10 March 2006
	RETAIL EDCON leads the WAY By Chris Gilmour Rising share price has delighted shareholders, but advancements in BEE will make staff happy

Edcon has been one of the darlings of the JSE for the past three years. Since its share price nadir in 1999, when it fell to the equivalent of R1,70, the share has risen twentyfold, delighting shareholders, management and the media. But quietly in the background, the company has been making profound moves on the black economic empowerment (BEE) front, which should make employees much happier as well. The big news in this area for Edcon last year was the announcement of its empowerment deal, which includes the following benefits: Voting rights equivalent to a 10,6% stake in Edcon for at least a six-year period; Economic benefits equivalent to the dividends paid on a 10,6% stake in Edcon but paid in terms of a half-yearly empowerment payment to these employees; and Capital appreciation on the Edcon share price over and above R50 in years three and six of the transaction. In July 2005, Edcon shareholders voted in favour of the creation of a staff empowerment trust. In terms of this scheme, 18 000 Edcon employees, of whom 94% are black, received an allocation of units in the Edcon Staff Empowerment Trust. These units will entitle the holders to semi-annual empowerment payments. "Eligible staff can look forward to receiving their first empowerment payment, the value of which is directly linked to Edcon's dividend declaration, in January 2006," says Edcon chief executive Steve Ross. About 93% of the value created in terms of the transaction will accrue to Edcon's black employees. The cost of the transaction to Edcon will be about 2,9% of its market capitalisation (at R27-R70/share) or 5% of its headline earnings. "It is gratifying that our shareholders support this initiative to empower our employees. It is an acknowledgment that the future prosperity of the country and the company hinges on the positive transformation of SA," says Ross. "In that context, the Staff Empowerment Trust should be seen as an investment rather than a cost."