It’s underpinned by properties as assets and not share price movements.
Black economic empowerment schemes that are underpinned by volatile share price movements, which is how JSE-listed companies usually structure their schemes, cannot guarantee consistent returns for investors.
Some JSE-listed companies in recent years have failed to deliver attractive returns to black investors because the success of their BEE schemes, which are financed by large debt, depended on a rise in share prices and volatile commodities. Unlike Barloworld’s previous BEE scheme, value creation in Khula Sizwe is not based on share price movements, but on properties.
Makofane, who is acting as an advisor on Barloworld’s Khula Sizwe deal, didn’t disclose the level of commitment so far, saying only that the response from the public “has been positive”. The properties that are sold to Khula Sizwe will be occupied by Barloworld for 10 years, with the rentals paid by the company escalating at 8% per annum on a triple net lease. A triple net lease means that all the upkeep costs of the properties will be carried by Barloworld, the tenant.
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