South African companies push empowerment forward
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CAPITAL MARKETS

South African companies push empowerment forward

The massive shift of equity ownership needed in post-apartheid South Africa was always going to be a tough task. There will never be a template for deals, but a range of structuring and financing strategies are taking shape. Mark Brown reports from Johannesburg.

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THE PHILOSOPHY OF the South African policy of Black Economic Empowerment (BEE) is simple. Execution is not so straightforward. Working out how best to get equity in businesses of all shapes and sizes into the hands of blacks, women and the republic’s other historically disadvantaged groups is part of the broader BEE process of giving them the capital, jobs, and skills to take part in entrepreneurship and wealth creation. But this equity transfer is the single biggest preoccupation for South Africa’s M&A advisors and corporate financiers.

According to Ernst & Young’s annual South African M&A survey, there were 244 BEE deals worth a total of R52.9 billion ($7.8 billion) in 2004. That’s an increase in BEE deal activity of nearly one-third by volume and over one-quarter by value on the previous year.

“BEE is keeping every corporate financier in the country busy,” says Tim Thackwray, head of corporate finance at Standard Bank in Johannesburg.

The figures for 2005 should be just as impressive. In the fourth quarter alone De Beers announced its BEE deal – a R3.6 billion ($533 million) sale of 26% of its South African operations – and Anglo American, Kumba Resources and Eyesizwe Mining established a new empowered mining company with an enterprise value of R16 billion.

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