The department of trade and industry has criticised research published by trade union Solidarity on growing black ownership of companies on the JSE.
A report released by the Solidarity Research Institute (SRI) last week showed that the ownership of companies on the stock exchange by black, Indian and coloured people had grown by 18% in 13 years. It said that black ownership on the JSE had risen to 23.8% in 2008 and would increase to 34% by 2012.
The report formed part of the trade union’s South Africa Transformation Monitor, which keeps a check on empowerment in all sectors of the economy. But the department has released a statement raising ‘concerns” about the research which, it said, did not ‘address the issue of direct ownership, which is critical when measuring levels of transformation”.
In the report the trade union argued that the increased ownership by black people of products offered by institutional investors like pension funds and unit trusts resulted in an increase in the ownership of listed companies by black people. It noted that, after the ownership of shares by foreigners was accounted for, the JSE ‘is dominated by local institutions which control about 70% of the JSE’s remaining assets”.
Solidarity estimated that pension fund ownership by black people was about 42%, life fund ownership 22%, unit trust ownership 17% and private individual ownership of shares about 5%. Given these assumptions, Solidarity conservatively estimated that this had resulted in an 18% rise in black ownership on the JSE.
But the department’s chief director of BEE, Nomonde Mesatywa, said that Solidarity’s figures pointed only to ‘indirect ownership, through pension funds, medical schemes and insurance policies, etc”. She said that the 23.8% was in fact below the target set by the government for indirect ownership.
‘In relation to the Solidarity findings of 23.8%, it is still far below the 40% mark in terms of the mandated investments exclusion principle, where 15% of direct ownership [unencumbered] is still required,” she said.
‘The actual direct ownership in the JSE-listed companies is still encumbered, therefore it is premature to suggest that the implementation of BEE has contributed more to the development and promotion of a black middle class than is recognised.”
She also said that other elements of transformation needed to be included, such as skills development, employment equity and enterprise development. The Black Management Forum also criticised the research.
In a statement arguing that recent calls for lifestyle audits on public officials ‘disguises a racist narrative”, its deputy president, Tembakazi Mnyaka, said that research done by groups such as Solidarity continued to mask ‘unjust economic relations”.
‘Such number-throwing does not say anything about how the elite and middle class remain the preserve of white compatriots,” she said.
‘Worse, for the few Africans who are mentioned, a blackmail tag has to be placed, highlighting that their wealth and success is somewhat of questionable source. The same does not apply to the white compatriot. His/her whiteness is enough to justify wealth and status and is enough to refute any suspicion of wrongful doing in wealth accumulation.”
But Johan Kruger, head of the SRI, said that the transformation monitor did not focus only on ownership of the JSE.
The report was only the first on a number of sectors that would be examined, including the banking sector and related access to finance, healthcare, education and the public sector.
‘Our findings suggest that there has been a significant increase in indirect ownership of the JSE but, naturally, we do not argue that this alone is enough to say that sufficient empowerment of blacks has been achieved,” he said.
‘However, it is an important indicator that transformation in this sector has been significant and faster than is commonly acknowledged. ‘To suggest that measurement of BEE and transformation can be done only through measuring direct ownership of the JSE is misleading.”
He said that indirect ownership in conjunction with direct ownership was an important indicator to measure transformation in this sector.
‘A broader approach to measurement of ownership is more realistic. To suggest that transformation can be measured only by taking direct ownership into consideration, as the department appears to be doing, is of concern and an incorrect approach to the issue,” he said.
The spat between the department and the trade union came on the heels of an announcement by the JSE that it would be launching a new board on the stock exchange devoted to empowerment stocks.
Some commentators have welcomed the step, arguing the board will offer a way to increase transparency in the trade of empowerment shares. Their special status, which often comes with lock-in periods or the proviso that shares can be sold only to other black people, has meant that they are often traded over the counter with little price transparency.
Referring to the new board, a JSE spokesperson said: ‘Some of the companies listed on the JSE have empowerment schemes whose beneficiaries are wanting to trade their shares. The BEE board is the marketplace for them to buy more or sell the shares — to another black owner in terms of the company’s scheme mandate. This may be integral to ensure the long-term objective of a BEE scheme.”