SABMiller shows how BEE model should work

2011-05-21 12:02

The latest figures for SABMiller not only show growth but also reflect a broad-based empowerment model worthy of following, the group managing director and analysts agree.

The soft drinks and liquor producer announced this week that the black liquor traders who had each invested at least R100 in the SABMiller BEE transaction, Zenzele, would receive R39.3 million in dividends.

SABMiller employees, who received the shares for free, received R38.9 million in dividends while R17.2 million went to The SAB Foundation.

SAB managing director Norman Adami said each black liquor trader who had invested R100 would get R600.

“The Zenzele scheme is meaningful to our BBBEE shareholders because we structured it to benefit many people instead of the usual suspects or politically connected individuals,” said Adami.

“There are very few BBBEE schemes that pay dividends directly to shareholders,” he said.

Sandile Hlophe, the managing director of BEE and restructuring advisory at auditing firm KPMG, praised the Zenzele dividends.

“This is true empowerment because many BBBEE schemes only start paying out dividends between three and 10 years into the transaction,” said Hlophe.

“This innovative scheme was structured in a way that ensured that the shareholders were empowered quicker,” he said.

Hlophe said it was easier for SABMiller to persuade its existing shareholders to buy into the Zenzele empowerment model because the BEE shareholders – through their retail businesses – are an extension of SABMiller.

The Zenzele shares, worth R19.2 million (3.52% of SABMiller), were awarded a year ago to 29 500 black liquor retailers The other 3.4% was allocated to the SAB Zenzele Employee Trust for the benefit of 9 416 SAB employees, while the remaining 1.54% of shares went to the SAB Foundation.

The BEE shares were priced at between R100 and R50 000.

Other companies that have embarked on broad-based empowerment transactions include petrochemical giant Sasol, mobile multinationals MTN and Vodacom, and City Press’s parent company, Naspers.

Not everyone was impressed with the Zenzele scheme, though. Black Lite Consulting executive Ajay Lalu said the scheme would be more meaningful if the dividends could help improve the lives of black shareholders.

If R39 million is divided among 31 000 shareholders it means that on average they will receive dividends worth R1 250.
Some of this money will be used to repay the debt and interest.

“What can a person really do with R1 250?” asked Lalu. “We need to consider the net amount each individual will receive. These amounts are often received and spent without creating any real chance of saving or impact.

“We can’t be singing praises to a BEE scheme which does not have real objectives of improving the lives of black South Africans.”

EconoBEE chief executive Keith Levenstein said: “The Zenzele scheme is a very good deal because it is beginning to achieve its objectives a year after it was initiated. SABMiller was quite clever to include their core customers – who help the company distribute its products – in the BBBEE deal as this has bought the company loyalty.”

SABMiller, which liquor traders have been criticising for years for failing to empower them, introduced Zenzele after its competitor, Brandhouse, announced plans to increase its market share by building a liquor plant in Vereeniging.

Levenstein said broad-based empowerment schemes that failed to add value to the lives of the shareholders immediately were disempowering.

“What is the point of owning shares and (only) receiving benefits three to 10 years later?” he asked.

Bravura Consulting chief executive Alana Bond also praised SABMiller for paying dividends to beneficiaries less than two years after the deal was done.

“Far too many transactions in South Africa have the illusion of benefiting many South Africans when in fact there is very little true value going to these parties,” said Bond.

“South Africa needs more BBBEE deals where cash flows to beneficiaries who are a broad range of South Africans and not a handful of well-connected or already wealthy individuals.”

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