swaziland's investment institution, Tibiyo Taka Ngwane, over which Mswati has absolute control, a Business Times investigation has revealed.

In the case of MTN, it paid dividends directly to Mswati as the 10% "esteemed shareholder" of MTN Swaziland.

These amounts exceeded R114-million over the past five years, according to financial records disclosed by the Times of Swaziland.On Friday, MTN's corporate affairs executive, Paul Norman, would not confirm this amount, but he did reveal that Mswati, "along with all shareholders, received dividends declared by the business".

Apart from these direct payments, activists say he is also scoring from the cash paid to Tibiyo by South African companies. Last year, Tibiyo scored R218.1-million in dividends, up sharply from the R148.8-million the year before.

Tibiyo is meant to benefit all Swazis, but several sources say it is "an open secret" that it funnels cash directly to Mswati's family.

Tibiyo had increasingly become "royal family property", said Mandla Hlatshwayo, activist and former MD of Illovo's Swaziland operations.

"With the current king, it is very clear that he is determined to hold Tibiyo as his personal wealth," he said.

This is underscored by numerous reports, including a 54-page Freedom House report last year in which it concluded that Tibiyo's income "supports Mswati, his dozen wives, their 27 children and those of the king's royal kinfolk".

"Foreign companies wishing to enter Swaziland must bribe Mswati with shares or cash in varying amounts depending on the potential for profitability of the proposed venture and the new business's possible impact on Mswati's own business interests," it said.

Even South Africa's ruling ANC, through its investment front, Chancellor House, has gone into business with Mswati in transactions that raise questions about South Africa's willingness to tackle cronyism and rights abuses in Swaziland.

Chancellor House has a 75% stake in Swaziland's Maloma mine and the remaining 25% is held by the state-run Tibiyo.

The companies have typically denied that having a cosy relationship with the king constitutes a breach of corporate governance, but none has denied that its operations benefit the monarch directly.

MTN's decision to allow Mswati 10% direct holding of the shares in its Swazi business has raised concerns, because the cellular giant shut down communications in the country during the recent "Arab spring"-style protests against Mswati - a move that Congress of South African Trade Unions international relations secretary, Bongani Masuku, said was designed to protect the monarch.

"MTN is unapologetically part of sustaining the political regime in Swaziland and is directly involved in the political affairs of the country," he said.

"In Swaziland, MTN is not just business. It is an embedded element of the monarch's power structure."

Of a population of 1.4 million, 811000 - or 57% - use MTN, which obtained a licence from Mswati's government in 1998. Although MTN's documents do not name Mswati directly, saying only that 10% is held by the "esteemed shareholder", the company has confirmed that this refers to Mswati.

"We can confirm that there was a sale of shares to the esteemed shareholders in two tranches of 6% and 4%," said Norman.

Mswati has since appointed his daughter, Princess Sikhanyiso Dlamini, a director of MTN Swaziland - a move that Norman said was "entirely the prerogative of that shareholder". But the cellphone company has other political connections in the Swazi government.

Prime Minister Sibusiso Dlamini effectively owns a 4% stake in MTN Swaziland through his share of the empowerment fund, Swazi Empowerment Limited, which also owns shares in MTN.

This degree of political insurance has ensured that MTN retains a monopoly in the country, where citizens are paying premium prices for cellphone services (see sidebar).

But Norman rejected the notion that MTN's ownership structure had allowed the Swazi business to enjoy a successful monopoly. "On the contrary, MTN has supported all processes to open up the market and the levelling of the playing field through an independent regulator in Swaziland," he said.

Sugar giant Illovo, which has been in Swaziland since 1997, is also in business with Mswati's government. Illovo owns 60% of Ubombo Sugar, which produces a third of all the country's sugar, and Tibyo owns the other 40%. Ubombo MD Guy Williams said Illovo was guided by the principle of ensuring "the people of the countries which host our operations are significantly better off for our presence, irrespective of the political administration of the day".

