Black Economic Empowerment in Western Cape: Market Performance and Future Outlook

1. Black Economic Empowerment: How does the Western Cape fare? Colin Reddy: BEE Director BusinessMap Foundation

2. What we will discuss……….. • Performance of the market… • The future…..

3. The Market’s BEE response…deal flow 1996 - 2002 Source: BusinessMap Foundation

4. The Market’s BEE response…sector profile Source: BusinessMap Foundation

5. The Market’s BEE response…Listed BEE Controlled Companies Total number of companies on JSE is about 500 Source: BusinessMap Foundation

6. The Market’s BEE response…market caps of black controlled companies Total JSE market capitalisation is about R 1.3 trillion Source: BusinessMap Foundation

7. The Market’s BEE response…black controlled market cap by value Source: BusinessMap Foundation

8. The Market’s BEE response…BusinessMap Foundation BEE index Source: BusinessMap Foundation

9. Sector Black beneficial holdings of total shares in issue * High case Low case Resources 14.18% 12.34% Banking 14.86% 12.61% Support Services 17.04% 14.57% Diversified Industrials 12.24% 10.69% Food Producers & Processors 17.50% 15.13% Black ownership studies.. [Source: The BusinessMap Foundation] * Based on total shares in issue, including foreign shares

10. Company Share price (c) – 28 Feb 2003 Share price (c) – 1 Mar 2002 Share price change (%) Brimstone 65 34 91.2 Brimstone-N 65 34 91.2 Cape Empowerment Trust 12 10 20.0 Casey 25 1 2,400 HCI 345 232 48.7 LA Group 160 135 18.5 LA Group-N 140 140 0.0 Oceana 1,390 1,400 (0.7) Sekunjalo Investments 41 20 105.0 Listed BEE companies based in the Cape… [Source: The BusinessMap Foundation]

11. Some definitions.. • Black refers to African, Coloured and Indians • Western Cape has…. • Coloureds (and Indians) = 55% • African = 23% • White = 22% • 4.35m people

12. A case study - Sekunjalo • Black-controlled by about 74% • A strong share price performance –105% rise in year to February • Has healthcare and fishing subsidiaries • Latest results: Turnover = R346m, Net profit = R17m and cash flow = R22m. • The main shareholder is fully operationally involved. • It boasts a 90% composition of black managers and staff. 70 % of the procurement budget is spent on black suppliers. 2.5% of profits are spent on CSI initiatives.

13. A case study – Mastercurrency - Unlisted • 51% owned by KK Combi Inv. • KK Combi is exec chairman. • Exec management are 71% of HDSA • Turnover = R35.5m, Net income = R7.2m • Net profit = R4.1m (for 6 months to Dec 2002) • Has a risk committee, internal audit committee. • 58% black managers, 73% HDSA. • Future leaders programme. • 6% of net profit on CSI • 25% of procurement expenditure

14. Western Cape: Persons Banked versus Un-banked Sample size = 2 895 982 Source: SAtoZ

15. Western Cape: Are there senior black employees in your business? Sample = 1139 Source: SAtoZ

16. Western Cape: Management Source: SAtoZ

17. Western Cape: Do black people have shares in your business? Source: SAtoZ

18. Western Cape: Working? Source: SAtoZ

19. Western Cape: Living standards? Source: SAtoZ

20. Western Cape: Property ownership? Source: SAtoZ

21. Entrepreneurship • Start-up activity is highest among Coloured (5.0%) and Indian (4.5%) adults, followed by Black (3.8%) and White (3.8%) adults. • In contrast, new firms are more likely to be owned by White adults (3.6%), followed by Coloured adults (3.0%). • Established firms are far more likely to be owned by White adults (6.8%) than any other group. Source: GEM

22. Racial classification of respondents that believe they have the requisite skills to start a business, 2002 Source: GEM

23. Experts’ opinions of the most important factors restricting entrepreneurship in decreasing order… • Education & Training • Financial Support • Cultural & Social norms • Government Policy • Government Programmes • Market Openness • R&D Transfer • Access to Physical • Infrastructure • Commercial & Professional Infrastructure

24. Is BEE advancing in the Western Cape? • Significant number of black listed company presence. • However this is within a very small active black presence in JSE – about 3% • Property ownership – somewhat more positive than other factors

25. Is BEE advancing in the Western Cape? • Large number of un-banked

26. Is BEE advancing in the Western Cape? • Large number of unemployed, but WC unemployment rate is about 19% compared to the national average of about 30%.

27. Is BEE advancing in the Western Cape? • Lower LSMs still occupied by black people– indicates little economic interest • Still a lack of meaningful BEE

28. However, the following requires investigation….for conclusiveness • Success of Western Cape government’s preferential procurement – pendulum shifting towards blacks • Is the licensing and quota system furthering BEE? – deeper problem of capacity to handle fishing quotas • The status of staff training in the Western Cape? Increasing towards blacks • Is SMME development furthering BEE in the Western Cape?

29. The solution…. • Grow the WC economy • Organic growth • Capture from other provinces

30. Colin@BusinessMap.org.za Questions?