The intention of a black economic empowerment (BEE) share ownership schemes is to give previously disadvantaged South Africans the opportunity to own a stake in a company and participate in its growth.
A recent Sowetan Dialogues, in association with JSE Investor Services (JIS), put the spotlight on trading and investing in BEE shares.
Carol Crozier, the CEO of JSE Investor Services, explained that JSE Investor Services is a specialist end-to-end keeper and manager of shareholder registry and communication. They maintain the register of over 80 companies, including the JSE Top40, and have over 2.5 million shareholder records on their books. The service offering at JIS comprises of shareholder register maintenance, corporate actions, shareholder analytics, managing employee and BEE share schemes as well as training and education in trust, financial management and BEE schemes functions, Crozier added.
Investors can access these services by contacting the JSE Investor Services Call Centre, by utilising the walk in centre, contacting the call centre or online through ShareHub. The in-coming JSE BEE Verification platform powered by ShareHub, will remove the administrative burden of needing to repeatedly verify your identity to buy, sell or trade these share schemes. The platform aims to empower shareholders and facilitate wealth creation.
Craig Gradridge, investment and retirement planning specialist at Gradridge-Mahura Investments, kicked off the dialogue by explaining the difference between secondary trading, for example on the JSE, and an IPO where shares are offered for the first time. A good example of the latter is Old Mutual’s Bula Tsela, which is biased towards the smaller investor. Discounted shares, where the spot value is lower than the fair value, offers a good opportunity for investing, as the discount tends to unwind slowly over time.
When it comes to paying out dividends, Gradridge revealed that Phuthuma Nathi was still the king of the dividend payers. Other companies paying out dividends include SOLBE1, Ukhamba, YeboYetu and Old Mutual. Dividends are important for older investors who need an income. Younger shareholders, on the other hand, have the option of choosing highly geared investments with greater long-term rewards.
“BEE investors, especially first-generation investors, need to be educated, in their own language, in this highly regulated industry,” Gradridge added. Well-educated retail investors are good for the economy, he said, adding that lock-in conditions or so-called “golden handcuffs” also work well for this group.
BEE shares can create wealth, said Gradridge, revealing that he had met a father who had bought into Phuthuma Nathi when it first listed, and several years later put his daughter through university with the dividends.
Investor appetite is growing, revealed Langa Manqele, head of Equity and Equity Derivatives at the JSE. Before investing, potential shareholders need to know about the growth of the company and its ability to generate returns. Investor education is crucial, he added.
For first-time investors, a long-term mindset is encouraged, with the focus on secondary trading only when the investor needs to exit. Solid BEE schemes such as SOLBE1, Zakhele Futi, YeboYetu and MultiChoice’s Phuthuma Nathi, make it easy for investors to buy and sell. BEE shares are discounted for their lower levels of liquidity, but those shares tend to have a higher dividend yield.
The current rising interest rates will affect the price of shares, Manqele cautioned, BEE investors, however, should be in it for the long term, and over time the rate cycle will even out.
After an initial reluctance to buy SOLBE1 share, investors now understand the offering, said Michelle du Toit, group company secretary at Sasol. After trading at a discount, the return is now significantly higher. For Sasol, which offers purely discounted SOLBE1 shares to BEE investors, their reward is the presence of a truly transformed SA company, fulfilling their BEE requirements, and offering evergreen empowerment.
As a key player in the South African economy, the JSE will continue to facilitate engagements that provide insight into BEE share schemes, and drive efforts to creating a progressive, inclusive and empowered South Africa.
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