This is not a paywall.

Register for free to continue reading.

We made a promise to you that we’ll never erect a paywall and we intend to keep that promise. We also want to continually improve your reading experience and you can help us do that by registering with us. It’s quick, easy and will cost you nothing.

Nearly there! Create a password to finish up registering with us:

Please enter your password or get a login link if you’ve forgotten

Open Sesame! Thanks for registering.

First Thing, Daily Maverick's flagship newsletter

Join the 230 000 South Africans who read First Thing newsletter.

We'd like our readers to start paying for Daily Maverick

More specifically, we'd like those who can afford to pay to start paying. What it comes down to is whether or not you value Daily Maverick. Think of us in terms of your daily cappuccino from your favourite coffee shop. It costs around R35. That’s R1,050 per month on frothy milk. Don’t get us wrong, we’re almost exclusively fuelled by coffee. BUT maybe R200 of that R1,050 could go to the journalism that’s fighting for the country?

We don’t dictate how much we’d like our readers to contribute. After all, how much you value our work is subjective (and frankly, every amount helps). At R200, you get it back in Uber Eats and ride vouchers every month, but that’s just a suggestion. A little less than a week’s worth of cappuccinos.

We can't survive on hope and our own determination. Our country is going to be considerably worse off if we don’t have a strong, sustainable news media. If you’re rejigging your budgets, and it comes to choosing between frothy milk and Daily Maverick, we hope you might reconsider that cappuccino.

We need your help. And we’re not ashamed to ask for it.

Our mission is to Defend Truth. Join Maverick Insider.

Support Daily Maverick→
Payment options

Trusts under BEE scrutiny in yet another dramatic polic...

Business Maverick


Trusts under BEE scrutiny in yet another dramatic policy shift

The Niall Mellon Township Trust, founded by Irish philanthropist Niall Mellon, provides chartiy housing for township areas in South Africa. This year about 1350 Irish builders will build 200 houses, a community centre and a Garden of Hope in Freedom Park.

One thing certain about SA’s business and economic environment is uncertainty. Targets or policies seemingly set in stone are suddenly not worth the paper they were written on, leaving investors scratching their heads if they are not banging them against walls. This is the case with the sudden U-turn last week by the BEE Commission, which signalled that trusts will no longer count for black participation in ownership structures. Expect corporate SA to draw a line in the sand. Meanwhile, the mining industry, which has had its own issues with trusts, should be out of the line of fire.

While President Cyril Ramaphosa tries to woo investors to sink their capital into the sinking economy that is South Africa, the bureaucrats below deck are busy smashing holes into the hull. The BEE Commission, it was reported in Business Day last week, has decided that trusts no longer count for BEE. To restructure these schemes and deals could cost tens of billions of rand. This could leave investors scrambling for the lifeboats.

Zodwa Ntuli, the commissioner, seems to have three main issues with the way trusts – which typically aim to benefit a defined group of black people – operate. These are the voting rights they exercise, the economic benefits such as dividends that flow from them (are the same as other shareholders) and if the beneficiaries can become unencumbered owners of the shares.

These may well be legitimate concerns and a number of questions can be raised. A trust that helps fund university scholarships may give a student a needed leg up, but is that real ownership? Do the people in a community endowed with a trust even know they may have voting rights and can attend the AGM? But the fact of the matter is that such trusts have been considered compliant for over a decade – until now, apparently.

Africa’s largest law firm ENSafrica, citing the 2017 Intelledex Research Report, noted last week that “over R50-billion of value has been created for charitable recipients through broad-based BEE structures, including community trusts. As such, there is no question that broad-based ownership schemes have significantly contributed towards the upliftment of a large number of black people who would not ordinarily have been recipients of such benefits”.

ENSafrica director Sanjay Kassen told Daily Maverick that corporate South Africa was bound to resist.

There are many broad-based schemes out there and some of them hold shares worth billions of rand in large listed entities. Corporate South Africa is saying that we have been doing this for more than a decade. If you say overnight that these schemes no longer contribute to the black ownership of that company, I think that there will be significant pushback from the corporations,” he said.

Among sectors, the mining industry at least should be in the clear. The Department of Mineral Resources (DMR) said it could not immediately comment – on the understandable grounds that there has been no formal statement issued on the matter for it to study.

The mining industry is governed by the MPRDA (Mineral and Petroleum Resources Development Act) and adheres to the Mining Charter and the structures of empowerment vehicles is reviewed and approved by the DMR,” the Minerals Council South Africa said in a statement.

This is certainly the legal consensus. ENSafrica’s Kassen said: “Mining companies measure their compliance in terms of the mining charter. There is a legal view that this doesn’t fall within the ambit of the Department of Trade and Industry at all. There is a legal view that the BEE legislation does not trump the MPRDA.”

Still, there are lingering concerns. One mining executive, who asked not to be named, said, “we are not quite sure about the matter”. The questions raised could bring fresh scrutiny to the mining industry’s trusts. After experiencing several dizzying policy shifts under the Mining Charter, the industry can hardly afford more uncertainty, and does not have a lot of spare cash to restructure existing schemes.

The mining industry also serves as a warning regarding trusts. Among miners, they have been set up not just to further empowerment or ownership goals, but also to help meet targets laid out in the social and labour plans that companies operating in the sector are required to meet. In the socially explosive landscape that is South Africa, it is not always easy to please everyone, let alone regulators brandishing measuring tapes. Among many examples, Anglo American Platinum (Amplats) and Impala Platinum (Implats) both put together community trusts with tribal councils on the restive platinum belt, which soon came unstuck.

In the case of Amplats, the R175-million Mapela Trust aimed to fund various projects around its Mogalakwena operation, the Anglo American unit’s main cash spinner. This became a flashpoint of discontent, with local communities complaining the trust was not transparent with too much authority vested in the local chief. Violent protests periodically erupted, disrupting production. So Amplats did the sensible thing and restructured the trust at relatively little cost to make it more transparent while diluting the power of the chief. Implats faced a similar situation with a trust it set up around its Marula mine, which had been on the verge of closure because of protests triggered in part by the trust’s structure. It also rebooted the project after discussions with various community stakeholders, soothing tensions, if not outright eliminating them.

So trusts can certainly have issues and create unexpected consequences. The broader point here is that the companies, and the affected communities, ultimately fixed the problem themselves. That is also empowering. DM


Please peer review 3 community comments before your comment can be posted