‘Cut will spur BEE growth’

2010-09-14 00:00

THE Reserve Bank’s repo rate cut will breathe new life into black economic empowerment (BEE) investors and small- and medium-sized enterprises, many of which have been collapsing under the weight of debt and stunted economic recovery.

Chia-Chao Wu, deputy chairperson of BEE ratings agency Empowerdex, is confident that the half-percentage point cut will spur growth, slash interest repayments and swell the coffers of empowerment firms.

“Their [BEE firms’] underlying investments are likely to be more profitable, which means they will earn more dividends.”

In the wake of the global credit crisis, many BEE investors saw the value of their JSE-listed investments shrink while dividends took a nosedive. The majority of empowerment deals are structured in such a way that dividends are used to repay the debt incurred when the stakes are bought.

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