Coronation signs up for 51% BEE ownership on the back of ‘public and private pressure’

In a statement issued on the JSE Stock Exchange News Service, Coronation explained that the deal would “future-proof its current client base and revenue stream, whilst providing potential upside through access to opportunities which would otherwise not be available in the absence of a 51% level of black ownership.”

Mark Davids, founder and managing director of Motswedi Economic Transformation Specialists, says only 8% of the long-term savings industry is allocated to black asset managers. “This woefully low number (of an industry managing R7-trillion) is an indictment on the financial services industry which is trusted with the facilitation of information to asset owners,” he says.

However, Coronation’s bold move to increase BEE ownership by another 20% points to a shifting landscape.

Chief executive officer Anton Pillay told Daily Maverick there were three main reasons for the deal, which include having missed out on potential funds that could have been invested, and a concern that current assets under management would be moved.

“There has been increasing pressure from both government and the private sector with a drive towards asset managers that have a BEE shareholding of more than 51%. Some companies have made this public – we have already lost assets to competitors and there was some concern about the potential loss of a portion of our current assets under management,” he said.

A year ago, the Government Employees Pension Fund (GEPF), arguably the largest pension fund scheme in the country, announced a transformation policy, which would be “committed to actively investing in return-seeking, sound investments that support the transformation of the financial services sector. These investments should encourage the growth of black-owned asset managers,” the fund said.

The company is also precluded from participating in industry surveys geared towards asset managers with majority black ownership, which translates to missing out on certain client mandates from the outset.

Coronation currently has around R632-billion assets under management. Over the past 10 years, this figure was at its lowest in 2020, sitting at R569-billion. To put that in context, close competitor Allan Gray had R372.3-billion in assets under management at the end of 2023.

Coronation shareholders holding 26.95% of the issued share capital have already provided letters of support to vote in favour of the proposed transaction, although the deal has yet to be signed off by all shareholders.

Nuts and bolts of the deal

The proposed deal will see the creation of two BEE trusts – an Employee Share Ownership Plan (ESOP) Trust, which will benefit around 193 permanent black employees, and the Ho Jala Trust, a broad-based ownership scheme which will “conduct public benefit activities for the benefit of black people.” Qualifying employees who have participated in previous BEE transactions will not be included in the ESOP Trust.

The total cost of the deal over a 10-year period is estimated at R270-million to R330-million. However, Pillay noted that this was not a cash flow cost but rather an accounting cost in terms of an IFRS 2 charge. “While the estimated figures do include some transaction costs, these are minimal,” he said.

Coronation currently has R263-billion or 42% of total assets under management managed by black employees. The asset manager’s South African-based employees are 64% black of which 57% are black women. DM