black economic empowerment: how does the western cape fare?
DESCRIPTION
Black Economic Empowerment: How does the Western Cape fare?. Colin Reddy: BEE Director BusinessMap Foundation . What we will discuss………. Performance of the market… The future…. The Market’s BEE response…deal flow 1996 - 2002. Source: BusinessMap Foundation. - PowerPoint PPT PresentationTRANSCRIPT
Black Economic Empowerment: How does the Western Cape fare?
Colin Reddy: BEE DirectorBusinessMap Foundation
What we will discuss………..
• Performance of the market…• The future…..
The Market’s BEE response…deal flow 1996 - 2002
0.000
5.000
10.000
15.000
20.000
25.000
1996 1997 1998 1999 2000 2001 2002
R-m
illio
n
Source: BusinessMap Foundation
The Market’s BEE response…sector profile
0
1
2
3
4
5
6
7
2000 2001 2002
R m
illio
n
Financial servicesTelecommsMining
Source: BusinessMap Foundation
The Market’s BEE response…Listed BEE Controlled Companies
Total number of companies on JSE is about 500
0
5
10
15
20
25
30
35
40
Oct-97
Nov-97
Feb-98
J ul-98
Sep-98
Nov-98
J an-99
Apr-99
Aug-99
Nov-99
Feb-00
May-00
Aug-00
Nov-00
Feb-01
Mar-02
J un-02
Sep-02
Dec-02
Mar-03
Period
Num
ber o
f Com
pani
es
Source: BusinessMap Foundation
The Market’s BEE response…market caps of black controlled companies
Total JSE market capitalisation is about R 1.3 trillion
0
1
2
3
4
5
6
7
8
Oct-97
Nov-97
Feb-98
J ul-98
Sep-98
Nov-98
J an-99
Apr-99
Aug-99
Nov-99
Feb-00
May-00
Aug-00
Nov-00
Feb-01
Mar-02
J un-02
Sep-02
Dec-02
Mar-03
Period
% o
f Tot
al J
SE M
arke
t Cap
Source: BusinessMap Foundation
The Market’s BEE response…black controlled market cap by value
0
20
40
60
80
100
120
O ct-97
Nov-97
Feb-98
Jul-98
Sep-98
Nov-98
Jan-99
Apr-99
Aug-99
Nov-99
Feb-00
May-00
Aug-00
Nov-00
Feb-01
Mar-02
Jun-02
Sep-02
Dec-02
Mar-03
Period
Mar
ket c
ap (R
bn)
Source: BusinessMap Foundation
The Market’s BEE response…BusinessMap Foundation BEE
index
-
0.20
0.40
0.60
0.80
1.00
1.20
1.40
Equally weighted
Market cap weighted
MTN/Alsi Relative
Source: BusinessMap Foundation
Black ownership studies..
SectorBlack beneficial holdings of total shares in
issue *
High case Low case
Resources 14.18% 12.34%
Banking 14.86% 12.61%
Support Services 17.04% 14.57%
Diversified Industrials 12.24% 10.69%
Food Producers & Processors
17.50% 15.13%
[Source: The BusinessMap Foundation] * Based on total shares in issue, including foreign shares
Listed BEE companies based in the Cape…
Company Share price (c) – 28 Feb 2003
Share price (c) – 1 Mar 2002
Share price change (%)
Brimstone 65 34 91.2
Brimstone-N 65 34 91.2
Cape Empowerment Trust 12 10 20.0
Casey 25 1 2,400
HCI 345 232 48.7
LA Group 160 135 18.5
LA Group-N 140 140 0.0
Oceana 1,390 1,400 (0.7)
Sekunjalo Investments 41 20 105.0
[Source: The BusinessMap Foundation]
Some definitions..
