Concern about the concentration of black economic empowerment (BEE) deals in the hands of a few big players is set to increase after Standard Bank’s announcement that it will be selling an effective 10% of its South African banking operations to Safika Holdings and Millennium Consolidated Investments (MCI), among others.
Safika Holdings is best known through its deputy chairman, African National Congress national executive committee (NEC) member Saki Macazoma, who has a 20% stake in the investment company. Standard Bank also announced that it is in ”advanced discussions” to purchase a 20% strategic shareholding in Safika — a move it says is not related to the BEE deal. Macozoma is currently a member of the Standard Bank Board.
The public face of MCI is another ANC NEC member, Cyril Ramap- hosa, whose family has a 30% stake in MCI. Standard Bank also has a holding in MCI. Ramaphosa will be invited to join the Standard Bank board when the deal is implemented.
Besides Safika and MCI, the other members of the Tutuwa Consortium — which is buying the empowerment stake in Standard Bank in a deal worth about R4,3-billion — is a managers’ trust which represents about 2 500 current and future black managers of the Standard Bank Group; and a community trust made up of various regional business and community empowerment groups.
However, for now, neither of the broad-based groupings is in place. Standard Bank anticipates ”that the initial participants in the managers’ trust will be finalised in the beginning of the fourth quarter of 2004”.
Safika and MCI have committed to assisting Standard Bank in the ”identification and selection and negotiation with such groupings”. This process is expected to be complete only by December 31 2004.
Standard Bank has also announced that a general staff scheme will be put in place to allow all members of the group, worldwide, to receive ordinary shares when the deal is implemented.
The preference shares, on which the deal is based, will be paid for by ”the future dividend stream of Standard Bank” and will not be linked to the performance of the Standard Bank share price.
Big BEE players such as MCI and Safika have amassed investments in communications, financial services, industry and mineral resources, to name but a few, as South African businesses struggle to reach human resource and equity targets set by the government in its efforts to transform the economy.
Companies have shown a preference for well-known names as they try to transform their make-up while not risking their value by taking on unknown partners with little business experience.
Standard Bank, MCI and Safika all insist that their joint participation in other deals has seen all partners add value to the ventures.
Until a year ago there was no black ownership in the banking industry, which is the powerhouse of the economy. That all changed with the signing of the financial-services sector charter last October — although the charter has come in for criticism from senior black business people for not setting more ambitious targets.
Absa was the first of the big four banks off the mark, netting Tokyo Sexwale as a partner.
Banks have a market capitalisation of R 145,7-billion, representing over half the financial-services sector wealth. Over the next 10 years they will transfer value worth between R22,4-billion and R65,7-billion into black hands, according to the rating agency Empowerdex.
The sector will also have to increase the rate of black control, measured by the number of black managers and directors.
Empowerdex estimated that between 92 and 203 black directors must be appointed by the sector if it is to meet its targets.