The value of black empowerment deals this year so far, as measured by Robin McGregor’s Who Owns Whom, is less than half that of 2008.
Looking broadly at all BEE corporate activity, about R45-billion was recorded by Who Owns Whom‘s Takeover Talk database.
About R96-billion was recorded in 2008 for BEE deals of all sorts — new deals and the completion of deals signed some time ago.
The Who Owns Whom list includes expansions, investments and takeovers by companies with some empowerment ‘status” as opposed to strictly BEE-owned companies.
Naturally, there are now quite a few BEEM companies, or companies with black shareholding, that comply with the department of trade and industry’s broad-based black economic empowerment balanced scorecard.
One transaction was in fact the completion of a deal signed some years ago. This was the conversion of preference shares into ordinary shares in terms of the 2004 Absa BEE deal, which I described at the time as basically an option to buy Absa shares at a future stage.
As it transpired, Batho Bonke, which was in theory entitled to buy 10% of Absa, ended up with about 5% and some income from the deal. It was always on the cards that Batho Bonke would end up with half.
Batho Bonke has had to raise about half the R3.7-billion it needed to buy its stake, with the other half coming from the conclusion of the Absa deal.
Given the global financial crisis that started in earnest in 2008 and the global economic crisis that followed it, this is not too bad a conclusion of the transaction for both Absa and Batho Bonke.
There have been few actual classic BEE deals of note this year, deals in which a percentage of an established company is transferred over time to black individuals, companies or consortia.
The top three big BEE deals this year all have a broad-based component and all are vendor-financed, that is, financed by the companies doing the deals.
SABMiller plc’s announcement of a deal to allow its black wholesale customers and staff of SA Breweries and Coke bottler ABI to acquire a 10% stake valued at R6-billion was the broadest.
No big names, either from the politically connected or black business, are attached to this deal, where shares will be transferred over 10 years to black-owned licensed liquor retailers, employees and a foundation.
Tiger Brands announced the transfer of a 10% stake of R2.8-billion to an empowerment consortium, which also had broad-based elements.
However, shareholders refused to ratify the inclusion of non-executive directors on the grounds that this would taint their independence, so only 9% was allocated.
The third big classic BEE deal was the transfer of a 26% stake in Foskor, the fertiliser producer owned by the Industrial Development Corporation.
The beneficiaries are the Manyoro Consortium and two special purpose vehicles (SPVs) created for staff and local communities.
There are 12 consortia, including black business consortia and broadbased special interest groups in the Manyoro Consortium, which will be allocated 15% of Foskor, according to the IDC.
The remaining 11% will be split between the two SPVs. One of these will incorporate a trust for communities near Foskor’s operations in Phalaborwa and Richards Bay.
The other will control an employee share ownership scheme for Foskor’s 2 000 employees, the IDC said when announcing the details of the deal, adding that the transaction will have more than a million beneficiaries, including women and disabled people.
There remains an element of narrow-based empowerment in these deals. Manyoro, for example, is led by former Robben Island prisoner Peter-Paul Ngwenya, who is executive chairperson of Makana Energy Consortium, one of the ‘strategic black business partners”.
But, none of the deals involves high-profile BEE personalities or political high-flyers. SABMiller’s BEE deal was the largest this year.
Last year’s big deals included Vodacom’s R7.5- billion Yebo Yethu retail scheme, another broad-based deal.
The table shows the top 10 deals that involved acquisition, either in terms of a classic BEE deal or in which a company with BEE shareholding made an acquisition. Top of the list is the Petroline Holdings acquisition.
Even though the total value of the Petroline acquisition is R6.2-billion, only 25% of that can be considered BEE, because that is how much of the consortium is owned by women’s empowerment group, Women in Oil and Energy South Africa (Woesa).
The consortium is made up of Mozambican state company Petromoc (with 40%), private consortium Companhia de Desenvolvimento de Petroleos (15%), SA groups Gigajoule Int (20%) and the Woesa consortium (25%).
It will invest in a 450km diesel and petrol pipeline from Johannesburg to Maputo. Five of the top 10 are mining deals, which shows that the Mining Charter is still influencing corporate transactions.