• Black refers to African, Coloured and Indians
• Western Cape has….• Coloureds (and Indians) = 55%• African = 23%• White = 22%• 4.35m people
A case study - Sekunjalo
• Black-controlled by about 74%• A strong share price performance –105% rise in year to
February• Has healthcare and fishing subsidiaries • Latest results: Turnover = R346m, Net profit = R17m
and cash flow = R22m.• The main shareholder is fully operationally involved. • It boasts a 90% composition of black managers and
staff. 70 % of the procurement budget is spent on black suppliers. 2.5% of profits are spent on CSI initiatives.
A case study – Mastercurrency - Unlisted
• 51% owned by KK Combi Inv.• KK Combi is exec chairman.• Exec management are 71% of HDSA• Turnover = R35.5m, Net income = R7.2m• Net profit = R4.1m (for 6 months to Dec 2002)• Has a risk committee, internal audit committee. • 58% black managers, 73% HDSA.• Future leaders programme. • 6% of net profit on CSI• 25% of procurement expenditure
Western Cape: Persons Banked versus Un-banked
0%
20%
40%
60%
80%
100%
Banked Un-banked
WhiteBlack
Source: SAtoZ
Sample size = 2 895 982
Western Cape: Are there senior black employees in your business?
0%
20%
40%
60%
80%
100%
There AreSenior BlackEmployees
There Aren'tSenior BlackEmployees
Don't Know
WhiteBlack
Source: SAtoZ
Sample = 1139
Western Cape: Management
Source: SAtoZ
0%
20%
40%
60%
80%
100%
ManagePeople
Don't ManagePeople
WhiteBlack
Western Cape: Do black people have shares in your business?
0%
20%
40%
60%
80%
100%
Black White
They Have Shares They Don't Have SharesDon't Know
Source: SAtoZ
Western Cape: Working?
0%20%40%60%80%
100%
Blacks Whites
Earn Something Not Earning
Source: SAtoZ
Western Cape: Living standards?
0%
20%
40%
60%
80%
100%
Blacks Whites
Source: SAtoZ
Western Cape: Property ownership?
0%
20%
40%
60%
80%
100%
Black homes White homes
Owned Rented Company Owned
Source: SAtoZ
Entrepreneurship
• Start-up activity is highest among Coloured (5.0%) and Indian (4.5%) adults, followed by Black (3.8%) and White (3.8%) adults.
• In contrast, new firms are more likely to be owned by White adults (3.6%), followed by Coloured adults (3.0%).
• Established firms are far more likely to be owned by White adults (6.8%) than any other group.
Source: GEM
Racial classification of respondents that believe they have the requisite skills to start a business, 2002
Source: GEM
African Coloured Indian White
No matric 17.1 34.1 24.4 38
Matric 27.6 64.7 51.7 45
Tertiary 30.1 51.9 75 65
Experts’ opinions of the most important factors restricting entrepreneurship in decreasing order…
• Education & Training• Financial Support• Cultural & Social norms• Government Policy• Government Programmes• Market Openness• R&D Transfer• Access to Physical• Infrastructure• Commercial & Professional Infrastructure
Is BEE advancing in the Western Cape?
• Significant number of black listed company presence.
• However this is within a very small active black presence in JSE – about 3%
• Property ownership – somewhat more positive than other factors
Is BEE advancing in the Western Cape?
• Large number of un-banked
Is BEE advancing in the Western Cape?
• Large number of unemployed, but WC unemployment rate is about 19% compared to the national average of about 30%.
Is BEE advancing in the Western Cape?
• Lower LSMs still occupied by black people– indicates little economic interest
• Still a lack of meaningful BEE
However, the following requires investigation….for conclusiveness
• Success of Western Cape government’s preferential procurement – pendulum shifting towards blacks
• Is the licensing and quota system furthering BEE? – deeper problem of capacity to handle fishing quotas
• The status of staff training in the Western Cape? Increasing towards blacks
• Is SMME development furthering BEE in the Western Cape?
The solution….•Grow the WC economy
•Organic growth
•Capture from other provinces
