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BEE ownership for multinationals is a critical aspect of maintaining compliance and competitiveness in South Africa. With ownership as a priority element in BEE, companies must align their strategies to drive transformation through ESOPs, Black investor partnerships, and equity equivalent programs.
Employee Share Ownership Plans (ESOPs) involve providing targeted employees with an ownership stake in their employing company.
Large multinational transactions that require Competition Commission approval can benefit greatly from the inclusion of Employee Share Ownership Plans (“ESOPs”), which can serve to address the public interest considerations of the Competition Commission and to provide other benefits to the parties to the transaction. Multinationals considering implementing ESOPs in this context need to clearly understand the commercial and economic impact on the transaction and structure the ESOP carefully.
ESOPs (Employee Share Ownership Plans) involve enabling employees to share in ownership of the company they work in. Employee ownership is gaining momentum in South Africa as more companies recognise the benefits it offers. These include improved business performance, better employee relations, socio-economic benefits, and positive BEE outcomes, among others. These are particularly relevant in context of South Africa right now, where the country is facing a cost of living crisis, skills shortages, and high unemployment. For every business, employee ownership should be considered as part of the BEE and business strategy.
Employee Share Ownership Plans (ESOPs) in South Africa remain underutilised, despite their potential to enhance employee engagement, align business interests, and achieve BEE ownership goals. Shaun Smit of Transcend Capital delves into the complexities, challenges, and benefits of ESOP implementation and offers insights into creating sustainable employee ownership models.
Research indicates that when employees feel a sense of ownership in the organisation they work for, they have increased job satisfaction and show more commitment and loyalty which then leads to improved productivity, innovation and profitability. It’s for this reason that organisations globally use Employee Share Ownership Plans (ESOPs) as a form of employee ownership, to increase employee engagement, align employee and shareholder goals, reward employees and as a tool for business succession planning.
Companies in South Africa can recognise ownership points on their BEE scorecard by selling a property, business or subsidiary to Black investors.
The recent decision of the Competition Commission to block the proposed acquisition of Burger King in South Africa by a US-based private equity firm has sparked intense debate.
The Minister of Trade, Industry and Competition has on Tuesday 18 May 2021 published a Practice Note on discretionary Collective Enterprises, such as employee share ownership plans (ESOPs) and broad-based ownership schemes (BBOS).
