A Spotlight on Ownership: Coca-Cola makes waves.
The recent Coca-Cola Beverages South Africa (CCBSA) B-BBEE deal to increase its black ownership from 5% to 20% through an Employee share ownership scheme highlights not just the centrality of this pillar on the B-BBEE Scorecard, but also the variety of options available to South African entities to participate in the transfer of productive assets in the South African economy to black people.
Black ownership for the purposes of B-BBEE can be actioned through various options, the preferred method being direct equity ownership through individual black shareholding or shareholding through companies with black shareholding. It is the “preferred method” because it allows black people to have both ownership and control of economically active companies and encourages active interest in the longevity and profitability of the business. Black ownership is also available through the more commonly seen indirect shareholding via multi-level tiered structures or where special purpose vehicles (SPV’s) are used to incorporate a trust and scheme. Effective Black ownership is then tested by using the flow through principle to all links in the ownership chain down to the measured entity or using the Modified Flow Through Principle where applicable.
The CCBSA deal mentioned above is part of the conditions of Coca-Cola’s 2016 merger with former partner SABMiller, now part of brewer Anheuser-Busch InBev. The Competition Tribunal approved the deal subject to several conditions, including increased worker ownership in the beverage company as well as commitments relating to localisation and procurement. Ebrahim Patel, Minister of the Department of Trade, Industry and Competition celebrated the commitment from CCBSA to increase the level of worker ownership in the company and noted its importance in the country’s efforts to create a more inclusive economy.
“It’s an example of what companies can do, and we look forward to others following their lead, as we drive an enhanced model of broad-based transformation, through worker empowerment, in our country,” Patel said.
In addition to the above mentioned direct and indirect shareholding methods, black ownership may be affected through the below options, each one having its own benefits and rules which must be taken into account when planning for this element of the B-BBEE Scorecard:
· Broad Based Ownership Schemes (BBOS) and Employee Share Programs (As with CCBSA above)
· Mandated investments
· Private Equity Funds
· Equity Equivalent (for Multinationals)
· Sale of Assets
· The sale or loss of shares by black participants can also be recognised under specific conditions
The importance of Ownership in facilitating economic transformation is evident in its presence at the inception of the first narrow-based, 2-pronged BEE policies in South Africa up until present date where it forms one of 3 priority elements on the B-BBEE Scorecard. In short it is here to stay for the many iterations we will see going forward. In the example above and as is the case with all Broad-based ownership schemes, qualification rules apply in order to ensure that the black beneficiary base’s benefit is realised and true economic transformation is taking place in accordance with the BEE Act. It is important that these rules are taken into consideration when planning your B-BBEE Strategy to decide on the best ownership structure for your company as B-BBEE Rating agencies scrutinize its implementation and effectiveness in terms of the structure being vested or not.
The avenues briefly mentioned herein are just an overview of the different type of ownership structures that a business can explore and they are by no means a one size fits all recipe that can be copied and pasted across organisations and industries. Companies are advised to seek the help of a consultant to determine what will bring the best results whilst truly empowering Black South Africans.