Masana inks deal with BEE partners
Three firms take 35% stake
BLACK economic empowerment (BEE) deals that were sealed about a decade ago are now coming to an end and, to maintain their empowerment status, companies are concluding replacement transactions.
Petroleum supplier Masana Petroleum Solutions is the latest entity to find new BEE partners.
Masana has completed a transaction with a new broad-based black economic empowerment consortium made up of three black-owned venture capital firms – fund management company Ata Capital, diversified investment company Kwande Capital and investment and finance group Identity Capital.
The new consortium will take up a 35 percent stake that became available after Masana’s founding shareholders, Mineworkers Investment Company (MIC) and WDB Investment Holdings (WDBIH) exited, to cash in on their investment in the company.
“We have been invested in Masana for over 10 years, and our investment has con- sistently performed to expectations,” MIC financial director Cynthia Mapaure said.
MIC, WDBIH and BP Southern Africa established Masana in 2005. BP has a 45 percent stake in Masana.
Masana chairman Paul Nkuna said: “While all parties have benefited from our partnership, our founding empowerment partners have decided to realise their value from the company which is common with all growing businesses.” The companies have not disclosed the value of the BEE deal.
Non-binding offers
As part of the transaction, Lelo Rantloane from Ata Capital and Deon Dhlomo from Kwande Capital would join the board of Masana.
Masana managing director Abhay Raichoora said the company initially invited 40 BEE companies to tender for the stake. It received non-binding offers from 20 of them, said Raichoora.
“After going through the offers, we sought binding offers from nine companies,” he said.
Masana settled for the chosen consortium because it was led by black women. It is really true that the consortium came through strongly.
“There was a strategic fit between their vision around investment in petroleum and Masana’s strategy and vision.
“We are a young company. Our future is around diesel and ability to fuel companies,” said Raichoora.
Masana operates exclusively in the commercial and industrial segments of the petroleum industry and sells BPbranded oils, fuels and chemicals as well as Castrol-branded lubricants to business customers in sectors such as commercial transport, manufacturing and processing, mining, civil engineering and construction as well as government and state-owned entities.
He said the company was also eyeing growth in infra- structure investment. Masana is a major supplier of bitumen, a dark brown to black viscous liquid used in road and construction projects.
BEE charter
Masana is one of a few companies in the petroleum sector with a relatively high BEE ownership. One of the targets of South Africa’s BEE charter for the petroleum and liquid fuel industry – signed in 2000 – was that 25 percent of ownership and control of all facets of the industry should be in black people’s hands within 10 years.
A 2011 review of the char- ter showed that most aspirant investors in the industry lacked the necessary capital. It specifically fingered access to affordable and practical financing mechanisms as a major impediment for retailers and wholesalers.
“One of the reasons why transformation has been slow is because the industry is capital-intensive especially in the refineries and pipelines. Marketing is not so capital-intensive,” Raichoora said.
He said the company wanted to improve on its level-two broad-based BEE level status.
“It is a journey. We are looking at level one,” he said. THE AMENDED broad-based black economic empowerment (B-BBEE) codes of good practice have raised costs for almost two-thirds of local companies since they came into effect last year, according to Grant Thornton’s international business report for 2016.
The new codes identify elements on which companies should focus: ownership, skills development and enterprise and supplier development. Firms must be compliant to tender or apply for Department of Trade and Industry (dti) grants.
The report said 76 percent of businesses that reported increased costs had to employ outside consultants, while 44 percent appointed an inhouse B-BBEE team and 41 percent enlisted specialist service providers to assist with procurement as well as enterprise development requirements.
Grant Thornton Johannesburg managing director of verification services Jenni Lawrence said: “Our survey shows that many companies are now turning to specialist consultants to reach compliance, while a number have actually gone as far as to appoint internal specialists and transformation managers.”
Non-compliance
“The cost of non-compliance, however, should not be underestimated, particularly for companies relying on BEE scorecards to tender or apply for dti grants,” said Lawrence.
Increased costs for business executives come from two main areas: first, the increase of spend targets under skills and procurement; and second, an increase in implementation costs in terms of specialists, service and solution providers, as well as internal capacity.
Lawrence said contributions towards enterprise development and new sub-element, supplier development, made up to 15 out of 109 points on the new scorecard. She said these two sub-elements fell under the old preferential procurement element, which was renamed enterprise and supplier development.
The focus of the procurement scorecard had altered towards buying from blackowned suppliers, she said. Under the “old” codes, BEE spend was measured out of 20 points, with three of those coming from spend with firms that were 50 percent blackowned and two points from at least 30 percent black-owned suppliers. “Under the amended codes, BEE spend is measured out of 25 points, with nine being allocated towards companies that are at least 51 percent black-owned and four points for suppliers with at least 30 percent black women ownership, an increase in emphasis of 27 percent.” – Staff Reporter