Applying employee share-ownership schemes as a transformation mechanism aimed at decreasing poverty levels in South Africa : a comparative socio-legal perspective

Abstract

In South Africa, the black majority suffered socially and economically during the apartheid government. The effects of the apartheid government are still evident today in South African societies, as millions of South Africans do not have daily access to the most basic resources such as food, water, health care and accommodation. Hence, this thesis explores the possibility of applying employee share-ownership plans to alleviate poverty in South Africa. The administration of Employee Share-Ownership Plans (ESOPs) is regulated by sections 96 (1) (c) and 97 of the Companies Act 71 of 2008. This thesis indicates that though ESOPs have the potential to alleviate poverty, they are under-utilised in South Africa. ESOPs are one of the powerful mechanisms that can be employed in fighting poverty in South Africa. What make ESOPs so powerful is the fact that they can be tailored for employees of any type of company. A financially healthy company can implement ESOPs by transferring share ownership to its employees. This can be done by issuing unissued shares within the company’s authorised capital and providing financial assistance for purchase considerations, where necessary. Furthermore, companies may also repurchase already issued shares and then re-issue them to employees, as necessary. A company in financial distress can rely on Corporate Law reforms such as business rescue to restructure the business and subsequently implement ESOPs. A terminally ill company can sell the realised assets to employees to allow employees to start an ESOP. The thesis demonstrates that ESOPs cannot be effective in fighting poverty without capital growth, and thus, the government’s involvement through policy changes and financial aid could enable the effective implementation of ESOPs. Though various economic theories have been advanced for economic growth, the thesis supports Kelso’s view of binary economics, where employees rely on capitalism and capital ownership.