Old Mutual authorizes new black empowerment shares
The Bula Tsela project will assist the insurer in meeting its B-BBEE ownership target of at least 30%. Qualifying Black South Africans, particularly lower-income earners and Old Mutual employees, will now be able to purchase the insurance giant's shares at relatively low costs through Bula Tsela, the insurance's newest black empowerment-focused ownership program ('pave the way' in Sesotho).
On Friday, August 12, Old Mutual shareholders approved the broad-based black economic empowerment (B-BBEE) ownership model.
It promises to be the country's first insurer to "enable an offer of shares directly to the Black South African population, particularly lower income earners."
The plan, which is set to be fully operational by the end of December, permits qualified applicants to purchase a minimum of 200 retail scheme shares for a total upfront subscription cost of R2 000.
Applicants who cannot afford the aforesaid upfront subscription will be given the option of applying for a maximum of 100 retail scheme shares for a total subscription price of R1000; this implies a R100 payment up front, with the remainder spread over 12 months. The insurer has set aside 10% of the retail portion of the scheme for these applicants.
According to Old Mutual, applicants cannot select the scheme to which they want to subscribe. Instead, the insurer will use its discretion to match applicants with programmes for which they are eligible.
The Old Mutual Bula Tsela Retail Scheme will launch on August 22 and close on October 24, 2022.
Increasing ownership goals
According to the entity, the new program will assist it in meeting its goal of having at least 30% black ownership.
“This deal underpins our firm belief that real transformation is necessary to sustain business growth and serve the best interests of all South Africans,” " says CEO Iain Williamson in a statement.
“Through this Old Mutual Bula Tsela Retail Scheme, we will give our people the opportunity to become (indirect) owners of the company they love and trust,” Williamson adds.
On Monday, Old Mutual's share price fell slightly more than 2% to R11.52 per share.
At this market price, 200 shares would cost about R2 304, implying that purchasing retail scheme shares through the Bula Tsela empowerment structure will provide participants with an R1.52 per share discount. Another motivation for establishing the program, according to the insurer, is to foster a culture of investing and savings among consumers, despite their dwindling spending power.
"The reality is that consumers are stretched," says Williamson, "but many are looking for ways to save or invest for the medium- to long-term."
"It's important for South Africans to understand that they can continuously invest little amounts to establish savings for themselves - you don't need hundreds of thousands of rands to begin your savings journey," he says.
The B-BBEE Commission's National Status and Trends on B-BBEE Transformation Report for 2021, released earlier this month, found that black ownership levels across all businesses fell to 29.5% in 2021, down from 31% in 2020.
According to the research, black women's ownership levels in the county were even more concerning at 12.4% (down 2.6% from 2020).
"As a valued partner in Africa, transformation is a critical component of our strategy and journey." "We want to continue to play a significant role in driving growth and transformation in general," Williamson says.
"We're now inviting our key stakeholders to join us as we work to 'open the way' and create a sustainable, long-term difference in their lives and livelihoods through this share scheme."
