There has been an increase in recent B-BBEE activity focused on Employee Share Ownership Plans (ESOPs) as demonstrated by some of the larger transactions that included…
There has been an increase in recent B-BBEE activity focused on Employee Share Ownership Plans (ESOPs) as demonstrated by some of the larger transactions that included a major ESOP component announced recently, including those for Northam, Capitec, Old Mutual and most recently, Shoprite.
In the case of Northam, the previous BEE transaction had a relatively small ESOP component, with the replacement B-BBEE transaction increasing the ESOP component significantly. Capitec and Shoprite’s B-BBEE transactions comprised only ESOPs. This is in addition to some of the more recently announced international buyouts of South African entities that also entailed ESOP schemes.
In the case of international buyouts, the movement to ESOPs has been largely driven by the conditions imposed by the competition authorities. It will be interesting to see what conditions the competition authorities impose on Heineken’s buyout of Distell in this regard. The Department Trade Industry and Competition, through the Competition Commission, has been at the forefront of driving this increase.
Some of the key features of these transactions include:
- Largely vendor funded
- Long tenures and, in certain cases such as Shoprite, perpetual
- There has also been a move towards inclusivity, i.e., the ESOP schemes have tended to include all employees, both black and white, as well as employees outside of South Africa
There are likely to be even more companies, including those who do not have a regulatory requirement for BEE, implementing ESOP transactions.
Are you thinking of implementing an ESOP for your company?
Tamela has implemented several B-BBEE employee ownership schemes over the past 14 years and has experience in structuring sustainable B-BBEE structures, whether evergreen (e.g., Exxaro’s recent ESOP scheme) or finite (e.g., Old Mutual’s recently announced Bula Tsela transaction). We can provide detail on the ever-changing B-BBEE landscape and how corporates should consider these changes when implementing ESOPs.
For more information, please contact Mathibe Hlapolosa, 0723295179 / mathibe@tamela.co.za