The imperatives of a successful empowerment programme by the private sector

This essay will focus on the imperatives of a successful empowerment programme by the private sector. The South African Breweries Limited (SAB) broad-based black economic empowerment (BBBEE) deal is used as a case study.

Firstly, whereas governments and political parties are primarily driven by political imperatives, business is driven by a commercial agenda. For a healthy society, it is essential for both government and business to excel in their respective missions. A political party incapable of winning elections at all is like a voice in the wilderness. Similarly, a business underpinned by continuously irredeemable losses should either dissolve itself, or transform into a non-profit organisation (NPO).

The same applies to permanently vulnerable political parties, unless they have no greater ambition than being a permanent opposition.

This means that successful political parties and successful businesses must be extolled, not demonised, when they are successful.

Similarly, the more successful they are, the greater their moral responsibility. There is an appeal in the tendency to stereotype government as solely pursuing power, and business as nothing but a slave of the profit motive. On the contrary, both government and business have to subject themselves to the requirements of the greater good of society as a whole.

To pursue narrow self-interest to the exclusion of broader societal interests is, in the long term, unsustainable. Ultimately, no one has ever succeeded in a fight against society.

Secondly, an optimal form of transformation should be underpinned by an intersection of political, commercial and community interests. Any agenda pursued and driven exclusively for and by only one of these actions is bound to fail.

There is nothing wrong with the constituencies driving their own agendas, provided these are in alignment with wider societal interests.

Zenzele

For example, the SAB Zenzele BBBEE deal was launched in response to public policy imperatives. Yet, it was designed in a manner that met these policy requirements and also promotes the company’s commercial agenda.

The participants in Zenzele are employees of SAB Ltd, qualifying black-owned liquor and soft drink retailers, and the SAB Foundation.

The SAB Zenzele offer was significantly oversubscribed when launched a year ago, and today it has nearly 40 000 mostly black participants who together hold 8.45% of the shares in SAB. Shareholders have similarly benefited from the deal and will continue to contribute to the company’s growth. This intersection of interests and effort is essential to the success of the scheme. From a public policy point of view, successful taverners extend the country’s tax base and create jobs.

Transformation works better if it is an essential element in the company’s overall strategy. The company invests similar expertise and resources as it does in other elements of company strategy. It is no longer confined to a “casualty ward” for the sole purpose of compliance.

The above principles apply largely to the other requirements of the Codes of Good Practice. If each element is designed to drive company strategy, then window dressing becomes something of the past. Business interests, like individual interests, are key drivers of performance. Once aligned with societal interests, they become an immense force for good.

The SAB Zenzele BBBEE transaction is valued at approximately R7.3 billion. A combination of key features makes the transaction distinctive

• The benefits of the transaction are specifically targeted at the major stakeholder groups who have played a meaningful role in the SAB’s long-term business success and will continue to impact on its future performance.

• The transaction is affordable and easily accessible for targeted stakeholders. Employees and the SAB Foundation were not required to pay for their shares, and retailers were required to make only a symbolic cash investment.

• There was no external bank funding required, contributing significantly to the sustainability of the transaction.

• A cash dividend stream is paid to all participants from year one for the whole of the 10-year transaction period, which delivers a significant economic benefit. To date, over R90 million has been paid in dividends. In its Annual Results for financial year 2010 – 2011, the SAB Ltd Board declared a full year dividend of R94.4m, in respect of the shares held by SAB Zenzele, which is made up of the SAB Foundation, SAB Zenzele Employee Trust and SAB Zenzele Holdings Limited. The dividend for the first half of the financial year, paid out in November 2010, amounted to R32.45m, while the second half dividend of R61.9m was paid out in June 2011.

• Through the new SAB Foundation, many historically disadvantaged South Africans will benefit from the sustainable ongoing investment, which is aimed at fostering entrepreneurship.

Dr Vincent Mapai