2005-11-14,+Manne+and+Nicky



City Press, Johannesburg, 12/11/2005 17:35 - (SA) = De Beers deal not sparkling yet =

SIYABULELA QOZA

"HELLO shareholder!"

This is how workers at the head office of diamond giant De Beers greeted one another on Wednesday morning.

It came a day after the company announced it was selling 26 percent of its seven local mines to Ponahalo for R3,8 billion. Ponahalo is a consortium led by ANC national executive committee member and former Northern Cape Premier Manne Dipico.

Dipico, who worked at the De Beers mine earlier in his career, will not find much joy in having to be part of a decision on the workers of the Koffiefontein mine.

Ponahalo is joining De Beers at a time when the company is looking at selling or closing the mine by Christmas.

Jonathan Oppenheimer, managing director of De Beers Consolidated Mines (DBCM) which house the businesses Ponahalo is buying into, said the company had a short-list of interested investors.

He said DBCM would have to close the mine if it could not sell the mine because it was expensive to run on their cost structures.

At the beginning of the year, De Beers said five of the mines were budgeted to make a loss this year. Oppenheimer said this week that the re-engineering of the business this year left only Cullinan in the sick bay, excluding what will happen at Koffiefontein.

He said the mines were 20 percent ahead of the business plan. Oppenheimer said the "healthy" mines had at least 15 years of operation left. Ponahalo expects to pay off its debt in 10 years.

Having to make a decision on the workers, who are also his partners, will rest uneasily on Dipico who said he got into business and this specific deal to contribute to sustainable job creation and employment in the Northern Cape and labour-sending areas.

The first R15 million of dividends will be used by Ponahalo to start economic activity in areas where De Beers mining is dying and for social responsibility. Oppenheimer said the workers were included in the consortium because the family "owed a duty to those who put us in a privilleged position".

Dipico and the DBCM are finalising the rules of how they are going to engage each other.

As part of the deal, Dipico moves to the Crown Mines, Johannesburg, office where his title is still being considered.

He said he would be involved in the strategy formulation and operations. He will also assume a board position.

Another detail Ponahalo is deciding on is how it will give its female and worker partners a hearing at board level.

Other pressing matters for Ponahalo will be how to raise the money required for the acquisition as Dipico starts a site visit of the mines to conclude the due diligence exercise.

Ponahalo and De Beers will be engaging banks for the financing of the deal.

The deal excludes Diamdel, the local rough diamond-selling arm of De Beers.

Oppenheimer said this business was left out because it was a non-profit-making entity that supplied diamonds to the local cutting and polishing industries.

The deal also received mixed reactions from observers.

In some quarters, it was hailed as a breath of fresh air because it introduced new entrepreneurs in Dipico, businesswomen Cheryl Carolus, Dolly Mokgatle, Wendy Lucas-Bull and Thandi Orleyn.

In others, it was criticised for its apparent empowering of people who were close to the ANC.

"If the path to economic glory is via a political office, we are setting a bad precedent," said long-time diamond entrepreneur McDonald Temane of the Masingita group. He said it would be worse if businesses that chose political heavyweights as partners, would later complain that the deals were not working.

Another analyst, who did not want to be quoted, said maybe the weighting of black ownership in the BEE Codes of Good Practice and industry charters needed to be reduced.

It will be interesting to see what the deal looks like when the financing agreements are finalised by the end of next month as expected by partners.

Some workers may not even be shareholders.

From: http://www.news24.com/City_Press/Finance/0,,186-246_1833302,00.html