Research released by Intellidex revealed that BEE deals done by the JSE’s 100 largest companies have collectively generated R317bn of value for beneficiaries.

1. Slide 1
THE VALUE OF
BEE DEALS
Results presentation
25 June 2015
Stuart Theobald CFA
www.intellidex.co.za

2. Slide 2
THE VALUE OF
BEE DEALS
READY
BACKGROUND
• Recognised there is a lack of proper research to inform debates over BEE
deals
• Ambition to calculate the total amount of net value created from BEE
deals by the largest 100 JSE-listed companies
• In January 2015 began the research process
• Developed independent model of each deal to estimate NAV at end
December 2014 based on company circulars and announcements
• Presented our results to companies for comment
• Companies provided feedback including missing data
• Developed estimates in light of data to finalise results
• Various assumptions had to be made in some cases

3. Slide 3
THE VALUE OF
BEE DEALS
READY
KEY RESULT
R317bn
Total value generated in the 20 years to end 2014 from both matured
deals and deals that were live at that stage

4. Slide 4
THE VALUE OF
BEE DEALS
READY
MAKING SENSE OF R317bn
R 179.5
R 317.0
R 0.0
R 50.0
R 100.0
R 150.0
R 200.0
R 250.0
R 300.0
R 350.0
Tax take Deal value
1.8 times the total amount of corporate income
tax paid in 2014
R 285.0
R 317.0
R 0.0
R 50.0
R 100.0
R 150.0
R 200.0
R 250.0
R 300.0
R 350.0
Value of agri land &
equip
Deal value
1.1 times the total value of agricultural land and
equipment in SA
Sources: Sars, department of agriculture, Intellidex

5. Slide 5
THE VALUE OF
BEE DEALS
READY
THE TIMING OF DEALS
0
5
10
15
20
25
30
35
≤2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
Number of deals launched/matured per year
Deals launched Deals matured
2004/5 was the
peak period for
the signing of
deals (50 deals)
Maturity periods
range from seven
to 10 years.

6. Slide 6
THE VALUE OF
BEE DEALS
THE TIMING OF MATURING DEALS
2014 was a record
year for maturing
deals with
R59.8bn of value
delivered to
beneficiaries
0.0
10.0
20.0
30.0
40.0
50.0
60.0
70.0
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
Value generated by maturing deals per year (Rbn)

7. Slide 7
THE VALUE OF
BEE DEALS
THE BREAKDOWN OF LIVE VS MATURING DEALS
Live deals still face
market risk as
share prices can
fluctuate
R107 839
R209 203
Value by matured vs live deals (Rm)
Matured
Live

8. Slide 8
THE VALUE OF
BEE DEALS
TYPES OF BENEFICIARIES
Contrary to recent
comments, staff
and community
schemes have
accrued
substantial value
16%
62%
22%
Value by beneficiary type
Staff schemes (R52bn)
Strategic investors (R196bn)
Community schemes (R69bn)

9. Slide 9
THE VALUE OF
BEE DEALS
EVOLUTION OF BENEFICIARY TYPES
This illustrates
how different
beneficiary groups
have evolved over
time. It indicates
the cumulative
value attributable
to each beneficiary
type as a
percentage of the
total, according to
the date of deal
initiation.

10. Slide 10
THE VALUE OF
BEE DEALS
SOURCES OF RETURNS
KEY DRIVERS OF RETURNS
• Share price appreciation
• Length of deal – compounding effects
• Reinvestment of dividends – compounding
effects
R24 369
R291 892
Value by returns type (Rm)
Dividends
Capital appreciation

11. Slide 11
THE VALUE OF
BEE DEALS
VALUE CREATION PER INDUSTRY
Value creation per industry sector
Sector Total value (Rm)
Value as % of
mkt cap
Banks R 57,228 6.0%
Financials R 32,358 5.4%
Healthcare R 14,289 7.2%
Industrial R 56,740 2.1%
Investment companies R 10,431 4.2%
Mining R 100,915 11.8%
Pharmaceutical R 9,568 5.0%
Property R 8,872 3.9%
Retail R 7,677 1.8%
Telecoms R 17,246 2.7%
Travel & Leisure R 1,636 3.6%
Mining has been
the biggest creator
of value in both
absolute and
relative terms
Retail relatively
underweight.
Reflects voluntary
mechanism of BEE

