MANAGING OF EMPOWERMENT TRUSTS
Empowerment trusts aim to advance and promote the spirit of the South African Broad-Based Black Economic Empowerment (B-BBEE) Codes of Good Practice. More than a decade after the first empowerment trusts were established, many of these strategies to diversify ownership structures have been successful.
Tshikululu manages empowerment trusts as part of these B-BBEE Codes of Good Practice to ensure the growth of individuals and communities in South Africa.
Through the establishment of an empowerment trust, which generally owns a share of a company, historically disadvantaged employees and communities are able to benefit from obtaining a stake in the business. In the dividends received, the trust can directly look after employees as well as benefit communities through the establishment of social development projects. As empowerment trusts are complex corporate finance structures involving a range of stakeholders, they require a different set of management skills. Given an empowerment trust’s intrinsic link to companies, they also follow specific regulatory requirements
With each trust having its own goals and objectives based on its trust deed, as well as its own unique set of challenges, Tshikululu has amassed extensive expertise and a solid track record through its management of seven empowerment trusts to date.
Tshikululu has designed and implemented social development strategies for all the empowerment trusts under their management. Beyond this, and in order to overcome the complexities and to achieve the end goal of empowering individuals and communities, Tshikululu has also assisted these empowerment trusts in navigating trust regulation, compliance and governance parameters, including:
• Expertise considering the Companies Act and the King IV Code
• Tax issues
• Establishing a financial structure – including a restructure of the trust
• Managing the insolvency of empowerment trusts
Relationships form a critical part of the success of an empowerment trust. There can often be an expectation, particularly in the establishment of geographically based trusts, that the trust must do the ‘right’ thing. An enormous amount of work must be done to ensure buy-in and to manage this expectation from all stakeholders in the community. Moreover, trustees are often from very different walks of life and each may have differing views on how and where the Trust should invest. Tshikululu understands these views and assists the empowerment trust in navigating this difficult path in uniting the stakeholders together towards the common goal.
By virtue of the fact that empowerment trusts are intrinsically linked to companies, the reporting and regulatory requirements for an empowerment trust are rigorous. In an effort to comply with the B-BBEE policy, each company employs the services of a verification agency, each of which have a different manner of verifying the B-BBEE points. This is in addition to the annual socio-economic development reporting that is required by a company’s auditors.
Reporting for a verification agency involves gathering affidavits, proof of payment, written confirmation of payment, provision of identity documents (confirming the beneficiaries are previously disadvantaged South Africans), a report on the shareholding of the trust, its stakeholders, detailed management accounts of the trust, and if applicable, the debt of the trust.
Tshikululu, through its innate knowledge of the empowerment trust and its linked company, works independently with each verification agency to ensure that all the correct and verified documentation are supplied.