Sep 02, 2011
BBBEE deal benefits employees and communitiesBack
AMB Capital|Had Sappi South Africa|Lereko Investments|Lereko Property Consortium|Merchant Bank|Sappi|Sappi Foundation Trust|Sappi Limited|Sappi South Africa|Sappi Southern Africa|Paper Manufacturer|Colin Mowatt
© Reuse this
Sappi has enhanced its commitment to BBBEE transformation through this deal by recognising the role that employees play in the success of the company; attracting and retaining staff, especially skilled black employees; building on Sappi’s commitment to communities; as well as moving from Level 6 black economic-empowerment (BEE) contributor status to Level 3 contributor status.
The BBBEE deal benefits all Sappi’s South African employ- ees, apart from white managers who already participate in an existing Sappi share incentive scheme. The employee share ownership plan owns some 62.5% of the deal, constituting the majority percentage of the shares. The management share ownership plan was awarded 15% of the deal. “This will help retain skilled black managers at Sappi,” says Sappi Southern Africa financial director Colin Mowatt.
The Lereko Property Con-sortium, headed by Lereko Investments and including other beneficiaries such as the Malibongwe Women Develop-ment Trust and financial services company AMB Capital, received 12.5% of the deal. The Sappi Foundation Trust received 10%. The beneficiaries of this trust include the local communities and the grower organisations situated around Sappi’s mills and plantations.
Through this new transaction, Sappi South Africa has maintained its initiative to expand from a Level 6 BEE contributor to a Level 3 contributor. “Had Sappi South Africa been scored in terms of the generic Department of Trade and Industry (DTI) scorecard, we would only have achieved Level 4 status,” explains Mowatt. This is due to the bonus points that the Forestry Charter scorecard awards for increased socio-economic development spend, which are not provided for in the generic DTI scorecard.
Meanwhile, he mentions that Sappi is involved in various community projects, such as the ongoing Project Grow programme, which assists community members in rural areas with aspects of the forestry business, such as financial aid and technical assistance. “The aim of this community project is to provide the necessary assistance to emerging timber farmers, which enables Sappi to create a mutually beneficial relationship with the community residents,” he explains.
Sappi provides various financial assistance programmes, which enables farmers to plant and main- tain new trees. Besides financial assistance, farmers also receive site-suitable free seedlings as well as free technical assistance. “Sappi and the communities are, thus, mutual beneficiaries. Sappi has already bought trees from emerging farmers and new trees have been planted. This money then benefits the surrounding communities through initiatives such as building new schools,” says Mowatt.
Sappi also plays an important role in health-related projects. “Sappi’s HIV/Aids awareness programme offers support to child-headed homes, as well as developing centres where children can receive proper care while their parents are at work,” he explains.
But, besides the various community initiatives that have been established, the BEE transaction creates the additional benefit of employees becoming shareholders. Mowatt says that being given the opportunity to own shares in Sappi is like a long-term savings plan, as the shares in the company are expected to grow in value over time. Thus, it is clear that the intention of the BEE transaction is to lock employees in to prevent shareholders selling their shares too soon, which is not the true objective of BEE. The deal has been structured in such a way that previously participating employees will only be able to sell their shares in 2019. “The benefits of the deal are long term, where employees are given shares, which will provide them with the opportunity to sell them when they have grown in value and are worth more,” explains Mowatt.
Sappi South Africa has played a prominent role in the development of BEE in the past. In 2006, the pulp and paper manufacturer signed a BBBEE land deal, where it sold a 25% undivided share in its plantation land to the Lereko Consortium.
In 2008, the Sappi Limited board and the transformation committee reviewed the 2006 transaction, which led to the decision to restructure the deal in accordance with the BBBEE requirements of the gazetted Forestry Charter of May 2009. “Looking at the requirements of both the DTI’s generic scorecard and the Forestry Charter, it became clear that Sappi needed to do an equity-based empower- ment transaction rather than a property-based transaction,” says Mowatt. With this transaction, Sappi identified that its employees needed to have shares. “Instead of owning 25% of the land, employees will own Sappi shares,” concludes Mowatt.
Edited by: Shannon de Ryhove© Reuse this Comment Guidelines
Other Black Economic Empowerment News
US car giant General Motors (GM) has agreed to pay a symbolic sum of up to $1.5-millio to victims of South Africa's apartheid-era government, who are suing it and another four companies for helping prop up the white-minority state. South Africa's Khulumani Support...
Black economic-empowerment (BEE) in South Africa provides a significant contribution to the development of the country, says BEE consultancy EconoBEE CEO Keith Levenstein. However, he notes that irregularities such as tender fraud and corruption create severe...
Professional services company KPMG has warned South African businesses that the current employment
Recent Research Reports
Defence 2013: A review of South Africa's defence industry (PDF Report)
Creamer Media’s 2013 Defence Report examines South Africa’s defence industry, with particular focus on the key players in the sector, the innovations that have come out of the defence sector, local and export demand, South Africa’s controversial...
Road and Rail 2013: A review of South Africa's road and rail infrastructure (PDF Report)
Creamer Media’s Road and Rail 2013 Report examines South Africa’s road and rail transport system, with particular focus on the size and state of the country’s road and rail network, the funding and maintenance of these respective networks, and the push to move...
Liquid Fuels 2013 (PDF Report)
Creamer Media’s 2013 Liquid Fuels report examines South Africa’s liquid fuels market, focusing on the business environment, oil and gas exploration, the country’s feedstock supplies, the development of South Africa’s biofuels industry, fuel pricing,...
Projects in Progress - Second Edition (PDF Report)
Creamer Media’s second Projects in Progress supplement considers some of the major project developments under way, including high-profile energy and transport projects, as well as a few of the lower-profile public and private developments. What remains apparent is...
Water 2013: A review of South Africa’s water sector (PDF Report)
Creamer Media’s Water 2013 report considers the aforementioned issues, not only in the South African context, but also in the African and global context, and examines the issues of water and sanitation, water quality and the demand for water, among others.
Canadian Mining Roundup for June 2013 (PDF Report)
The June 2013 roundup includes details of the development of TSX-V-listed Aldridge Minerals’ flagship Yenipazar polymetallic project, in Turkey; the Canadian Nuclear Safety Commission’s renewal of Cameco’s uranium mining licence pertaining to the Cigar Lake...
This Week's Magazine
Mitsubishi Motors South Africa (MMSA) has introduced a 4x2 derivative of its Pajero Sport sports-utility vehicle (SUV), which will give it access to a substantial slice of the full-size SUV market, where it will compete with the likes of the Ford Everest, Chevrolet...
South African Energy Minister Ben Martins has affirmed that the government wants the country to be globally competitive in the nuclear sector. "Our responsibility has always been ... to ensure that, in nuclear energy, South Africa can compete with the rest of the...
Mercedes-Benz South Africa (MBSA) president and CEO Dr Martin Zimmermann describes the new S-Class as “a special place to be”, with the car creating a sense of “wellness” once you are seated inside the German brand’s flagship model. It is difficult to argue...
Water scarcity and water-quality issues are broadly recognised and understood in most political, business and civil organisations in South Africa, but solving water issues will require wide and continuous action in catchments and municipalities by organisations and...
Work is well under way on the R212-million Imvutshane dam, 30 km north-west of Stanger, in KwaZulu-Natal, which is a key link in supplying people in rural Maphumulo with a reliable source of safe drinking water.
Next ArticleBlack Economic Empowerment – a change for the better