Will Avusa - formerly Johncom - ever reclaim the black economic empowerment (BEE) ground it lost after dithering on its long awaited BEE equity transfer deal? In the 2008 Top Empowerment Companies survey Avusa is the third most empowered company after Naspers, and Kagiso Media, the only black-controlled media company on the JSE. Kagiso scored 37,88 points, which could be attributed to its failure to submit all the necessary data - especially on employment equity, procurement and skills development. The same applies to Avusa.
But it's still a wonder how a firm that was the first in this sector to conclude an empowerment deal is now playing catch-up. At the time of going to press Avusa was set to come up with a BEE equity transfer proposition as part of the group's restructuring. Avusa was spun out of the landmark 1996 BEE transaction that gave black interests access to industrial holding group Johnnic. It was the National Empowerment Consortium, led by Cyril Ramaphosa, which acquired the then Johnnic. A major rationalisation of the group led to the unbundling of the Johnnic pyramid structure and delivered freestanding entities like Johncom and telecommunications giant MTN.
"There was, however, too much debt and there were asset sales to keep things together. High rates and a rough market in 1997/1998 didn't help either," says Warwick Lucas, senior investment analyst at Imara SP Reid. "MTN did, however, come out of Johnnic as a large empowered company and to that extent Johnnic was a success."
Others say as the years went by Avusa's BEE shareholder base was worn down by attrition, through open trade in the market, making the historical moment in 1996 a distant memory.
However, it's likely that Avusa will conclude an empowerment deal this year. The firm will be split into two listed entities. A new entity, Opco, will house the media and entertainment operations and is actively looking for a BEE partner. This search for a BEE partner has attracted lots of interest. Among those who've made their ambitions known is advertising executive Groovin Nchabeleng's Koni Media Holdings. Its hopes were dashed when Avusa made it clear it was not for sale.
Businessman Tokyo Sexwale's investment firm Mvelaphanda Group got its foot in the door by securing a deal to buy up to 30% of the new entity for R1,4bn in cash.
Meanwhile, the ANC has called for print media industry BEE charter, as its ownership is still concentrated in the hands of the minority. Strides, though, have been made in employment equity and skills development. In its 2007 annual report Caxton says 80% of its staff complement are previously disadvantaged people. The industry has also recently seen the appointment of senior black journalists and women to management positions.
"In the fiercely competitive SA newspaper market, politically motivated owners who interfere in the running of their papers will need deep pockets. Let the BEE buyer beware," wrote Reg Rumney, chairman of the Centre for Economics Journalism of Africa, in a recent article.
