PPC, the country’s largest cement product manufacturer, has launched an employee share ownership trust to give its staff in South Africa a 10% shareholding, which will pay them a dividend almost immediately.
PPC Cement SA MD Njombo Lekula, said yesterday that they had worked for two years to formulate a sustainable empowerment scheme.
The scheme is unique in that it relies on PPC’s dividends for its sustainability - the groups previous empowerment schemes were largely reliant on the share price for their sustainability, and had to be unwound as they were under water.
PPC’s share price has been low in recent years in line with falling construction and infrastructure activity in South Africa, and because the group had to undergo significant capital restructuring, which has only recently been completed, to reduce debt.
“This scheme will reward employees for their success in the business,” Lekula said in an online interview. In the past financial year PPC declared a dividend totalling R200 million, and members of the new scheme would receive a dividend from this payout, he said.
The PPC Employee Share Ownership Trust has purchased 10% of the share capital of PPC South Africa Holdings, the holding company through which PPC manages the group and conducts its South African cement and materials businesses.
He said the scheme would enhance PPC’s B-BBEE status and was expected to improve the company’s rating to level 1 from level 2 by the end of the financial year. The 10% staff ownership together with other BEE qualifying shareholders such as the Public Investment Corporation which hold their shares on the JSE, which changes periodically, should take PPC’s black empowerment shareholding to around 20%, he said.
The purchase price of R380m for the shares for the Trust will be funded via a PPC loan of that amount, and an additional R975 000 to cover related tax. The loan will be repaid through future dividends declared by PPC SA Holdings to the trust, 25% of which would be distributed to qualifying beneficiaries of the trust and 75% to PPC towards repayment of the loan.
Lukela said the group recently undertook some share buybacks, but in future, the aim was to declare sustainable and regular dividends, as they had done in the past.
For the foreseeable future, qualifying employees will receive 2.5% of any dividends declared by PPC SA Holdings. Following the loan’s repayment, employees will receive 10% of the dividends declared by PPC SA Holdings.
The debt of the consolidated South African operations will not be affected by the transaction.
The scheme is open to all South African employees not participating in PPC’s long-term incentive programme, although participation would be weighted in favour of historically disadvantaged individuals.
Group CEO Roland van Wijne, said PPC had been built upon the shoulders of its employees and the transaction was a meaningful way of rewarding them.
“The terms are such that it stands to benefit employees for many years to come,” he said.
Lukela said the scheme was one of many empowerment initiatives at the group. The group does substantial small enterprise development work, particularly in relation to its products such as brick-making and in building materials businesses.
The group has trained more than 4500 brickmakers, invests in human development, such as in the training of bricklayers, plasterers and other artisans. There is also a graduate development and bursary program. A technical skills training centre is in operation in Mafikeng.
It also has a youth development programme that entails the payment of a stipend to youths who are rotated through the group’s departments, “which allows them to find their areas of interest, and some 6-7% of these are fully employed currently,” Van Wijne said.
He added that a recent social labour initiative involved the establishment of two centres in the Western Cape where after-school facilities are provided for the youth, and feeding schemes are operated.
“We pride ourselves in that we exist as a business to empower people, so that they experience a better quality of life and this transaction helps to make sure this vision extends to our staff as well,” said Lukel said of the staff share scheme.
He said the construction industry was sitting with unused capacity, the backlog and demand for infrastructure in South Africa continued to grow, and yet infrastructure development was not taking place sufficiently to meet this demand.
“There are substantial employment benefits to be gained in South Africa if we start meeting the demand for infrastructure, he said.
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