Black on black empowerment

Tsogo Sun bails out dis­tressed fel­low play­ers

Finweek English Edition - - Portfolio Punts -

THE YEARS OF WORK that have gone into the own­er­ship as­pect of black eco­nomic empowerment have had some pos­i­tive re­sults in the cur­rent tur­moil in fi­nan­cial mar­kets. While the sub-prime credit cri­sis has slashed the val­ues of many as­sets – with dis­as­trous con­se­quences for their own­ers – the case is even worse for those who rely on gear­ing.

For his­tor­i­cal rea­sons, black empowerment play­ers fall into that cat­e­gory and many have watched help­lessly as their heav­ily geared as­sets are be­ing pounded in the mar­ket, putting them fur­ther into debt. The cri­sis is not only en­dan­ger­ing empowerment deals but also the con­cept of eco­nomic empowerment it­self.

Part of gam­ing and leisure com­pany Gold Reef Re­sorts’ empowerment deal – con­cluded as re­cently as March 2007 – was in dan­ger of fall­ing through when an­other empowerment player came to its res­cue. Hosken Con­sol­i­dated In­vest­ments-con­trolled Tsogo Sun bought 15% of Gold Reef from now for­mer chair­man Richard Thabo Moloko and ex­ec­u­tive di­rec­tor Bon­gani Biyela for R942m, thereby sav­ing the deal and se­cur­ing Gold Reef ’s empowerment sta­tus. The sig­nif­i­cance of that is the empowerment sta­tus of both Tsogo and HCI, par­ties that have been in the empowerment game for more than a decade.

What’s even bet­ter is that both in­di­vid­u­als man­aged to walk away with real em­power- ment in the form of R400m profit, even though the share was trad­ing well be­low its buy­ing price of 2050c/share. The 2250c/ share Tsogo paid was a mas­sive 52% pre­mium on the 1480c/share Gold Reef closed on the day of the an­nounce­ment.

“Ours was sheer luck, in that some­one was will­ing to as­sist us by buy­ing the stock from us,” says a re­lieved Moloko. “That’s only be­cause there was a player (Tsogo) in the

In­su­lated. Si­fiso Dabengwa

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