2005-11-10,+Big+BEE+for+Dipico,+Carolus,+Orlyn+and+others

Business Day, Johannesburg, 09 November 2005 = State, unions welcome De Beers’ BEE deal = Charlotte Mathews

Resources Editor

DE BEERS yesterday unveiled its long-awaited empowerment deal, with the proposed sale of a R3,8bn stake in its South African business to a group including African National Congress (ANC) heavyweights Manne Dipico and Cheryl Carolus.

Government and trade union leaders welcomed the deal, saying its beneficiaries were not the “usual suspects” that gained from high-profile empowerment deals.

De Beers has long been castigated by government for its failure to transform, and yesterday’s announcement, together with last month’s appointment of David Noko as the first black MD of its local operations, will help it comply with its charter targets.

De Beers is the last of SA’s big mining houses to do an empowerment deal.

Financing for the deal was not yet in place, but according to outgoing De Beers Consolidated Mines (DBCM) MD Jonathan Oppenheimer the company intended to provide “meaningful financial facilitation” to ensure the transaction was sustainable.

De Beers will sell 26% of DBCM to a newly formed company called Ponahalo at R3,8bn, valuing the whole company at R14,6bn. Ponahalo is 50%-owned by DBCM employees and pensioners while the other 50% belongs to Ponahalo Investment Holdings (PIH) — which is headed by former Northern Cape premier Manne Dipico and includes South African Sports Confederation and Olympic Committee head Moss Mashishi, deputy chairman of SizweNtsaluba VSP Barend Peterson and women’s investment company Peotona.

Prominent businesswomen Cheryl Carolus, Dolly Mokgatle, Wendy Lucas-Bull and Thandi Orleyn own Peotona.

Carolus is a former deputy secretary-general of the ANC, while Dipico worked for De Beers early in his career and was regional organiser for the National Union of Mineworkers in Northern Cape. He chairs the ANC’s organising committee for local government elections.

As chairman of Ponahalo he will become deputy chairman of DBCM and serve on the company’s executive committee. Ponahalo will also nominate two others to serve on DBCM’s board.

Dipico said he was elected by the ANC’s national executive committee, and would serve out his term of office through to 2007.

DBCM’s 9600 current employees and 8700 pensioners will own 35% of Ponahalo, with their interest in the trust allocated equally regardless of race, seniority or length of service. They will not have to make any cash contribution.

Another 15% of Ponahalo will be owned by the Key Employee Trust, which will consist of selected current and future key employees primarily from historically disadvantaged backgrounds, who will also not have to pay for their interest.

Minerals and Energy Minister Lindiwe Hendricks said at a ceremony to mark the deal yesterday that there would be an immediate benefit to DBCM’s new partners and the communities involved, but more important to her was that the deal did not involve what had been termed in some quarters “the usual suspects”.

National Union of Mineworkers general secretary Gwede Mantashe said in a statement: “The union can objectively say that this deal, in contrast to the other highly acclaimed so-called BEE ones … is by far the better one. It is without the usual suspects. Diamond mineworkers, past and present, are beneficiaries.

“The only thing that spoils the apple pie is the 15% that De Beers claims will be set aside for some fashionable group called key employees,” he said. The problem with the “key employees” was that it could lead to the company patronising certain sections of the workforce.

Asked to respond to the NUM’s concerns, Dipico said there had been discussions with the union, and De Beers had said it would “thoroughly engage” with the union on the trust.

From: http://www.businessday.co.za/articles/topstories.aspx?ID=BD4A110402

= De Beers reveals canny BEE deal = Business Report, November 9, 2005

By Nicky Smith

Johannesburg - De Beers would sell 26 percent of its South African operations to a consortium made up of its staff, prominent former politicians and business people for R3.8 billion, the diamond giant said yesterday.

The deal with Ponahalo, headed by former Northern Cape premier Manne Dipico, has been a long time coming and De Beers has been raked over the coals by cabinet members for its tardiness in getting its business aligned with the government's transformation objectives.

