Three MultiChoice directors, Calvo Mawela, Tim Jacobs, and Imtiaz Patel, were paid R127 million despite the company reporting its worst financial results since it was founded.
MultiChoice’s 2024 annual report revealed that the company’s chief executive, Calvo Mawela, was paid R53 million in the last financial year.
His pay package included a base salary of R12.8 million, short-term incentives of R8.1 million, and long-term incentives of R25.6 million.
MultiChoice also provided Mawela with R4.7 million in benefits, including medical, fringe, family, travel, and long-service and disability benefits.
The company’s chief financial officer, Tim Jacobs, received a pay package of R28.9 million last year.
It included a basic salary of R8.1 million, short-term incentives of R5.5 million, and long-term incentives of R13.6 million.
He further received benefits of R1.2 million, which include a “European contract”. What this contract entails is not clearly stated.
Former MultiChoice non-executive chairman Imtiaz Patel, who stepped down on 23 April 2024, received R45.7 million last year.
MultiChoice explained that Patel did not receive director or meeting fees. Instead, he received an annual fee of $1 million relating to the service and restraint agreement.
MultiChoice added that Patel also received travel reimbursements related to business travel.
“Patel played a leading role in the successful completion of the Showmax deal with Comcast during the 2024 financial year,” the company said.
“He started developing the deal over the Covid period while executive chairman when discussions commenced for a strategic partner.”
On the recommendation of MultiChoice’s remuneration committee at the time, a bonus of $1.25 million was approved.
Therefore, Patel received $2.509 million over the last financial year, translating into R45.7 million at the current exchange rate.
This means Mawela, Jacobs, and Patel received R127 million during the last financial year when the company achieved its worst performance on record.
MultiChoice’s dismal performance
The news of MultiChoice’s leaders receiving big pay packages came amidst its worst financial performance since it was listed on the JSE.
MultiChoice, which owns DStv, Supersport, Showmax, and Kingmakers, is in serious trouble and had to start selling assets to fund its operations.
Prominent analysts described MultiChoice’s annual financial results for the year ended 31 March 2024 as “truly awful” and “scary”.
The broadcaster’s loss for the year increased from R2.9 billion to R4.1 billion, and had become technically insolvent.
It suffered a 9% decline in active subscribers, including a 13% decline in the Rest of Africa business and a 5% decline in South Africa.
Even more concerning is that MultiChoice became technically insolvent, with negative equity of R1.07 billion.
Last week, MultiChoice announced that it was selling 60% of its insurance business to Sanlam for R1.2 billion and a potential performance-based cash earn-out.
The money will be used within the MultiChoice group for working capital purposes. Simply put, MultiChoice needs the money to fund its operations.
Wayne McCurrie from FNB Wealth and Investments described MultiChoice’s latest results as awful. “It was terrible,” he said.
The only reason the share price did not plummet is that Canal+ offered to buy all of the outstanding MultiChoice shares at R125 each. The deal will close on 25 April 2025.
However, there are concerns that the deal may not close. Canal+ may have an exceptional circumstances clause and there are many regulatory hurdles.
The deal will need approval from the Independent Communications Authority of South Africa (ICASA) and the Competition Commission.
Therefore, it is not certain that the deal will go through. This poses a significant downside risk to current shareholders.
Shane Watkins from All Weather Capital expects the share price to drop below R60 if the deal does not happen.
He highlighted that MultiChoice missed its earnings targets by a wide margin. It went from an expected R10 to R12 per share two years ago to a R9 loss per share in its latest results.
He added that the results are even worse than the numbers suggest. “There are lots of profits in the numbers which are artificial,” he said.
“MultiChoice pushed between R1 billion and R2 billion of Showmax costs to next year, and decoder subsidies are R2.2 billion less than last year,” he said.
“If the deal does not go through, MultiChoice will plummet and be trading at below R60 per share,” Watkins said.
McCurrie is even more bearish, saying the share can go to R40 or even R30 if there is no Canal+ deal.
Considering this dismal performance, many shareholders would be justifiably aggrieved by MultiChoice executives’ multi-million bonuses and benefits.
Living it up in Dubai
One question raised is why some of MultiChoice’s top executives, including Calvo Mawela, live in Dubai at company expense.
MultiChoice Group has had a corporate home in Media City Dubai since 2008, and Patel moved there in May 2017.
Very little information is available about MultiChoice and its executives’ presence in Dubai. However, insider information sheds some light on the matter.
MultiChoice does not have a commercial presence in Dubai. Many believe it will benefit the company if its chief executive is based in South Africa, its biggest market.
Apart from having contact with staff and customers, it will also cut down on spending millions for him and his family to stay in Dubai.
The company insider said executives in Dubai receive numerous benefits, including accommodation, travel, kids’ school fees, and related costs.
One executive was rumoured to live in the luxury Grosvenor House 5-star hotel, and another in the prestigious Emirates Hills, where the Gupta family has a residence.
Being based in Dubai may explain why Mawela’s R4.7 million in benefits dwarfs that of other executives, including CFO Tim Jacobs.
A MultiChoice spokesperson said the decision to base certain executives in Dubai stems from the strategic importance of the Rest of Africa business.
“It constitutes a significant portion of our operations, covering 50 countries and 60% of our video entertainment subscriber base,” he said.
“Dubai’s status as an international hub affords us optimal access to global markets and partners, facilitating ease of travel to our operations across Africa.”
The spokesperson added that Dubai’s international business environment enables them to attract the best talent at the managerial and executive levels.
“Our Dubai office primarily serves the Rest of Africa regions, and it is important to note the office has twelve people, including the Group CEO,” he said.
MultiChoice would not comment on whether Mawela and other executives are based in Dubai to take advantage of its low taxes.
Instead, it said, “We confirm that our Group CEO, Calvo Mawela, fully complies with applicable tax laws in both South Africa and the UAE”.
Patel’s $1.25 million fee is also under the spotlight. Business Live reported the disparities between board member remuneration and consultancy arrangements raised eyebrows.
“Shareholders would need to pay very close attention to these board consultancy arrangements as they have the potential to erode proper oversight,” he said.
The analyst added that board consultancy arrangements have the potential to plunge the company into a corporate governance crisis.
“The amounts paid to some board members and the former chair seem exorbitant,” he said.
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