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TOP EMPOWERMENT 2010 – OWNERSHIP – ON A TRULY REMARKABLE LEVEL

03 May General

Despite uncertainty and a lot of work that needs to be done, some firms have managed to keep the ownership factor real.

The ownership focused list of Top Empowerment Companies (TEC) survey has over the years shown a remarkable level of consistency.

This suggests that some black economic empowerment (BEE) deals have been able to stand the test of time. This observation comes when concerns about the financial sustainability of many BEE deals have reached alarming levels.

Many deals have been obliterated during the receding global financial crisis. Other deals were unwound voluntarily, while others have been heavily diluted by refinancing.

Ownership commands a 20% weighting within the broad-based BEE scorecard. There are 20 points for excellent contributors in the ownership factor. There is a maximum of three additional bonus points available in this factor for the inclusion of designated broad-based BEE beneficiaries.

The 2010 TEC ownership list features companies that have featured in this section for a number of years. These include investment holding company Sekunjalo, which is also ranked as the most empowered company on the JSE in this survey. Sekunjalo is also the leader in the ownership focused rankings, with total black economic interest of 83% and 94% voting rights.

Sekunjalo also leads in the representation of black women interests, which are quoted at 51%. That allowed the group to claim all the 23 points available in the ownership element. And the gender factor sets the company apart . The broad- based BEE codes of good practice put emphasis on the inclusion of women groups in BEE equity transfer initiatives. The codes require every BEE initiative across the broad-based BEE scorecard to apply a 40%-50% gender equity factor.

Sekunjalo is followed by Astrapak in the Top 10 ownership list. Then comes Hosken Consolidated Investments (HCI), which also claimed all the 23 ownership points. The Top 10 ownership list also features Spescom, Aveng, Esorfranki, Bidvest, Adcorp, Kagiso and Metropolitan. Most of these companies derive their ownership points from transactions concluded some time ago.

Sekunjalo came to the JSE 10 years ago with strong BEE credentials and has maintained these through thick and thin. It is remarkable that the group has maintained a high BEE ownership score even after Absa acquired about 10% of its shares in 2007. “We have taken a long-term view of empowerment,” says Sekunjalo CEO Iqbal Surve. “Empowerment should not be treated as a get- rich-quick scheme.”

Led by former apartheid activists Johnny Copelyn (CEO) and Marcel Golding (chairman), HCI makes for another remarkable broad-based BEE ownership story. The group boasts a total BEE score of 82% and is ranked as the sixth-most empowered company on the JSE. HCI achieved 50,7% in black economic interests and voting rights in the 2010 TEC survey. Its black women interest stands at 28,5%. With that representation, HCI also claims all the 23 points in the ownership element.

HCI’s impressive BEE ownership flows from its history. The group was established partly with funds from the SA Clothing & Textile Workers’ Union (Sactwu). The union operates in an industry dominated by female blue- collar workers. Therefore, the Sactwu influence in HCI comes with a strong women representation. Sactwu holds about 40% of HCI shares. The group also created a broad-based entity called HCI Foundation, which owns about 7% of its shares.

Construction group Aveng concluded its BEE transaction — in which it transferred about 25% of its shares to broad-based BEE consortium — in 2005. The consortium featured prominent BEE group Tiso, Aveng Employee Empowerment Trust and Tiso Aveng Women Trust. With a total BEE score of 65%, Aveng boasts 77% black economic interests and 21% black women economic interests.

Astrapak concluded its BEE deal in 2005. This deal transferred 20% of the consumer goods packager to Royal Bafokeng Holdings (RBH). RBH brought to the deal a sound broad-based BEE element as it represents more than 300000 members of the Bafokeng.

The ownership factor has come under the spotlight recently with concerns that many BEE transactions have not delivered on their promise. The level of BEE ownership in the general economy has also been hotly debated. The JSE is generally used as a proxy for this debate. And recently trade union Solidarity raised eyebrows with a suggestion that black ownership on the JSE has soured to about 23%. Solidarity uses this observation to bring to the table the debate about a sunset clause for BEE.

Rating agency Empowerdex puts black ownership on the JSE at about 5%. This figure reduces to less than 2% when Empowerdex discounts the debt that comes with black ownership. “Using the debt free portion is a more reliable way of measuring black ownership on the JSE,” says Empowerdex executive director Chao Chao Wu.

Director of BEE at the department of trade & industry Nomonde Mesatywa says the talk of a sunset clause for BEE is premature because black ownership in the economy is still unacceptably low and JSE ownership is debt ridden.

Source: Financial Mail – Sibonelo Radebe