Top steelmaker makes major BEE transaction
Mittal gives up 22% stake worth R2.3bn
AFORMER government-appointed commissioner, a development bank finance chief and a former deputy finance minister are on course to become major shareholders in ArcelorMittal SA (Amsa), taking a chunk out of billionaire Lakshmi Mittal’s stake in the continent’s largest steel maker.
Apportioning a 22% stake valued at R2.3-billion to black investors, employees and communities is a way for the struggling company to support the government’s strategy of boosting black South Africans’ ownership of the economy.
While Amsa says the black economic empowerment deal is “broad-based”, members of the country’s business elite will get 12% of its equity while workers and communities living near its operations will get less, sharing about 10%.
The producer scrapped a transaction in 2011 that would have benefited President Jacob Zuma’s son, Duduzane after opposition party and labour union criticism.
Black economic empowerment has been criticised for benefiting only a small, often politically connected elite rather than the wider population, where the average annual household income is R120 000.
After more than R600-billion of such deals took place from 1995 to 2013, Zuma’s government said it had to do more to redistribute wealth.
“BEE is a necessary evil in a country like SA to level the playing field, but the policy design is defective,” said Mzukisi Qobo, an associate professor at the University of Johannesburg.
“It encourages a gulf between the politically connected elites who benefit the most from these deals and the wider portion of South Africans.”
The steel producer will sell a 17% stake to Likamva Resources and provide the black-owned company with a loan to cover its cost, Amsa said on Wednesday.
The loan will be paid back through dividends over the next 10 years or through a higher share price. Should the company’s stock reach R27 per share after a decade, the whole loan would have been paid back, CEO Wim de Klerk said.
Likamva will distribute a 5% stake to local communities within two years. Employees will receive a further 5% stake through a separate trust.
“We wanted to partner with a consortium where it would not be – as it’s become known in the South African market – the ‘usual suspects’, where you are just perpetuating empowerment among certain regular participants,” Amsa chairman Mpho Makwana said.
The company carried out “robust due diligence” on all the investors, he said.
Mittal, worth $12.9-billion according to the Bloomberg billionaires index, is the biggest shareholder in Luxembourgbased ArcelorMittal, which in turn is the majority owner of Amsa.
ArcelorMittal’s stake will drop to 54% from 69% as a result of the BEE deal.
Amsa has asked for, and been granted, protection from cheap Chinese imports which has decimated earnings.
Amsa has not made a profit since 2010, and raised R4.5-billion from shareholders earlier this year.
Likamva started pursuing the deal with Amsa two and a half years ago, before the company said it intended to put one together, Noluthando Gosa said. — BDlive