[miningmx.com] — SANDILE Zungu, the well-known mining entrepreneur and chairman of the Ayigobi consortium, leapt to the defence of the consortium which is set to benefit from a R9.1bn broad-based black economic empowerment (BEE) deal with steelmaker, ArcelorMittal SA (Amsa).
Zungu in an interview with The World at Six, a business programme on Talk Radio 702 said on Tuesday evening that despite the public’s preconceived notions about the deal being born of political connections, it was nevertheless a legal one “that needed to be celebrated’.
“I am not a new player in the mining industry; nor are the people in the Ayigobi consortium,’ he said, adding that the partners had paid their dues and could add value to Amsa.
“Our role as a strategic partner should not be undermined,’ said Zungu.
The transaction, however, may fall foul of new proposals by the mineral resources department (DMR) intended to stop the ‘flipping up’ of assets in which empowerment firms, on receiving mineral rights, on-sell them almost immediately at a premium.
Zungu’s consortium has emerged as a constituent of Imperial Crown Trading (ICT) which was awarded a mining right over a portion of Sishen Iron Ore Company (SIOC), a right the DMR today ratified.
A week earlier, ArcelorMittal – whose lapsed rights over SIOC ICT had earlier applied for – offered to buy ICT in an R800m deal, itself part of Amsa’s R9.1bn empowerment transaction.
In the interview, Zungu was at pains to justify how the transaction was “broad-based BEE’ as stated in Amsa’s announcement last week.
Although a share trust representing 8,500 employees was part of the beneficiaries, the staff only held 5% of the 26% on offer.
The mining giant would only score about 4.95 points towards its BEE score card which was unlikely to significantly improve its compliance rating.
“The stake which the employees will hold must not be looked down upon,’ said Zungu.
But the cost of the stake, which Amsa will hand to the consortium, to trade under the subsidiary ‘Opco’, outweighs the immediate benefits the company will reap unless there is a silver lining.
Another criticism of the empowerment deal is that Amsa’s empowerment partners include the Indian-born Gupta family which has known close business links with President Jacob Zuma.
