BAT unveils employee scheme

HARARE - Tobacco processor British American Tobacco Zimbabwe (BAT) is set to launch an Employee Share Ownership Trust (Esot) as the company gears to comply with the controversial Indigenisation laws.

Zimbabwe’s indigenisation and economic empowerment regulations gazetted in 2010 compel non-indigenous-owned businesses operating in the country to achieve part compliance with the law through the disposal of at least five percent shareholding to employees, including management.

Shungu Chirunda, BAT secretary said in order for the Trust to hold 10 percent of the shares, the parent company BAT UK shall donate 1 031 676 shares, about five percent to the Trust.

“The Esot shall acquire 1 031 676 (one million, thirty one thousand, six hundred and seventy six) of the issued shares in the issued share capital of BAT Zimbabwe at arms’ length terms and conditions by way of subscription and this represents five percent of the issued share capital of BAT Zimbabwe post the indigenisation transaction,” she said in a circular to shareholders.

An employee share ownership scheme is a contribution plan that provides a company’s workers with an ownership interest in the company.

Under such schemes, companies provide their employees with stock ownership, typically at no cost to the employees.

Shares are given to employees and are held in the scheme’s trust until the employee retires or leaves the company, or earlier diversification opportunities, creating an opportunity for workers to amass long-term savings and benefits from their work.

Under the Indigenisation regulations BAT is required to have 26 percent of its shares held by indigenous Zimbabweans by October 28, 2012, 36 percent by next year and 46 percent and 51 percent by 2014 and 2015 respectively.

Local employees currently hold 6,2 percent shares in BAT.

“In order to meet the first compliance threshold of 26 percent, BAT is required to place at least 19,78 percent of its issued share capital in the hands of indigenous Zimbabweans by no later than October 28, 2012. BAT is fully committed to comply with this requirement,” said Chirunda.

The costs of implementing the transaction are estimated at $250 000.

“This amount relates to various advisory, brokerage fees, printing, regulatory fees and other professional charges,” she said.

In an effort to ensure that the company complies with the impending October 28 deadline BAT is set to hold an extra-ordinary meeting to approve the increase of authorised companies shares from 17 381 517 to 20 633 517 among other things.

“That, the directors be and are hereby authorised to issue 3 252 000 ordinary share and to issue 1 031 676 of those shares to the employee share ownership trust and issue 2 220 324 ordinary shares to the corporate social investment trust,” the company secretary said.

The model of Zimbabwe’s indigenisation law places prominence on wealth creation through broad-based participation of the indigenous people in economic activity.

Market observers have noted that employee ownership in firms appears to increase production and profitability, and improving employees’ dedication and sense of ownership insofar as it increases their financial risk if the company does not perform well.

Although they are a critical component of the local indigenisation and economic empowerment drive, employee share ownership schemes are commonplace across the globe.

In the United States, for example, there are approximately 11 300 employee share ownership plans for over 13 million employees, according to the country’s National Centre for Employee Ownership. - John Kachembere

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