Wiseman Khuzwayo
ArcelorMittal SA’s “money-for-jam” BEE deal worth R9.1 billion would have been dead in the water had it gone ahead, because accusations of corruption would have caught the attention of the US anti-corruption authorities.
This is the opinion of a lawyer and anti-corruption expert, who wanted to remain anonymous because ArcelorMittal SA is a client of his firm.
He said the US department of justice would have had to scrutinise the transaction under the Foreign Corrupt Practices Act.
This prohibits US companies and citizens, foreign companies listed on a US stock exchange, or any person while in the US, from corruptly paying or offering to pay, directly or indirectly, money or anything of value to a foreign official to obtain or retain business.
ArcelorMittal SA’s global parent company is listed on the New York Stock Exchange.
There were howls of protest in South Africa when the deal was announced in August 2010.
The deal was considered corrupt because of the stakeholders in Ayigobi consortium, which consisted of players connected to President Jacob Zuma, either politically or through family.
“The justice department would have started looking at the transaction, once it was completed.
“I very much doubt the transaction would have passed the hurdle. The US authorities are now paying particular attention to corruption by companies operating in Africa,” the lawyer said.
ArcelorMittalSA spokesman Themba Hlengani admitted the BEE deal would probably have invited the scrutiny of US authorities because of the corruption attacks on the deal.
However, he remained tightlipped about why the parties aborted the transaction.
“Timelines were not met. We can’t say anything further, because we are bound by the confidentiality agreement we signed.”
Hlengani said ArcelorMittal SA still planned to go ahead with a BEE deal, with or without Ayigobi, because South Africa’s mining laws required this.
Ayigobi shareholders are Imperial Crown Trading (ICT), the politically connected entity that snatched prospecting rights for 21.4 percent of Kumba Iron Ore’s Sishen Mine from ArcelorMittal SA earlier this year; Oakbay Investments, owned by the Gupta family that is accused of influencing Zuma’s decisions by employing his daughter and son; and Mabengela Investments, owned by Zuma’s son, Duduzane, and Sandile Zungu, allegedly a confidant of the president.
The BEE transaction would have diluted the holdings of ArcelorMittal in the underlying operations of ArcelorMittal SA.
The irony of this is Zungu, the leader of the Ayigobi consortium that was to buy 21 percent of the giant steel maker, and who described the transaction to Business Report as “money for jam”, only to recant it later, said yesterday: “Certain conditions were not fulfilled within the timeline.
“As Ayigobi, we are quite happy the discussions have been terminated, because investors can’t trade under a cautionary for ever.”
The deal was criticised when it was announced by five of the steelmaker’s largest minority shareholders, including the Public Investment Corporation – South Africa’s biggest fund manager – and Sanlam.
Jagdish Parekh, a substantial shareholder in ICT and director of the Guptas’ Sahara Computers, referred questions about the unravelling of the transaction to Pamelo Sehumelo, ICT’s CE, who was not available.
The transaction is linked to ArcelorMittal SA buying ICT for R800 million for its prospecting rights in Sishen.
Hlengani said this acquisition is still going ahead despite a Kumba court challenge against the Department of Mineral Resources (DMR) decision to grant Sishen’s prospecting rights to ICT.
Sishen alleges ICT stole its mining-right application to make last-minute copies for its application. Imperial has denied the charge.
At the time of the announcement, ArcelorMittal SA chief executive Nonkululeko Nyembezi-Heita said: “We feel our acquisition of ICT is a prudent decision based on strong commercial grounds, given that the vertical integration is a crucial component of ArcelorMittal SA’s ability to remain competitive.”
ArcelorMittal SA wants the rights – which were taken away when it failed to apply for their conversion in 2009 – added to its present rights.
In July, the Hawks raided the ICT business premises, a house belonging to Sehumelo, and the DMR offices in Kimberley.
This happened after Kumba laid charges against ICT.
Kumba accuses ICT of fraud, alleging ICT’s application for a 21.4 percent stake in Sishen contains Sishen’s preamble in its application.
According to the Mail & Guardian, the Hawks claim to have unearthed more evidence to suggest ICT forged Sishen’s mining-rights application.
In August, ICT brought an urgent application at the Kimberley High Court to have all material the Hawks seized in the raids sealed and stored at the court registrar’s office.
In the latest round of court papers at the Kimberley High Court, relating to the raids of the ICT premises, the Hawks claim a land surveyor admitted receiving a manipulated copy of a title deed from ICT founder Sehunelo.
Sehunelo reportedly showed the surveyor the title deed after the date on which ICT claims it submitted its bona fide application to the DMR.
The newspaper says, if true, the land surveyor’s claim would discredit ICT’s assertion the manipulated documents originated from Sishen, and would suggest ICT was responsible for the forgeries.