Original publish date – Thu, 19 Aug 2010 06:47:33 +0000, Keith
The Business Report has conducted an interview with Sandile Zungu, a well known businessman and partner in the ArcelorMittal deal. He is also a member of the BEE Council.
Some of the questions asked of him was:
BR: Some of the BEE score agencies rate it as not a particularly good deal with low scores.
SZ: I suspect that they have jumped the gun, in terms of the value in empowerment hands. I doubt there are many deals that would surpass this one. Number one, the empowerment shareholders, in terms of how the deal has been structured, is guaranteed the minimum returns. And most of the empowerment deals there is almost like speculation as to in five years’ time, in seven years’ time, how much money am I going to make? When the share price collapses, a deal that was deep in the money suddenly is getting wrecked. We have removed that uncertainty in this transaction. And I think that’s a very positive attribute, so it’s very empowering. I think also we have a further share in the upside in the share price of ArcelorMittal as it goes up, and we expect it to go up, of course up to a certain cap. We’ve agreed to that. But there’s further upside and that’s very important for empowerment, and therefore it’s a very empowering deal. Now the people who have actually gone further to score it using the balanced score card, I suspect they have jumped the gun in my opinion. Because a balanced scorecard would want to explore the issues of contribution towards (indistinct)… We want to explore the issues of skills development, management control. I’m not so sure how those have done that without having spoken to us as Ayigobi as well as the management of ArcelorMittal.
BR: Have you done your own scorecard or had it done on your behalf?
SZ: The transaction is not completed, that’s the problem. As ArcelorMittal has indicated, they have only now just commissioned a rating agency to do their scoring. This thing is not an overnight thing, it’s a process, and in the fullness of time I think people will be very pleased indeed that this transaction would score highly.
Our comment as the BEE consultancy that broke this story:
Yes, of course we did a quick assessment. It’s not jumping the gun, but doing a quick analysis, in the interests of B-BBEE and the shareholders.
What continues to give us concern is that ArcelorMittal did not evaluate the deal BEFORE signing it, to maximise the points. To state that they have now called in a rating agency is of course the wrong organisation to call in. A verification agency’s job is to verify the points earned, not award and calculate the points for them. They should have done this already! The Verification Manual repeatedly mentions that the task of the verification agency is to RE-CALCULATE the score, clearly implying that the measured entity should have a score, and evidence or suitable documentation to justify that score. If they don’t then zero points must be allocated or else they could be accused of fronting!
The most concerning part is Mr Zungu is a member of the BEE Council, and should know all this.