Gloves come off over black-ownership figures

2015-03-08 19:00

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The JSE estimates that black people own 10% of its shares, but President Zuma maintains it is a mere 3%

When President Jacob Zuma says blacks own 3% of the JSE, he is excluding all black investors who own less than 10% of a listed company.

Apart from excluding all indirect ownership, his measure automatically excludes all individual black retail investors and all small empowerment partners with less than 10% in a listed company.

He is also seemingly excluding all black shareholders who do not have representation on the boards of the companies they have invested in.

This alone explains away the controversy that has swirled over the past two weeks about the JSE’s far larger numbers for black ownership on the exchange.

The JSE estimates 10% direct black ownership plus another 13% through pension funds and other mandated investments.

The JSE is trying to find every small black shareholder, while the government measure excludes them because they represent “passive” investment instead of “meaningful empowerment”.

In reality, there is no real factual dispute, only an ideological one about what measure of black share ownership carries meaning.

The 3% figure comes from the National Empowerment Fund (NEF), which calculates it from data produced by the research organisation Who Owns Whom.

Who Owns Whom was left scratching its head this week and had to meet with the NEF to clarify how their data was used to calculate black ownership – something they themselves do not do.

The Who Owns Whom information the NEF uses was essentially a list of “black groups” that owned 10% or more of a listed company, said Andrew McGregor, MD of Who Owns Whom.

According to this measure, black South Africans have steadily been losing ground, not gaining it.

It shows that meaningful black ownership fell 25% in less than three months last year.

The NEF’s CEO, Philisiwe Mthethwa, has been using the same measure since 2008 in annual reports and public forums.

In 2008, Mthethwa said black ownership of the JSE was 5%. Four years later, she said the number was 3%.

In October last year, at a conference with the Black Management Forum, Mthethwa claimed 3.9% black ownership of the JSE – attributing it to numbers for March 2014.

The latest 3% number reflects the situation on June 30 last year.

A large part of the fall could be explained by the unbundling of the Mvelaphanda Group, said McGregor.

Last year’s drop also reflected the “vesting” of empowerment schemes by Absa and Standard Bank.

This refers to the end of the “lock-in” period that makes BEE partners keep shares for a predetermined amount time before they can sell them.

If that is true, the drop seen in the NEF number is actually evidence of black people finally making money, and not a regression.

The government nonetheless believes the 3% figure is a good “proxy” for black ownership and control in the economy, according to a statement by the president.

On Friday, the NEF released a press statement claiming that the JSE had conceded and now agreed with the NEF that “direct” black ownership was 3%.

This was based on a statement the JSE allegedly sent to news channel CNBC on Monday.

Earlier this week, Sidwell Medupe, spokesperson for the department of trade and industry, made the same claim, but did not provide the statement.

The JSE has refused to comment on this.

The exchange’s latest research of the top 100 listed companies gives a figure of “at least” 23%.

This includes all direct shareholding.

The JSE doesn’t publish the figure, but from its release you can calculate that whites own about 14% of the top 100 directly, compared with 10% for black people.

As whites constitute a minority, the 4% lead reflects an astonishing racial split in wealth.

Likewise, the JSE numbers say that black workers, through pension funds, own another 13% of the JSE. The white number is about 8%. Considering they represent a relatively small proportion of the labour force, that is another indication that black workers face a serious savings deficit.

The government is, however, opting for a measure of black economic empowerment that renders these things invisible and focuses exclusively on the control of large companies.

That fits the growing rhetoric around “black industrialists”, which signals a new turning point in the national transformation agenda, away from broad-based empowerment or social measures other than ownership.

The NEF has been a major proponent of the black-industrialist concept. It defends the 3% measure as the one that shows the extent of “meaningful transformation”.

The JSE’s CEO, Nicky Newton-King, sent City Press a statement defending the broader measure: “People save if they are working and have disposable income – so increasing indirect holdings must be a good thing.”

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