Conrad Mwanawashe Business Reporter
Delta Corporation says taxing capital gains from the sale of shares acquired under share option schemes is inconsistent with the indigenisation and empowerment thrust.
Giving oral evidence before the Parliamentary Committee on Indigenisation and Empowerment, Delta chief executive Mr Pearson Gowero said the company’s employees had so far paid about $7,1 million in PAYE with respect to capital appreciation of the shares.
He said Delta has so far issued a total of 120 million shares to staff under the share schemes since 2009. This represents 10 percent of Delta’s current issued shares. Currently 33 percent of the issued shares in the $1,6 billion beverages manufacturer is considered indigenous.
“About 50-60 percent of the shares are sold to cover the purchase cost and 20 percent to cover PAYE. Any capital gain from sale of the shares of above $240 000 attracts PAYE at 51,5 percent. This appears to be inconsistent with the indigenisation and empowerment thrust,” said Mr Gowero.
“It has been recommended that share option schemes, just like employee share ownership schemes, should be considered for tax exemption as they promote both indigenisation and employee empowerment,” he added.
Indigenous Zimbabweans need a minimum of $300 million to pay for the 18 percent that is required to achieve the mandatory 51 percent shareholding under the indigenisation and employee empowerment schemes.
“The Government entities do not have capacity to purchase significant shareholding in Delta. We have periodically advised NSSA as and when significant parcels of shares are available for sale,” Mr Gowero said.
The Delta CEO noted that qualifying shareholding has decreased due to reasons which include the sale of POSB shareholding in 2009 to foreigners -2,5 percent, reduction in Old Mutual shareholding to 14 percent from 28 percent, employee trust shares sold -1,5 percent, individual employees share sales -3 percent; equivalent shares sold to fund PAYE -1,5 percent.
This represents a total of 22,5 percent shares movement from locals to foreigners.
“This demonstrates that the 51 percent indigenous shareholding remains elusive and can only be met at a specific point in time. This is typical of all listed entities,” said Gowero.
Once empowered through the share schemes, most employees prefer to sell the shares for cash to fund their personal needs.
“The company has no control on how the employees deal with the shares they would have acquired through these schemes. Shares that are listed on the stock market are freely tradeable.
“Foreign shareholders are allowed to buy shares on the ZSE subject to the limits placed by the Exchange Control Act. There is no provision to reverse specific shares to indigenous buyers; neither is this desirable as it would create distortions in the capital values of the companies,” said Mr Gowero.
Between April 1 2009 and March 31 2014 beverages manufacturer has so far realised $2,5 billion in revenue and paid $832 million to the Government towards various taxes.
The taxes chewed 33 percent of the company’s revenues during the period under review. It paid dividends of about $128 million, which is five percent of revenue and invested $353 million in capital projects -14 percent of revenue during the period under review.
The company has paid in excess of $200 million to purchase locally produced agricultural products since 2009. In 2013 alone Delta purchased 47 000 tonnes of barley from local farmers and invested between $50 million -$60 million supporting farmers who produce specific agric products.
Delta’s top 20 shareholders include Stanbic Nominees, SABMiller Zimbabwe B.V, Rainier Incorporated (SABMiller), Old Mutual Life Assurance Co. Zim, Old Mutual Zimbabwe, Standard Chartered Nominees, Browning Investments NV (SABMiller) NSSA and the Delta Employee Participation Trust Company, among others.