ICT group Dimension Data's 2004 broad-based empowerment deal has vested and most of the participants, including ICT veteran Andile Ngcaba, have chosen to reinvest the bulk of the R1.26 billion pay-out.
Ngcaba, who is chairman of Dimension Data Middle East and Africa (DDMEA), will remain a shareholder through Convergence Partners, along with 35 broad-based groups that provide support and care to over 45 000 vulnerable individuals in the nine provinces of SA. Ngcaba will also keep his position on DDMEA's board.
Ngcaba was DG of the Department of Communications for eight-and-a-half years until December 2003, before joining DiData in March 2004. He is also chairman of Convergence Partners and FibreCo, a partnership formed in 2010 between Cell C, Internet Solutions and Convergence Partners.
The total value of the transaction, which will be paid to the various empowerment individuals and organisations, is R1.26 billion. Group CEO Brett Dawson says the reinvestment is a “significant” deal. “There are not many deals of this size that get done in our sector.”
Staying empowered
Ngcaba, through Convergence Partners, is re-investing his full stake back into the DDMEA business, while previously disadvantaged staff, who worked for Dimension Data during the almost eight-year empowerment period, will be paid in full on Friday. Convergence Partner's stake in the business has not been disclosed.
The broad-based groups, which have grown to 35 from the initial nine in 2004, will receive an initial cash distribution.
Dimension Data turned over $5.79 billion in the year to September, a 14% gain on 2010. The company is no longer listed on the JSE after being bought out by NTT in a R24.2 billion deal in 2010.
Round two
Dawson says the initial empowerment structure lasted “seven years and some change” and DDMEA is ready to enter another five-year minimum transaction. DiData entered into its original empowerment deal in September 2004 when a consortium, Andile Ngcaba, bought 25.01% of the South African subsidiary for R380 million.
The rest of the consortium included Safika Holdings, which is led by Moss Ngoasheng, and a group of broad-based black economic empowerment participants, including current and future DiData SA staff members, as well as nine broad-based groups.
The deal was mostly funded through an earn-in model, while the consortium contributed a cash payment of R23 million. The structure allowed the consortium to pay down its financed stake by using its full share of annual headline earnings of the company over the terms of the transaction.
After the transaction, DiData owned 74.99% of DiData SA, while Ngcaba Holdings had 12.71% and Safika had 5%.
As part of the initial deal, Ngcaba Holdings undertook to allocate 2.9% of its 12.71% shareholding to a group of broad-based empowerment participants. Safika gave up 1% to the broad-based group and DiData SA contributed 6.3%, taking the total broad-based shareholding in DiData SA to 10.20%.
In December 2010, when Safika exited the consortium, Convergence Partners acquired 50.01% of Safika's 5% shareholding, with Dimension Data acquiring the balance. Ngcaba Holdings is now part of Convergence Partners.
Growing opportunities
Ngcaba says the new investment is into DDMEA as there are huge opportunities for growth in the Southern African Development Community region, as well as in East and West Africa.
It is important to grow DiData's reach in SA and those other regions, says Ngcaba. Group chairman Jeremy Ord says Ngcaba “has played a key operational role transforming the DDMEA business”.
“Transformation is an ongoing strategic business imperative - not a period in time or a transaction - and the group remains committed to deepening transformation across the business,” says Ord.
Since the initial deal was inked in 2004, revenue from the African continent grew from R700 million, to an estimated R1.5 billion as of October 2011. DiData expanded its African footprint from nine countries in 2004 to 20 countries currently.
In addition, according to DiData, the deal has benefited the company as it was able to compete for business in the public and private sectors, with the required BEE credentials. Public sector revenue grew from R162 million, to an estimated R1.4 billion in 2011, it says.
Broad benefits
Ngcaba says the philosophy around the deal is about how DiData can contribute in all the pillars of society by working through groups that deal with issues that plague SA, such as education and health.
“Our broad-based groups, represented by the Dimension Data Community Development Trust in the future, are critical to sustainable development in SA. Our goal is to ensure they are provided with ongoing business support and guidance,” says Ngcaba.
Groups in the trust will receive an annual pay-out so they can expand their services and grow their reach, adds Ngcaba.
Under the initial deal, each of SA's nine provinces was represented by the group of broad-based BEE participants, and the initiatives chosen supported educational and developmental projects managed by women and youth.
Share
