How Guptas beat ANC bigwigs to R9bn deal

How Guptas beat ANC bigwigs to R9bn deal
Consortium led by former deputy president walks away from ArcelorMittal deal
Feb 27, 2011 12:04 AM | By STEPHAN HOFSTATTER, MZILIKAZI wa AFRIKA and ROB ROSE

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The Gupta family and President Jacob Zuma's son, Duduzane, scooped a R9-billion empowerment deal ahead of a consortium led by ANC chairman Baleka Mbete.

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Atul Gupta owner of The New Age
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The deal gives Duduzane and the Guptas a stake in global steel giant ArcelorMittal worth more than R3-billion.

The Mandumo Investment Holdings consortium was led by Mbete, who was deputy president at the time, and included Mvelaphanda Holdings chairman Mikki Xayiya and IT mogul Robert Gumede.

Mandumo was the front runner for the deal, on terms considerably more favourable to ArcelorMittal shareholders than the Gupta-Zuma consortium, as it would have brought a cash injection of R375-million, mostly funded by Mvela.

Two Mandumo insiders said ArcelorMittal's head office in London had put pressure on the consortium to include the Guptas in the deal. But, at a meeting soon afterwards, all its members had voted unanimously to walk away.

Gumede and Xayiya declined to comment on the issue.

Mandumo CEO Brian Mosehla, speaking on behalf of Mbete, Mvela and Gumede, denied that the consortium had pulled out of the deal because of the Guptas' involvement.

"The proposed structure resulted in unhealthy returns for all parties involved," he said. "The Mandumo board resolved not to proceed with the transaction."

A source close to Mvela said the economics didn't make sense, especially considering that it would pitch the company against Anglo American, whose subsidiary company Kumba is engaged in a court dispute over prospecting rights worth billions of rands at its Sishen Iron Ore Mine with Imperial Crown Trading (ICT), a company linked to the Gupta-Zuma consortium.

Mvela, a company formed by ANC heavyweight and now Minister of Human Settlements Tokyo Sexwale, is a partner with Anglo American in Coal of Africa Ltd.

"We estimated that the maximum upside for the BEE consortium was $250-million over five years, but a realistic figure was probably $150-million. You'd then have to share it with ICT and the other consortium partners, so you're starting a lengthy legal battle with Anglo for not much reward," said the source.

ArcelorMittal confirmed that it held talks with the Mbete-led consortium that were abandoned, but declined to comment on the role played by the Guptas.

"ArcelorMittal South Africa previously entered into discussions with Mvelaphanda with the objective of concluding a BEE deal," said company spokesman Themba Hlengani.

"However, as often happens during negotiations of this kind, the parties were unable to agree on terms, and discussions did not progress. No contractual commitments were made.

"We cannot say any more on this, since we do not discuss the details of confidential negotiations in public."

ArcelorMittal denied that it had rejected a deal more favourable to shareholders.

"The BEE transaction, as announced by ArcelorMittal South Africa in August, is structured to be in the best interests of shareholders," said Hlengani. "However, it has not yet been finalised or put to shareholders."

hofstatters@sundaytimes.co.za mzilikazi@sundaytimes.co.za