The model followed by Bidvest, South Africa’s largest diversified industrial group, in selling a 15% stake valued at more than R2,1-billion to black investors has set a precedent that could lead to more meaningful black economic empowerment (BEE) in South Africa, analysts believe.
Delayed payment and direct involvement in the holding group structure rather than in a subsidiary are the two main elements that distinguish Wednesday’s deal between Bidvest and a consortium called Dinatla.
The word Dinatla means the “strong ones” in Sotho and denotes strength, willingness to excel and hardworking.
The consortium’s members include WDB Investment Holdings, established to promote the economic empowerment and social upliftment of women in South Africa. Its mandate is to build a strong portfolio of businesses in order to provide a capital base to fund the WDB Trust’s development programmes.
These programmes focus on linking women to resources such as finance, information, training and entrepreneurship. Strategic investments are held in leisure, energy, IT and services.
The other two consortium members are Makana Investments and Bassap Investments.
Makana Investments is involved in clearing and forwarding, technology, media and telecommunications and  is the investment arm of the Makana Trust, established to benefit 5 000 former political prisoners and their dependants.
Bassap is a Western Cape based company whose shareholders include community groups and women’s organisations from the Western, Northwest and Southern Cape. Its’ investment focus is in support services, food production and food processing.
Also charting a new direction for BEE is Bidvest’s intention to restructure its board of directors to give effect to its empowerment initiative and to comply with the recommendations of the King report on corporate governance.
The transaction was put together in consultation with, among others, the Ministry of Trade and Industry.
Colin Reddy, director of BEE at the BusinessMap Foundation, said he was especially impressed with the fact that the deal was done at group rather than a subsidiary level. On a more cautionary note he added that one had to wait for implementation of the deal to see what kind of value it would add to the consortium companies.
The deal will enable Dinatla to participate in Bidvest’s South African and foreign operations.
Brian Joffe, the executive chairman of Bidvest, believes the deal will position the group for participation in private and public opportunities. “It will provide us with an additional platform for growth,” he said, adding that the initiative reflects “our desire to make a significant contribution to the economic transformation of South Africa.”
Joffe believes empowerment is essential, rather than negotiable.
He told Moneyweb during an interview on Classic FM this week that the Bidvest model was one that most companies could use, with the added benefit that the particular structure of the deal did not require any funding.
“The problem with this transaction, if I may say, is it is the first time that people are actually seeing what the discounts are in empowerment, whereas of all the other transactions that are done in the company, most of them are accepted as long as they’re reasonably commercial. Institutions have basically regarded them as being OK.
“This is the first time where shareholders are actually seeing the impact of empowerment, and the need for them to make this contribution.”
Shareholders will only be paid for the 15% stake in three-years-time. A minimum price of R42 and a maximum price of R60 per Bidvest share have been set. Until Dinatla is able to pay for the stake it will forfeit all dividends.
Once the stake has been paid for, Dinatla must hang on to the Bidvest shares for at least five years.
Although Bidvest shareholders must still give the deal their blessing, this aspect is not viewed as a stumbling block. The only alarm bell ringing in the market was an initial slump in the Bidvest price on Wednesday, but this was corrected the following morning.
David Shapiro, a director of Barnard Jacobs Mellet — South Africa’s largest independent stock broker — said it was an aberration that occurred during a last 10-minute auction when someone was apparently “caught on the wrong side”.
The Bidvest share price was quoted at R44 a share by Thursday lunchtime.