But Nicky Oppenheimer, the chairman of Luxembourg-based holding company De Beers Société Anonyme, said the group needed the time to structure an empowerment deal that could be sustainable.

Last year the group revealed the shocking state of health of De Beers Consolidated Mines (DBCM), which houses its South African operations, saying that five of its seven local mines were loss-making and that as many as 10 000 jobs were threatened. Asked how DBCM, which has been soaked in red ink for a couple of years as the rand's strength has eroded margins, would guarantee its new partners a large enough dividend flow to service its debts and contractual obligations, Jonathan Oppenheimer, Nicky's son and the managing director of DBCM, said the company had turned its operations around. He said by early next year only one of DBCM's mines would still be making losses.

In the first year Ponahalo must invest at least R10 million to create jobs and new businesses in communities affected by diamond mining. This amount escalates by 5 percent a year for the next nine years.

It must also donate at least R5 million a year of its dividends to trusts for the disabled, disadvantaged women and communities over the same period without the escalation.

These payments have priority over debt repayment. Manne Dipico, the chairman of Ponahalo, said the investments would be made not only in areas where the mines were situated but also in the areas from which migrant labour had traditionally been sourced.

The price has provisionally been set at R3.8 billion, but this may change as the consortium has not yet done a due diligence of the mines. The funding has not been finalised but Jonathan Oppenheimer said De Beers could possibly help finance the transaction, and local banks had shown "an appetite" for the deal.

The deal builds on Anglo American's empowerment drive, following the Kumba restructuring announced last month, which created the country's largest empowerment company. Anglo's 45 percent shareholding in the De Beers group is a strategic part of its precious minerals portfolio. An analyst, speaking anonymously, described the deal as "elegant".

"It is probably one of the best empowerment deals we have seen, especially with the staff share scheme and the disabled trust; that was neat.

"Anglo probably played quite a big part in the structuring of this deal. They are also very aware of the criticism from the government [over the lack of transformation]," he said.

Staff and former staff will hold 50 percent of Ponahalo Investment Holdings. Headed by Dipico, it also includes DBCM board member Barend Petersen, former high commissioner to London Cheryl Carolus, respected business personality Wendy Lucas-Bull and Dolly Mokgatle, the former head of Spoornet, none of whom have been linked to high-profile empowerment deals in the past.

The analyst said that, while the faces in the deal might be new, he would have liked to see a lot more of them. "This deal will probably become a bit of a benchmark," he said.

The deal has been priced with an 8 percent royalty on diamond revenues in mind. However, a possible 15 percent export duty on diamonds that cannot be profitably cut locally, as envisaged by the Diamond Amendment Bill, has not been priced in.

With ministerial discretion being applied to exempt producers from the duty, Oppenheimer junior said he believed there was no threat to either the recovering mines or to the structure of the empowerment deal.


 * At a glance**

De Beers, now 45 percent owned by Anglo American, was founded in 1888 by Cecil John Rhodes. Jonathan Oppenheimer, who heads De Beers Consolidated Mines (DBCM), which houses the local operations, is the great-grandson of Ernest Oppenheimer, who founded Anglo American and took control of De Beers in 1929.

Founded in Kimberley, De Beers was named after a nearby farm. Ernest Oppenheimer and his son and grandson, Harry and Nicky, built it into a business that now sells three out of five of the world's uncut diamonds and added to the wealth of his family, Africa's richest.

DBCM produced 13.7 million carats last year, which accounted for 29 percent of De Beers' output and most of South Africa's total. South Africa's overall output rose 19 percent to 7.73 million carats in the first half of the year and might reach a record this year, the minerals and energy department said last month.

- Bloomberg

From: http://www.busrep.co.za/index.php?fSectionId=552&fArticleId=2986613&fPreview=1&fMakeMirror=1