Analysis of JSE’s black ownership claims by EconoBEE

The JSE has brought out its annual survey – black ownership of the JSE. The report states that black people own at least 17% of the top 100 JSE companies. They then use the dti’s methodology of the exclusion principle, whereby certain mandated investments can be excluded from the ownership calculation. This includes shares held by pension funds on behalf of policy holders, shares held by government, where it is impossible to identify the demographics of the shareholder, or where the shareholder has no control over which shares are purchased by his unit trust.

Following this method, up to 40% of the ownership calculation can be excluded, meaning that the 17% is calculated out of 60%. The report’s conclusion is that black people own 28% of available shares of the JSE top 100 companies.

The report continues by stating that the dti’s B-BBEE targets for ownership are 25% (this is dependent on the sector – the construction sector target is 27.5%), and states that the top 100 companies black shareholding exceeds the dti’s targets.

We welcome the improvement, but still note that 72% of shares are in white hands. This number is not too different to the stats presented by the Commission for Employment Equity that stated that about 74% of all top management jobs are occupied by white managers.

The report does mention the dti’s target and presents themselves as beating the targets. What should be recognised is that the dti’s targets are broad-based, even for ownership, and this the report does not report upon.

For example the targets are:

  • 25% of shares with voting rights in black hands
  • 10% of shares with voting rights in the hands of black women
  • 25% of shares with economic interest rights in black hands
  • 10% of shares with economic rights in the hands of black women

There are even targets for broad-based schemes.

The highest number of points available for ownership refers to net value, which is a complex calculation based on the effective ownership by black people – this takes into account any debt outstanding on the shares to be purchased. Many B-BBEE deals have failed, or ownership been reduced due to the inability of the black participant to repay the debt.

A different, and maybe better way to analyse JSE share ownership would be to look at the top 100 companies’ BEE scorecards, especially the ownership element.

This piece was written by EconoBEE.





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