Big and black
With adjustments in shareholding, Sanlam Investments is catching
the wave for pension funds’ procurement choices.
In a stroke, a deal with African Rainbow Capital has shot Sanlam’s third-party asset manager to the top of B-B BEE rankings for assets under management. By virtue of its brand and base, Sanlam Investments (SI) moves to a pole position for the attraction of business from pension funds in terms of the Financial Sector Code.
At present, compliance with the code is voluntary but progress will be annually measured by the Financial Sector Transformation Council. A critical metric is that large retirement funds – which implicitly include umbrellas – compile and publish annual scorecards for preferential procurement. So an easy win is to appoint a black-owned asset manager.
The council warns that, if sufficient disclosure by pension funds does not materialise, “consideration will be given to revising this (voluntary) dispensation”. In measuring transformation progress, it says, there may be reliance on surveys in the public domain. The only such survey is BEE.conomics (TT Nov ’18-Jan ’19).
In terms of the survey’s black-owned definitions, ranking firms by size of assets under management the first is Taquanta (R146bn) followed by Aluwani (R57bn) and Mazi (R48bn). SI will eclipse them all, perhaps soon to have assets under management that will equate double the R410bn size of the top 10 put together. Don’t be surprised if at least one additional black-owned firm is soon merged for shares into the restructured SI.
|Van Zyl . . . strategic advance|
“We’re contemplating one or two similar transactions,” says ARC joint chief executive Johan van Zyl. “The idea is to have a firm with R800bn of assets under management, which will be at least 60% black-owned, by the second half of this year.”
ARC is black-owned and controlled via the Patrice Motsepe-led Ubuntu-Botho Investments, Sanlam’s long-standing empowerment partner with cross-shareholdings between ARC and Sanlam. In a R2bn transaction — ARC buys shares in Sanlam, and Sanlam buys shares in ARC Financial Services — ARC gains effective economic control of Sanlam Investment Holdings.
“This will position SIH as a leading player in a market segment where B-B BEE credentials will support the strategy to enhance our share of it,” Sanlam group chief executive Ian Kirk has explained.
The extent of SIH black ownership, inclusive of the 25% now bought by ARC, will be 30% directly and 52% indirectly. For participation in the BEE.conomics survey, fund managers must be at least 50% owned by blacks (as defined in the codes of good practice) with accompanying voting rights. They must also have a minimum of 50% black directors and 50% black individuals in senior management positions.
SA’s larger asset managers would battle to reach the levels required for participation. However, the effect on them of the SIH transaction is probably minimal. SIH’s targeted market would be pension funds. Theirs are heavily targeted on retail investors where margins are larger and transformation is advanced.
Are SA black-owned asset managers frightened by the developing SIH colossus? “Not at all,” says one. “It’s part and parcel of the sector’s transformation that we welcome.”
Amongst the major insurance groups, first off the mark to a Level 1 rating for broad-based black economic empowerment under the revised Financial Sector Code is MMI. Having spawned black-owned asset manager Aluwani Capital Partners, its brands include Momentum and Metropolitan.
The Level 1 rating applies to all companies within the group. Its transformation focus is on youth employment, by increasing its support for youth-development initiatives, and building strategic partnerships with organisations similarly focused.
Another area is support for small and black-owned businesses, inclusive of empowerment financing and assisting the businesses’ access to markets by directing procurement spends. An improvement in MMI’s equity ownership also contributed to the Level 1 elevation, says MMI group head of transformation Busisiwe Sithole.
|Sithole . . . committed approach|
Closely on the heels of MMI to be a Level 1 contributor is Sanlam. Transactions concluded or pending, ARC being one, will increase Sanlam’s direct black ownership to more than 18% and combined B-B BEE ownership (direct and indirect) to 35%. In some operating units, Sanlam expects B-B BEE ownership in excess of 51%.
The issue of new shares, in aggregate constituting 5% of Sanlam’s enlarged issued ordinary shares (excluding Treasury shares), is to new broad-based groups of empowerment shareholders and Ubuntu-Botho. The new groups, focused on black women and youth as well as Sanlam employees in SA, will participate in 80% of the share issue. Ubuntu-Botho will participate in the 20% balance.
“Institutional clients want to see companies like Sanlam facilitate inclusive wealth creation,” says group chief executive Ian Kirk. “While direct B-B BEE ownership at listed-company level is key, increasingly clients want to see B-B BEE in the operating companies with which they do business.”