Employee Ownership Gains Ground in South Africa

The announcement by the South African energy giant Sasol that it is giving its 27,000 employees an estimated 4 billion Rand worth of stock (about $561 million) is the latest sign that broad-based ownership plans are gaining traction there. Several of the country's largest companies, including most of the major mining companies, have also set up plans. Typically, as at Sasol, these plans own between 3% and 7% of the company, and the amounts employees will receive are often substantial compared to their salaries. At Sasol, for instance, the average stock award per employee is about $20,500. The shares are held in trust and subject to vesting, so they could be worth much more over time.

The plans are being driven by a few factors. First, the Black Economic Empowerment law gives companies points for creating ownership among the country's black population. The rules are flexible, giving companies points even for sharing large amounts of equity with already well-off black investors, for instance. Broad-based plans earn points as well, however. Companies with enough points get preference in government contracting. In addition, a tight labor market for skilled employees and a perception among some companies that sharing ownership and getting employees more involved in job-level decisions can be good for business are contributing to growth.

South Africa's tax laws, however, provide no incentives to share ownership, either at the corporate or employee level. Experts agree that some kind of even modestly favorable framework is necessary for long-term growth of the idea.