Two interesting empowerment conundrums are likely to emerge in the years ahead as empowerment takes root and matures.
The first is whether a company name or its brands should necessarily reflect underlying ownership, together with its empowerment component. The other is whether members of empowerment consortiums are guided by aligned interests.
Two instances where brands and underlying ownership will come into focus are Sasol and Nedcor. Both companies have reached a critical phase in their relationship with their empowerment subsidiaries.
Sasol, majority owner of Exel, has stated its intention to integrate Exel into Sasol Oil. At the same time, from next year Sasol will enter the retail market, and compete with other retail giants, and Exel, by rolling out its own petrol station and convenience stores.
In time, Sasol and Exel will have to decide whether they can afford to compete in an overtraded market. They might find it is better to join forces and turn Exel outlets into the more powerful Sasol brand.
Nedcor, as part of its recovery as a group, will also have to decide on the long-term ownership status of its empowerment subsidiary, People’s Bank. If, as market talk suggests, People’s Bank is integrated into Nedbank, it will help the bank meet the Financial Sector Charter requirements on ownership.
Yet it is difficult to imagine ditching the People’s Bank brand, which has given Nedbank parent Nedcor a foothold in the low-income end of the market. Without People’s Bank, Nedbank will be schizophrenic, trying simultaneously to appeal to rich and poor. Imagine seeing a Nedbank billboard in a downtown taxi rank — and later in Sandton’s Rivonia Road.
Then there is an interesting question of empowerment consortiums. In every major empowerment deal announced over the past year, a defining feature has been the broad-based nature of the empowerment group. Although it has been correct to insist that empowerment is broad-based, it is time to acknowledge the possibility that parties may have divergent interests.
Take an investor like the Mineworkers Investment Company, which has a stated policy of entering deals that allow it to draw a cash dividend to pay over to the Mineworkers Investment Trust. It is possible to imagine a situation where other consortium members would take a strategic decision not to draw a dividend for a few years, using it instead to increase their holding in an entity. Such a move would clearly conflict with the company’s agenda.
Another potential area of conflict could be the strategic direction of a company in which the consortium has invested.
We can expect a range of disagreements in the next few years, amid the din of clashing egos. This conundrum arises because of the assumption that treats the black middle class as homogenous, when in time we will find it is not.