Publication: Mail and Guardian Issued: Date: 2005-11-11 Reporter: Kevin Davie

Rich Pickings of the waBEEnzi

 

Publication 

Mail and Guardian
Date

2005-11-11

Reporter

Kevin Davie

Web Link

www.mg.co.za

 

Usual suspects in deals worth billions
 
It was another momentous week for South Africa’s waBenzi, as three major black empowerment deals were announced in the diamond, hotels and casinos and aerospace sectors. But the deals by De Beers, Sun International and Aerosud, two of them worth R4,2-billion, have poured fuel on the smouldering ­controversy around BEE.

Among the major concerns is the repeated appearance of the same beneficiaries in different deals, the fact that the politically connected receive the lion’s share, and that big business is using black economic empowerment (BEE) to cement cosy relationships with the government and its key officials.

Features of deals announced this week include a growing list of government officials who are major beneficiaries, continuing generous share allocations to members of the African National Congress’s national executive committee and highly unequal allocations between leading and ordinary members of BEE consortia.

Economist and consultant Duma Gqubule said that the blame for the trend should be put squarely on the private sector for “their cynical and calculated move to buy political influence” and protect themselves.

Gqubule said the biggest danger of this practice was that the ANC national executive committee would be stuffed with people who no longer gave priority to the needs of the poor, but to those of the private sector and the rich.

The three companies are dependent on licensing or contractual arrangements with the government for their existence:

Sun International has as a condition of its casino licence in the North West province that it facilitate the sale or transfer of not less than 5% of the equity of the company to empowerment entities.

Aerosud has said it benefited substantially in recent years from the industrial participation policy of the Department of Trade and Industry, which it has converted into sustainable contracts worth R4-billion over the next five years.
These contracts flow almost entirely from the offset obligations created by large state or parastatal aircraft purchases, notably SAA’s acquisition of Boeing passenger jets, and the defence force’s planned acquisition of a fleet of Airbus A400M military transport aircraft.

De Beers needs to meet the terms of the mining charter, whereby 26% of its equity must be black-owned for it to be able to convert its mining rights to new order rights. It is also lobbying against the imposition of a proposed 15% export tariff on rough diamonds, and will be substantially affected by the final size and shape of mineral royalties — it has priced an 8% royalty into the structure of its BEE deal.

Three government officials are beneficiaries of two deals announced this week. The head of communications in the Presidency, Murphy Morobe is a shareholder in Lereko, which has secured part of a 7% stake in Sun International.

Foreign Affairs spokesperson Ronnie Mamoepa and presidential adviser Titus Mafolo have been allocated 8% and 3% respectively of Phatsima, which has taken a 20% stake in Aerosud. Mafolo, who has landed two lucrative deals in a week, is also a shareholder in Lereko.

South Africa’s ambassador to The Netherlands, Hlengiwe Mkhize, is an existing shareholder of Aerosud, with an 8% stake.

Aerosud features in a R6,4-billion government deal to buy eight military transport aircraft from European aircraft giant, Airbus. The purchase means that two local manufacturers, Denel and Aerosud, will manufacture components worth R3,2-billion for Airbus.

A further concern is that the politically connected continue to dominate BEE transactions. Manne Dipico, Popo Molefe and Valli Moosa, members of the ANC’s national executive committee, its top ­decision-making body, feature in two of this week’s deals.

In addition, Max Sisulu, an executive director and general manager at Sasol, is a beneficiary of the Aerosud deal. Sisulu chairs the ANC’s economic transformation committee.

And Cheryl Carolus, formerly ambassador to Britain, gets a 4% stake in De Beers Consolidated Mining, a 100% subsidiary of De Beers, housing its South African operations.

Analysis of the deals shows that the share allocation continues to be highly unequal between high-profile and rank-and-file BEE beneficiaries.

Dipico, with a R342-million stake in De Beers’ South African operations, gets 4 600 times that of an ordinary employee beneficiary in De Beers deal. Just seven people — Dipico, Barend Petersen, Moss Mashishi, Carolus, Wendy Lucas-Bull, Dolly Mokgatle and Thandi Orleyn — get R1-billion of De Beers’ R3,8-billion allocation.

In the Aerosud deal, just four people — Herman Mashaba (54%), Mamoepa (8%), Mafolo (3%) and Sisulu (3%) — get 68% of the BEE allocation. Mkhize’s 8% stake brings Aerosud’s BEE shareholding to 28%.

Heightening the risk of conflicting interests is the fact that state-owned or state-controlled entities feature in two of the three deals.

The Public Investment Corporation sold the 7% stake worth R392-million in Sun International to Dinokana, in which Lereko is the lead investor with a 28,05% stake.
At the same time, the Industrial Development Corporation sold its 20% holding in Aerosud to Phatsima. The value of the stake has not been disclosed.

