Tebello Radebe
Extensive new capital investments in South Africa have been part of lengthy discussions between the Japanese giant, Toyota Motor Corporation (TMC) and its local affiliate, Toyota South Africa (TSA), which has become embroiled in a controversy over the National Empowerment Consortium (NEC) bid for Anglo’s stake in Johnnic.
Asked again this week to shed more light on TMC’s possible investment plans in South Africa, Tokyo representative Keith Truelove told the Mail & Guardian that “we [TMC] cannot make any comments now; we are looking into the matter”.
But, according to confidential minutes of meetings held in Japan in May, the car giant has been considering major investments in South Africa for some time. However, it may not have been able to do so because of the possible negative repercussions for local investors and the reputation of local management.
TMC first indicated more than a year ago that it was interested in buying up about 12% in TSA as well as exploring the possible establishment of a major plastics plant, including extensive improvements to the Toyota plant in Prospecton, Durban. Since then, TMC has expressed its desire for no less than 25% of TSA.
But among the fears over TMC’s investment plans is that it would have cut the 50 % stake held by the family of the late founder, Albert Wessels, in TSA’s holding company, Wesco. This would have led to a delisting of Wesco on the Johannesburg Stock Exchange, which in turn would have led to institutional investors selling their shares.
Another option that was ruled out was a possible 25% rights issue. It was given the thumbs down because the funding requirements of TSA do not justify such an investment “which must show tangible growth expectations. If merely normal business is carried on, such an investment would also give a negative sign that management cannot manage their business profitably and needs capital injections to keep going,” states the confidential document.
In the wake of plans by Anglo American to sell Johnnic to the NEC, the Japanese group has been urged to invest in TSA via the 21,7% stake in TSA held by Johnnic, worth more than R230-million.
This has unleashed a stormy debate, with Dr Nthato Motlana, head of New Africa Investments Limited, part of the NEC, saying “it will be interesting to see whether Anglo will sell off TSA separately since they have offered Johnnic to us as a package”.