Safiyya Patel (partner) and Stacia Super (candidate attorney), corporate and commercial department, Sonnenberg Hoffmann Galombik, say the Old Mutual and De Beers deals were among last year’s most significant because of the broad-based beneficiaries in line to benefit from the deals.

The Old Mutual deal, announced in April, involved the London-listed insurer selling an effective 12,75% stake of its South African business to black partners in an empowerment deal that was valued at R7,2 bn.

Patel says the De Beers’ deal, announced in November last year, involves the sale of 26% of De Beers Consolidated Mines to an empowerment consortium led by Manne Dipico. Among the beneficiaries are 18000 employees and pensioners, as well as disabled people and communities living near the operation, and three women’s trusts.

“The broad-based elements of deals such as these are now likely to be scrutinised in terms of the trade and industry department’s Codes of Good Practice on Broad-Based Black Economic Empowerment released late last year.

“The codes encourage broad-based ownership schemes by allocating up to four points for deals that involve such schemes. However, to qualify as broad-based schemes the codes have prescribed a list of requirements that may call the credentials of many such schemes into question,” Patel says.

The codes define broad-based ownership schemes as collective ownership schemes that facilitate the participation of specified natural persons in the benefits flowing from the ownership by that scheme of an equity interest in an enterprise.

Super says: “Contrary to the way many broad-based schemes, such as charitable trusts, have been set up, the codes require that beneficiaries of schemes assume a more active role in the management of the schemes.”

For example, all beneficiaries in a scheme must be entitled to appoint the fiduciaries of the scheme. They must also be afforded the right and ability to participate themselves in the management of the schemes at a level at least equivalent to the level of participation required of shareholders of a private company with shares, she says.

Other requirements include that the constitution of the scheme be available to all beneficiaries in an official language in which the beneficiaries are conversant and, as far as possible, summarised in a user-friendly way, taking into account levels of literacy and numeracy.

The measure of Old Mutual and De Beers deals is largely dependent on the finer details of the broad-based schemes involved in these deals, says Super.

“These are the details that almost always go unnoticed by the media, but that are integral to true and effective empowerment.

“These details are a welcome innovation in the codes. They will ensure that employees, pensioners, women, disabled persons and youth not only appear as designated groups or personalities of empowerment deals, but as active participants who have a say in how their benefits are managed. This safeguards the essence of true empowerment,” Super says.