Stainless Empowerment gets a Black Mark

摘要

The collapse of black economic empowerment (BEE) has made its mark on the stainless steel industry, says Small Business Exchange special projects head Colenso Mani."Surely something has gone very wrong with the empowerment process," comments Mani. He says that a closer look at most of these deals revealed structural flaws. For instance, most BEE companies, especially the ones listed at the JSE, were floated through special purpose vehicles (SPVs). These are complex financial arrangements that enable the financier, usually a bank, to inject too much debt into a company through the creation of a holding company that houses the debt raised by the BEE company to purchase a stake in another company. The BEE consortium obtains voting rights in the holding company, and thus the control of the company purchased.After an agreed period, the consortium pays the financier the original amount, interest over the relevant period, and a share of profits realised after the sale of the shares, if any. If the price of these shares has not increased enough during this period to cover the principal, interest and incidental costs, the consortium gets nothing, and these shares go back to the financier.