Absa’s R11.2B B-BBEE Scheme Aims for 25%+ Black Ownership Boost

ABSA Bond Holders To get interest
  1. Absa has announced a significant broad-based black economic empowerment (B-BBEE) scheme worth R11.2 billion ($759 million) to increase its black ownership by approximately 7 percentage points, aiming to surpass the 25% threshold outlined in the Financial Sector Charter.
  2. The empowerment scheme includes a 4% indirect shareholding through a Corporate Social Investment (CSI) trust for the benefit of black communities, and a 3% indirect shareholding through a staff trust.
  3. The CSI trust will focus on education and youth employability, while the staff trust will provide additional benefits for black staff members. Absa’s commitment to diversity and inclusion is also evident in the promotion of four black executives to the executive committee in 2022.

South African bank Absa has recently unveiled a substantial broad-based black economic empowerment (B-BBEE) scheme worth R11.2 billion ($759 million), with the goal of increasing its black ownership by approximately 7 percentage points. The bank’s latest empowerment report indicated that black share ownership was at 17.56% in 2021, and after the transaction, Absa expects its black ownership to surpass the 25% threshold outlined in the Financial Sector Charter.

This move is part of Absa’s commitment to fostering a diverse and inclusive organization throughout South Africa and its wider business operations. The bank aims to finalize the deal before the end of the year, with shareholders scheduled to vote on the matter on June 2.

As part of the empowerment scheme, a Corporate Social Investment (CSI) trust, established to benefit black communities, will indirectly own 4% of Absa’s shareholding. Additionally, a staff trust will indirectly hold 3% of the bank. Black staff members in South Africa will receive just over 82% of the staff trust’s value, while approximately 1% of Absa will be made available to staff employed by subsidiaries in other markets.

The CSI trust will primarily concentrate on education and youth employability, with beneficiaries being reviewed annually. The trust will receive an annual dividend equal to 25% of the dividend per share paid by Absa, and staff will receive the same amount. While all employees are eligible, black staff members will benefit from an additional 20% allocation, and the shares will vest after five years.

In a statement, Absa CEO Arrie Rautenbach emphasized the bank’s commitment to being an active force for good, stating, “The transaction was specifically designed to align with our intent of being an active force for good, firmly demonstrating our commitment to broad-based black economic empowerment as we build a diverse and inclusive organization not only in South Africa but also more broadly across our business.”

Aside from the ownership targets outlined in the Financial Sector Charter, Absa has also made prior commitments to its second-largest shareholder, the Public Investment Corporation (PIC), to enhance the level of transformation within the bank.

Furthermore, Absa underwent a significant executive committee shake-up in 2022, promoting four black executives to the committee, which brought black representation at the leadership level closer to 50%. This move showcases the bank’s dedication to diversity and inclusion in the financial sector and positions Absa as a progressive leader in the industry.

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