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Balwin Properties announces BEE deal

Involving businessman Aobakwe Kukama and aimed at boosting its empowerment credentials.
Steve Brookes, founder and CEO of JSE-listed Balwin Properties, right, with Aobakwe Reginald Kukama at the signing of the empowerment deal in Bedfordview on Wednesday. Image: Supplied

South Africa’s largest sectional-title residential developer JSE-listed Balwin Properties announced a milestone Black Economic Empowerment (BEE) transaction on Wednesday which it says could see black shareholders taking up to 10% of the company’s issued share capital.

The deal, which will boost the group’s empowerment credentials, involves businessman Aobakwe Reginald Koketso Kukama, who will own 51% of a new BEE special purpose vehicle (SPV) that will be able to own up to a tenth of Balwin.

Read the full Sens announcement here.

The balance of the 10% stake is expected to be taken up by a broader base of black shareholders, representing women and the youth.

Read: Cost of shelving Sandton high-rise ‘insignificant’ says Balwin

Kukama is the founder of Yaetsho Investments & Projects, a project management and property asset management group that is also involved in renewable energy. He is behind the Vaal River City Development in Gauteng and has worked with the Mia family – the landowners of the Waterfall mega development precinct – among other business interests.

Balwin says the transaction will entail the setting up of the BEE SPV, which will be able to subscribe for 10% of the group’s issued share capital at a 20% discounted subscription price.

The discount will be applied to the 30-day volume weighted average price of the Balwin’s shares on the JSE.

A representative of the SPV will also be included on Balwin’s board.

Steve Brookes, Balwin’s founder and CEO, hailed the move as a significant milestone for the group.

“Transformation has always been very close to our hearts. This is a process we’ve been driving since listing, and as a board and management team, we are excited to have found the right partner with the skill, drive, technical expertise and experience to complement the growth of the Balwin brand,” he said.

In terms of the transaction, the SPV owned by black shareholders will subscribe for 47 219 260 newly issued Balwin shares.

According to Balwin, the SPV will be controlled by Kukama (with 51% of the shares in the BEE SPV), however, a black female will hold 24% and black youth will hold the remaining 25%.

“The BEE SPV owners will invest R20 million of their own capital in the transaction, with the balance to be repaid from the proceeds of distributions over the next nine years,” Balwin noted in a media statement.

“There is also a lock-in clause of ten years during which the [BEE SPV] shareholding may not be disposed of or encumbered,” the group added.

Read: Mooikloof opposition is not about entitlement – Saibpp president

Brookes says he is looking forward to working with Kukama, stressing that the successful collaboration with its BEE partners will facilitate continued growth of the Balwin brand.

“We are committed to creating a business that is truly diverse, representative, and transformed and we firmly believe that this transaction will assist us in achieving our goals. I have known Kukuma for a few years, having worked with him on developments in Waterfall, so this deal is a natural extension of our relationship,” he adds.

Balwin’s current major residential estate developments in Waterfall include The Polofields, Kikuyu and Munyaka, however the group has developments underway across Gauteng as well as the Western Cape and KwaZulu-Natal.

Listen/Read: Balwin’s Crystal Lagoons coup

“Besides the phenomenal work done by the Balwin Foundation, the operational side of Balwin has made considerable efforts in transforming our business over the past number of years in support of the principles and objectives of the BEE Act. This transaction will significantly improve our BEE scorecard rating,” Brookes further points out.

In its statement on the deal, Balwin noted Kukama’s “vast experience in the property sector” highlighting his specific focus on project management.

“Balwin believes that Mr Kukama will be a value-adding partner who possesses the functional and technical expertise to complement the existing board’s skillset,” it said.

Mr Kukama obtained a Bachelor of Architectural Studies and Bachelor of Architecture [Hons.] Cum Laude, from the University of Cape Town. He also holds an MSc in Urban Design in Development from the University of London,” Balwin added.

After completion of his Masters’ degree in London, he returned to South Africa, and was offered a position of associate director and head of urban design at Stauch Vorster Architects in Cape Town. During that period, he became an exchange employee to a leading retail architectural firm in Baltimore, Development Design Group, [which] at that time were designing Cavendish Square for Old Mutual Properties,” said.

Speaking to Moneyweb following the signing of the deal at Balwin’s Bedfordview head office on Wednesday,  Kukama said he is looking forward to partnering with the group by “opening new markets and avenues of growth”.

He added: “This is more than a BEE deal. We’ve worked together ever since Balwin’s first residential  development in Waterfall started some five years ago. We are just taking our mutually beneficial business relationship to another level.”

