According to the Financial Sector Charter (FSC), BEE empowerment financing is geared toward mobilising proper resources and promoting the productive and sustainable participation of black companies and black people. For Sanlam this means assessing investment opportunities that yield long-term returns in excess of those of the listed markets, where there are black investors or shareholders in the target business.
Sanlam's performance for Empowerment financing against the FSC
|Empowerment financing points scored against the Charter allocation||22||19||13|
|BEE transactions||R3 024m||R3 488m||R1 056m|
|Targeted investments||R3 840m||R2 459m||R1 944m|
We earned 5 points out of a possible 5 for BEE transaction financing in 2006 and 2007. As the FSC council exempted all non-originating institutions from targeted investments in 2006, the points scored under targeted investment were not disclosed in the 2006 report. For targeted investment, we scored 14 points out of 17 in 2007, compared to the 8 points we would have scored in 2006 had the FSC council not exempted this aspect.
Sanlam is a major financer of public infrastructure projects, most often through intermediaries, government and parastatals. As you can see from the quantum of debt and equity funding highlighted under targeted investments above, we’ve made significant contributions to addressing the urgent need for infrastructure in South Africa, in particular in the former and previously disadvantaged areas identified in the FSC. However, due to a lack of deal flow available to non-originating institutions such as Sanlam in the market currently, it’s unlikely that we’ll achieve our 2008 FSC targets for Targeted Investments.
BEE transactions attempt to ‘redress the imbalances of the past by seeking to substantially and equitably transfer and confer the ownership of the country's financial and economic resources to the majority of its citizens’ (BEE Commission Report 2001). The focus is on sustainability and long-term wealth creation rather than short-term ‘quick fixes’.
Sanlam Private Equity (SPE) represents the primary area through which our FSC-compliant Investment programme is implemented. This programme is driven by a formal investment mandate.
SPE also contributes on an ongoing basis to the development and monitoring of transformation of its Investee companies. It achieves this through active participation on the various boards and subcommittees of these companies. The following are more specific examples of SPE's facilitation of BEE and transformation during 2007:
- SPE was the sole financier of and advised on the creation of the largest black-owned welding supplies business in South Africa.
- SPE facilitated the participation of BEE shareholders in the Consol Limited LBO through a sell-down of our equity to BEE parties.
- Funding of Destiny Corporation (Pty) Limited, a black-owned and controlled investment holding company, through acquisition of a 19,9% equity interest by SPE.
- Majority financier of the Shanduka Group's participation in SEACOM, the project currently under way to construct the first submarine fibre-optic telecoms cable on the African East Coast (total transaction value of USD25,5 million);
- SPE invested R40 million in Sphere Fund I, a black-owned and managed private equity fund.
- Increased our shareholding in a number of BEE companies such as Thebe Investment Corporation and Sphere.
- Funded and participated in the acquisition of the third-largest outdoor media company in South Africa, Outdoor Network Group, by a consortium led by Zungu Investment Company Limited (ZICO).
- Selling of a portion of Sanlam's shares in a number of companies to increase the BEE shareholding.
- SPE also contracted the African Centre for Investment Analysis at the University of Stellenbosch Business School (ACIA) to compile social impact reports for two of its major clients. These reports provide in-depth analyses of the company's transformation progress and targets in all relevant areas.
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