Hotel and casino group Sun International (SI) came in third after Phumelela and The Don Group in the hotels & leisure sector. The group has not been slow in making significant strides towards meeting important black economic empowerment (BEE) challenges.
BEE ownership at the group began at least 10 years ago. After the democratic elections in 1994, a number of companies, including SI, expressed an interest in applying for gambling licences, and empowerment partnerships were essential for successful applications.
SI teamed up with its national BEE partner Afrisun Leisure Investments, whose shareholders include Real Africa Investments, Wiphold (headed by Gloria Serobe), and Siyakha Trust. SI also created partnerships at a provincial level to ensure a successful licence application.
Generally, the empowerment partners collectively have voting control but lower economic control. Grand West Casino in Cape Town is a good example. The local BEE partner is Grand Parade Investments, which has voting control, with an economic interest of about 19%. Afrisun Lesiure has 16% and PDI employees 3,6%.
SI encourages its empowerment partners to develop an economic interest of 25%-30% in all its operations. However, one of the difficulties encountered by both SI and its empowerment partners has been the unwillingness of financial institutions to underwrite structures for economic interest in the company.
SI's BEE partners, at both national and provincial levels, have added value to the company. "They are not passive partners," says SI deputy CEO David Coutts-Trotter. Tasks undertaken by the companies at an early stage included major contributions to the bidding process.
It is also a symbiotic process, with a huge amount of infrastructural work being carried out by black businesses. For example, during the construction of SI's Carnival City at Brakpan, much of the steel scaffolding work was awarded to black construction companies. SI estimates that more than 30% of the local content required for its casinos was procured through empowerment companies.
SI is also one of the few SA companies to establish a share incentive trust for all its employees, and not just for directors and senior management. The share trust was established in April 2003 at an initial cost of R140m, or about R23 000/employee. The value is now closer to R300m.
The scheme was introduced to meet the commitments it made when it applied for new casino licences. The undertakings applied only to new casino operations, of which there are six, but the group decided to extend the scheme to include all SI employees.
SI MD Peter Bacon says this represents one of the most comprehensive employee empowerment schemes ever implemented in the tourism & leisure industry in SA. "SI is committed to a new order in the ownership and benefits of SA's tourism & hospitality industry."
In terms of the scheme, employees do not assume risk because they do not purchase the shares individually. They share equally in the trust and benefit through dividends and growth distributions. The scheme is open to all permanent, full-time and scheduled employees with at least six months' service. The stake held by the trust is not diluted when employees leave the company because they cease to participate in the scheme.
With regard to the advancement of black staff, SI human resources director Rob Rimmer says: "We have a passion for internal promotion. About 3% of payroll is spent on training, of which 70% is directed towards training previously disadvantaged individuals."
When making bids for new casino licences in the 1990s, certain commitments were made regarding black economic advancement within SI. According to Rimmer, these were in many instances set at higher levels than those required by the Employment Equity Act.
SI's targets for black representation are 25% for executive management (currently 16%) and 55% for management (currently 49%).
With subsidiary board representation, blacks comprise 32 out of 65 board members. Among senior management, there are 30 black general managers out of 185.
"We're confident we've made good progress on the scorecard in most areas. The area requiring the biggest change is the executive management category," says Rimmer.