Kukama said the housing market, especially in Gauteng, is still set for significant growth due to urbanisation and the province being South Africa’s economic hub.

“Balwin is set to benefit from this and I like both its residential product and business, which is primed for growth,” he explained.

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Once again, I’m happy for the beneficiaries. If they sleep well at night, good for them.

However, racism by any other name is still racism.

Top choice! Reggie is a legend…does solid work!

Appeasement of the masses by every means !!

10% does not make sense, I mean why do it all for this percentage, for R20M (in my quick calculation only 1% of Market cap) and then to pay it off through dividends and dilute the other shareholders equity in the company. Mr Brookes please explain a little more as to how this benefits an investor in Balwin as it does not do this in the article, there are only adjectives such as excited.

They putting in 20 bar of their own tom and locked in for 10 years for a light 10% equity. Seems solid.

This random guy approaches the farmer and makes the following proposition: “I give you 20 chickens and a cow as a deposit and you sell a portion of your farm to me. You also lend me the money to buy that land from you. You lease the land from me and use the money that you are supposed to pay me to service the loan.”

Farmer: “You want me to sell land while I actually need more land. Then, you want me to take the risk to finance a partner that I don’t trust, in a transaction that makes no sense and adds zero value to my business? Further, you suggest that I farm your land that is not mine anymore to get my own money back from you because I financed a transaction that I did not want to do in the first place?.

Random guy: “Yes. This is called transformation and you must do it”.

Farmer: “Listen, If I wanted squatters on my land who cost me money and contribute nothing I can have one thousand of them tomorrow. Why would I finance you to squat on my land while I do all the work, take all the risks and provide all the finances?

Random guy: “Because we make the laws and this is the law. It is called BEE. You either do it willingly or we take it anyway”

Farmer: “Take your 20 chickens and your cow and disappear before I transform you into something that even your mother won’t recognize”.

I agree with your analogy and find BEE distasteful. In my view – to use your analogy, the farmer should look towards involving his farm workers, some of whom in South Africa have worked for the same family for generations. He could rather consider participative management and gain some capital injection by selling a stake in business to his farm workers.

But this goes to the fundamentals of one’s assumptions of human nature. If you assume that people are untrustworthy, dishonest and have to be controlled and monitored 24 hours per day – then this would never work for you. If however, your view is that people have the desire and ability to make a positive contribution in and beyond their jobs, and cannot and should not be monitored 24 hours per day – then you could consider this.

There are some excellent examples of how this can work in SA agriculture. But sadly – too few…

The capitalist system of property rights and rule of law delivers employment opportunities, that create the only sustainable and mutually beneficial empowerment and transformation of society. Farmworkers are empowered already.

BEE is not sustainable because it consumes capital. The process destroys employment opportunities. BEE beneficiaries cannot wait to cash in the chips, to finance their consumption habits. They want the money, not the asset. They want cash, not shares. They are consumers, not savers. BEE is a system that forces property owners to share their productive assets with consumers. This is a certain recipe for economic destruction.

Employment opportunities are the only viable and sustainable empowerment tool. Therefore, BEE destroys the only form of empowerment and stops the transformation of society by creating rising inequality between the politically connected elite and the unemployed masses.

Yay, free stuff!, because I can’t build my own….

BEEggars belief :
Beginning of the end for Baldwin ;
Pathetic.

maybe i am misunderstanding this deal, but the whole setup looks like the seller is financing the buyer’s 10% shares via the company itself that is actually selling the 10% shares and not getting much if anything at all in return for it – if i was a current shareholder in that company, i would have been very upset – surely it must a negative influence on the rest of the 90% issued shares

The dividends are diluted by the BEE partners. The risk increases for all shareholders because the transaction is financed by their business. The viability of the deal depends on economic circumstances and will fail if the company cannot pay dividends. The deal will be underwater if the share price dives. These additional risks are not offset by larger profit potential. These are unproductive risks. BEE requirements destroy local companies’ ability to compete with international competitors who do not have to BEE.

It was the culmination of these additional risks that eventually bankrupted Lonmin.

BEE is a scourge and as one of my clients said: What can I do? I have to comply to obtain government business.

Well thats just how lily livered SA business people are, instead of uniting and refusing to go along with this nonsense (and they all know its nonsense) they roll over. What would the state do if no one complies (some of my clients have dumped their BEE compliance)? What can they do?

10% is hardly massive BEE transformation and if I read correctly, it will consist of 3 individuals. 51% Kukama and a black female and black youth. This is not helping Broad Based BEE.

Surely the easiest way for investors to show their disapproval is to dump your shares.
Invest in companies that do not indulge in such disgraceful sycophantic groveling

End of comments.

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