By Bruce Hunt

How can Employee Share Ownership Plans (ESOPs) in South Africa go beyond ticking the compliance box and become a true driver of economic growth?

Moneywebmidday interview with Jeremy Maggs (JM)- Employee share ownership plans have been underused as a galvanising factor for economic growth in South Africa 

JM: Employee share ownership plans have been underused as a galvanizing factor for economic growth in South Africa, according to Bruce Hunt (BH), Managing Director of Transcend Capital. ESOPs have become a compliance and empowerment tick box, but according to Bruce, they could play a greater role in creating lasting shared value across sectors.

JM: Bruce, how can ESOPs be leveraged as a strategy for economic growth?  

BH: Globally, employee ownership is prolific. Many states use tax incentives to encourage it. We don’t have that in South Africa. Other countries aren’t focused on transformation like we are. They’ve seen ESOPs increase competitiveness and productivity, build cohesiveness in communities, and create growth. In South Africa, ESOPs focus on black economic empowerment. Some clients in a turnaround phase say, “We’ve had a rough time, and the business wasn’t aligned.” A new CEO may come in saying, “We can build this company together as one team.” Using employee ownership aligns everyone, so they share in gains and feel part of the company. Companies thinking this way have seen a 50–60% share price increase over the last few years.

JM: Why is cohesiveness so important in creating an inclusive and competitive business approach?

BH: South Africa has significant inequality and a large pay gap. Often, companies that turn around reward CEOs and execs well while workers don’t benefit, which isn’t sustainable. Shared growth and value require cohesiveness, so people feel they’re on the same team. Employees share in both the risks and rewards, though not everyone wants that. Employees shouldn’t be expected to write checks; many already face challenges. Shared growth means employees gain only if the company does well.

Executives are also remunerated this way—they don’t write cheques for share options that may fail, but they participate when the company succeeds.

JM: How do you ensure ESOPs are simple and understood across all levels of the organization, given concerns or confusion?

BH: Distrust is also an issue. Many companies have ESOPs where employees received nothing, leading to distrust in new schemes. To design effectively, consider the company’s history and value delivery, then communicate in the simplest way. There’s a trend toward “evergreen” schemes, where employees participate annually, making it more real and tangible as opposed to long-term payouts.

JM: Is there a specific way to structure ESOPs to impact both business and the community, particularly in industries like mining?

BH: With ESOPs, there are two main elements: the structural corporate finance design and the impact beyond just company boundaries. If the owners do the bare minimum to be compliant, it won’t make a difference, no matter the structure. But with a shared value approach, the goal is for employees to benefit and understand the plan. There’s been a move toward recognising that historic ESOPs depended on timing and structure—like at Kumba, where people made a fortune, earning R500,000 in the first scheme, while other commodities saw no returns. This was due to structure, timing, and leveraged investment.

There’s now a shift toward “evergreen” structures, where people receive larger dividends and potentially less capital gain at the end, building trust and sustainability. This structuring is becoming widespread, seen in large structures at Anglo and Shoprite. That’s the direction things are going.

JM: Thank you, Bruce Hunt, Managing Director at Transcend Capital.

About Bruce Hunt BCom, CFA, MBA(Manchester) – Director at Transcend Capital

Bruce is the Managing Director at Transcend Capital. He has 12 years of experience in structuring multinational BEE transactions which include Black operational partners, employees, Broad-based Ownership Schemes, and the sale of assets to Black investors. Before joining Transcend Capital, Bruce was a trader and structured finance professional at Investec Bank.