Ann Crotty
Thousands of Kumba Iron Ore employees are in line to receive pre-tax cash payments of about R500 000 in December from what has been described as an exceptionally generous employee share option scheme.
A spokesman said Kumba, together with the unions, had put programmes in place to help workers cope with the windfall payments they would receive just before Christmas.
“We realised that there was a significant risk that some employees might be disinclined to return to work after receiving such a large sum of money and so we set up ‘financial fitness training’ sessions,” said Gert Schoeman, the manager of communications and branding at Anglo American.
The precise value of the payment will be set by Kumba’s share price on November 17.
In an announcement last Friday by Anglo, which holds a 65 percent controlling stake in Kumba, a reference share price of R468.35 was used. On the basis of this price, Anglo said “an anticipated pretax monetary benefit of R2.5 billion will accrue to the participants” of the scheme. The scheme, which was put in place when Kumba listed on November 17, 2006, holds 3 percent of Kumba’s shares and has just more than 6 000 members.
In terms of the scheme, every full-time employee below manager level received an allocation of Kumba shares. The size of the allocation depended on the length of time the employee worked for Kumba. Employees who have worked for Kumba for the full five years of the scheme will receive the full allocation. Those employed for four years will receive 80 percent, three years’ employment means 60 percent and so on.
Schoeman told Business Report that there were 6 140 members of the scheme, most of whom had been with Kumba for the full five years. He indicated that the cash value that would be received by employees who had worked for five years would be about R500 000 each.
However, Schoeman stressed that the amount would be less if the Kumba share price was weaker than R468.35 on November 17. If the share price moves above R468.35 on November 17, the total payout will be higher.
Kumba’s shares fell 1.3 percent to R437 on Friday.
Schoeman also stressed that because the payment was considered to be part of remuneration, employees would be fully taxed on whatever cash payment they received. “We have been communicating with employees on this issue and have been using tax advisers to guide us,” Schoeman said.
A second similar scheme will be launched when the first scheme’s payouts are made. This means that in five years time, Kumba employees are in line to receive another payout.
Schoeman said communities in the areas in which Kumba mined would also get hundreds of millions of rand from a community development trust.
The National Union of Mineworkers could not be contacted on Friday but Gideon du Plessis of Solidarity commended Kumba for its initiative and challenged all other employers in the mining industry to follow its example. “This is real worker empowerment, it creates real ownership and wealth for the workforce, it is better than creating bogus black economic empowerment companies,” he said.
A leading empowerment analyst told Business Report that the Kumba scheme had benefited enormously from the surge in the price of iron ore over the past five years. “This means it is exceptionally generous, there is little doubt employee share option schemes are the way to go; their success will inevitably undermine calls for nationalisation.”