To BEE or not to BEE ..

B

bekdik

Honorary Master
Joined
Dec 5, 2004
Messages
12,860
Reaction score
20
Location
I exist only in my own mind ...
http://www.businessday.co.za/articles/topstories.aspx?ID=BD4A549400

Posted to the web on: 28 August 2007
HP ‘shows way for multinationals’
Lesley Stones and Linda Ensor

NUMEROUS multinational companies are likely to opt out of selling shares to local black investors now that technology company Hewlett-Packard (HP) has led the way in proving the equity equivalent scheme is viable.

However, Black Management Forum president Jimmy Manyi urged the government to be vigilant when investigating multinationals wishing to opt for equity equivalents under the black economic empowerment codes of good practice.

The codes excuse multinationals from the obligation to sell equity in their local operations provided they can demonstrate that this is global policy and that they have not made any such disposals elsewhere.


US-based computer company HP has helped the government thrash out exactly how foreign firms can contribute to empowerment without selling a stake in their local operations. Other multinational hi-tech players are looking seriously at equity equivalents, said HP’s regional vice-president Ken Willett.


“There is a precedent now that HP has gone through this process. I expect our peers will be filing their own proposals very soon,” he said.


It has taken eight months of negotiation with the government to finalise how HP can make up for the empowerment points it is losing by failing to conform to the criteria that 25% of its local operation be black owned.


HP will score those points by setting up a business institute to train existing employees and new graduates looking to enter the information and communication technology sector.


Pumping money into training young entrepreneurs will spare HP from having to sell any shares and is a substantial enough investment to qualify as HP’s one and only equity equivalent scheme. “We believe this will allow HP to better meet the goals around closing the skills gap and creating and improving small black companies, which is a much more efficient mechanism than selling equity,” said Willett.


Software developer Oracle could be next in line to unveil an equity equivalent scheme, according to Oracle SA MD Nicky Sheridan. “What HP has announced is exciting and we are going along the same road. Oracle has things in the pipeline and within weeks we will be making a similar announcement.”


Watching the process closely is German software giant SAP, which came close to selling shares to black partners, but held off until the percentage of black ownership was finalised.

Recently SAP Africa MD Claas Kuehnemann, said that the board was evaluating equity equivalents instead .


Networking company Verizon is one of the few hi-tech multinationals to shun equity equivalents outright, by selling a 30% stake to J&J and gaining an empowerment status of 80,64%. “We have no regrets whatsoever because it’s worked for us and we enjoy working with them,” said its local head, Angela Gahagan.



Manyi said while equity ownership was the “first prize”, equity equivalents for multinationals were “understandable”. The challenge for the government was to ensure the multinationals were fully compliant with the terms.



HP SA CEO Thoko Mokgosi-Mwantembe would not break down the exact cost, but said HP was spending R150m on meeting all empowerment requirements. The institute would train graduates from small black companies and give them the experience to move up the skills chain , he said.
Click to expand...
 
This is so unfair to SA companies that have sold equity shares to Black empowerment companies.

Big up to HP for channeling those funds into education though.
 
Sounds OK. Anything to cut down on the free handover of wealth to the undeserving and the greedy.
 
Manyi said while equity ownership was the “first prize”, equity equivalents for multinationals were “understandable”. The challenge for the government was to ensure the multinationals were fully compliant with the terms
Click to expand...

True to form, Manyi thinks something for nothing is better than actually empowering people. Once again he shows his true colours.

I marvel at this agreement. If a company chose to leave SA due to sanctions and forfeit the income it would have earned, it if wants to return, it now has to give away 25% equity to be able to conduct business.

And this is not a racist and corrupt practice? :rolleyes:
 
Tassidar said:
True to form, Manyi thinks something for nothing is better than actually empowering people. Once again he shows his true colours.

I marvel at this agreement. If a company chose to leave SA due to sanctions and forfeit the income it would have earned, it if wants to return, it now has to give away 25% equity to be able to conduct business.

And this is not a racist and corrupt practice? :rolleyes:
Click to expand...

Tassidar, just to correct a little misconception IMO, most BEE deals the shares are not "given" away, they are usually heavily debt structured deals, where the BEE company can't realise REAL benefit from those shares for periods of 3-7 years.
 
sox63 said:
Tassidar, just to correct a little misconception IMO, most BEE deals the shares are not "given" away, they are usually heavily debt structured deals, where the BEE company can't realise REAL benefit from those shares for periods of 3-7 years.
Click to expand...

They work around the dividends paying for the equity don't they? Money for jam.
 
rwenzori said:
They work around the dividends paying for the equity don't they? Money for jam.
Click to expand...

You are assuming the company issues dividends every financial year end. In the end the companies that have sold off the shares expect the BEE companies to bring in business for them. Why else do you think Ngcaba has an Executive position at DD? His main responsibility is to bring in business, mostly from the Public sector.

I'm just trying to bring across the point that most companies expect a lot from their BEE partners and it is not "money for jam" as you put it.
 
It's the same in Europe. There the big multinationals threaten to move there operation elsewhere unless the get heavy tax subsidies. Some don't even pay tax. They have enough clout to dictate terms.
 
It does sound like they still have quotas to deal with. This only spares them ownership issues. I guess this is good because a 25% stake could throw power and merger deals out of whack. Especially when corruption comes to the fore...
 
You must log in or register to reply here.
Back
Top
Sign up to the MyBroadband newsletter
X