BEE deal brings Guptas closer to Zuma

Kimberly Guest
By Kimberly Guest, ITWeb contributor
Johannesburg, 11 Aug 2010

The India-born founders of local manufacturing ICT firm Sahara Group are to participate in AcelorMittal's black economic empowerment (BEE) deal, despite not qualifying as BEE investors.

The investment sees the Gupta family linked positively to President Jacob Zuma once again, as the President's son, Duduzane, is a fellow participant in the deal.

Yesterday, the international mining house revealed the terms of its BEE deal, which it expects to deliver equity ownership in the South African operating assets to the tune of 26%. The deal is to be split between an employee share ownership plan named ESOP Newco, and the Ayigobi Consortium - a BEE special purpose vehicle (SPV) - led by Sandile Zungu. The two channels will receive a 5% and 21% shareholding respectively. The company said it expected the transaction to deliver an aggregate value of R9 billion.

BEE benefiting

The Gupta family, through its investment vehicle Oakbay Investments, and Mabengela Investments, led by Zuma jnr, are participating in Zungu's SPV. Acelor Mittal's statement yesterday said the consortium would provide for the following broad-based elements/categories of empowerment: women, youth and strategic groups.

As the majority of the family was born in India, the Gupta family cannot be considered to be a BEE grouping.

This morning, AcelorMittal's investor relations manager Hennie Vermeulen acknowledged that the Guptas had been included, despite not meeting the BEE criteria.

“It's difficult to put together a deal like this, sometimes you have to include additional aspects, which provide strategic advantage. The Gupta family provides a strategic advantage through its ICT investments and insight,” he explained.

However, Cosatu spokesperson Patrick Craven says there is a need for BEE deals to be genuine and “to bring real benefits to the people who are supposed to benefit”.

Courting government

The Gupta family has been regularly linked to SA's ruling party for some time.

Just last month, Business Day revealed the family was to fund a national daily newspaper expected to launch in September. The newspaper claimed media circles understood that the publication, The New Age, would be sympathetic to the ANC.

The Gupta family also funds The Thinker magazine, which was launched by Mbeki-ally Essop Pahad. Pahad will be closely involved in the development of The New Age.