Ownership that holds up, and pays out

Ownership is often the most commercially significant element of the scorecard, and the most scrutinised. It is also where I have seen the most well-meant deals disappoint: structures that scored on paper but never paid a cent to the people they were built for, or that unravelled the first time a verification agency asked a hard question.

A good ownership deal is judged twice. Once by the verification agency, on voting rights, economic interest and net value, and again, over the years, by the Black shareholders it was meant to benefit. The first test gets you points. The second is the reason the points exist.

Start with who should benefit

The first decision is not the percentage. It is the people. Each vehicle serves a different purpose:

• An employee trust (ESOP) holds shares for your staff. It builds engagement, retention and a long-term view, but it has to deal with staff who leave before their units vest, and with the hard question of what private shares are worth.
• A broad-based scheme (BBOS) holds shares for a wide group of Black people and communities. Its reach is wide, and its dividends can fund education or health. It also costs more to administer and has many interests to balance.
• A Black strategic partner brings capital, networks, skills and an active board role. The funding cost is real, and the involvement must be real too.

Many good structures combine more than one. What matters is that the choice follows from what you want the deal to achieve, not from a template.

The funding is the deal

Most Black shareholders do not buy their shares for cash. The deal is funded through vendor finance, notional vendor funding or third-party finance, and that debt is repaid from dividends. This is where structures quietly fail. If the funding is too heavy, the dividends go to the debt for years and nothing reaches the beneficiaries.

It matters for the scorecard too. Net value, the Black-held equity less the funding still outstanding, builds as the debt is repaid, and it carries a sub-minimum of its own. A deal that never pays down its funding will not hold its points. Fund it sensibly, track it tranche by tranche, and the score and the benefit grow together.

A trust is only as good as its administration

Employee and broad-based trusts only deliver value if they are run well. Trustees need to meet, minute their decisions and understand their duties. Beneficiaries need to know what they hold and why. Records with the Master of the High Court, SARS, the auditors and the bank need to stay current.

When that work slips, two things happen. Beneficiaries lose faith in the scheme, and the verification pack has gaps. Both are avoidable.

Real involvement, never fronting

The line between a real deal and fronting is not a technicality. Black shareholders must hold real rights, receive real economic benefit and, where the structure says so, take part in real decisions. Anything else puts the certificate, the contracts that rely on it and the company's reputation at risk.

My advice to any board considering an ownership transaction is simple. Decide who it is for. Fund it so that it pays out. Run it properly for as long as it exists. Do that, and the deal will hold up at verification, and it will be worth something to the people it was meant to serve.