From today's Business Day. Joffe is referring to the latest BEE book - "Jenny Cargill: Trick or Treat : rethinking black economic empowerment".
Cargill points out that it cost the big four banks 2,5%-3% of their market capitalisation to transfer 10% of their equity to black shareholders. Which implies that giving the shareholders 3% free would have transferred the same economic value as trying to sell them 10%.
I have ordered this book off Kalahari. On the subject of books - have you noticed that Vuyo Jack's book is no longer available on the shelves. I went to every bookshop between Sandton and Benoni and could not find it. Thankfully my good friend Fiona Khan donated a copy to my worthy cause.
And another quote from the Joffe article
Then there’s the thorny “once empowered, always empowered” issue. If the black empowerment partners sell their stakes, does the company get the full credit for a deal done, or must it start again? This is crucial, for companies and black shareholders.
I know that many of the bigger companies in South Africa are waiting for more clarity on this once empowered rule. Once shares vest then scores go down - ask Absa, they are the first to feel this.
Back to Joffe
If firms have to keep doing empowerment deals forever to comply with the rules, the cost to the economy will be incalculable. One way around this is for companies to lock the black shareholding in for good. If they bar the black shareholders from selling at all, then they are not transferring wealth: the shares are worthless because they can’t be traded. If they insist the shares can be sold only to other black people, the effect is to slash the value of those shares, because the pool of investors who can afford to buy them is so small they will have to be sold at a deep discount.
Apparently there were behind-the-scenes talks on this among the mining stakeholders, but Mineral Resources Minister Susan Shabangu wasn’t persuaded, telling reporters that any company that sold its empowerment stake to non-empowered shareholders would just have to do another deal.
I really hoped that this myopic view would find itself lost to antiquity.
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