VZCZCXRO1016
RR RUEHBZ RUEHDU RUEHJO RUEHMR RUEHRN
DE RUEHSA #2994 2391550
ZNR UUUUU ZZH
R 271550Z AUG 07
FM AMEMBASSY PRETORIA
TO RUEHC/SECSTATE WASHDC 1388
INFO RUCNSAD/SOUTHERN AF DEVELOPMENT COMMUNITY COLLECTIVE
RUEATRS/DEPT OF TREASURY WASHINGTON DC
RUCPDC/DEPT OF COMMERCE WASHDC

UNCLAS PRETORIA 002994 
 
SIPDIS 
 
SENSITIVE 
SIPDIS 
 
DEPARTMENT PASS USTR FOR PATRICK COLEMAN 
TREASURY FOR TRINA RAND 
USDOC FOR 4510/ITA/IEP/ANESA/OA/JDIEMOND 
AF/S FOR RMARBURG 
 
E.O. 12958: N/A 
TAGS: ECON EINV SF
SUBJECT: HEWLETT PACKARD WINS APPROVAL OF FIRST "EQUITY 
EQUIVALENT" PROGRAM 
 
REF: 06 PRETORIA 5067 
 
¶1.  (U) Summary:  Hewlett Packard has won SAG approval to 
implement the first "equity equivalent" plan under South 
Africa's black economic empowerment (BEE) codes.  Under the 
plan, HP will accrue BEE "points" by promoting information 
technology skills in the small and medium enterprise sectors, 
instead of by selling equity to black South Africans.  The 
BEE codes have an "equity equivalent" exception for 
multinationals unable to comply with strict BEE requirements. 
 End Summary 
 
---------------------------- 
Hewlett Packard Gets the Nod 
---------------------------- 
 
¶2.  (SBU) Hewlett Packard has become the first multinational 
company to win SAG approval to go ahead with an "equity 
equivalent" plan under the country's black economic 
empowerment (BEE) codes, according to Benni North, an HP 
official in Johannesburg.  He recently told Deputy Econ 
Counselor that HP will establish an HP Business Institute 
(HPBI) to develop information technology skills in South 
Africa's small- and medium-enterprise sectors.  HPBI plans to 
train 1,800 students and apprentices over the next 6-7 years. 
 The first tranche of learners will enter the program in 
February 2008.  HP announced the HPBI plan on August 27. 
 
¶3.  (SBU) North said that it took "quite a long time -- at 
least a year" for the HPBI proposal to win approval from the 
Department of Trade and Industry (DTI).  Officials in DTI's 
BEE division were "very reasonable," he said, but they lacked 
knowledge of business models and eventually had to call on 
expertise from other DTI departments.  Turnover at DTI also 
delayed approval.  North stressed that "HP has a good working 
relationship with DTI" and he predicted that future "equity 
equivalent" proposals would win speedier approval as DTI 
acquired more experience.  He noted, however, that some DTI 
officials still dislike the concept of "equity equivalent" 
schemes, even though they know they must comply with the law. 
 
---- 
Note 
---- 
 
¶4.  (U) Under the BEE Codes of Good Practice, companies are 
awarded BEE "points" according to their performance on seven 
separate dimensions of black empowerment, including black 
ownership of equity (reftel).  High-scoring companies then 
receive an advantage on bids for SAG contracts.  However, the 
Codes make an exception for multinational corporations, which 
can earn equity points through the use of customized BEE 
programs not actually involving black equity ownership. 
These "equity equivalent" schemes must have prior approval 
from DTI. 
 
¶5.  (SBU) The concession to multinationals was granted after 
foreign business lobbies (including the American Chamber of 
Commerce) argued that many multinationals have a strict 
global policy of owning 100 percent of their subsidiaries' 
equity, making it impossible for them to comply with the BEE 
equity mandates.  Although "equity equivalent" schemes were 
controversial when they were first proposed by the business 
community, they came to be seen by the SAG as a way to 
accommodate foreign investors without undermining racial 
transformation.  Multinationals are not exempt from other BEE 
requirements. 
Teitelbaum