2005-11-12,+Piercing+the+veil+over+diamonds+and+gold,+Letters,+B+Day

Business Day, Johannesburg, Letters, 11 November 2005 = Diamond dogs =

What will go down in history is not De Beers’ black economic empowerment deal, but the Oppenheimer family’s systematic distortion of how committed the company actually is to SA.

De Beers places itself as the “wellspring” of SA’s industrial revolution, as though the discovery of mineral wealth is a mere footnote. Then for the next 170 years it accumulates wealth and exploits African labour under the protection of a repressive white regime.

Shortly after Nelson Mandela’s release, nervous about nationalisation, De Beers shifts its non-South African operations to Switzerland. Immediately after the 1994 assumption of power by the black majority, it registers its South African operations abroad and ships its warehouse of diamonds off to England.

And now it sells 26% of its South African concerns to black politicians, thereby converting that share into cash — also for export presumably — and sets itself up for another round of extraction and exploitation of Africa’s mineral wealth.

The deal is dressed to look like a correction of past wrongs and of being developmental. It is actually about securing De Beers against prospects of future nationalisation and royalty payments.

Nicky Oppenheimer abandoned SA, and so it will go down in my, and eventually all, history. Similarly, contributions to building SA by Manne Dipico, Cheryl Carolus and their likes, will be rewritten to show just how they placed selves before country.

Cape Town**
 * J Kuhn

From: http://www.businessday.co.za/articles/opinion.aspx?ID=BD4A111782

Business Day, Johannesburg, Letters, 11 November 2005 = De Beers hides sickening truth =

Another day, another sickening black economic empowerment transaction. The latest deal “truly making diamonds SA’s best friend” is trumpeted as the best one, lauded by the minerals and energy minister as being “without the usual suspects” — the only shining light of the deal.

The formal announcement, littered with the usual tombstones of financial and legal advisers who dream up these deals to evade Companies Act provisions — that prohibit companies providing financial assistance to acquire their own shares — is crafted to provide as little substance as possible on how the deal involving a 26% equity stake valued at R3,8bn is to be financed.

The announcement on financing contains 39 words which say nothing. Of course this is by design — to obfuscate the fact that the equity stake is financed by way of a loan that will be serviced out of the company’s own dividend flows.

De Beers has shackled its current and future directors to declaring and paying dividends, irrespective of the company’s financial position, in order to allow the black economic empowerment consortium to fund its debts.

How can a company be held to ransom to pay for its own shares? How is it possible that future directors will have no alternative but to declare dividends, irrespective of the company’s financial position, so as to prevent the company’s equity from being impaired? This is common to most empowerment deals.

The announcement is also unclear as to whether the deal involves a sale or issue of new equity. De Beers appears ready to spend the cash, however.

While the ideals of empowerment transactions are to be commended, the nature of the transactions will inevitably weaken the companies’ capital strength.

Capital remains the foundation on which companies are built – that’s why capital has to be fully paid up and cannot be financed by the company itself.

Johannesburg**
 * Pierce de Veil

From: http://www.businessday.co.za/articles/opinion.aspx?ID=BD4A111707