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Posted: 2006-05-20 / Author: Business Day

The Role Of B E E In Sa Business

The Role of BEE in SA Business

The number of small and medium-sized companies making genuine empowerment deals is increasing. Kevin de Villiers, CEO of Arcay Investments, says almost all the small and medium company transaction discussions with Arcay start off with a major black economic empowerment component.

“Even those few transactions that start off without empowerment being a driver, often end up with at least some empowerment element before they are concluded.”He says, for example, empowerment played a key role in the deal in which Beige and its empowerment consortium partners, Thebe Investments and Mothebe, acquired Quality Products from Unilever. De Villiers says empowerment as window dressing is on the decline and the rate of genuine empowerment is accelerating.” This is good news for SA’s empowerment goals,” De Villiers says.

At the same time, he says there are challenges.Smaller companies are often owned by a family or a single shareholder and there is a considerable emotional investment in these enterprises, making shareholders reluctant to part with shares to anyone, De Villiers says. However, he says there appears to be some recognition on the part of government of this pattern and there seems to be an apparent willingness to give more weight to other empowerment elements such as the level of black participation in the company’s executive team and the senior management.

At the same time, small and medium-sized companies are finding that they are under increasing pressure to obtain their empowerment credential.“Large multinationals are seeking to address their empowerment credentials through areas such as procurement, and this means companies that wish to do business with them often have to be empowered,” De Villiers says.

Size can also cause concern for businesses, as small enterprises may not be able to support more than one shareholder. However, this does not eliminate the potential for empowerment, he says. De Villiers says that such circumstances can give rise to very real empowerment. For example, a black-owned and a white-owned business can decide to merge their interests to give themselves greater resources so they can tackle more sizable contract and explore more tender opportunities, he says. “There are examples of this approach being taken. These mergers are completely genuine, as they can only work if both entrepreneurs have built up viable businesses that can benefit from merging.”

The move towards broadbased empowerment is resulting in much more competition among empowerment partners. William Blackie, director of corporate finance at Standard bank, says fewer companies will simply pick a single empowerment partner and conclude the deal with that entity. “There is a lot more use being made of tender processed to select partners.” He says many more potential empowerment partners have been emerging as more black entrepreneurs enter the market.

SOURCE : Business Day

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