Personally, I wonder whether it isn’t time for a review of the equity portion of BEE anyway. I wonder whether it would not be much simpler to just create a fund to benefit all black South Africans.
Listed companies would then be required to deposit a proportion of their dividends into this fund.
Hence, BEE would not become a burden for struggling companies, or even high-growth companies for that matter, since neither issue dividends.
When it comes down to it, at the end of the day, BEE deals essentially consist of dividend set-asides anyway, and the amalgamation of risk would help all beneficiaries.
It has the great advantages of simplicity, equity and certainty.
What about it?
Not a bad idea Tim. This was after he wrote the immortal
"THERE is one aspect of the nationalisation debate that I don’t think has been considered sufficiently — if the ANC is really considering nationalisation, shouldn’t BEE in the mining and banking industries be put on hold until the policy has been decided one way or the other?"
You really should read the whole article because it's a great summary of the very complicated issue between ICT and Arcelor Mittal (and Sishen).
It needs to be on net profit after tax, rather than dividends, so as not to further increase incentives to 'fiddle the books'. As it is so many (Pty) Ltd businesses find ways to declare very low profits, especially those involved in importing, or exporting, either goods or materials. I visited a company recently who had a turnover of some R 100 million, and looking at the type of business, margins and cost structures, I estimated that net profit after tax would be about R 8 milllion. Well it was declared at about 15% of that level. Here BEE gets something, albeit at a very diminished level. But if it was based upon dividends paid to the owners, there simply wouldn't be any!!
Posted by: Richard Ferrer | July 12, 2011 at 12:25 PM