ArcelorMittal South Africa ( Amsa), the countr y ’ s biggest steel producer, has received bids from empowerment consortiums as it faces increasing pressure to improve its BEE ratings to benefit from state procurement spending.
One broad-based black empowerment consortium made an of f er to t he ArcelorMittal Group to buy its stake of nearly 47% in Amsa in June and again in September. Documents seen by show the involvement of one of S A’ s leading investment banks, which s e n t a representative to London in June to discuss the offer in person with Sudhir Maheshwari , who heads mergers and acquisitions and sits on the ArcelorMittal Group board.
The offer was declined, but it is understood that the consortium remains interested in
BY JANA MARAIS acquiring a 26% empowerment stake in Amsa. Its bid enjoys strong support from the department of trade and industry, which has long had a fraught relationship with ArcelorMittal over pricing, a person involved with the matter said.
“A stake of 10% will do nothing – they won’t be able to effect any change. What they’d like is if the combined stakes of the consortium, I DC [with 7. 9%] and PIC [7.35%] are more than 40% altogether. A block of 40% can’t be i gnored by Mittal,” the source said, referring to head office in London, which controls t he l ocal business and earns substantial management fees even when the company is reporting l osses. The consortium has f unds available and also wants to i nvest substantially i n ArcelorMittal’s ageing Vanderbijlpark plant, bid documents show.
ArcelorMittal said that it will address the ownership issue “at a later stage” and that it is not engaging with any parties regarding a BEE deal at present.
Amsa, which last reported an annual profit in 2010, is currently ranked as a Level 7 BEE contributor, s cori ng zero on ownership, employment equity and enterprise development, a ccording t o a verif i c ati on cer t i f i c ate on i t s website that i s valid until December.
“It is a strategic imperative for Amsa to improve its B-BBEE rating. Under the leadership of the CEO, we have set up a specific B-BBEE committee to address the issue from the bottom up as a matter of urgency. This means that the pillars of procurement, enterprise development, employment equity and skills development are being prioritised,” says spokeswoman Kesebone Maema.
The s t e e l maker has been l obbying to benefit f rom the state’s preferential procurement programme, as i nfrastructure spending is a major contributor to sales. Paul O’Flaherty, who took over as CEO in July, said in October that he wants import duties to be introduced on Chinese steel.
A ms a is also lobbying t he I ndustrial Development Corporation (IDC) over its plans to build a new steel plant i n the country with China’s Hebei I ron & Steel Co., a move the s teelmaker s ays will l ead to further overcapacity in the local market. Taking steps to address its dismal empowerment status will be crucial to get government support for its various lobbying efforts to increase protection in