A newish formation called BayHill Transformational Investment Portfolio (TIP) is threatening to disrupt South Africa’s transformational/black economic empowerment (BEE) space with a promise to mainstream black capital.
Brought to the market by BayHill Capital, TIP is leveraging the possibilities opened by South Africa’s new stock exchange ZAR X. It aims to harness the power of black savings in a way that will “aid the development of black enterprises, support job creation and alleviate poverty, while simultaneously offering competitive returns to investors.”
TIP will essentially canvass investment capital from black communities and direct it via a ZAR X listing. It may sound like a uniquely intelligent idea but it can partly be understood as a thing of the moment, that is if one considers many other initiatives that are bubbling under. These include the ideas floated by the BrownSense formation and the KCB crowed. But TIP sounds more organised and mainstream.
TIP will collect mainly black capital, mix it with other monies, and target investments in listed companies via their BEE schemes, as well as non-traditional investments such as black industrialists, black-owned start-ups and private equity firms.
BayHill TIP Financial Director Lilitha Mahlati says the entity is primed to act as a disruptor in the transformation landscape, allowing existing participants in the empowerment space to sustain and grow their wealth, encouraging the entry of new participants into financial markets and increasing inclusiveness in the investment landscape.
She notes that the decision to list TIP on ZAR X was central to its creation, allowing TIP to benefit from a shared culture of innovation and the creation of unique solutions.
“Listing on ZAR X means that TIP will enable grass-roots investors to play a direct role in the success and development of black businesses. Additionally, listing on a stock exchange opens the opportunity for institutional investors such as retirement funds to exercise their social investment responsibilities while fulfilling their fiduciary obligations to their own investors,” she adds
ZAR X Chief Executive Officer, Etienne Nel, believes that TIP’s listing marks a historic moment in the financial markets. “This is the first time that regulated financial markets players will combine their particular capabilities to deliver wealth creation potential that has never been available in this country before.
“The opportunities for individual and institutional investors are greatly enhanced, creating organic prospects whereby companies can achieve BEE in perpetuity and the economy can access sources of capital previously denied it.”
Unlocking B-BBEE schemes
Mahlati states that one of TIP’s key features is its structure as a permanent black capital investment vehicle, guaranteed by pre-trade listing rules which dictate that the company will retain a minimum 51% black shareholding at all times.
Taking advantage of ZAR X’s real-time shareholder registry, the sale of shares to non-compliant or white investors will be frozen should the company’s black shareholding fall to 51% until such time as this shareholding rises again.
She explains that this feature will enable TIP to access shares in blue-chip companies listed on other exchanges at a discount through their BEE schemes, unlocking the value of these schemes for a diverse pool of stakeholders rather than a well-connected few.
TIP’s position as a majority black-owned company also means that the company is able to offer its “BEE swap” facility, whereby BEE scheme participants can swap their shares in BEE schemes for shares in TIP on a rand-for-rand basis.
“Two of the most significant benefits offered to investors from the BEE swap are flexibility as well as diversification. It affords individuals and organisations who currently participate in BEE schemes the opportunity to swap into TIP and thereby expose themselves to a more diversified portfolio with liquid shares, as opposed to being locked into a single investment until their scheme matures.”
“This also benefits the value chain of BEE schemes as TIP is able to offer itself as a long-term partner and a solution for the future of empowerment transactions.”
Mahlati emphasises that one of TIP’s central aims is to drive financial inclusion, “encouraging all black South Africans to participate in the market and dispelling the myth that trading in securities is reserved for a select few.”
“Sharing our vision, ZAR X has numerous advantages that will allow us to achieve this such as the low cost of trading, as well as the accessibility and technology behind the platform,” she said.
In addition to allowing investors to view market data free of charge via their website, ZAR X is also poised to become the first stock exchange in Africa to offer a mobile trading app. The app will be launched by mid-year. This will mean that investors can buy and access TIP shares from anywhere, complementing TIP’s goal of encouraging greater economic participation.