12. Slide 12
THE VALUE OF
BEE DEALS
SHARE PRICES AS MAJOR DRIVERS OF RETURNS
2008 recession left
many deals under
water. Three fold
recovery since.
Mining has
struggled to recover
post 2008
Global equities bull
market has been
important factor
50
100
200
400
800
Dec2004
May2005
Oct2005
Mar2006
Aug2006
Jan2007
Jun2007
Nov2007
Apr2008
Sep2008
Feb2009
Jul2009
Dec2009
May2010
Oct2010
Mar2011
Aug2011
Jan2012
Jun2012
Nov2012
Apr2013
Sep2013
Feb2014
Jul2014
Dec2014
Financials Industrials Banks Healthcare Mining

13. Slide 13
THE VALUE OF
BEE DEALS
20 LARGEST BEE DEALS
Of the 100
companies
studied, 17 had
done no deals and
eight had deals
that were
underwater as at
end 2014
Company Deal start date
Live/
concluded?
Staff
schemes
Strategic
partners
Community
schemes
Total Value
FirstRand Jun 2005 Concluded R 5,971 R 2,594 R 14,698 R 23,262
Exxaro Nov 2006 Live R 1,045 R 15,788 R 0 R 16,832
Sanlam Apr 2004 Concluded R 0 R 7,915 R 6,476 R 14,391
Naspers Dec 2006 Live R 0 R 13,884 R 0 R 13,884
MTN Nov 2010 Live R 0 R 12,200 R 0 R 12,200
Impala Platinum Jul 2007 Live R 0 R 0 R 11,339 R 11,339
Standard Bank Oct 2004 Concluded R 4,367 R 4,359 R 2,179 R 10,905
RMH Dec 2011 Live R 0 R 9,878 R 0 R 9,878
SABMiller Jun 2010 Live R 3,882 R 4,076 R 1,747 R 9,705
Aspen Mar 2005 Live R 0 R 8,684 R 0 R 8,684
South32 Jul 2007 Concluded R 0 R 7,949 R 0 R 7,949
RMI Dec 2011 Live R 0 R 7,096 R 0 R 7,096
Mediclinic Jun 2005 Live R 1,383 R 5,321 R 0 R 6,704
Anglo American Platinum Jun 2002 Live R 0 R 0 R 6,652 R 6,652
Old Mutual Aug 2005 Live R 3,716 R 1,696 R 969 R 6,381
Kumba Iron Ore Nov 2006 Live R 646 R 0 R 5,136 R 5,782
Nedbank Jun 2005 Concluded R 2,185 R 1,743 R 1,573 R 5,501
Netcare Jun 2005 Live R 2,547 R 1,329 R 561 R 4,437
Northam Platinum Jan 2008 Concluded R 0 R 3,921 R 0 R3,921
Vodacom Oct 2008 Live R 0 R 3,646 R 0 R3,646

14. Slide 14
THE VALUE OF
BEE DEALS
A NOTE ON THE DIFFERENCE BETWEEN VALUE AND OWNERSHIP
• Deals are transitory. Value is created at a moment in time
• BEE deals generate balance sheet – equity that can be used by beneficiaries
• BEE deals involve concentrated exposures. We should expect rational
investors to want to diversify exposures to balance risk and return
• To the extent that beneficiaries are natural persons (staff, strategic investors)
we should expect normal life-cycle asset class distribution
• Equity is a long-term savings asset class so suits older savers focused on
retirement funding
• In short, should not expect shareholdings to be held by beneficiaries for long
• “Normal” racial pattern of share ownership should reflect a normal
distribution of economic resources at large. Individual share ownership is the
result of transformation rather than a cause of it.

15. Slide 15
THE VALUE OF
BEE DEALS
QUESTIONS?
A report and spreadsheet with all the deals we analysed are available at
www.intellidex.co.za/bee