Johannesburg - The Gupta brothers, friends of President Jacob Zuma,
are embroiled in a saga over their eligibility to benefit from
Soon after the news that the Gupta brothers had acquired a part of
the ArcelorMittal SA [JSE:ACL] (Amsa) R9bn empowerment deal last week,
eyebrows were raised as to how Ajay, Atul and Rajesh, who immigrated
from India in 1993, could be benefiting from black economic empowerment
meant for South Africans disadvantaged by apartheid.
The Guptas defended their acquisition of a share of the deal that is
being allocated to local black people by the steel producer.
Family spokesperson Gary Naidoo said: “The Guptas’ participation in
the Ayigobi consortium is not premised on them being black in the
“It must be noted that the BEE (black economic empowerment)
legislation does not prohibit non-blacks from participating in BEE
companies or consortiums.”
The view concerning the
participation of non-blacks in BEE companies was shared by Keith
Levenstein, chief executive of BEE consultancy firm EconoBEE.
“It is incorrect for ArcelorMittal to say that they sold 26% of
their business to a BEE partner. The Ayigobi consortium is not 100%
black because of the Guptas’ involvement. The BEE points they would
earn on the deal as it is structured are few because the consortium is
also not broad-based.”
Naidoo said the Guptas facilitated the ArcelorMittal empowerment
transaction, which would result in the firm acquiring Imperial Crown
Trading (ICT) for R800m and some of the ICT investors becoming
shareholders in the steel maker.
The Guptas earned themselves a 6.25% interest in the Ayigobi
consortium, which was awarded the BEE stake by the steel maker on the
basis that some of its shareholders held highly contested iron ore
mining rights in the Northern Cape.
However, empowerment legislation states that BEE beneficiaries must
be blacks (Africans, Coloureds, Indians and Chinese) who are South
African citizens by birth, descent or naturalisation prior to 1993.
Naturalised South Africans, who can prove that they would have
qualified for citizenship before 1993 had the apartheid policy not
discriminated against them, are also eligible.
The Guptas were naturalised after 1993. They were therefore not eligible to be BEE beneficiaries but could still be investors.
Sandile Zungu, the face of the Ayigobi consortium, said he had no details of when the Guptas received their citizenship.
“The Guptas brokered the deal and brought ICT and ArcelorMittal together. How else should they have been rewarded?”
Amsa spokesperson Themba Hlengani said the Guptas were part of ICT
and “we had no control over the make-up of the Ayigobi consortium”.
Tshediso Matona, director general of the trade and industry department, declined to comment on why the Guptas were BEE beneficiaries.
“I cannot comment on the basis of what I have seen in the newspapers
about the credentials of the Guptas, or whether the deal is BEE
compliant. We typically get involved if there is a complaint but at
this stage there is no complaint.”
The Ayigobi consortium comprises politically connected people –
Duduzane Zuma, the son of President Zuma; Prudence “Gugu” Mtshali, the
former personal assistant to ANC treasurer Mathews Phosa; Jagdish
Parekh, who owns 50% of ICT; and Zungu.
The state controversially awarded ICT an undivided 21.4% of iron ore
mining rights in the Sishen mine that previously belonged to
ArcelorMittal after the steel maker failed to convert the mining rights
into new order mining rights before April 30.
As a result, iron ore miner Kumba scrapped a preferential supply agreement the two companies had since 2001.
Kumba is challenging the awarding of the mining rights to ICT. By
making the deal with Ayigobi, ArcelorMittal is trying to regain its
mining rights and restore its cheap supply of iron ore, a major steel
The Mail & Guardian on Friday reported that Amsa chief executive
Nonkululeko Nyembezi-Heita said the BEE and ICT deals would have to
pass an internal due diligence investigation in terms of the US Foreign
Corrupt Practices Act and satisfy local anti-corruption legislation
before coming into force.
The paper said the act required companies to take care when “red
flags” were present, which included circumstances where benefits flowed
to relatives of politicians or decision-makers.
- City Press
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