Jacques Magliolo reports on black business’ opposition to proposed JSE changes this year
BLACK business cannot bid for the Anglo-controlled JCI if proposed changes to present regulations relating to pyramids go ahead this year.
New Africa Investment Limited’s chairman, Dr Nthato Motlana, one of South Africa’s most prominent black businessmen, says: “We will oppose the Johannesburg Stock Exchange’s forthcoming changes to regulations, particularly those affecting pyramid structures.
“Now that we are becoming more established in big business, the JSE and white conglomerates want to change the rules,” he says, asserting that “we want, we desire and it is necessary for conglomerates stay in place.
“It would be unfair for blacks to follow different rules, when the old ones have proven to be successful for the Oppenheimers, the Ackermans and the Wieses.”
Says another black businessman: “We want to be part of conglomerates and, if rules regulating these companies have been good enough for whites, surely its good enough for us.”
Motlana believes that “to change the playing fields now would be race discrimination”.
One stockbroker, head of research, says: “All new black businesses are pyramids, but it is only in being a part of such a conglomerate that they can get access to massive funds to take on the Anglos or bid for the restructured JCI.”
Motlana agrees: “Pyramids enable companies with small shareholder stakes to control larger companies. If this type of structure is abolished it will make it impossible for blacks to own companies or to help transfer wealth to the disadvantaged people.”
In this manner, Motlana confirms that his group will be making a bid for “a stake in JCI’s industrial division”. Although a number of “informal meetings have taken place with Anglo and JCI, no firm plan will be formulated before April”, says Motlana.
JSE proposals will prohibit second tiered pyramids by the end of this year, which means a holding company which is listed can have only one listed subsidiary. In turn, that holding company cannot have a major shareholder that is listed.
Nail fits the description of a multi-tiered structure. While it controls listed institution Metlife, its shareholder is recently listed Corporate Africa. In addition, another of its shareholders, Sanlam, may seek a listing in the future, which would force them to sell their shares in Nail.
Experts say that it is doubtful whether Nail would be able to acquire Sanlam’s shareholding. Although Nail’s pre- listing statement indicates that it bought 30 percent of Metlife from Sanlam, Nail actually controls only 10 percent. The company wishes to acquire an additional 20 percent.
Like a number of black businesses, Nail finds itself in a predicament. While it intends to continue to grow by taking advantage of a breakup of white pyramid structures, it wants to be in control of its own conglomerates which would contravene new pyramid requirements.
“This is a complete contradiction,” says the head of research. “You cannot have it both ways; either you are for a breakup of all pyramid structures, or against it.”
According to a corporate financier: “Most businessmen don’t understand or even know that changes are in the pipeline. If they did, they wouldn’t be listing companies in pyramid form.”
To highlight his point, he mentions the quick succession of listings of Nail and its major shareholder Corporate Africa. “Despite having a host of corporate experts, stockbrokers and merchant banks involved in these listings, the directors of Nail did not seem to know that the JSE changes would take place in 1995,” he says.
However, Motlana is determined that his group and other black organisations will continue to grow in pyramid form. He believes that this will enable them to turn Metlife’s two million policyholders into shareholders.
“Our plan is to take annual actuarial surplus (profit made on policy funds which are paid out to policyholders only on maturity) and to buy shares in the company,” says Motlana. “We would do this only at the policyholders’ request.”
While plans are in progress to obtain a share in JCI, Motlana intimates that the group is in the process of conducting negotiations for other takeovers.
“If you don’t grow, you die,” says Motlana.