The revised black empowerment laws are a grey affair. The much-debated ‘once empowered always empowered†principle has been retained but amended to ensure that some wealth is transferred before black investors can sell.
As most empowerment deals include debt financing, allowing investors to sell all or some of their shareholding would enable them to use gains in the share price to pay off loans and unlock value.
By contrast, companies are keen to lock in black investors or retain empowerment points, to comply with BEE ownership Âtargets.
The new BEE codes, to be released next week, allow companies to claim up to 40% of the empowerment ownership points even after black investors pull out, if they can prove that wealth has been created for the empowerment beneficiaries.
The BEE partner must also have held the shares for at least three years, and some transformation must have taken place within the ‘measured entityâ€.
At a media briefing in Sandton on Thursday to explain the new codes, department of trade and industry acting chief director for BEE, Polo Radebe, said: ‘If we are not creating wealth, we are stagnating.â€
She added that while some early empowerment deals succeeded, many did not result in the creation of value for black investors because of onerous financing structures.
But Empowerdex director Chia-Chao Wu, who spoke to the Mail & Guardian before the briefing, said black investors will need to amend the terms of their contracts with companies before they can opt out of lock-in periods.
These can stipulate that investors hold the shares for up to 10 years.
‘Currently, only R160-billion of the estimated R285-billion to R300-billion in BEE transactions is more than three years old,†he said.
Indirect shareholders, who cannot be classified as either black or white, can now be excluded from calculation of ownership up to a maximum of 40% of the company being measured.
This includes the Public Investment Corporation, which invests pension money for government workers, section 21 companies, state entities and mandated investments such as pension funds and unit trusts. A concession to business, this would make the target 25,1% ownership significantly easier to achieve.
Trade and Industry Minister Mandisi Mpahlwa said nearly 87% of local enterprises are exempt from BEE requirements, and that only the largest companies have to apply the BEE codes.