I was at a meeting with a company who wanted to know what happens when the shareholders vest their shares. After about half an hour I figured they were talking about cashing out. I like cashing out – it generally means you are going to make some money. Companies who have done BEE deals don't like it. Why – because our esteemed government is so obsessed about ownership and not about value created from the shareholding. Companies need to try and retain their black shareholding or suffer the consequences – which generally amounts to wild accusations of lack of transformation and racism et al (you might be able to figure out that I do not hold the ruling party or its corresponding government in high regard).
Take a look at ABSA. Theirs was one of the first BEE deals that vested – certainly the first of the big 4. Their ownership score dropped from 14 points to 9 in a year. And this is a problem for them. FNB on the other hand is not going to have this problem in a while. TimesLIVE reported
Though the term of the initial third-party funding was five years, maturing in 2010, it was always envisaged that [the trust] would, subject to it being commercially feasible, refinance the third-party funding in 2010 for a further five years, since the BEE transaction contemplated a 10-year term, maturing in 2014
Mzwandile Jacks of Business Report phoned me yesterday and asked me what I thought. He didn't publish my whole diatribe, so I thought I'd add in the bits he missed.
FNB's deal was underwater and they very cleverly went off and and refinanced their deal for another four years – their ownership score of 16 points is likely to be safe.
A smart move that should be emulated across the board.
And on the subject of racial obsession I have posted a lovely little duo by Margaret Singana and Rabbitt – a cover of a Freedom's Children song called Tribal Fence.
There is some Jeremy Taylor stuff coming soon too – I will try not to be so sparse in my posting.