Employee Ownership in Southern Africa

Learning about Predistribution Initative's plan for employee ownership

In February of this year, The Predistribution Initiative (PDI) released its "Playbook for Employee Ownership in Sub-Saharan Africa.” PDI’s aim as a company is to “address socioeconomic inequality and conservation,” with this playbook being the first comprehensive guide to implementing employee ownership in Southern Africa.

Employee ownership can actually be found in many South African (SA) mining and financial companies through the model of an Employee Stock Ownership Plan (ESOP). Many success stories of SA-ESOPs derive from the Black Economic Empowerment (BEE) policies introduced in the 1990s. These policies give incentives to “promote black ownership and management,” which is often seen through SA-ESOPs. Over the years, utilizing the BEE framework in Southern Africa has been more focused on compliance than enthusiasm toward employee ownership.

Difficulties with employee ownership can be attributed to the small percentage of shares given to a large number of employees, being funded by debt that companies accumulate. Oftentimes, “trusts have ended up holding shares worth less than the debt owed,” during times of economic downturn. Highly concentrated ownership is more commonly found in South African countries than broad-based ownership. PDI aims to analyze the barriers to employee ownership for Southern African economies to “promote inclusive growth and economic empowerment

From Predistribution Initiative’s Playbook for Employee Ownership in Sub-Saharan Africa

PDI suggests a few main focuses to “locally optimize” their approach to employee ownership:

• Ensure Accessibility

  • Advises against approaches to employee ownership that require a purchase of shares before granted

• Create Near-Term Benefits

  • Design plans that give tangible benefits early to show workers the impact that employee ownership has on long-term growth

• Invest in Worker Engagement and Education

  • Assist with funding education towards financial literacy and EO programs

• Leverage Each Market’s Unique Resources

  • For example, the US utilizes low interest rates to incentivize owners to transition to employee ownership when selling their company

• Create The Right Incentives

  • Encourages plans that foster long-term retention and promote group performance

Employee ownership in Southern Africa has worked in the past (such as BEE policies) but plans to continue the growth of these models can help create more equitable economic conditions for individuals. If you want to read the entire playbook, you can find that here. Thanks for reading!