Abstract
M.Comm.
This study of dividend rules and accounting issues relating to the payment of dividends, has now reached its conclusion. All that remains is to put the study in the South African context and to reflect on a number of new topics that may be researched on the issue of dividends. In the 1950's and the 1960's, the South African economy grew at a rate of 4,5% per year, which was in line with many other western economies. During the 1 970's, the South African Government's role in the economy increased dramatically under a burgeoning bureaucracy. Slow economic growth over this decade and the 1980's, caused South Africa to fall further behind its major trading partners. High inflation, poor productivity, a high population growth rate and a shortage of skilled manpower was the resultant effect (Manning, 1988:14). The collapse of apartheid and the dawning of the New South Africa during the 1990's have brought with it its own opportunities and challenges. The South African economy's most pressing reality now is its own sheer economic survival. South Africa is currently battling with a staggering unemployment rate of 40%, suffering a budget deficit amounting to 5% of its R118 billion gross domestic product and must compete on world markets with nations like Brazil, Chile, South Korea and Indonesia (Ogden, 1996:49). The issues that need to be addressed'are undoubtedly immense. The question then has to be asked if and how a study on dividends can make a difference. The fact, however, remains that the proverbial drops eventually fill an empty bucket. There are certainly no short-cuts if the country is to make a successful transformation to full economic maturity (Ogden, 1996:49). Share investments and dividends received by individual investors could go a long way in introducing new participants into the equity market that is one of the pillars of the South African economy. Equity ownership in South Africa need to be democratized and filtered down to the individuals of all population groups and income levels in order to reduce ethnic conflict, reduce economic disparity of population groups and contribute to development (Nyhonyha & Braithwaite, 1 996:8). The majority of the population would, however, need assistance in this regard. The empowerment of these individuals through information would be the starting point as discussed in paragraph 9.9.3.1. Apart form the information and training that should be provided, these individuals would also need financial assistance in some form in order to invest in shares and receive dividends. Employee share incentive schemes could be a valuable tool that could provide the majority of the economically active South African population, who currently do not have access to equity capital, with the means of ownership of a portion of the economy (Nyhonyha & Braithwaite, 1996:8). Employee share incentive ownership programs are urgently needed in South Africa. The excessive concentration of economic power in the hands of a small minority must be addressed (Nyhonyha & Braithwaite, 1996:8). Individuals who have previously not taken part in the formal economy need to be empowered in this way. Employee share incentive schemes normally take on the form of a scheme in terms of section 38 (2) (b) and section 38 (2) (c) of the Act (South Africa, 1 973). Section 38 (2) (b) allows for a scheme through which a trust receives assistance from a company in the form of money, for the subscription for or purchase of shares. The trustees may then purchase shares in the company or its holding company. The trustees will hold the shares for the benefit of the employees of the company, including any salaried director holding a salaried employ or office in the company (South Africa, 1973). Section 38 (2) (c) allows for a company to provide financial assistance to persons, other than directors, bona fide in the employment of the company with a view to enabling those persons to purchase or subscribe for shares of the company or its holding company to be held by themselves as owners (South Africa, 1973). There are, however, other ways through which individuals may invest on the JSE. This study of dividends, focused on a number of problems that may be encountered by small individual investors and in particular black investors who intend to invest on the JSE. Paragraph 7.4.6.1. highlighted a number of problems that these investors face and noted that their discretionary savings may be limited. In South Africa, more than 50% of the black population earns less than R300 a month (Nyhonyha & Braithwaite, 1996:8). The savings of potential investors as individuals, however, need not be mobilized. Programs for future investment on the JSE, can target stokvels. Research has shown that about 8 million people in urban townships belong to stokvels, exchanging more than R900 million a year (Anon., 1996:4). The market capitalization of black controlled companies on the JSE is currently R7,78 billion (Kobokoane, 1996:3).