Mar 31, 2023
South Africa’s Absa Unveils $630 Million Black Empowerment Plan
(Bloomberg) -- Absa Group Ltd., South Africa’s third-largest lender by market value, proposed a new plan to help boost Black ownership beyond the 25% recommended threshold.
The transaction would constitute 7% of issued share capital and be worth as much as 11.2 billion rand ($630 million), the bank said in a statement Friday. It will see 4% of Absa’s issued shares allocated to a perpetual Corporate Social Investment trust focused on education and youth employability support for black South Africans. The trust will receive an annual amount equivalent to 25% of Absa’s dividend.
South African companies are encouraged to adopt Black-empowerment plans to comply with government policies to redress financial inequality stemming from the apartheid era. Absa was scheduled to announce the terms of the new plan in late 2021, but it was delayed in part due to the Covid-19 pandemic.
Under Absa’s proposal, another 3% of the shareholding will be made available to a staff trust for its 26,000 local employees, with 82% of the value allocated to the roughly 20,500 Black staff. Participants will receive an annual amount equivalent to 25% of the bank’s dividend, and the shares will vest after a five-year period.
It is “the next big step in our broader transformation journey and, at the same time, recognizes the role that our staff and communities play by giving them the opportunity to benefit from the value generated by the group,” Absa Chief Executive Officer Arrie Rautenbach said in the statement.
Absa shares dropped as much as 1.7% on Friday in Johannesburg. Investors don’t view such deals positively due to the dilution impact on headline earnings, said Adrienne Damant, an analyst at Avior Capital Markets. Still, the move will help Absa raise its Broad-Based Black Economic Empowerment score by 6.75 points, she said.
Staff employed by subsidiaries in other markets will also be able to access a further 1% shareholding.
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