Louisa Mojela, co-founder and group CEO of pioneer women’s empowerment vehicle Women Investment Portfolio Holdings (Wiphold), says attacks on their legitimacy by the broad-based BEE commissioner are threatening BBBEE.
Commissioner Zodwa Ntuli, who was appointed last year, says Wiphold and other respected pioneer empowerment vehicles are black ownership fronts. Wiphold’s appeals to trade & industry minister Ebrahim Patel to provide policy certainty since Ntuli began making her accusations more than a year ago have been ignored.
“If this lack of clarity around policy is not corrected it will have negative consequences for the investment of big business in BBBEE,” says Mojela.
“At a time when SA needs to broaden black ownership even more, these investee companies will pull back. Instead of more BBBEE there is going to be less.”
She says uncertainty over the interpretation of the codes by the commission has created an untenable environment for Wiphold because investors are wary of entering into empowerment transactions if there is doubt about the black ownership status of their BEE partner.
The more confusing the policy the more of a disincentive it is for potential business partners wanting to invest in BBBEE trusts.
Mojela says Wiphold and other pioneer empowerment vehicles have been pleading with the department of trade and industry to publish a clarification notice, but to no avail.
“All we request is can they clarify the policy because nobody wants to go through a situation where there is no clarity of policy.
“You talk to the commissioner and she says one thing. You talk to the minister and the minister says another thing. When the policy is blurred it obviously creates a problem.”
The problems are created not only for Wiphold and other respected early empowerment vehicles like Kagiso Charitable Trust, the Mineworkers Investment Trust and HCI, which have had their BEE credentials questioned, but for future BEE companies that try to broaden black ownership.
“Investee companies out there become reticent to the whole idea because now the policy is not clear,” says Mojela.
“You have a commissioner who seems to be fighting and wanting to come up with her own interpretation of this policy.
“Then you talk to the department and they seem to be understanding and supportive of our broad-based ownership.”
She says in a meeting with the minister more than a year ago, in which the commissioner was also present, “he expressed support for our view and acknowledged the commendable work that our trusts have carried out for the betterment of South African communities.
“So we really do not understand why there is this uncertainty. We fail to understand why it is taking the department so long because we’ve been talking to these people for over a year now.
“We are properly accredited, but the challenge is every time there is this noise and the policy does not get to be clarified it creates challenges.”
Wiphold was started by four friends in 1994 with combined savings of R500,000 as an investment vehicle to empower black women.
It was the first women-owned and women-led company to be listed on the JSE.
It delisted in 2003 in order to increase the economic ownership of Wiphold employees and beneficiaries.
It has 1,400 individual beneficiaries in an investment trust and more than 200,000 collective beneficiaries in an NGO trust. The trusts own more than 33% of Wiphold, which has investments worth R4.1bn in listed and unlisted companies, including Old Mutual, Quilter Plc, Nedbank, Adcorp, Sasol Mining and Sasfin.
The beneficiaries have received R268.5m in dividends so far.
“It’s direct ownership. Any dividend goes directly to them,” says Mojela.
But the commissioner says their broad-based ownership schemes are not genuine black ownership.
“Trusts don’t have shareholders, they have proper projects with identifiable beneficiaries,” says Mojela.
Agricultural projects supported by Wiphold in the Eastern Cape, KwaZulu-Natal and Free State have created “quite massive” job opportunities for rural women and wealth creation through the sale of their produce, she says.
“Long before it was decided that broad-based BEE must be legislated and there must be broad-based black ownership, we were doing it. It was something we did of our own volition,” says Mojela.
Wiphold was careful to address the concerns of investee companies that this would not be about “black people being used for fronting” but that identifiable beneficiaries would be empowered directly.
“We killed the notion of fronting from day one,” says Mojela. “We were on the road talking to women to come and join and participate in wealth creation for themselves through investing in Wiphold.
“The key is to make sure you know who your beneficiaries are and you know that there is accountability. We do the yearly audit to see that what they are intended to do they do exactly that with the proceeds of the resources they receive from us.”
The BBBEE Act has always recognised broad-based ownership schemes, including trusts, as black ownership – until the appointment of Ntuli.
“We really do not understand why all of a sudden the new commissioner is challenging this. We continue to engage the minister and the commissioner. Hopefully the commissioner will come to her senses,” says Mojela.
She adds that with such a pressing need for more broad-based economic empowerment the confusion created by the commissioner could be a serious impediment.
“The policy should not be confusing and complicate matters. It needs to be clear because it is important that everybody around the table understands what is expected of these trusts. Now it is confusing for investors and for the BBBEE partners that go out of their way to be compliant and to contribute to BBBEE.”
Mojela, who has a BCom degree from the National University of Lesotho, managed the emerging markets division of Standard Corporate and Merchant Bank and was project leader of the business and entrepreneurial development division for the Development Bank of Southern Africa before starting Wiphold.
“Let it not be forgotten that we, together with our partners, established BBBEE ownership schemes long before there was any legislation enforcing it, because we saw the need. And we still do.
“That is why there should be absolute clarity about the policy. It cannot be left untidy like it is now.”
- This piece was written by Chris Baron and was first published by Business Times on Sunday 29 November 2020. Read the original post here.