Black on black empowerment
Tsogo Sun bails out distressed fellow players
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