Tibiyo also owns 40% of Royal Swazi Spa, in which Sun International holds an "indirect" 50.6% stake.

The hotel, which is managed by Sun International, was not "a lucrative operation", said Michael Farr, the group's communications manager.

"We recently went to meet the king to gain an understanding of his view on the challenges of the Swaziland economy," he said. Mswati had committed to reinvigorate Swaziland's tourism industry, said Farr, but the Swazi hotel group was run with "no undue influence from the royal family or its investment arm, Tibiyo".

Remgro's sugar subsidiary, TSB, owns a 26.4% stake in Swaziland's third-largest business, the Royal Swaziland Sugar Corporation, and Tibiyo holds 50%. TSB general manager Vusi Khoza said the company "derives no competitive or any improper benefit from the political situation in Swaziland".

SABMiller, which owns 60% of Swaziland Beverages, is in business with Tibiyo, which holds the other 40%.

But the firm would not comment on the ethics of its relationship with Mswati. Spokesman Richard Farnsworth said the brewer made "a significant local contribution to the Swazi economy directly through excise and other taxes and indirectly through job creation".

Last week, Mswati's regime was booted out of the US trade pact with the region, the African Growth and Opportunity Act.

Washington said this was because Swaziland had "not demonstrated progress" in protecting rights. "Of particular concern is Swaziland's use of security forces and arbitrary arrests to stifle peaceful demonstrations, and the lack of legal recognition for labour and employer federations".

Political parties are banned and activists are regularly arrested, jailed and tortured.

In March, Bheki Makhubu, editor of Swaziland's The Nation magazine, and human rights lawyer Thulani Maseko were arrested after writing articles critical of the country's chief justice.

US firms are also making a mint in Swaziland. Coca-Cola runs a concentrate plant in the town of Matsapha.

Although there is no overt connection to the king and no dividends or profits accrue directly to him, Coca-Cola pays about 40% of Swaziland's tax revenue.

How MTN profits from its Mswati-protected monopoly

Swiziland's King Mswati III and MTN Swaziland, which is 30%-owned by the South Africa-based multinational mobile service provider, have a lot in common.

For one thing, they are both monopolies: Mswati has the power and MTN Swaziland has complete control of mobile communication and data in the country.

Besides MTN's 30%, the rest of the Swazi operation is split between the Swaziland Posts and Telecommunications Corporation (41%), Swaziland Empowerment Limited (19%) and Mswati (10%).

This effective monopoly means MTN is raking in hefty profits from Swaziland while citizens pay an arm and a leg for cellphone connections.

MTN corporate affairs chief Paul Norman said the high cost of mobile services in the country were "determined by underlying costs beyond the control of Swazi MTN".

Internet links, international connectivity and overseas voice-call costs were determined by the state-run telecommunications company and were "well above [Southern African Development Community] and other regions".

"Ultimately, effective regulation in support of competition is an enabler for companies to provide affordable services in any environment," he said.

But Mswati has no intention of liberalising the telecoms service. When MTN's licence expired in 2008, the company, which made an average of R79-million a year for six years to 2012 in dividends, tried to sell some of its shares in the company.

In 2009, it offered to sell Mswati 3.5% of its stake in MTN Swaziland. This decreased shareholding would have allowed it to enter the cellular market in its own right. The backlash was swift: Nathi Dlamini, then the company'sMD, was arrested on trumped-up charges and Information and Communications Technology Minister Nelisiwe Shongwe was fired soon after.

The company still tried to go ahead with its mobile operation, but MTN Swaziland took legal action to block it. Initially, the high court ruled in the Swazi company's favour, but this was reversed on appeal. The case then went to an international arbitrator, which ordered it to shut down its mobile operation because it had tried to enter the market while it still held a 41% MTN shareholding.

Is MTN ripping off Swazis?

In Swaziland:

R149 gets you 300 megabytes of data

R399 gets you 1.5 gigabytes.

In South Africa:

R79 gets you 300 megabytes of data

R149 gets you one gigabyte and

R245 gets you two gigabytes.