Evon Jeewan of Bravura

Trade, industry & competition minister, Ebrahim Patel, briefed the media as part of the announcement of the Coca-Cola Beverages Employee B-BBEE Ownership Scheme in the first week of February 2021. He commented that broad-based ownership schemes which include ownership through trusts are “genuine BEE” and should be duly recognised as such. Evon Jeewan, a Corporate Finance Principal at investment bank Bravura, cautions that empowerment schemes such as trusts may still likely have to ensure their structures meet the B-BBEE Commission’s requirements.

Jeewan comments that ownership schemes or trusts are a highly popular type of Black empowerment vehicle, utilised by a third of all major B-BBEE transactions. However, B-BBEE Commissioner Ntuli remains highly critical of the model, stating that there is little certainty around whether broad-based ownership really benefits the intended recipients. Her concern with trusts, broad-based ownership schemes and employee share ownership programmes is that they lean towards “passive” shareholding, meaning that there are no specific Black individuals able to drive transformation in the company. 

Minister’s Patel’s statement was made in the context of the expanded worker ownership scheme by Coca-Cola Beverages SA (Coca-Cola) that aims to transfer a further 10% of equity in the company to its 8,000 employees who will receive a trickle dividend from inception, with full ownership of employee shares bestowed in ten years.  A seminal feature of the scheme - and one that should be noted by other trusts - is that Coca-Cola will include employee representation on its board. According to a Coca-Cola spokesperson, the company worked extensively with B-BBEE Commissioner Ntuli on its expanded worker ownership scheme, highlighting that board representation of employees could have been the critical factor in the scheme’s acceptance by the B-BBEE Commission.

Minister Patel said that there was wide agreement that employee ownership schemes where shares are vested in the names of individuals, are genuine black ownership. Commissioner Ntuli has remained adamant in her view that ownership cannot be recognised when it fails to meet the requirements in terms of vesting, exercisable voting rights and all of those other rights that should flow naturally to a shareholder. Although agreeing that the trust model can be used to facilitate broad-based ownership, Ntuli has cautioned that the Commission does not want to see “CSI masquerading as ownership” because at the end of the day “we must be able to look for the Black person and find the Black person in the deal.”

While Minister Patel’s written clarity on the matter of trusts remains critical, given the Commission’s stance on trusts it is not unforeseeable to expect the stipulation of new structural requirements in order for trusts to be recognised. This could include the naming and listing of beneficiaries. Of course, this provides no solution for existing trusts. Until the Department of Trade, Industry and Competition and the B-BBEE Commission move towards closer alignment, it seems that the fate of these trusts could still hang in the balance. 

Evon Jeewan is a Corporate Finance Principal at Bravura, an investment banking firm specialising in corporate finance and structured solutions services now in its twenty-first year. Bravura has been a consecutive award winner in the Africa Global Funds Awards (AGF) for both 2019 (Best Independent Advisory Firm) and 2020 (Best Independent Advisory Firm – South Africa).  Bravura Holdings has a primary listing on the Stock Exchange of Mauritius and a secondary listing on the NSX.  It has representation in Mauritius, South Africa and Namibia.