BEE shares?

Finweek English Edition - - INSIGHT -

In May 2008, black in­vestors were of­fered an op­por­tu­nity to in­vest in S a s ol I n z a l o , S a s ol ’ s BEE in­vest­ment scheme. At the time, or­di­nary Sa­sol shares were trad­ing at R420, while In­zalo sold at a dis­counted price of R366. It was a good deal un­til the oil price tanked. As soon as it did, Sa­sol shares fell to be­low the In­zalo list­ing price to as low as R362 in midJan­uary.

Buy­ing l i s t e d com­pa­nies at a dis­counted price is one part of the ap­peal of BEE in­vest­ments, but with ex­pen­sive t rad­ing costs, i ncreased risk due to de­riv­a­tive in­stru­ments and limited liq­uid­ity, wouldn’t or­di­nary share in­vest­ment be a bet­ter bet?

“Sa­sol In­zalo i s a deal with a sig­nif­i­cant amount of debt on the bal­ance sheet. Sa­sol, the un­der­ly­ing in­vest­ment, is a com­pany with t wo volatile price driv­ers: the oil price and the cur­rency. This com­bi­na­tion of a highly geared deal and a volatile un­der­ly­ing in­vest­ment make Sa­sol In­zalo a high risk in­vest­ment, a higher risk than an in­vest­ment into Sa­sol alone,” ex­plains Craig Gra­didge of Gra­didge-Mahura In­vest­ments.

De­spite the pres­sure on Sa­sol, In­zalo paid its first div­i­dend last year amount­ing to over 10% of the ini­tial share price.

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