| The consultancy Business Map presented its annual report on Black
Economic Empowerment (BEE) last week. The momentum has declined markedly over the past few
years. BEE will continue, but become of a better quality and be more sustainable during
the next few years.
The Issues :
- The value of BEE transactions declined last year. New
investments in Black controlled companies amounted to R2.5bn in 2000, as opposed to R3.4bn
the previous year. The value of transactions entered into by Black controlled companies
last year was R3.3-3.5bn, as compared to about R4.5bn in 1999.
- Trends in sectoral interests : Mining, financial services
and IT/telecommunications dominated the transactions, in this order. Given the emphasis
that government places on small mining and using the proposed legislation on mineral
rights, the restructuring of the liquid fuels sector so that blacks will have a 25% stake
and the IPO of Telkom, these sectors will tend to feature quite prominently during the
next few years.
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Analysis :
Studying the trends as sketched by Business Map leads to the following conclusions. BEE
lost momentum over the last few years, but its growth will continue and be of a better
quality.
(a) The bear market in equities makes it more difficult for BEE companies to make
acquisitions.
(b) The interest rate shock of 1998 made many possible partnersmore risk aversive.
(c) The trend in the demands of the investment community towards more accountability to
shareholders made complicated control structures less acceptable. If these structures were
maintained share prices were at a discount to underlying value, which made acquistions
more difficult.
(d) After the flurry of activity of the initial years, there is less emphasis on window
dressing and giving directorships to a small elite and a growing emphasis for the need to
empower from the bottom up. Business Map reports a growing number of joint ventures.
(f) Government will decide in the near future on its BEE policy, following the
recommendations of the BEE commission under the chairmanship of Cyril Ramaphosa. |
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