Absa staff in line to benefit from BEE deal worth R9.5bn
Absa, SA’s fourth-biggest bank by market value, is considering a second broad-based BEE (BBBEE) scheme to make a more meaningful contribution to transformation in the financial services sector.
The bank, which shocked the market in April when its first black CEO stepped down after differences with its board, said in a statement on Wednesday that its proposed new BBBEE scheme could constitute up to 8% of its issued share capital. That would equate to about R9.5bn, based on Absa’s share price on Wednesday, for a deal that is expected to include thirdparty investors and staff.
“The planned transaction is a demonstration of our commitment to transformation and cements our longstanding view and approach of creating inclusive growth in Africa,” Jason Quinn, Absa’s interim CEO, said in a statement on Wednesday. “While it is aligned with the SA government’s BBBEE objectives and with the commitments contained in the financial sector code, we will also extend the offer to include employees across our operating markets.”
Absa first concluded a significant BBBEE transaction in 2004 when it allocated a 10% shareholding to black empowerment consortium Batho Bonke, which included Tokyo Sexwale’s Mvelaphanda Holdings and Leslie Maasdorp’s Nthobi Angel as well as regional community trusts and women’s groups.
At the time, the conclusion of that deal propelled Batho Bonke, whose name means “all the people”, to Absa’s secondlargest shareholder.
However, that original BBBEE deal was partly unwound in 2009 when Batho Bonke beneficiaries representing 4.99% of Absa’s shareholding sold their stock. That was followed by a further 5.01% equity sale by Batho Bonke in 2012.
STOCK SALES
The government has been growing ever more vocal about transformation in the financial services sector in recent years, with deputy finance minister David Masondo leading the charge. While much of his commentary has been focused on the asset management sector, he said in March that the government wanted transformation to become an explicit function of the Financial Sector Conduct Authority.
As part of its separation from Barclays Plc, Absa announced it would undertake a new BBBEE transaction in line with its transformation efforts. In September 2017, that saw Barclays transfer 1.5% of its shareholding in Absa to an interim structure called the Absa Empowerment Trust, which was created to facilitate a new BBBEE deal for the bank.
INTENSE SCRUTINY
Since then the dividends received from the bank by the Absa Empowerment Trust have been used to purchase additional equity in the group, boosting the initial stake to about 1.9%.
It is envisaged that these shares will form part of Absa’s new BBBEE deal.
Absa was forced to put the proposed BBBEE deal on hold in 2020 after the Covid-19 pandemic caused unprecedented market volatility and a sharp economic downturn that saw SA’s GDP shrink 6.4%.
However, the rapid improvement in market conditions since the onset of the pandemic has allowed Absa to restart work on the BBBEE deal just as the government exerts increasing pressure on financial services firms to transform. While the
proposed transaction still requires shareholder approval, it is likely to help restore Absa’s transformation credentials, which came under intense scrutiny in April when former CEO Daniel Mminele resigned with immediate effect.
Absa is expected to publish the terms of its new BBBEE deal later this year, with implementation scheduled for 2022.
Analysts will no doubt eagerly await those details amid speculation that Absa is engaged in talks to sell its asset management business to Sanlam. If that deal transpires, it could create a black-owned asset manager with close to R1-trillion in assets under management.
“The intention to undertake a new BBBEE transaction demonstrates Absa’s significant commitment to transformation,” said Quinn. “Meaningful black participation, including ownership, at all levels of the SA economy is a national priority to ensure sustainable sociopolitical, financial and economic stability.”