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Black Economic Empowerment deals: Ways to get the BEEs buzzing

Ridley: ?We effectively arrange
funding for the participants.
The new shareholders get their
shares on day one and the
dividend flow is used to repay
the debt. It's quite a simple
structure?





South African banks are working out how to structure and finance the Black Economic Empowerment (BEE) deals that are altering the ownership structure of the country's financial services industry. Under South Africa's voluntary Financial Sector Charter, direct black ownership in financial institutions should reach 10% by 2010.

In July, Standard Bank Group announced plans to sell a 10% interest in its South African banking operations to three BEE groups. The deal is worth about R4.3 billion ($645 million).

Standard Bank's sale follows deals by Absa and Investec, as well as BEE deals in other sectors such as mining and telecoms. The country's total requirement for BEE financing could exceed R75 billion.

There is no regulation BEE template for South African companies to follow. Different deals use different combinations of options structures, equity and debt. In mining sector deals, for example, third-party lenders to BEE groups often take a view on future commodity prices and provide project finance-style debt.

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