Marelise van der Merwe
Sasol’s new employee shareholding plan must not result in “polarising” labour unrest, according to an expert in broad-based back economic empowerment implementation.
Soria Hay, head of corporate finance at independent investment banking firm Bravura, said the dispute registered by union Solidarity with the Commission for Conciliation, Mediation and Arbitration is “one of many other problems Sasol has faced with its B-BBEE transaction[s]”.
Aside from operational costs to the business, Hay believes racial tensions around B-BBEE schemes are “bad for business and the country”.
In her capacity at Bravura, Hay has been involved in the implementation of some 50 B-BBEE schemes.
Her comments come in the wake of a ruling by government mediators that workers at Sasol [JSE:SOL] could strike over the exclusion of white staff from the Khanyisa scheme.
On May 25, 2018, the CCMA ruled that the matter be referred for further conciliation, with Sasol saying it would “adhere to the process”. The next conciliation meeting is scheduled for June 14.
Sasol Khanyisa is the company’s new R21bn B-BBEE scheme. Its previous scheme Inzalo, once one of South Africa’s biggest B-BBEE transactions, cost R28bn. However, Inzalo is set to be disbanded when it matures this year and shareholders will receive no payout due to the fund’s debt.
When Inzalo was launched, oil was trading at about $100 per barrel. It has virtually halved since then, which impacted stock prices. Sasol has subsequently written off internal debt relating to the funding of Inzalo, but still has to pay what it owes to banks.
Khanyisa, however, has also come under fire. Its structure has been criticised for being complex and difficult to understand, and potentially diluting shareholder earnings.
Hay says it’s an improvement that Khanyisa is funded in-house, with a more favourable and flexible funding term. This will provide more stability, which she calls a “big step forward”.
However, she has voiced doubts over comments from the B-BBEE Commission. In a circular to shareholders in October 2017, Sasol noted that the B-BBEE Commission had “raised concerns about SSA [Sasol South Africa]’s entitlement to claim ownership points in respect of the proposed holding of shares by the Sasol Khanyisa ESOP [employee stock ownership plan] trustees, based on its interpretation of what constitutes ownership”.
According to the circular, the commission criticised aspects of the Inzalo transaction, including its termination, but was considering arguments put forward by Sasol.
“They [Sasol SA] haven’t got the commission’s buy-in,” Hay believes. “It is wiser to ensure that you have [that], and deal with the concerns raised.”
Sasol says Khanyisa shouldn’t be singled out. “The B-BBEE Commission has raised concerns in general about South African companies’ entitlement to claim ownership points in respect of the holding of shares in ESOP schemes, based on its interpretation of what constitutes ownership,” spokesperson Matebello Motloung told Fin24.
“The Sasol Khanyisa ESOP is no different in many respects to those structures adopted by many South African corporates in their BEE ESOP schemes, and we believe that the Sasol Khanyisa ESOP complies in all respects with relevant South African legislation.”
Sasol and its advisers “disagree with the commission on what constitutes ownership”, the circular adds.
Sasol also told Fin24 that Khanyisa is “one of the key focus areas of Sasol’s broader transformation strategy” and “an important business, social and moral imperative for Sasol”.
“As a responsible South African corporate citizen, it is our moral duty to take decisive action to redress the injustices of our country’s past,” Motloung said.
Motloung also said Khanyisa is not necessarily a labour issue. “Sasol Khanyisa is not part of the employee value proposition that we offer our employees; it is not a benefit. Sasol offers a great variety of benefits that form part of our employee value proposition that are open to our employees.
“This plan was specifically designed to address the ownership component of the B-BBEE Codes and therefore primarily focuses on the inclusion of black employees, as defined by the codes. It is about us advancing transformation to redress the injustices that result from our country’s legacy,” Motloung argued.
Regarding the CCMA dispute and the threat of strike action, Hay notes the legal requirements for a broad-based ownership scheme are that at least 85% of the value of benefits allocated by the scheme must accrue to black people. (In the Broad-Based Black Economic Empowerment Act, the wording states: “‘[B]lack’ is a generic term which means Africans, Coloureds and Indians”.)
Sasol could legally allow some qualifying white employees to participate in the scheme, Hay says, provided that the Codes of Good Practice issued under the Broad-Based Black Empowerment Act are adhered to.
Hay believes where there is a risk of labour unrest, a company may weigh up the social and business cost of such unrest against the benefits of entirely excluding previously advantaged participants.
Another factor would be whether the strikes are protected or unprotected.
In general, there is a “golden triangle” of empowerment, Hay adds, which includes entrepreneurs, community participants and employees. This ensures the process is “meaningful for everyone”.
Corporations that have implemented 100% black-owned B-BBEE schemes in South Africa include MTN’s Zakhele, which means “built it yourself”. The JSE-listed company announced in 2010 that 4% of its ordinary shares would be sold as part of a public offering, translating to an effective 29% ownership of South African operations.
Welkom Yizani, Media24’s B-BBEE scheme, opened in 2006, transferring 15% of the company’s ordinary shares to black ownership.
Listen here: Interview with Soria Hay on Classic Breakfast with Moneyweb
Listen here: Interview with Soria Hay on KhayaFM
Watch here: Interview with Soria Hay on eNCA Moneyline
Categories: B-BBEE, JSE, News
Published: 31 May 2018