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27 Sep 2011 11:10
ArcelorMittal South Africa, a unit of the world’s largest steelmaker, said it would not proceed with a much-criticised black economic empowerment deal after its conditions were not met.
The plan to sell 26% of its shares to black investors in a deal valued last year at R9.1-billion faced harsh criticism from the company’s shareholders for not being done in a transparent way and for favouring political elites.
ArcelorMittal said the parties negotiating the deal failed to extend their talks.
“Shareholders are advised that the parties involved in the black economic empowerment transaction have not agreed on an extension for the satisfaction of the conditions precedent and that the subscription and shareholders’ agreement has therefore lapsed,” the company said in a statement.
The proposed deal was linked to a dispute over iron ore supplies between ArcelorMittal and Kumba Iron Ore, a unit of global miner Anglo American, that has been dragging on for over a year.
Kumba and ArcelorMittal have been at loggerheads over a preferential iron ore supply deal since early 2010 after ArcelorMittal, which had mineral rights over a 21.4% stake in Kumba’s Sishen mine, failed to convert its rights as required by law.
Kumba has since argued that ArcelorMittal was no longer entitled to source iron ore at a discount. The dispute will be argued in arbitration next year.
‘Bribe of the political class’
After ArcelorMittal’s right lapsed, the government awarded little-known but politically connected Imperial Crown Trading (ICT) a prospecting right over that same stake.
ArcelorMittal then said it would buy ICT to regain its preferential deal with Kumba.
As part of its proposal to buy ICT, ArcelorMittal said it would sell about a quarter of itself to black investors, including ICT shareholders and President Jacob Zuma’s son.
Foreign investors and many South Africans have grown increasingly worried about the implementation of the black economic empowerment policy introduced in Africa’s biggest economy after apartheid ended in 1994.
The BEE policy is aimed at righting the economic wrongs of apartheid, but critics say all it has done is enrich some businessmen in a country where millions of black South Africans still live in poverty and over a quarter of the work force is jobless.
ArcelorMittal South Africa is a unit of Luxembourg-based ArcelorMittal South Africa.—Reuters
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