Dipico and Molefe are former premiers of the Northern Cape and North West provinces respectively, while Moosa is a former Cabinet minister. Lulu Gwagwa, a lead investor with Molefe and Moosa in Lereko, is formerly deputy director general of public works.

Lereko’s principal empowerment deal to date, before Sun International, was the 7,5% stake it took in Imperial. The consortium’s website details its other investors as Eric Molobi, Monhla Hlahla, Seth Phalatse and Tsheko Ratsheko.

Meanwhile, former communications director general Andile Ngcaba appears set to grow his telecommunications empire through the probable purchase by Dimension Data of a controlling stake in Plessey from Worldwide.

Worldwide has told the M&G that it intends selling the 51% stake, as it wants to focus on the energy sector.

Dimenson Data, which has Ngcaba as a 26% empowerment investor, owns 49% of Plessey and has a pre-emptive right to the other 51%. A deal is understood to be imminent. It is unclear whether Ngcaba will take a direct stake in Plessey.

While controversy has been growing around empowerment, mainly because a few high-profile individuals have featured in so many deals, the Aerosud and Sun International deals break new ground in that the beneficiaries include government officials, Mamoepa and Mafolo, and Morobe, respectively.

Previous deals have allocated stakes to ANC office bearers, including ANC Secretary General Kgalema Motlanthe, who landed 7% of Pamodzi, and Smuts Ngonyama, who got an undisclosed stake in Telkom, as part of the Elephant consortium.

Moosa, Molefe and Dipico are ANC national executive committee members, joining NEC members Saki Macozoma and Cyril Ramaphosa, who have notched up a string of BEE deals.

A nexus appears to be emerging, with some of the BEE beneficiaries popping up in multiple BEE companies. Titus Mafolo has stakes in both Phatsima (Aerosud) and Lereko (Sun International).

Dipico, lead beneficiary in Ponahalo Investment Holdings, which has a 50% stake in Ponahalo, which in turn has 26% of De Beers Consolidated Mines, is a co-investor in Pamodzi with Motlanthe.

A growing empire
Former communications director general Andile Ngcaba looks set to up his stake in the information and communication technologies (ICT) sector, writes Lloyd Gedye.

Worldwide African Investment Holdings has announced that it will sell its 51% stake in Plessey South Africa, which it jointly purchased for R1,6-billion with Dimension Data Africa (DiData) in 1998.

DiData is 75% owned by Dimension Data Plc and 25% by an empowerment consortium lead by Ngcaba. Dimension Data, which owns 49% of Plessey, has pre-emptive rights on Worldwide’s 51% stake.

Kevin Handlesman, of DiData investor relations, confirmed that the company held pre-emptive rights, but said it was currently in a closed period before its results were announced and could not comment.

Analysts told the Mail & Guardian this week that it was likely that Dimension Data Africa would purchase the stake, but reiterated that a deal was always dependent on price.

An analyst said that Ngcaba had shown his ability to open certain doors and it would probably make sense for DiData to involve him in a possible Plessey deal.

However, he added: “I am concerned that this brings him into a greater conflict of interest situation due to his shares in Telkom.” Plessey South Africa is a key supplier to Telkom.

In May this year Ngcaba concluded a deal with the Public Investment Corporation in which the Elephant consortium bought a 10,1% stake in Telkom, paying for it over five years.

Ngcaba is thought to have secured a 1,15% stake in Telkom for himself, worth R887-million at current prices.

Another analyst said that if Dimension Data was to exercise its pre-emptive right, Ngcaba would be involved either through his stake in Dimension Data Africa or directly in Plessey SA. The analyst said the deal would offer Dimension Data a simplified structure and access to Plessey’s cash flow.

Ngcaba’s personal assistant told the M&G that he was on leave. Attempts to contact him on his cellphone were unsuccessful.

With acknowledgements to Kevin Davie and Mail and Guardian.


Arms and Empowerment - Cadres Cash In

Publication : Financial Mail
Date : 2001-05-04
Reporter : Ferial Haffajee
Web Links :
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But it soon became clear that certain empowerment companies and partners were favoured above others, says Richard Young, MD of C²I² Systems. He says black empowerment was zero-rated in the final stages of the bidding. His company lost out on a R38m information management system contract for the corvette combat suites to a Thomson-CSF subsidiary, Detexis, even though he had an empowerment plan in place.
"I have no problem with true empowerment," says Young, "but major capital acquisition programmes need to follow transparent and rigorous tender processes, not ad hoc ones as was the case. What concerns me is that the defence industry is being manipulated out of local hands into foreign hands. These foreign companies in turn partner with selected empowerment companies." These selected companies, he avers, all have links to the ruling ANC - links he has painstakingly plotted.

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