Black economic empowerment ownership initiatives: a Johannesburg Stock Exchange perspective

Figures & data

Table 1: Percentage of total equity transferred to a BEE partner

Percentage of total equity transferred	Total
Up to 5 per cent	1
Between 5 per cent and 10 per cent	26
Between 10 per cent and 15 per cent	11
Between 15 per cent and 20 per cent	8
Between 20 per cent and 25 per cent	9
Between 25 per cent and 30 per cent	14
Above 30 per cent	3
Total	72

Table 2: Reasons for implementing BEE ownership initiatives

Reason	Total
BEE is essential for South Africa to sustain its economic and democratic structures	37
Companies see BEE as an opportunity to grow their business and market share	32
Companies are committed to the principles of BEE	29
Companies realise that BEE is a business imperative and that they will lose market share if BEE is not implemented	23
Companies wish to comply with requirements of their respective industry charter/legislative reasons/licences	19
A BEE ownership initiative is part of a broader BEE strategy	17
Companies hope to attract and retain black staff by implementing a BEE ownership initiative	15
Companies see an advantage in being the first mover or leading BEE company in their industry	7
The companies customers require the company to have BEE credentials	7
Companies use a BEE ownership initiative as an opportunity to raise finance	7
Companies are required by government procurement to comply with BEE requirements	5

Table 3: Reasons for selecting specific BEE partners

Reason	Total
Investment holding company
The investment holding company will add value to the company and help the company to grow its  market share and customers	42
The economic benefits from the BEE ownership initiative will flow to a broad range of beneficiaries	37
The investment holding company has developed a focus on the particular industry	30
The investment holding company has market credibility and a good track record	22
The investment holding company will assist the company with transformation initiatives	21
The investment holding company has connections with government or within the industry	19
A current business relationship exists between the company and the investment holding company	19
The investment holding company will become involved in the management and operations  of the company	19
The investment holding company has investments in multiple industries	13
The company will gain a black director from the investment holding company	13
A current director of the company is a director in the investment holding company	12
The investment holding company is wholly owned by women	9
Social responsibility fund
The economic benefits from the BEE ownership initiative will flow to a broad range of beneficiaries	14
Complements existing corporate social responsibility	6
The social responsibility fund is wholly for the benefit of women	2
Business partners
A current business relationship exists between the company and the business partner	4
The business partner has market credibility and a good track record	3
The business partner will become involved in management and operations of the company	3
The business partner will add value to the company and help the company to grow its market share  and customers	2
The business partner has connections with government or within the industry	2
A current director of the company is a director in the business partner	2
The company will gain a black director from the partner	2
Employees
Attracting and retaining employees by providing employees with an ownership stake in the company	11
Companies plan to align the interests of the partner with those of shareholders	7
The economic benefits from the BEE ownership initiative will flow to a broad range of beneficiaries	6

Table 4: Sources of finance for BEE ownership initiatives

Funding	Total
Third-party finance	22
Own funds of BEE partner	11
Company provides funding	10
Undisclosed	10
Deferred shares^a	8
Holding company provides funding for BEE ownership initiative in subsidiaries	6
Share exchange^b	4
Loans between shareholders	2
Donation	1
Preference shares	1
Total^c	75
^aDeferred shares are a way of funding the purchase of shares. ^bThe share exchange occurs when the company merges with a BEE partner. ^cThe total is more than 72 because three initiatives mentioned two equally important sources of finance.

Table 5: Checklist for evaluating the suitability of a BEE partner

Checklist	Variable	Advantages/disadvantages	Cost/benefit
1. Extent of equity	Industry charter, competitors, compliance with other BEE factors
2. Reason for BEE transaction	Social responsibility, political connections, increase market share
3. Suitability of BEE partner	Internal versus external, management skills, finances, political connections
4. Source of funding	Third-party finance, loans, own finance