5 September 2007
Internet networking company Cisco Systems has announced a black economic empowerment (BEE) deal with that will turn a local investment partner as well as employee and education trusts into shareholders in the company’s local and global operations.
“Cisco believes participating in South Africa’s monumental and transformational BEE programme is not only a duty but a once-in-a-lifetime opportunity,” Cisco South Africa general manager Steve Midgley said in a statement on Tuesday.
According to the company, it has selected Lereko Investments as its external investment partner, while it will create one trust for its black South African employees and another trust to fund an education programme
Lereko Investments will receive long-term share participation rights represented by shares in parent company Cisco Systems Inc, with a value equal to a 20% stake in a newly created services organisation that will do business in South Africa.
In addition, a Lereko representative will be appointed to the advisory board of Cisco Services South Africa. Lereko’s current senior management includes prominent figures like Popo Molefe, Valli Moosa and Lulu Gwagwa.
The employee and education trusts, meanwhile, will receive shares in Cisco Systems Inc with a value equal to 5.1% stake in the new company.
According to the company, black South African directors now make up 60% of the board of Cisco South Africa, while 60% of its senior management and 62% of its junior management are previously disadvantaged individuals and 30% of its employees are female.
The two trusts will also receive share participation rights with a value equal to a 20% stake in Cisco’s local sales and marketing organisation, as well as a 25.1% stake in Cisco Capital South Africa, which offers financing for the company’s customer base.
“The transaction is subject to customary closing conditions, including regulatory approvals,” the company said.
Following the completion of the transaction, Cisco says the new investors will have voting rights in the local entity, while receiving the right to restricted shares of the common stock of Cisco Systems Inc. The investors may also not dispose of their holdings prior to 2017.
“This asset will be of equivalent value to the agreed stake in the local entity, and provides access not only to the value of Cisco’s South African operations but also to the value of Cisco’s businesses on a global basis,” Cisco said.
One of the beneficiaries of the education trust is the Cisco Scholars programme, which will provide scholarships for high-potential disadvantaged students graduating from high school to attend the African Leadership Academy.
The company is also to intensify its local Cisco Networking Academy efforts, which aim to address skills development, by adding 18 local academies to the existing 52.
In addition, Cisco has submitted a proposal to the Department of Trade and Industry of nearly US$15-million of direct foreign investment, further details of which are still to be released.
“Cisco’s support for the BEE initiative is a continuing step along the path to help create an information based society that can leapfrog other nations,” said Cisco’s Middle East and Africa vice president Mark de Simone said. “South Africa truly embodies the opportunity for country transformation that Cisco is working to foster through collaboration with African governments.”