The South African Breweries (SAB) declared last week that retailers who bought into its BBBEE investment scheme, SAB Zenzele, would have paid off their initial investment in just three and a half years after receiving the latest dividend. How did they do it?
SAB, a subsidiary of global brewer SABMiller, launched the SAB Zenzele BBBEE scheme in 2008. The scheme, valued at R7.3bn back then, had three separate BBBEE beneficiary groupings namely SAB Foundation, SAB Zenzele Employee Trust and SAB Zenzele Holdings Limited. Jointly these groups would earn 8.45% of SAB Limited shares.
SAB Zenzele Holdings Limited was established via invitation of black people within the SAB retailing network to subscribe for subsidised SAB Zenzele shares. This group would have included bottle store owners right down to tavern owners.
SAB described the beneficiary base as follows: black-owned licensed liquor retailers and liquor licence applicants, as well as registered black-owned customers of ABI, the soft drinks division of SAB. Up for grabs in the retail group was 19.2 million ordinary SAB Zenzele shares.
About 29500 retailer shareholders prevailed. These participated in investment options which started with a minimum of R100 for 317 SAB Zenzele shares value at R50 000. The balance of R49 900, between the R100 paid and the value of the share allocation R50 000, was covered by SAB. The scale of allocation increased to a maximum payment of R14 650 per investor for an allocation of about 2 133 SAB Zenzele shares valued at about R337 000. In this case SAB covered the difference of R322 000.
What sets the SAB Zenzele apart from many other BBBEE schemes is the following: Whereas other companies facilitate loan funding to cover the difference between BBBEE subscription price and the value of the shares pursued, SAB covered this from its own resources. As such the scheme was unencumbered and therefore was gathering dividend payment from day one. The broader SAB Zenzele scheme with a beneficiary base of 40000 plus people paid an interim dividend of R48.9 million for the six months ended September. This brought the total dividend paid since establishment of the scheme to R383.8 million. The scheme is set to until 2018 at which point the SAB Zenzele shares will convert to SABMiller shares. This is where things get complex and will be explained in the next installation by ujuh.co.za.