RADIO INTERVIEW on SUMMIT ASK THE EXPERTS

11/08/2006 - Interview of Darryl Horney (Summit Ask the Experts)

Interviewer

Joining in Ask the Experts this evening, Darryl Horney, who is the director and founder of Spirit Capital. Thanks for joining us. You have put out a press release to the effect that people need to basically be aware of BEE, Broadbased BEE and the risks inherent in that. Would you like to elaborate?

Darryl Horney

Sure! I think most private business owners or business leaders are aware of the fact that historically certain transactions were done in an empowerment sense and they relied on the involvement of one or two key individuals … to protect the business or help grow the business in terms of achieves its strategies and grow the business in the future, but what we are finding is that now with the trend towards Broadbased BEE, is that there are risks following that strategy. When we say risks, it is a risk that although you have a Broadbased community grouping or maybe a staff compliment that share in your equity as a business, they don’t necessarily have the contacts or the expertise to help you protect your business or grow your business in a tender environment.

Interviewer

Is that not though … really going back to enriching just those few who do have the powerful networks?

Darryl Horney

Sure. What we are saying is that we would like to see a blend … or there is a blend in the market coming through. You will see the Sasol’s and the Standard Banks and the De Beers and empowerment transactions have a mix or a blend or both, and the way we see it, is that we advise our clients to document their expectations from the empowerment parties and understand that they will get certain deliverables from certain of the empowerment …

Interviewer

Criteria?

Darryl Horney

No, the empowerment parties, so certain of the criteria will be fulfilled by the Broadbased component and certain by specific individuals, and from those individuals they should request or obtain specific commitments in terms of time or areas in which they will assist the business and they understand that from the community groupings or from the staff groupings, there will be more of a passive involvement, and one in which they can tick the box in terms of meeting the empowerment criteria.

Interviewer

From a Broadbased level.

Darryl Horney

From a Broadbased level, yes.

Interviewer

Are those few individuals taking advantage of a number of different BEE deals?

Darryl Horney

I would say that there are a few individuals that have been lucky enough to be invited into certain transactions, and you probably are seeing a back, the markets probably saying, enough is enough, and we need to find different people to fulfil those criteria, so yes, I would agree with you that certain people have enriched themselves enough and it’s enrichment and not empowerment that the market is fighting against.

Interviewer

If you were relatively a small business … how do you go about actually soliciting the right BEE partner?

Darryl Horney

If you are a small business … what we found is that there needs to be some emotional link or acknowledgment between the parties that they like each other and they’d like to work together. If there isn’t that link, it’s rather difficult to get an empowerment deal done. Firstly, you have got to introduce the parties to each other. If they don’t necessarily get … see eye to eye or they don’t really find a bond that they can work around, it becomes rather difficult, so it is far easier for an empowerment deal to be done with someone when you know each other, or you have worked with each other through or over a number of years or on a couple of transactions, so necessarily introducing two parties to one another doesn’t necessarily give you the perfect partnership.

Interviewer

Are you finding the companies are managing their BEE relationships correctly in terms of actually sitting down and assessing whether they have got the value that they initially set out to get?

Darryl Horney

What we found is that probably the listed Corporate’s have managed their relations properly. They have gotten a … committee that have these criteria and they meet and have performance appraisals. What we are advising our clients to do this to have the same kind of process. If you are a private business, you may not be necessarily familiar with these kinds of assessments or criteria and we are advising them to do the same kind of thing. Document your expectations and have quarterly meetings or by-monthly meetings where you measure the performance and the processes in terms of whatever the law is obliged to commit, or at least attempt to commit.

Interviewer

There’s a pressure within the South African business environment to have a BEE partner is leading to some relatively quick and perhaps even irresponsible decisions in attracting a BEE person to your company.

Darryl Horney

I think the responsible decisions could possibly be made by people who don’t really … or making decisions on behalf of others. In a private business, the business owners will be making decisions on behalf of themselves or their families, so those decisions are very emotional and they take far longer to get through or understand or make that commitment. In the corporate world where possibly you are not talking about your own money, you make decisions that would be different from a private business owner. So in some degree, I think you could be right.

Interviewer

Darryl Horney, Director and Founder of Spirit Capital, thank you very much for joining us in the studio this evening.

Darryl Horney

Thank you.

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