Johnnic: A long way to go
A firm proposal on the Johnnic deal is yet to be made, despite a deal between Nail and the NEC. Madeleine Wackernagel and Jacquie Golding-Duffy report on the progress so far
To judge by the media frenzy sparked by Cyril Ramaphosa’s entry into business, the deal between Anglo-American and the National Empowerment Consortium (NEC)—- with New Africa Investments (Nail) on board—- is all sewn up, and Ramaphosa has been chosen as the natural leader of the new-look Johnnic.
Nothing could be further from the truth, say NEC insiders.
First, the conditions under which Dr Nthato Motlana’s Nail joins the business half of the NEC have yet to be completely finalised.
An agreement should be reached by early next week. And the NEC is at pains to make clear that no one group will dominate. Says Tommy Oliphant, joint chairman with Wiseman Nkuhlu: “No one party will have more than 20% control, either among the black business element or the union bloc, which are equal partners.”
Although the largest trade unions in the country have agreed in principle to back the bid, most of the unions have yet to canvass their members and get official mandates at grassroots level, union sources say.
Second, the manner in which Ramaphosa’s appointment as joint deputy chairman of Nail was announced has ruffled some NEC feathers, although this negative sentiment should not hinder the whole consortium’s negotiations with Anglo.
Many small black business groupings within the NEC felt the photo-call with President Nelson Mandela and Motlana last weekend gave the unwelcome impression that Nail had the president’s blessing—- and by implication, that of the African National Congress and government—- in the Johnnic deal, making it a virtual fait accompli.
Third, the figure of R4-billion being bandied about for the 48% stake in Johnnic owned by Anglo and De Beers is “unrealistic”, being based on the market capitalisation of Johnnic at a R54 share price. But, said a union source: “We just don’t have that kind of money. We are looking for a realistic deal; amounts of this magnitude are not feasible.”
Besides, says Jenny Cargill, director of BusinessMap South Africa, in all the discussions between the NEC and Anglo, only a figure of 34,9% was mooted, as this is the maximum permitted under stock exchange regulations before an offer has to be made to all shareholders.
Anglo and the bidding partners would not comment on how the deal would be structured, or on the financing arrangements. But, according to Anglo’s Michael Spicer, a firm proposal is some way off; formal negotiations are not even under way at present.
The money from the unions—- including the National Union of Mineworkers (NUM), the South African Commercial, Catering and Allied Workers Union (Saccawu), the South African Clothing and Textile Workers Union (Sactwu) and the South African Railway and Harbours Workers’ Union—- will be cashed from membership fees, pension and provident funds.
Saccawu president Setena Khaile says: “It is only right that we obtain a proper and representative mandate from our workers before moving ahead. Workers must understand where we are taking the money from and the plans to become shareholders have to be discussed with all relevant parties.”
NUM general secretary Kgalema Motlanthi said the union had agreed in principle to back the NEC bid. “Any investment is done in the interest of workers and we hope they will reap returns from all our endeavours. The union does not benefit, but hopefully its members will reap some returns from our investments and those returns get put in the members’ kitty and not into the union’s funds.”
Oliphant says the group would have to negotiate some form of discount with Anglo. In the light of the sharp increase in Johnnic’s share price in the past year, the bidding alignment is under pressure to secure a lock- out period while the deal is finalised and funding raised.
NEC sources are adamant it could have gone ahead with the bid alone—- and, indeed, was on the verge of tying things up when Nail applied to join the consortium. But having Nail on board gives the group more clout and increased bargaining power with Anglo. Fears of Motlana taking over the proceedings have been exaggerated, it says; Ramaphosa’s involvement will see to that. Indeed, commentators see his position as a positive one, helping to bring together the disparate negotiators and facilitating the deal.
Ramaphosa’s role at Johnnic post-bid is still in question. Chief executive Vaughan Bray has said he is willing to stay on for an initial period, or longer, but will accept whatever the majority shareholders decide. But with three positions to fill—- chair, deputy chair, and chief executive—- there is sure to be space for all talented high-flyers.