ALTHOUGH high-profile empowerment deals involving listed companies tends to dominate public awareness, there are also a lot of deals being made by small and medium-sized companies.
Kevin Kerr, joint head of corporate finance at Investec, says Investec Private Bank, for example, is involved in a number of these deals.
He says the release of the codes last year has taken empowerment another step forward.
While the codes are not final, Kerr says people take the view that they are moving towards an answer, and that they are getting more clarity as time passes.
He says companies that concluded deals in the past may find that their deals are no longer in line with current empowerment requirements.
“They may need to revisit their deals and make some changes, or conclude additional deals.”
At the same time, those companies that concluded their deals earlier have enjoyed the benefits associated with the strong performance of SA’s equity market, he says.
“It is likely to be a lot harder to create value in today’s equity market than over the past three years.”
Kerr says companies seeking empowerment partners have more choice today, as there are more empowerment groups being formed.
William Blackie, director corporate finance at Standard Bank, says the release of the trade and industry department’s codes on broad-based black economic empowerment have led to more consistency in industry charters.
“There was quite a lot of divergence between, for example, the mining charter and the financial sector charter.
“The codes will lead to more consistency in the drafting of the charters and to more consistency in the structuring and the nature of deals being negotiated.”
He says there is a clearer understanding of what is meant by empowerment and, particularly, broad-based empowerment, including such factors as procurement, enterprise development, human resources development and corporate social investment.
Ernest Kwinda, corporate financier at Rand Merchant Bank, says while a large number of empowerment transactions have already taken place, there is likely to be a further increase in the level of empowerment deal activity.
“There is going to be an increase in the number of transactions, particularly with regard to private non-listed companies.
“To date there has been limited activity in this area as most of the transactions have been at listed-company level.”
He says one of the reasons for the relatively slower pace of empowerment among non-listed companies is that it has been difficult for the owners to develop effective empowerment strategies and to develop techniques for driving empowerment forward.
“As people better understand empowerment, so the number of these transactions will increase,” Kwinda says.