At the start of the month, Trade, Industry and Competition minister Ebrahim Patel hosted a media briefing on worker empowerment in South Africa. The majority of the briefing focused on empowerment through ownership structures in companies operating across all sectors of the economy.
This, according to Heather Irvine, partner at legal firm Bowmans, is a key outcome for government and the next frontier of broad-based empowerment in the country.
Analysing Patel’s address, Irvine said that much of the focus was on South Africa’s needs to build back its economy ‘differently and better’, to achieve a greater level of economic inclusion and attain higher levels of growth.
“He focused on a number of recent merger transactions in which agreements were reached with government during the course of the merger review process by the competition authorities, which led to worker empowerment schemes being set up.”
These structures have resulted in more participation of workers on boards of directors as well as training for these directors and the workers who are the beneficiaries of these structure, said Irvine.
“The briefing was joined by the leadership of some global and local companies, involved to date in the implementation of worker ownership structures in partnership with government as well as representatives from trade unions and the Industrial Development Corporation.
“Participants highlighted that worker ownership structures add real value to the companies involved and the South African economy as a whole, creating alignment between employees, management and shareholders and assisting to build strong and dynamic firms, in a manner which enhances social cohesion.”
Shift in focus
In his address, Patel drew specific attention to the amendment to section 12(3) of the Competition Act 89 which came into effect in July 2019.
The section requires competition authorities to assess whether any proposed merger with an effect in South Africa will promote a greater spread of ownership, in particular to increase the level of ownership by historically disadvantaged persons and workers in firms in the market.
Conditions during the merger review process which require these structures to be put in place are increasingly common, said Irvine.
Going forward, to further develop this model of empowerment, the minister indicated that:
- The Department of Trade, Industry and Competition (DTIC) has established a register of companies which put worker empowerment structures in place, to facilitate evaluation and tracking of both listed and unlisted companies;
- The department’s integrated performance plan includes a transformation element that will ensure that incentives are strongly aligned to developing worker ownership structures and maximising South Africa’s investment in industrial development;
- Discussions are already being held in the National Economic Development and Labour Council (Nedlac) to review the Companies Act 71 of 2008, in order to allow for even greater worker representation on boards of directors, building on the successful experience of countries like Germany. Government will publish a framework and provide a more detailed briefing in due course;
- The Minister intends to publish new guidelines in the form of a practice note on broad-based ownership schemes, long term ownership and evergreen structures to complement the existing Broad-based Black Economic Empowerment (B–BEEE) legislation, and provide more clarity in order to promote worker empowerment as part of the owner element of the B-BEEE scorecard.
Parties considering a merger in South Africa should place an even greater focus on these public interest considerations on a proactive basis, Irvine said.
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