When Mvelaphanda Resources, the investment group led by empowerment doyen Tokyo Sexwale, took first position in the FM's Top Companies last year, there were whispers: "You see, black economic empowerment [BEE] is a business imperative."
So should we expect to find more empowered companies in the higher ranks of Top Companies in future? Yes, but mostly because of the commitment to BEE among top performers.
BEE is a business imperative because its objective of curing the racial ills and imbalances of SA society will eventually translate into a more business-friendly environment - but it does not appear to have a direct relationship to top performers at present . The elusive nature of determining who qualifies for the empowered title makes assessments even more difficult.
Nevertheless, the BEE paradigm is gaining ground in the private sector and making serious inroads into the JSE, which is widening the pool of black chips. In determining black chips we took the top 10 companies from the FM's Top Empowerment Companies survey (March 4 2005), whose ranking is based on the department of trade & industry's broad-based BEE score card. We then ranked the companies in the top 10 by net profit size.
Telkom takes first position among the black chips, with net profit of R6,3bn. Using its monopoly hold on SA's telecom market, Telkom has produced good figures since listing in 2003. The market was impressed: its share price rose from its listing level of R28 to a record high of R117 in March.
Sugar milling group Illovo occupies the second position in our black-chip list with net profit of R504m. Though Illovo reflects no black ownership at holding level, the group made it to the top 10 because of its emphasis on skills and enterprise development. The group has thus far sold 26,5% of its cane farming land to black cane farmers. It also provides support to these black cane farmers.
Illovo is followed by Northam Platinum, chaired by Sexwale, whose Mvelaphanda holds a 22,5% stake of Northam. This stake could increase to more than 30% because the two groups are working on another deal. Other black chips are Datacentrix, Phumelela, Brimstone, Cape Empowerment Trust, Don Group, Sekunjalo and Merafe.
It's worth noting the presence of groups such as Brimstone, Sekunjalo and Don in this list. They form part of the earlier BEE wave, mainly driven by haste. Many of the names that emerged in this wave and made it to the JSE have since disappeared; others have bowed out of the JSE.
Brimstone is becoming a respected investment holding group under the leadership of founders Mustaq Brey and Fred Robertson. The group staged a coup with the appointment of Jakes Gerwel - a director-general in the Nelson Mandela presidency - as chairman. The group recently added a significant stake in Afrox Healthcare to its portfolio. It also heads the consortium that bought into Old Mutual. Its portfolio includes stakes in up-market clothing manufacturer House of Monatic, insurance broking firm AON and Sea Harvest Corp . The group boasts more than 50% black ownership and 100% black management.
Hotel group The Don represents one of the interesting faces of black empowerment. Group CEO Thabiso Tlelai, representing a family trust, took The Don when it was on shaky ground and steered it out of trouble.
Investment holding group Sekunjalo survived an onslaught resulting from the LeisureNet debacle. The group held about 18% in LeisureNet, which included the former Health & Racquet Club (now Virgin Active).
