JOHANNESBURG (miningweekly.com) – Current black economic-empowerment (BEE) policy is a casino that is forcing disadvantaged black South Africans to become high-risk gamblers on large volumes of borrowed money, says former investment banker Rauten Hofmeyr.
Hofmeyr, who addressed the third of six AngloGold Ashanti/Motjoli Resources’ Mining for Change seminars chaired on this occasion by Motjoli Resources CEO Nonkqubela Mazwai, says BEE policy is creating wealthy individuals when the roulette wheel stops at the right spot and poor ones when does not.
Former stockbroker Etienne Nel, who also addressed the seminar as MD of share-software provider Singular Systems, advocates the creation of a market for individual BEE participants who are locked into shareholdings for long periods.
Hofmeyr says that black shareholders, with little to no capital, are at best allowed to sell their valuable assets only to other black people, who also have little or no capital.
The importance of investment diversification is ignored and black investors are required to take all their money and invest it in one share, which “beggars belief”.
If the purpose of BEE is to empower black people to create wealth, participants should be given the optimal chance to achieve that purpose.
The obsession with BEE target ownership attainment misses the point of BEE participants needing to be put in the best position to create value rather than being forced as passive investors to back a single company 80% debt and 20% equity.
Instead of being locked into shareholdings for five and ten years at a time, the freedom, ingenuity and initiative should be left to the black shareholders to decide how they want to structure their transactions.
They should be allowed to decide whether they want to gear highly in order to match the value they are about to add to the company they are buying into, or whether, as communities, it is preferable to structure long-term debt-free dividend-enriched investments that have the potential to provide bursaries to members of communities over extended periods.
KIO Advisory’s Duma Gqubule, who also addressed the seminar, says that it is macroeconomics rather than structuring that has the biggest impact on the success or failure of BEE transactions.
“Unless we have our real interest rates coming way down and our real gross domestic product growth rates going way higher, BEE will not add up,” Gqubule says.
Money will only be made if BEE investors can take advantage of market trends, like buying when the shares prices are low and selling when they are high.
Gqubule believes in a multiplicity of shareholdings by individuals, employees, communities and the State.
He advocates that the State acquires mining ownership of 30% over a period of ten years and that the private sector retains 70% of the industry.