As we read that Sanlam is planning to sell 5% of its stake worth R7 billon to a black investment consortium before the end of 2018, one of the key questions that one has to answer is, should I buy into this deal or should I not?
Some BEE deals have yielded positive returns such as Multichoice’s PhuthumaNathi BEE scheme. However, we have had Sasol Inzalo and MTN Zakhele who after many years of lock-in periods, came back empty handed. I was equally shocked to realise that there were NO strong voices from anywhere to question what had really happened and how this could be avoided in the future BEE deals. I would have expected that Government and the DTI in particular, were going to question strongly why these schemes failed to deliver.
BEE schemes should be set up for no other reason but to fast track the economic advancement of Black South Africans who in the past, were deliberately and legally excluded from economic advancement through various Apartheid Laws. The Broad Based Black Economic Empowerment Act should therefore ensure that NO scheme comes back 10 years down the line with excuses why it did NOT deliver on its promise.
At the very least, the Act should be amended to ensure that Black participants are given back the capital amounts they put in the scheme, plus interest at the rate of Prime. This should deter those who use BEE schemes for other reasons other than the economic advancement of Black people. NO Black participant should be worse off for taking part in a BEE scheme. If there are no consequences for failing to deliver then BEE schemes could be used to further exploit Black participants.
While it is correct that a shareholder takes on all the risks and rewards of ownership, this should NOT be the case with BEE shareholding. If what happened with Sasol Inzalo and MTN Zakhele is allowed to continue then BEE schemes will end up being used as a means to further impoverish Black people.
Share prices go and up and down all the time hence declining share prices should not be used as an excuse. The Act must therefore be amended to protect BEE shareholders who buy into BBBEE schemes. If the BBBEE Act is not amended then the people who will end up gaining from these schemes will be the sellers of the shares and all those involved in setting up the scheme e.g. Banks, advisory firms, consultants, legal firms, etc…
Before one seriously considers the Sanlam BEE deal, the above facts must be kept in mind. More thoughts are to be shared on the Sanlam BEE deal in the near future
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