Employee Ownership Making Strides in South Africa

At the Inaugural Employee Share Ownership Conference in South Africa on April 23, leaders from government, unions, and business convened to review the progress made in spreading broad-based employee ownership in South Africa and what might be done to move it forward.

For many years, employee ownership has been encouraged by the government through regulations under the Broad-Based Black Economic Empowerment Act of 2003, which creates a point system for companies that receive government procurement (a high percentage of large companies in South Africa). One way to earn points is through broad-based ownership. In 2019, the Competition Act provided that merger and acquisition regulations could require companies to include broad-based plans as well. Most plans are either employee stock purchase plans where employees can buy at a discount, or trust-based plans where share purchases are paid by dividends from the company. The government has also made loans for some of the plans to buy shares. Most plans provide employees with 5% to 10% of the shares. There are no tax incentives for the plans. Many plans are in large multinational companies.

South African President Cyril Ramaphosa gave the opening address and strongly endorsed employee ownership, saying:

By participating as owners, workers also develop a deeper understanding of the challenges and opportunities facing their companies, enabling more fruitful partnerships to unlock opportunities for growth, investment and job creation.

This is a paradigm shift, which aims to empower workers not only as wage earners but also as stakeholders with ownership in capital.

Beyond the principle of social justice, worker ownership initiatives make sound business and economic sense.

They are key to building a more resilient economy whose benefits flow equitably through society.

Trade, Industry and Competition Minister Ebrahim Patel said that there are 125 employee ownership plans in the country, most of them in very large companies, but 38 in companies with fewer than 250 workers. These plans cover 551,000 workers, or about 5% of the private sector workforce. Based on numbers Patel provided, in the larger plans, employees would have account balances around $20,000 to $30,000.

Speakers at the meeting largely agreed that to move forward, the government needs to provide incentives to companies to share ownership, including better financing and tax incentives.