Black Economic Empowerment Partnership

Introduction

Associated Corrosion Engineering (Contracting) (PTY) Ltd (ACE Contracting) has been in existence for over 10 years and has grown into the largest purveyor of Cathodic Protection (CP) and AC Mitigation services in Sub-Saharan Africa, commanding more than 60% of the available market share.

In keeping with the country’s development objectives, ACE (Contracting) has entered into an equity partnership with Bantu Operations, a 100% black-owned firm. The members of Bantu Operations have several years experience in various engineering disciplines and bring to the merger new business opportunities and active management in ACE’s daily business. The partnership exploits synergies between the two organizations to better service the existing Cathodic Protection market as well as to explore new markets.

BEE Rating

Since ACE’s BEE transaction, SEESA Ratings (Small Enterprise Employers of South Africa), an economic empowerment-rating agency, gave the merger a score of 54%, thereby classifying the entity as a satisfactory contributor to Black Economic Empowerment.

The score relates to direct empowerment, human resources development and indirect empowerment components as defined in the scorecard, in the Codes of Good Practice on Broad-Based Black Economic Empowerment form the Department of Trade and Industry.

Summary of the Partnership Agreement

The highlights of the partnership agreement are the following:

• Ace Contracting (PTY) Ltd will have direct black ownership of 26.0% with immediate voting and economic rights.
• Provision has been allowed for Bantu Operations to increase its stake in the company in the near future.
• Two members from Bantu Operations have been appointed to the board of ACE Contracting. All board members have an equal vote.

BEE Plan

The highlights of the BEE plan are the following:

• To increase the number of black people, including black women and other vulnerable groups such as those with disabilities, workers and the youth, who directly own and control private enterprises;
• To eliminate and discourage the practice of token ownership on the part of blacks and whites alike, otherwise commonly referred to as fronting;
• To set acceptable targets for levels of shareholding by black people in private companies;
• To explore the notion of collective ownership through co-operatives and other similar structures; and
• To encourage black ownership and BEE compliance of the business’ suppliers.

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