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Oakbay ‘makes little money’ off government

Oakbay Investments, the unlisted business housing the Gupta family’s interests, went on a charm offensive this week, providing what it called its “maiden results” at an event at the JSE.

The emphasis was on showing that the bulk of the business’ revenue didn’t come from government.

CEO Nazeem Howa said government contracts accounted for 8.9% of the group’s R2.6 billion in revenue for the 12 months to February.

The government revenue seems to consist entirely of advertising on Oakbay-owned media, the company’s Eskom contract at the Brakfontein colliery and its minority interest in VR Laser.

Finance Minister Pravin Gordhan also revealed, in a written answer to questions in Parliament, that he had met Howa in May this year about the contentious snubbing of the Gupta family by the country’s major banks.

Howa had requested the meeting, but was sent away with the advice that he should take the issue to court if he felt Oakbay had been wronged, said Gordhan.

The company did not, however, disclose a full income statement or any profit numbers, saying only the revenue had been audited by SizweNtsalubaGobodo, its new auditors, after KPMG ended a 16-year association with the company.

“We are primarily a company driven by private sector business,” Howa told reporters.

“I hope this will help audiences understand our operations and dispel some of the myths that have been built about our group – especially the myth that we are heavily reliant on government business.”

The Gupta family last month announced it was quitting the country, putting up for sale all its interests in South Africa, which Howa said were all housed within Oakbay Investments.

Flanked by an all-male and all-but-white management team, Howa related the company’s 20-year history in South Africa, from its origins in a garage with eight employees to the current group employing 7 991 people, 76% of them South African.

Judged by revenues, Oakbays’ heart is its contract mining business, JIC, which contributed revenue of R1.17 billion, followed by the computer business Sahara at R1.1 billion.

Howa emphasised that the group’s media division, made up of The New Age newspaper and ANN7, was profitable and together had revenue of R275.6 million.

About 28% of that revenue came from government advertising, said Oakbay.

That’s less than 9% of total government advertising spend, Howa said, citing 2015/16 data compiled by Nielsen.

The company’s only Eskom contract in the year was the Brakfontein colliery’s delivery of 1.5 million tons of coal to the utility.

Oakbays says that its share in that was 29% and that the coal was delivered at about R270 per ton.

That puts revenue from Eskom at roughly R116 million, or 4% of Oakbay’s total revenue.

On the contentious contracts with Eskom, Howa said the company now had three contracts with the parastatal that made no money because Eskom paid it some of the lowest rates in the country.

In contrast, an export contract it clinched this week paid a premium of R150 a ton more than Eskom’s.

In total, Oakbay Resources supplied about 1.5% of Eskom’s total coal, he said.

“It’s fairly insignificant for the amount of attention it has received. The contract is a massive lossmaker for us, but Eskom has insisted we honour it,” Howa said, referring to the Tegeta contract.

“We certainly believe we have done nothing wrong.”

Howa also listed what he called the company’s strategic investments, which include an indirect 17% shareholding in VR Laser, which makes steel products for companies in the defence, mining, rail and transport industries.

The company did business with Denel and Transnet, with Oakbay’s share amounting to R20 million.

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