6 000 worker shareholders become half millionaires overnight

JOHANNESBURG (miningweekly.com) – Six thousand two hundred and nine worker shareholders of JSE-listed Kumba Iron Ore each became pretax half millionaires on Tuesday.

The R2.7-billion payout is the first phase of an employee share ownership plan (Esop) with the second five-year phase having the potential to make the employees full millionaires.

Beneficiaries are all below managerial level, “who drive the business from its heart”, Kumba CEO Chris Griffith told a media conference.

“This is the most successful Esop in South Africa’s history,” said Louis Pretorius, the national organiser of the Solidarity labour union.

However, this followed the comment of the National Union of Mineworkers spokesperson Lesiba Seshoka, who initially told the media conference that he was unimpressed by the payout in view of the company being part of a multitrillion-rand industry and suggested that it could have been prompted by the company’s fear of mine nationalisation.

But he then went on to describe the payout as a “wonderful gesture”, as in the past many miners often had “nothing more than a watch or a pair of boots” to show for many years of service to the mining industry.

Kumba, an Anglo American group company, has been running financial fitness programmes to help staff to use the money wisely by focusing on home ownership and the servicing of personal debt.

“Many of the beneficiaries will be buying and renovating homes for themselves and their families,” Griffith said.

Collectively the 6 000 own 3% of the high-flying seaborne iron-ore supplier, the share price of which rose from R120 a share in 2006 to R516 a share on payout deadline.

Each worker shareholder received R576 045 for their holding of 3 365 units in Kumba’s Envision Esop, which equates to an after tax payout of R345 627, based on a marginal tax rate of 40%.

Dividends will continue to flow to Envision in the second five-year phase first phase.

If dividends continue to flow and the share price continues to rise, the shareholding employees stand to benefit at the next maturation point.

Although the share price is not significantly higher than when the scheme was launched in 2006, unallocated shares from the first scheme have been injected as a discount into the second phase of the scheme.

This is expected to encourage staff retention beyond the first phase.

“What we don’t want is half our workforce taking six-month holidays,” Griffith told Mining Weekly Online in a video interview.

It also provides more chance for the second phase to be “in the money”.

The majority of Envision’s employee members have elected to receive the cash sum and can look forward to their Envision payout in December, instead of the equivalent in Kumba shares, which is the alternative option.

This value has been calculated based on a five-day weighted average of the Kumba share price prior to the official close of the first maturity on 17 November.

The broad-based Envision was designed for the promotion of black economic empowerment through an increase in broad and effective participation in the equity of the Sishen Iron Ore Company (SIOC) by workers who contribute on a daily basis.

Envision is only one part of Kumba’s three-part empowerment programme, the second the SIOC Development Trust, which targets community growth and poverty alleviation through the investment and support of local projects for health, education, enterprise development and more.

The trust’s work also ties up with Kumba’s own statutory social and labour plans and the company’s partnership with the JSE-listed Exxaro, one of South Africa’s most significant black-controlled , also working to deliver real empowerment, particularly in skills development and equity participation.