Charter Festivals part 2 In one of the previous articles we explored the phenomenon of charters and examined the different

BEE components of those charters. We go further to compare the equity ownership provisions of six different charters from the most strategic sectors of our economy. Opening the scene of charter festivals is probably the Petroleum and Liquids Fuel Charter which was groundbreaking when it was signed in 2000. This charter brought the spirit of the political charter of the 1950s into practical use in an economic environment. It is important to note that the Department of Minerals and Energy set the tone that would take the country by storm in years to come through their Energy Policy White Paper, which formed a basis of the Petroleum Charter. Equity ownership is the headliner in most of these charters and probably took the longest time to debate within the charter negotiation structures. The Petroleum Charter set the ownership target of 25% of the aggregate value of the equity of the various entities that hold the operating assets of the South African oil industry. With this target the deals within the sector increased. Some black people criticized the target of 25% because it did not give black shareholders the ability to block special resolutions that could be passed by the other non-black shareholders. But taking into account the context of the times, this was a bold move. The mining charter waltzed in 2002, which had the global markets spinning with its widereaching transformational impact of the South African mining sector. This charter proposed an equity ownership target of 26%, which for the first time gave the potential black shareholders some leverage in the decision making processes of mining companies. The Mining and Petroleum Charter introduced the concept of Broad-based BEE in a practical manner for other sectors to follow after the Black Economic Empowerment Commission released its report in 2000. The different charters have unique features of equity ownership. The Financial Services Charter caters for both direct (10% target) and indirect ownership (15% target). The AgriBEE Charter introduced land ownership as a critical element of its charter. The ICT Charter proposes a 30% mid-term ownership target and 35% long-term ownership target, and does not take into account indirect black ownership. The ICT Charter further specifies ownership targets for women (9%), youth (3%) and disabled people (1.5%) in the next five years. The Maritime Charter has a 25.1% target specified for the maritime transport sector, with 10% for women and 5% for people with disabilities in the next five years. In looking at the weighting given to equity ownership in the different charters it is interesting to note that it is no longer given a considerable amount of stage time in the charter festival. In the pre-dti Strategy and Scorecard era, there were no weighting allocated to the different elements of the charter, hence the Petroleum and the Mining Charter have

no weighting attached to them. The dti Balanced BEE Scorecard suggest an allocation of 20% weighting to equity ownership. The Financial Service Charter has a 14% weighting attached to equity ownership, with 12% going towards direct ownership and 2% to indirect ownership, with bonus points if the full target comprises direct ownership. The ICT Charter suggests an allocation of 15% to ownership and makes provision for bonus points for the inclusion of broad-based collective ownership mechanisms. The Maritime Charter sticks to the 20% weighting suggested by the dti. A scorecard is currently being drawn up for the AgriBEE Charter, therefore there are no weightings allocated to ownership yet. The issue of ownership of subsidiaries or branches of multinational companies is addressed differently across the different charters. The Maritime charter allows the equity ownership exemption for foreign multinationals in return for an increased contribution to enterprise development. The Financial Services Charter follows the same route by allowing multinationals an equity ownership exemption in lieu of empowerment financing for deals in the financial sector commensurate with the 25% ownership target of their South African operations. The ICT Charter effectively allows for a certificate of non-compliance from the equity ownership component by making companies meet stringent criteria. The bottom line for multinationals applying for such an exemption is to show that their global policy has never allowed joint ventures or sale of minority stakes in their subsidiaries before in any part of the world. In conclusion ownership still retains its headliner status but with less showtime in the charter festivals. It is important to note that all the charters requires the measurement of the substance of ownership in the form of share of economic benefits that accrue to black people rather than merely the legal form. To date the only charter that has full effect of law behind it is the Mining Charter. The others are yet to be gazetted by the dti.