American Renaissance

S. Africa: Blacks To Own 25-35% Of Technology Firms By 2009

AllAfrica.com, May 11

MULTINATIONAL technology companies should prepare to sell at least 25% of their local operations to black partners, with a draft empowerment charter released yesterday ruling out exemptions.

A draft information and communications technology charter proposes that 25%-35% of a company’s equity be in black hands by 2009.

The exact figure will be thrashed out on Friday at a conference to receive final comments on the draft charter by all stakeholders.

Multinationals will make a last plea for equity to be optional, but are likely to fail as the weight of opinion in the industry favours across-the-board compliance.

Local companies yet to strike an equity deal will also be under extreme pressure, with every technology firm seeking to woo SA’s limited pool of black partners.

Also controversial is a clause preventing firms from scoring enough points in one category to make up for a lack of points in another.

A firm’s management could be 90% black, yet it would not rank as empowered if it had no black shareholders. “You have to score a minimum in each category, and if you score below the minimum you will be categorised as nonempowered,” Dali Mpofu, chairman of the charter working group, said yesterday.

Microsoft SA MD Gordon Frazer said the draft was disappointing and a disincentive for making any empowerment effort at all. “This says if you can’t do equity then you can’t qualify, so why bother to do anything to address preferential procurement or skills development, which Microsoft has focused on.”

Frazer said bodies including the trade and industry department supported subsidising fewer points in one category by laudable efforts in another, and he hoped the final charter would take that stance.

The draft has also raised concerns about the cash-crunch facing black investors, if every company is expected to sell 25%.

SA’s listed technology groups have a market capitalisation of about R15bn 25% would cost R3,7bn at fair value. That excludes unlisted firms and multinationals, with 25% of Microsoft SA alone likely to cost R500m.

BusinessMap director Reg Rumney said: “Foreign-owned multinationals won’t want to sell shares at less than market value. I don’t know if there is the money for these kinds of transactions.”