Absa To Implement Landmark B-BBEE Transaction - Absa Group

31 March 2023

Absa Group has finalised the details of a new broad-based black economic empowerment (B-BBEE) transaction, to be implemented later this year, subject to shareholder approval. The transaction will strengthen Absa’s B-BBEE credentials in South Africa, while also providing communities as well as all staff with an opportunity to benefit from the value generated by the Group.

The transaction will increase black ownership through a transaction that will see 7% of the total Group shareholding allocated to structures that will benefit ordinary black South Africans through a Corporate Social Investment (CSI) trust, and employees through a staff trust. Seven percent of Absa Group equates to approximately R11.2 billion based on recent prices, making the transaction one of the largest B-BBEE transactions in recent times. After the transaction, black ownership of Absa Group is expected to exceed the 25% threshold set out in the Financial Sector Charter.

“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 organisation not only in South Africa, but also more broadly across our business,” said Arrie Rautenbach, Absa Group CEO. “The transaction is the next big step in our broader transformation journey and, at the same time, recognises the role that our staff and communities play by giving them the opportunity to benefit from the value generated by the Group.”

A CSI trust, benefiting black communities, will indirectly own a 4% shareholding, while a staff trust will indirectly hold 3% of Absa Group, collectively constituting the 7% Absa Group shareholding in the transaction. Black staff members in South Africa will receive just over 82% of the value of the staff trust.”

A further equivalent of approximately 1% of Absa Group shareholding will be made available to staff employed by subsidiaries in other markets.

“Although primarily designed to achieve our black economic empowerment and transformation objectives, it was also important for us to ensure that a portion of the benefit will be used to empower communities through education and youth employability initiatives,” said Rautenbach. “A key principle underpinning the transaction was Absa’s support for a just society that creates opportunities for all people to prosper.”

“The transaction signals another substantial milestone in our ongoing efforts to play our role in society and it enables us to scale our efforts to empower communities,” said Rautenbach. “We believe that staff will also be incentivised in a way that promotes engagement and our espoused culture objectives.”

“The transaction is a proof-point of Absa’s commitment to becoming a purpose-led organisation, empowering Africa’s tomorrow, together… one story at a time,” said Rautenbach.

A transaction circular will be published in May and shareholders will vote on the transaction at a general meeting on 2 June 2023.

Notes to the editor:

The 4% perpetual CSI trust will be focused on education and youth employability support for black South African beneficiaries. The trust will receive an annual dividend equal to 25% of the dividend per share paid by Absa Group. The CSI trust will spend the money it receives on CSI programmes in South Africa. The beneficiaries will be reviewed annually, with the aim being to achieve alignment with Absa’s shared value objectives.

Staff employed in South Africa will participate in the 3% component of the transaction, subject to shareholder approval. All eligible employees will receive the same share allocation, irrespective of race, background or seniority. Black (as contemplated in South Africa’s B-BBEE codes) staff will receive an additional 20% allocation, in keeping with South Africa’s national priority of creating an inclusive economic landscape and government’s black economic empowerment objectives. Black staff members will receive just over 82% of the value of the staff trust. All staff in the 3% component will receive an annual dividend equal to 25% of the dividend per share paid by Absa Group. The shares will vest after a five-year period, meaning eligible employees will take ownership of the shares, net of applicable taxes and any outstanding funding costs.
Staff employed by Absa subsidiaries in other countries will be able to participate in a similar award programme, provided those subsidiaries elect to participate based on local considerations. This initiative will be based on cash rather than Absa Group shares, given regulatory and taxation complexities related to cross-border shareholding. However, the intention is that the programme will broadly mirror the terms of the 3% share scheme in South Africa, with all eligible employees receiving an allocation equal in value to that awarded to staff in South Africa, as well as an annual payment equivalent to a 25% trickle dividend, and a net cash payment five years after implementation. The value of the programme will equate to approximately 1% of Absa Group’s market capitalisation.

31 March 2023

A further equivalent of approximately 1% of Absa Group shareholding will be made available to staff employed by subsidiaries in other markets.

“The transaction is a proof-point of Absa’s commitment to becoming a purpose-led organisation, empowering Africa’s tomorrow, together… one story at a time,” said Rautenbach.

A transaction circular will be published in May and shareholders will vote on the transaction at a general meeting on 2 June 2023.

Notes to the editor:

The 4% perpetual CSI trust will be focused on education and youth employability support for black South African beneficiaries. The trust will receive an annual dividend equal to 25% of the dividend per share paid by Absa Group. The CSI trust will spend the money it receives on CSI programmes in South Africa. The beneficiaries will be reviewed annually, with the aim being to achieve alignment with Absa’s shared value objectives.

Staff employed in South Africa will participate in the 3% component of the transaction, subject to shareholder approval. All eligible employees will receive the same share allocation, irrespective of race, background or seniority. Black (as contemplated in South Africa’s B-BBEE codes) staff will receive an additional 20% allocation, in keeping with South Africa’s national priority of creating an inclusive economic landscape and government’s black economic empowerment objectives. Black staff members will receive just over 82% of the value of the staff trust. All staff in the 3% component will receive an annual dividend equal to 25% of the dividend per share paid by Absa Group. The shares will vest after a five-year period, meaning eligible employees will take ownership of the shares, net of applicable taxes and any outstanding funding costs.
Staff employed by Absa subsidiaries in other countries will be able to participate in a similar award programme, provided those subsidiaries elect to participate based on local considerations. This initiative will be based on cash rather than Absa Group shares, given regulatory and taxation complexities related to cross-border shareholding. However, the intention is that the programme will broadly mirror the terms of the 3% share scheme in South Africa, with all eligible employees receiving an allocation equal in value to that awarded to staff in South Africa, as well as an annual payment equivalent to a 25% trickle dividend, and a net cash payment five years after implementation. The value of the programme will equate to approximately 1% of Absa Group’s market capitalisation.