Home Articles VIEWPOINT: A BLACK PARTNER Questions to ask



I sit around board room tables every week helping companies to reason on what constitutes the most appropriate black equity partner. One thing they all agree on is that the biggest risk lies not in the corporate structure itself or even the terms and conditions of the transaction, but in who the future partner should be. Here are some questions worth asking and answering when identifying potential candidates:

  • Trust, trust, trust. Do we trust the person and can we reasonably expect the relationship to remain stable over the long term?
  • Do we have an idea of how the person’s general outlook might change after receiving significant asset value?
  • Does the person share our vision for the business?
  • What financial expectations will we have to manage? Will the company be able to meet such expectations? What could result if expectations are not met?
  • How involved will the person want to be in the day-to-day operations of the company? Will he or she want a seat on the board of directors? How could that impact the dynamics and decision-making process at board meetings?

When reasoning on these and many other questions it becomes clear that when considering a new equity partner – no matter what racial background the person is from – it is imperative to be patient until the right party is identified.
Unfortunately the B-BBEE codes have imposed a window period in which this important decision needs to be made. If it is a ‘forced’ one, it poses a significant risk. Choosing the wrong partner could have devastating effects if the relationship later deteriorates – especially if the terms and conditions of the transaction were not clear enough.

After thinking about it most companies are opting for some type of institutional shareholding wherein good corporate governance can mitigate the risk of dealing directly with the wrong natural persons. The ultimate test of such corporate structures will be to prove that economic benefits do flow to the natural persons at the end of the chain of ownership.

Author: Anton de Wet CA(SA)  is a Partner at Middel & Partners