CAPE TOWN – Fishing company Oceana (JSE:OCE) has achieved a level 2 B-BBEE certification, making it the 12th listed company to achieve this ranking – that is according to the latest ranking published by Empowerdex. When the 2012 rankings are released Oceana hopes to join the likes of HCI, Sekunjalo and Standard Bank in the list of the country’s top five most empowered companies.
Yet this achievement is not good enough for the Department of Agriculture, Forestry and Fisheries (Daff) which continues to block proposed acquisitions by the fishing company on the grounds that it is not sufficiently transformed. Determined that the transformation achieved in the fishing industry since 2007 should not be undone Daff will only permit acquisitions of fishing companies by a party that is as, or more transformed.
That is a noble intention which many would not disagree with. However, problems arise with the interpretation of what is considered “transformed”. According to the broad based codes as defined in the B-BEE Act, Oceana is one of the most transformed companies in SA. Its black-owned level 2 status, equates to a 125% recognition level on the government’s B-BBEE scorecard. In most of the assessment categories the company achieves full marks as well as bonus points.
However Daff does not use these codes in assessing transformation. Its interpretation of transformation is far narrower, relying only on ownership and management.
To advance further up the empowerment ladder required a commitment of time and resources on the part of the Oceana management and staff. Oceana doubled its spend on the skills development of black employees from R6m in 2010 to more than R13m last year, while spend on suppliers with a turnover below R35m increased from R175m in 2010 to R423m in 2011.
Investment company Brimstone’s shareholding of Oceana increased from 9,73% to 16,7%, which boosted the black ownership figure to 55.85%. In addition Oceana’s black employee share scheme, the Khula Trust, was recognised as bringing new entrants into the corporate shareholding structure – as opposed to serial BEE entrepreneurs. The trust gives 2,439 employee beneficiaries a participatory right to 14,2m shares in Oceana. At the end of last year the net equity in the trust was worth R486m.
In addition, the corporate social investment policy was revised to focus on education and food security in the coastal fishing communities within which the group operates such as Lamberts Bay, St Helena Bay and Hout Bay.
“We closed a plant in Lamberts Bay, but instead of retrenching workers we looked to create other economic opportunities for them,” says CEO Francois Kuttel. “The French fry facility we established is not our core business, makes no profit, yet we now employ more people in that plant than we did in the fish processing facility. But Daff gives us no credit for any of this.”
Last year Oceana challenged Daff’s interpretation of transformation in court. The company suffered a setback when the judge ruled in the department’s favour. Oceana is appealing the decision. The appeal will be heard in the Supreme Court in March.
Kuttel is determined to grow Oceana. However, unless Daff recognises Oceana as transformed it will find this task impossible to achieve in SA. Growth can only come through acquisition. “There is this perception that we are too big and too untransformed and that rather than supporting our efforts to grow, our fishing rights should be taken away and given to smaller operators,” says Kuttel.
With a market cap of R5.5bn there is no denying that Oceana is a big company. But big is not necessarily bad. It is a highly efficient converter of marine resources into commercial product. Over a 20, 15, ten, five and three year period the company has consistently delivered an internal rate of return of 22% to 25%. That is the best in the industry.
This efficiency allows the company to provide high quality, decent jobs and invest in initiatives that deliver benefits to many.
The result of the appeal will have implications that go well beyond the fishing industry.