South Africa’s Department of Trade and Industry (DTI) said on Friday that it was concerned that the proposed Employee Share Ownership Scheme (ESOP) proposed under Sasol’s R17,9-billion black economic empowerment (BEE) deal “falls short of the level of empowerment envisioned in the Codes”.
“The BEE Act and its accompanying Codes of Good Practice were specifically intended for the benefit of black South African citizens,” the DTI said in a statement.
“This therefore means that when reviewing a BEE transaction of this nature, recognition will only be given to the extent that black South Africans benefit from the transaction,” it said.
The DTI added that in the case of the Sasol transaction, the 4% allocation for an ESOP is to be shared among permanent residents as well as white employees.
“It is therefore not clear what the effective allocation will be to black South African employees,” it said.
South Africa’s third largest company, Sasol on Monday announced plans to transfer 10% of its issued share capital to black investors by 2008.
In the largest BEE deal announced to date, Sasol said the largest portion of the stake had been set aside for employees.
In terms of its announcement, 4% of the shares worth more than R7-billion had been allocated to an ESOP that would benefit more than 27 000 of its employees.
Of the remaining shares, 3% would be offered to the broader black public, possibly through a retail offer, while 1,5% would go to black partners and another 1,5% would be put into a still-to-be-established Sasol Foundation, which will contribute to growing South Africa’s skills, particularly in science and technology.
According to Sasol’s BEE announcement, only employees with permanent South African residence and those below managerial level would stand to benefit.
However, it did say that 3,7% of the 4% would go to South African employees, which comprise 60% black and 40% white employees.
The other 0,3% would be allocated to black managers and black non-executive directors.
This means 92,5% of the shares worth an estimated R6,5-billion would go to local employees and 64,9% of that amount would go to black employees. That is, shares worth roughly R4,2-billion should end up in the hands of black employees with a further R525-million going to black management and non-executives.
The DTI said Sasol was one of the largest South African multinationals, with mining and energy operations across all continents, and also the largest industrial investor in the South African economy.
“In the department’s view, it is only appropriate that such a company should be one of the champions of black economic empowerment and other forms of transformation in the economy,” it said.
It acknowledged that the transaction otherwise appeared to be broad-based in nature and will include the participation of black women, cooperatives, black suppliers and customers, black youth and the facilitation of new entrants into the industry.
“The involvement of the Sasol Foundation, which seeks to produce critical skills in engineering, science and technology, is also exciting, and indicates that the company has adopted a long-term view to empowerment. In these aspects, we believe that Sasol’s proposed BEE deal is broadly in line with government’s Codes of Good Practice for Broad-Based Black Economic Empowerment,” the DTI said.
Since the market was still awaiting the finalised details of the transaction, which Sasol expected to be ready in 2008, the DTI said it “trusts that this and any other flaw in the transaction will be ironed out, so that the deal, in its final formulation, fully embraces all the aspects of empowerment set out in the Codes”. — I-Net Bridge