NCEO Works with South Africa on Employee Ownership

Corey Rosen, NCEO's senior staff member, traveled to South Africa in February to meet with government officials and speak at workshops on how the South African government can expand employee ownership. There are currently an estimated 500 employee ownership plans in South Africa. There are no tax incentives for these plans, but under the country's Black Economic Empowerment Program (BEE), companies get points for the degree to which they share ownership with blacks. There are a variety of ways to do that, but an employee ownership plan is one of the most favored, with more points awarded for plans with broad coverage and more ownership. Most of the plans are in large companies and typically own 3% to 7% of the stock through a trust that allocates shares equally or by salary, paying out periodically. The most successful of these, at Kumba Iron Ore, recently paid employees approximately $75,000 each after six years of plan operation, but most payouts are much smaller.

Under the leadership of the Industrial Development Corporation (IDC) in South Africa, the government is looking at ways to provide more incentives for these plans and clearer legal structures. These could include expanding BEE incentives, tax incentives, and/or the preferred sale of government holdings in companies (often through the IDC, which acts as an investor in job-creating companies) to a plan. Rosen also met with officials at the ministries of economic development and treasury, as well as a private group, Inclusive, which is working on creating an NCEO-like organization in South Africa as well as acting as a private equity firm for employee owned companies.

A large conference is now slated for July, and I, as NCEO executive director, am scheduled to attend.