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Madoda Milazi

Madoda Milazi

Black empowerment shares had mixed fortunes this week as some investors made great gains while others are licking their wounds.

The global crisis has been cruel to investors who bought Barloworld and Sasol empowerment shares as they lost 38 and 26 percent respectively.

Barloworld's empowerment shares were offered at a discount of R83,31 a share in June and this week traded at R43 a share.

Sasol Inzalo shares were sold at R366 a share in August and this week hovered at R270.

But it was not all doom and gloom as MTN and Telkom's black shareholders have made 18 percent and 349 percent gains respectively.

Last year MTN offered empowerment shares at a 20 percent discount of R80 from a 30-day average price of R100. This week the share was trading at R94,14.

Telkom's Khulisa shares were offered at R22,40 a share in 2003, and the this week traded at R100,50 a share.

Makwe Masilela, analyst at Nehawu Securities, said investors only made a loss if they have sold their shares.

He said: "Buying shares is a long term investment. It might appear as if Sasol and Barloworld empowerment shareholders have lost in the short term, but if they haven't sold, they are still perfectly fine. The market will recover and the share value will go up."

Stephan van der Walt, head of corporate finance at Bravura Equity Services, said those who took the funded option would lose the most.

"A basic financial principle is that shares cannot be funded by debt as the ability to repay is dependent on a volatile share price," said Van der Walt.

He said, on average, share prices need to increase by about 400 percent over a 10-year funding term for BEE investors to get only 1 percent ownership of the initial shares allocated to them.

He said the funded option of the Sasol Inzalo scheme was a typical special purpose vehicle empowerment structure where BEE investors acquired shares through borrowed funds.

Van der Walt said at the end of the first year, funding charges for each Sasol Inzalo share would be R40 and the dividend per share, based on 2007 figures, would be about R9.

He said if the shares were sold in the next three years and the dividend stayed the same as last year, the funder would have incurred a net cost of R93 a share.

To make up the shortfall, the share price must grow by 23 percent yearly over the next three years for investors not to lose their initial investment.


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