Cisco reveals BEE plans

By Kimberly Guest for Cisco

Johannesburg, 04 Sep 2007

Global networking company Cisco has announced a black economic empowerment (BEE) deal that will see stakes in both global and local operations in black hands.

The deal includes an external investment partner, a trust representing Cisco's black South African employees, and a new education trust, says Cisco.

This morning, Cisco president of emerging markets Paul Mountford outlined the details of several BEE initiatives to the company's local employees.

The first sees the external investment partner and employee and education trusts receiving long-term share participation rights, represented by shares in parent company Cisco Systems. These will be at a value equal to a 25.1% stake in a new services organisation.

The employee and education trusts will also receive share participation rights, with a value equal to a 25.1% stake in Cisco Capital SA, which offers financing to Cisco customers.

Lastly, the employee and education trusts will receive share participation rights - with a value equal to a 20% stake in Cisco's local sales and marketing organisation, which supports Cisco's customer base in SA.

The company notes that black representation on its local board now equals 60%. Of its senior and junior management, previously disadvantaged individuals hold 60% and 62% of these roles respectively. Cisco SA's female employees account for approximately 30% of its workforce.

"We believe that today's transaction will underpin our efforts to support the South African government in the continued transformation of the country's economy. As a result, it is in the best interests of all our employees, partners and shareholders in helping to grow our business," says Mountford.

Empowerment partner

Cisco has selected Lereko Investments to participate in the empowerment initiative, by taking the lead equity stake with respect to the services organisation.

Lereko is represented by executive chairman Valli Moosa, CEO Popo Molefe, and executive director Lulu Gwagwa.

Following the completion of the transaction, Lereko will hold share participation rights, with a value representing 20% of the services organisation, with the employee and education trusts holding rights representing the remaining 5.1%. This holding may not be disposed of prior to 2017 and is linked to the performance of Cisco's business.

A Lereko representative will also be appointed to Cisco Services SA's advisory board. The investors will have voting rights in the local entity, adds the company.

Back to school

Included in today's announcement is the establishment of a "Cisco Scholars" programme, which will be one of several beneficiaries of the education trust. This programme will provide scholarships for high-potential, disadvantaged black South African students who are graduating from high school, to attend the African Leadership Academy.

Cisco says this is one of "several initiatives" it is undertaking to support the objectives of the local government.

Additionally, it will intensify its local Cisco Networking Academy efforts. Over the coming year, Cisco aims to add an additional 18 local academies, up from the current 52.

Supporting government

In order to further contribute to skills development, the local creation of intellectual property and employment creation, Cisco has submitted a proposal to the Department of Trade and Industry (DTI).

This could see nearly $15 million (R112 million) of direct foreign investment and an ongoing maintenance investment committed to the DTI.

Negotiations around this proposal are progressing "very well" says Cisco. The details are expected to be released shortly.

Cisco SA GM Steve Midgley concludes: "Our motivation for transferring equity in our operations is simple: Cisco believes participating in SA's monumental and transformational BEE programme is not only a duty, but a once-in-a-lifetime opportunity as well."