SMEasy saga: founder slams MTN’s claim that deal had no exclusivity clause

SMEasy founder Darlene Menzies has hit back at MTN’s claims that there was no exclusivity clause in a multi-million dollar distribution deal that her startup signed with the telco giant three years ago and that failed to materialise.

The exclusivity clause is at the centre of a spat that has turned public, between MTN Group and SMEasy.

Last week Menzies said MTN locked her accounting software business SMEasy in a three-year agreement, preventing the company from expanding by distributing its accountancy product to micro firm customers on the rest of the continent (see this story). The deal is set to expire on 1 April.

SMEasy founder Darlene Menzies has slammed what she calls MTN’s ‘false report’ about there being no exclusivity clause in the agreement the startup signed with the telco

Menzies says despite spending millions of rands on preparing her product to enter various African countries, the deal went nowhere.

During this time, SMEasy was approached by another large telecommunication company that was keen to take the product to the rest of the continent.

When it became clear that what was promised by MTN in the deal would not materialise, Menzies says she and her team went back to MTN and asked if the company could release SMEasy from the agreement in the countries on the continent in which MTN didn’t operate, but where this other telecommunications company was active. MTN, she says, refused to do so.

No exclusivity undertakings claims MTN

But yesterday Group executive for corporate services and sustainability at MTN, Nompilo Morafo, claimed there were “no exclusivity undertakings” in the agreement (see update in this story).

Morafo explained that it means that under the agreement SMEasy was not locked into any deal with the corporate and would have been free to distribute the product via other companies or organisations if it so wanted to.

Morafo said as the official who oversaw the agreement is no longer at the company, MTN Group is looking into the case and expects to comment further on the matter to Ventureburn shortly.

‘False report by telco’

Yesterday in an email to Ventureburn, Menzies slammed what she called MTN’s “false report” about there being no exclusivity clause in the agreement.

This, while SMEasy chairman, Kingson Capital’s CEO Gavin Reardon produced a copy of the signed page of the agreement (which Ventureburn has in its possession), which it makes it clear that the agreement has at least some exclusivity attached to it.

A paragraph marked “exclusivity” in annexure four of the agreement reads: “MTN will have the exclusive rights, for the Telco Sector, to distribute SMEasy in Africa. This exclusivity does not include South Africa.”

Said Reardon: “As an investor, and knowing the founder we’ve invested in, our integrity is very important to us. We take exception to MTN’s hasty attempt to dismiss the exclusivity clause without fully appreciating the contents of the agreement.”

‘Typical of PR lip service’

Menzies added that MTN’s “false report” to Ventureburn that there is no exclusivity “is astounding but is not surprising”.

“It’s typical of their PR lip service when it comes to their purported support of SMEs. On public platforms they pay tribute to entrepreneurs and profess to be major backers of our vital sector, when in reality, their treatment of small businesses is the complete antithesis.

“Four years ago, their legal department and SME executives went to great lengths, for many months at significant cost to us to negotiate and compile a complex group-wide agreement, which included significant sales volume projections through 23 of their operating companies across the continent, for which they demanded exclusivity.

“The attention to detail they showed then, is in stark contrast to the lack of attention they have exercised now in scrambling to provide (Ventureburn) with a response to your article.

“It appears the current executive simply did a quick word search on the body of the contract to look for the word ‘exclusive’ and when they came up empty, they wiped the sweat off their brow and sent (Ventureburn) a response that they did not lock us in to exclusivity,” she said.

However, it appears that from the wording of the paragraph in question in the agreement, any exclusivity pertains just to the telecommunications sector outside South Africa. SMEasy could therefore foreseeably have been able to distribute the product via for example banks or accountancy firms, had they so wanted to.

Read more: MTN locked my startup in paralysis for three years says top tech entrepreneur [Updated]