AEEI said its NAV will be significantly reduced because of these proposed transactions. Picture: Armand Hough/ African News Agency (ANA)
Feroza Petersen
THE recent announcement by Sekunjalo subsidiary, African Equity Empowerment Investments (AEEI), to re-purchase eligible shareholders’ shares and de-list from the Johannesburg Stock Exchange (JSE) signals a dire warning to the JSE about the consequences of its actions that could, if not heeded, see the bourse hoist by its own petard.
On Monday, October 9, AEEI stated that its decision was prompted by the recent unbundling of the Group's investment in Ayo Technology Solutions Limited (AYO) and the proposed sale of a 30% stake in British Telecom South Africa (BTSA) by Kilomix, an AEEI wholly owned subsidiary, for R290 million. It also cited strained relationships with the JSE as another reason for its decision.
In a statement, AEEI said: “AEEI’s Net Asset Value (NAV) will be significantly reduced because of these proposed transactions. Further, with the current operating environment and illiquidity of the shares, along with the strained relationship between the JSE and Sekunjalo companies listed on the JSE, the board has determined that the remaining portfolio no longer warrants the costs and administrative burden associated to a listing relative to any benefits a publicly traded entity on the JSE, can bring.”
As one of the first black-owned and managed companies to list on the JSE post 1994, where it demonstrated what could be achieved in the new South Africa, AEEI’s decision is a setback to democracy and economic freedom.
AEEI, then Sekunjalo Investments, was established in 1998, and was co-founded by Dr Iqbal Survé and three of his long-term comrades. At the heart of Sekunjalo was the principle of putting people before profits and developing talent as a means of raising the lives of previously disadvantaged South Africans.
A year later, in 1999, the company listed on the JSE, making 36-year-old Survé the youngest CEO of a listed diversified conglomerate. From its inception, Sekunjalo only purchased controlling stakes in companies, hoping to empower black workers.
To better reflect the underlying businesses and investments of the Group going forward and to differentiate from the private holding company, Sekunjalo Investments changed its name to African Equity Empowerment Investments (AEEI) in 2015.
From an initial value of R250 000, today AEEI’s market value is R545.13 million. AEEI’s Market Capitalisation peaked in **November 2017 at a massive R2.65 billion. It has a diverse investment portfolio including fishing and brands, technology, events and tourism, health, and beauty and biotherapeutics and several strategic local and international investments. Support for B-BBEE and SMMEs is integral to its investment philosophy.
The recent decision to de-list from the JSE, therefore marks a dark day for Broad-Based Black Economic Empowerment (B-BBEE) companies in South Africa. This move raises questions about the hurdles that these entities face in either listing or remaining on the JSE, still the domain of predominantly white-owned and managed entities.
While the company has faced several hurdles and regulatory challenges in its tenure on the JSE, AEEI's dedication to empowerment and excellence cannot be questioned, earning them much recognition over the years.
AEEI has always been a symbol of transformation and empowerment, with a strong commitment to addressing racial inequality and driving economic inclusion in South Africa. Over the years, the company has received several awards and accolades for its dedication to empowerment, including recognition as a B-BBEE leader in the country.
The company secured the first position in the Empowerdex Top 100 Empowered Companies Award of 2016 and led in the Empowerdex Top 100 Empowered Management Award of the same year. AEEI's exceptional financial performance earned it a spot among the top 10 listed companies in the Financial Mail's Top 100 JSE Companies in 2015 and 2016.
The company's commitment to transparency and governance was also recognised when it was rated first by Integrated Reporting & Assurance Services South Africa (IRAS) in its sector for the Highest Sustainability Data Transparency Index (SDTI). IRAS is a highly impactful niche/boutique advisory and assurance services provider. AEEI's overall performance was impressive, securing the third place among 311 JSE-listed companies by IRAS.
The number of companies listed on the bourse has dropped by more than half over the past 30 years, to less than 300, with over 20 companies delisting from the exchange in 2022 alone. This was revealed in African Rainbow Capital Investments’ (ARC) latest annual report, released on 6 October. ARC also stated that it will consider whether there is value in remaining listed on the JSE.
While AEEI's decision to de-list is undoubtedly a setback for the B-BBEE sector, South Africa's broader transformation goals, and the overall economy, it also highlights the need for a deeper dialogue between regulators, the JSE, and B-BBEE entities. Whilst the JSE has done much over the past few years to reform its listing rules, it is not enough to stem the ever-increasing tide of companies abandoning ship.
Has the JSE missed a trick in not making the right kind of reforms to encourage the stimulation and growth of post-apartheid black-owned and managed companies that could not only bolster the capital markets, but shore up an ailing local economy?
Instead, nearly 30-years into our democracy and liberation from apartheid, the JSE seems to be on a self-determined collision course to its demise.
Finding a balanced approach that ensures regulatory reliability, while addressing the unique challenges faced by B-BBEE companies, is essential for fostering inclusive economic growth in South Africa and it’s time that the JSE wakes up.
*Feroza Petersen is a freelance writer
** Extracted from AEEI’s 2017 Integrated Report