Absa’s BEE deal gets green light to go ahead

The transaction is aimed at strengthening Absa’s BEE credentials and provide communities and staff with an opportunity to benefit from the value generated by the group.Picture: Karen Sandison/African News Agency (ANA)

The transaction is aimed at strengthening Absa’s BEE credentials and provide communities and staff with an opportunity to benefit from the value generated by the group.Picture: Karen Sandison/African News Agency (ANA)

Published Jun 6, 2023

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Absa Group’s R10 billion black economic empowerment (BEE) at recent share price values, one of the largest empowerment transactions in recent times, has been given the green light by its shareholders to proceed and possibly be implemented by September.

Yesterday the share was up 1.2% at R158.01 in late trade. However, the share price has fallen roughly 22% since the BEE deal was first announced, shaving nearly R1bn off the proposed transaction, with Absa’s market capitalisation currently sitting at R132bn.

South African banking shares have taken a beating as the rand falls against a stronger dollar and as the country’s fiscal outlook deteriorates amid an escalating power crisis.

Absa first announced the deal in March.

The bank said on Monday its shareholders last week voted in favour of the group’s broad-based black economic empowerment (B-BBEE) transaction.

Approval has paved the way for thousands of Absa employees to become shareholders and thousands of previously disadvantaged participants to benefit.

The transaction is aimed at strengthening Absa’s BEE credentials and provide communities and staff with an opportunity to benefit from the value generated by the group.

Absa Group CEO Arrie Rautenbach said this transaction was paving the way for implementation of one of the largest black economic empowerment transactions in recent times.

“We are grateful to our shareholders who are aligned to our long-term vision of empowering our staff and communities,” Rautenbach said.

“Today marks a milestone in the journey to bring this sizeable and impactful transaction to fruition, benefiting employees and communities in a meaningful way.”

The B-BBEE transaction involves 7% of the total Absa Group shareholding, comprising 3% for South African staff and 4% for black participants in selected corporate social investment (CSI) programmes.

Absa Group companies outside South Africa will be able to participate through a cash-settled staff scheme in their respective jurisdictions, which will contain terms and provisions notionally equivalent to the terms proposed for the SA staff scheme.

The bank said it anticipated that its South African staff scheme would be implemented on September 1, 2023, awarding rights to shares to thousands of Absa employees, who would become shareholders when the shares vest five years from the implementation date.

On implementation of the transaction, Absa would also allocate shares to a CSI Trus,t which would distribute its significant dividend income to its beneficiaries, who would be mainly black participants in CSI programmes that focus on education and youth employability.

Both the CSI component and the South African staff component would enhance Absa’s B-BBEE credentials and assist Absa in achieving the equity ownership targets set out in the Financial Sector Code, such that Absa could sustainably achieve at least 25% black ownership.

The CSI Trust would hold an effective indirect 4% interest in Absa and would house a CSI scheme focusing on education and youth employability, and will provide ongoing benefits to the CSI scheme participants.

The SA staff scheme would include all of the approximate 26 000 eligible permanent staff members of Absa Group companies in South Africa, regardless of race or nationality.

However, the SA staff scheme would be structured to enhance the participation of the approximately 20 500 eligible South African black (African, Indian and coloured) staff members who would receive an additional 20% allocation relative to staff who were not black.

Absa said it believed it was imperative to recognise the valued role all staff play in the bank’s success by inviting Absa Group companies outside South Africa, representing a further approximately 9 000 permanent staff members to participate via cash-settled staff schemes in their respective jurisdictions, which will contain terms and provisions notionally equivalent to the terms proposed for the SA staff scheme.

These schemes were subject to the approval of the respective boards of the non-South African subsidiaries and any other relevant approvals required.

“The transaction also demonstrates Absa’s commitment to being a purpose-led organisation, empowering Africa’s tomorrow, together… One story at a time,” said Rautenbach.

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