Are we surprised why shares doled out with fanfare in the mining sector to so-called Black Economic Empowerment consortiums (or some hastily assembled grouping classified as black) end up not worth even the paper on which they are printed? We shouldn’t.
It’s down to the mechanism employed to facilitate the transactions, according to an articulate analysis in the Business Section of the recent edition of Sunday Times raises points.
Given their disadvantaged backgrounds, the legacy of apartheid, black south Africans have no or limited access to capital if at all. So those who are privileged to be offered shares by a big company in a normal business environment cannot afford them on the account of having no collateral in the form of assets. In reality the black shareholders have a yoke of debt to the value of their shares, which they are obliged to settle to start earning real returns.
To pay off their debt or realise value, they are driven into selling their shares to back to the company.
As if that were not a big burden on its own, trends in the past decade have indicated that proceeds from the deals have been gobbled by administration fees to lawyers and banking deal makers, leaving the BEE shareholders with a paltry wad of banknotes.
Unless government or public bodies with vested interest in black economic empowerment deals introduce sustainable ways to raise capital, black shareholders will end up with a proverbial short end of the stick.
