The unbundling of Johannesburg Consolidated investments has been a damp squib. Reg Rumney reports
The unbundling of Johannesburg Consolidated Investments into three, separate and more focused companies has been received with little enthusiasm.
It was announced this week that JCI would be split into three separately listed companies on May 15:
* Anglo American Platinum will retain the crown jewels of the original JCI, holding the platinum and unlisted diamond investments.
Anglo will keep its hands firmly on Amplats.
* JCI Ltd, a mining finance house, will have investments in gold, coal, ferrochrome, base metals mining and mining investments.
It will hold 10 percent of Amplats, and interests in Societe Anonyme de Minerais, Johnson Matthey, and De
* Johnnic, an industrial finance company, will control Omni Media, with its newspaper and printing businesses, and have strategic holdings in the South African Breweries conglomerate, food company Premier, and motor manufacturer Toyota, as well as property.
The market was lukewarm after the announcement.
On Tuesday the share price of JCI on the Johannesburg Stock Exchange at R96 had moved up
2,7 percent on the previous day but was still well below the 12-month high of R122. Moreover, R96 is still a 25 percent discount to net asset value per share as at end-December 1994.
The split is also viewed as less clean than it could have been. Amplats is the platinum mining company. Yet JCI Ltd, which will house the gold and other mining investments retains a 10 percent interest in Amplats, and 9,9 percent of platinum company Johnson Matthey.
Also, JCI chairman Pat Retief becomes chairman of all three companies, raising issues of conflict of
JCI group consultant, strategic and public affairs, Nick Segal said that this was in theory correct.
However, in practice it would not work that way he said, hinting that Retief would be out of the picture by the time any competition between the two companies
While at least one market analyst has called the unbundling politically correct, the reaction of black business investors is yet to be gauged.
The split is intended by owners Anglo American and De Beers to aid black economic empowerment. What they are supposed to have in mind is something along the lines of the deal that led to the creation of the Afrikaner mining house that became Gencor.
JCI chairman Pat Retief said this week that the new investors which would take over the majority stakes in the two unbundled companies Johnnic and JCI Ltd would have to be acceptable to Johnnies management as well as to the minority shareholders. And the new investors would have to represent a broad spectrum of black
This is a tall order, made taller still by the high price of investing even in the unbundled companies.
At a price of R600-million or so for a reasonable stake in either of the two companies available for investment, few groups will be able to make the grade.
Both JCI Ltd and Johnnic have assets worth more than R6-billion each.
Real Africa is a possible investor. Real Africa Group chairman Don Ncube made it clear this week at a Press conference the group was exploring many avenues for investment, including mining.
However, Real Africa will have nothing like that kind of cash soon, even after its March 22 listing. Ncube also emphasised Real Africa would not be swayed by the Real Africa investors from investing in any company which offered good returns, even if it was unpopular with, say, the union movement.
“When we invest we bring about change,” said Ncube. But he added that the group was not philanthropic in its intent, and acted on commercial considerations in the interests of shareholders.
It is ironic that shareholders of Real Africa include union pension funds and in one case the union itself, through the South African Clothing and Textile Workers’ Union investment arm Sactwu Investments.
The union-controlled Community Growth Fund socially responsible unit trust has turned down JCI as an investment precisely because of what it sees as below- par treatment of labour at JCI mines.
Both the Real Africa listing and JCI unbundling are unlikely to impress the union movement.
CGF adviser Anthony Asher notes: “My own feeling is that selling businesses to black businessmen is a small step but one can’t call it black empowerment.
“I would measure black empowerment by the effect on distribution of income.”
And this kind of move he believes will not have much impact on redistributing income.