Rob Wessels, joint head of corporate finance at Nedbank Capital, says there is no mention of what is called the high-water mark principle in the government’s empowerment codes.

“Once a deal reaches maturity and the empowerment consortium has to sell some of its shares to settle its debt, or it opts to sell out completely, it may result in a company’s empowerment shareholding falling below what is required to meet the requirements of the codes.

“Companies could even find that they no longer have any empowerment partners,” Wessels says.

He says the codes’ silence on this issue implies that companies may have to do new empowerment deals to redress the situation, with serious cost implications for shareholders.

Research indicates that every 10% empowerment shareholding deal costs shareholders about 3% of their market capitalisation.

“At the moment the codes state that in 2014 there will be an assessment as to whether they will need to be modified or extended.

“Every two years, government assesses the difference between the value of shares held by an empowerment consortium and the underlying debt that needs to be paid on those shares.

“This is termed the net equity interest and companies have to score every two years on how they are doing on this element.

“It is one of the largest single elements on the scorecard,” Wessels says.

He says as there is a long time-horizon involved, and many companies are hoping that the economy will have normalised and that there will be no need for further government intervention.