Trading for a?fortune

2014-04-13 15:00

Since January, the directors of some of the country’s biggest companies have been pocketing millions from trading shares.

The largest trade was made by Unipalm Investment Holdings and was worth more than half a billion rand. Unipalm sold 30.8?million shares in Growthpoint Properties, the JSE’s largest property company by market capitalisation, for almost R663?million last month.

Unipalm, led by Growthpoint director Ragavan Moonsamy and which has celebrity businesswoman Basetsana Kumalo on its board, is part of a consortium of three that bought a direct 14.2% interest, or 100?million shares, in the property company in 2005.

It was fully funded by a bank and mezzanine financing provided by Growthpoint, and members of the consortium each held 33.33?million shares.

Estienne de Klerk, an executive director at Growthpoint, said the Unipalm disposal came about after it reduced its holdings, selling its shares to fellow member Mzolisi Diliza’s Miganu Investment – which accounted for the third-largest directors’ dealing by April – and Growthpoint Managers, which administers the property company’s portfolio. Unipalm now has 2.5?million shares remaining.

“They [Unipalm] bought in at approximately R9 and sold at R21.50,” said De Klerk.

The cash should help salve the fingers burnt in Unipalm’s acquisition of a piece of the recently liquidated Pinnacle Point Group, a luxury golfing estate and hotel developer. Textile workers lost millions in pensions invested through the Trilinear Empowerment Trust following the group’s spectacular collapse, and a commission of inquiry was formed to look into its affairs.

Second on the list is Shoprite chair Christo Wiese. In February, he sold 15?718 single-stock futures contracts, equivalent to 1.5?million Shoprite shares, for a tidy sum of close to R215.6?million. On the same day, Shoprite boss Whitey Basson bought R30.4?million worth of shares, earning the 10th spot on the list of top director dealings this year.

The following day, Wiese sold a further 2?500 contracts for R34.3?million. Together with two other deals falling outside the top 10, this made Shoprite one of the companies where most directors’ dealings took place by April. It was only bested by Ascension Properties and Capitec Bank, which tied at seven.

Wiese said he simply wanted to move the shares to another portfolio, but single-stock futures rules did not allow him to just move the shares from one portfolio to another, forcing him to sell out of one and then buy into another.

Shoprite’s disclosures of directors’ dealings showed Wiese later bought more than 1.9?million shares in two transactions totalling almost R263.4?million.

Bidvest boss Brian Joffe is fourth. He sold 500?000 Bidvest shares for R138.5?million, citing “diversification of investment portfolio” as his reason for selling. But the cash has not resurfaced, at least not publicly.

Bidvest did not respond to requests for comment.

Ascension Properties’ Shaun Rai takes up both the fifth and sixth spots. Two trusts linked to him made two separate, private deals to sell their combined 82.9?million shares for a collective R219.9?million.

Ascension did not comment on the trades, but the company was in the news in February for apparently two-timing other industry players, Sisa Ngebulana’s Rebosis and Sandile Nomvete’s Delta Property Fund, through selling the company to both.

Property analysts demanded to know what was going on, fearing Ascension’s lucrative property portfolio, mostly made up of government office buildings, would fall prey to a long bidding war.

Later that month, all three cleared up the confusion through a joint statement saying they were exploring a “tripartite merger” to form the largest listed BEE property fund, with assets worth about R16.5?billion and a market capitalisation of more than R9.5?billion.

Louis Norval, a nonexecutive director at retail mall owner Hyprop (through an associate company), and Arnold Goldstone, CEO of asset manager Invicta, round off the top 10 with share disposals of R77.5?million and R36.3?million, respectively.

Gerald Seegers, PwC HR services director for southern Africa, said the dealings would negatively affect the ongoing debate on executive pay, although gains on shares awarded as part of performance incentive packages and shares paid for as a shareholder needed to be differentiated.

“From [the top 10] list, it would appear that all are probably as a direct result of them cashing in shares that they would have acquired many years ago, either as the founder of the company or as a result of the winding-up of a BEE scheme,” he said.

“It is unlikely that these shares were awarded to them as part of their services contract. Had any of these payments been as a result of shares awarded as part of an executive incentive scheme, then there would undoubtedly be strong push-back and grounds for debate around excessive payments.”

Women in business

Of the top 10 dealings made in JSE-listed companies by directors so far this year, all were struck by men.

This isn’t surprising. A new PwC survey on gender diversity found that women represented less than a third of directors in listed mining companies around the world.

Mining is one of the largest sectors on the JSE. Although South African women performed better than their counterparts elsewhere – 23.8% of directors on JSE-listed companies were women – the report found that only 10.3% of the directors in the top 100 global companies were women.

Last year, Cynthia Carroll left her post at Anglo American, leaving the top 100 with only one female CEO – Kay Priestly of Canadian mineral exploration company Turquoise Hill.

There are only seven female bosses in the top 500. Still, in the top 500 mining firms, only 7.2% of the directors were women.

Gerald Seegers, PwC’s HR services director for southern Africa, attributed South Africa’s stronger showing to the country’s regulatory environment.

“The complex regulatory environment in which South African mining companies operate their businesses has played an important role in driving the development and representation of women in the mining industry,” he said.

He added research had shown having more women in management positions and around the boardroom table helped bolster company performance.

“The challenge is for the mining industry to pick up the pace of change, embrace the changing society that we find ourselves in, and try to find winning solutions.”

Why directors deal

Directors’ share dealings often contain vague reference to “personal reasons’’ for the sale or not even providing a reason:

The reasons directors sell include:



.?Poor health;


.?Diversification of a concentrated position;

.?Making stock available for new investors or to facilitate market liquidity;

.?Realisation of profit;

.?Financial needs elsewhere;

.?Investment decision. – Nellie Brand-Jonker

Source: Cannon Asset Management

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