Kumba workers to share R2.6 trillion windfall

2011-12-03 14:20

Kumba Iron Ore this week announced the final results of its spectacularly successful Envision employee share ownership plan: a R2.6 trillion distribution to 6 029 workers.
After tax, the distribution was as much as R345 000 a worker.

The share scheme was widely praised. Even the National Union of Mineworkers had nothing negative to say, except that other employee share ownership plans at Anglo American companies were not received as favourably.

Nevertheless, Kumba CEO Chris Griffith feels there is a better way to design this kind of incentive/empowerment scheme.

“You need a situation in which you don’t rely completely on capital growth,” Griffith told Sake24.

The Kumba bonuses come from the group’s share price, which climbed from R120 to R540 during the course of the scheme.

Kumba workers were offered the alternative of receiving these valuable shares rather than the distribution, but only a small minority chose the shares.

Envision will now run for another five years, after which workers will again get the opportunity to receive shares or cash to the same value.

After the second phase has run its course, Kumba will still have to retain its empowerment levels, and the group is “already thinking ahead”, Griffith says.

If the scheme has to be redesigned from scratch, it will possibly look more like Kumba’s existing community trust, he says.

This trust, which has the same interest in the group as Envision, has owned this interest debt-free since last year, and it will continue receiving dividends from the country’s most profitable mine, the Sishen iron ore mine.

The money is used for a variety of community projects.

“We felt the community trust needs a steadier annuity income,” Griffith says. “This is more sustainable.”

Kumba’s two latest half-year dividends were R21 and R21.70 per share.

With that kind of interest, the trust would receive about R250 million with this distribution – and would continue receiving it.

Nevertheless, Griffith feels that Envision, with its massive distribution, is the “most impressive and successful empowerment scheme to date”.

“It is good and bad; it depends on the situation. How many people in the world wouldn’t like to be able to pay off all their debt in one go? It’s the freedom that normal shareholders have – to buy or to sell.”

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