The opportunities provided by these BBBEE schemes are phenomenal, they allow previously disadvantaged individuals to participate in the success of the companies they work for and/or support.
The MTN Zakhele scheme came about in 2010, the qualifying black population was invited to buy into the scheme at R20, MTN shares were trading at around R122 at the time. The scheme will be closing shop in November 2016 as the proposed 6 years period lapses, it will be replaced by a very similar scheme named MTN Zakhele Futhi.
The MTN Zakhele scheme has produced surmount value for its shareholders, the anticipated closing price is estimated at around R75 (greatly dependent on the MTN share price at the time of closing). If things work out that way, original participants will have amassed an almost 4 fold increase in their holdings in 6 years, phenomenal!
The new scheme will be financed in a similar way to the MTN Zakhele scheme; equity from initial subscribers as well as debt facilities from MTN and other 3rd parties. Qualifying people and groups will soon be invited to subscribe to the shares of this scheme.
Existing Zakhele shareholders will be able to roll forward their shares into Zakhele Futhi shares, or elect a cash consideration or take up ordinary MTN shares. A combination of these is also permitted but subject to the number of MTNZ shares held.
Due to the nature of this scheme, it is evident that the ultimate success of the program will depend largely on 2 factors; the performance of the MTN share price as well as dividends paid by MTN. Given that the only assets Zakhele Futhi will have are the MTN shares, their only means of servicing the debt facilities is through dividends received from MTN as well as shares disposed of, with the former being the best alternative for MTNZF shareholders.
The longer period for MTNZF will also allow for a better reduction of the debt if we extrapolate the past dividends paid by MTN into the future.
Initial participants will not be allowed to trade in these shares for a period of 3 years, thereafter trade will be restricted between black participants until the 8 years period is reached.
Investors are encouraged to read the prospectus diligently as the scheme is subject to many rules and restrictions, this will further guide them in setting future expectations for their hard earned capital. It is anticipated that the prospectus will be made available in September 2016.