Absa, one of the country’s leading banks, on Friday announced one of the biggest transformation deals in recent times through its new R11. 2-billion broad-based black economic empowerment (B-BBEE) transaction, which it hopes to implement later this year.
The structure of the deal will see black ownership of the group increase by 7%. The benefit to black South Africans will be through a corporate social investment (CSI) trust, and employees through a staff trust.
Absa Group CEO Arrie Rautenbach said the transaction will see black ownership of Absa exceed the 25% threshold set out in the Financial Sector Charter.
“The transaction was specifically designed to align with our intent of being an active force for good, firmly demonstrating our commitment to broad-based black economic empowerment as we build a diverse and inclusive organisation not only in South Africa, but also more broadly across our business.
“The transaction is the next big step in our broader transformation journey and, at the same time, recognises the role that our staff and communities play by giving them the opportunity to benefit from the value generated by the group.”
A CSI trust, benefiting black communities, will indirectly own a 4% shareholding of the lender, while a staff trust will indirectly hold 3%.
“Although primarily designed to achieve our black economic empowerment and transformation objectives, it was also important for us to ensure that a portion of the benefit will be used to empower communities through education and youth employability initiatives. A key principle underpinning the transaction was Absa’s support for a just society that creates opportunities for all people to prosper.”
Absa shareholders will vote on the transaction at a general meeting on June 2.
The 2019 Transformation in Banking Report showed black ownership in the banking industry fell to 30.5% in 2017 from 34.8% in 2016, while black economic interest fell from 30.3% to 25.4%. This was, however, still ahead of the Financial Sector Code target of 25%.
The new Absa B-BBEE deal is the second major empowerment deal the bank has announced in recent times. Sanlam and Absa last year combined their investment management businesses in South Africa, creating a behemoth with more than R1-trillion assets under management.
The transaction saw Absa exchange its investment management business, Absa Investments, for a stake in Sanlam Investment Holdings Proprietary Limited (SIH). Absa Investments comprises Absa Asset Management, Absa Alternative Asset Management, Absa Fund Managers and Absa Multi-Management.
The conclusion of the transaction strengthens SIH’s offering through enhanced scale, broader distribution reach and a more holistic range of investment solutions. The deal further enhanced SIH’s position as one of South Africa’s largest black-owned asset managers.
Absa has also entered into a 10-year distribution agreement with SIH, meaning the expanded operations will use the distribution networks of both Sanlam and Absa, which significantly broadens market reach for the enlarged SIH.
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