Mittal can choose not to hear what the government wants
March 17, 2006
By Jabulani Skhakhane
In 2005, Mittal Steel South Africa charged domestic consumers 50 percent more for steel than it charged in the export market. In 2004, the domestic price was 66 percent more than the export price. In 2003, it was 83 percent higher and in 2002 it was 53 percent higher.
As Harmony's chief, Bernard Swanepoel, told the competition tribunal hearing yesterday, Mittal charged these excessive domestic prices "because it can". And as tribunal chairman David Lewis pointed out, Mittal's shareholders would expect it to do no less, indeed, would demand that it do no less. Which, of course, leaves the South African economy in a sorry situation.
The department of trade and industry has acknowledged that Mittal's policy of pricing steel at import-parity price has had a detrimental effect on the government's efforts to develop downstream industries, which in turn is adversely affecting opportunities to create employment. Indeed, it does seem that given the cheaper export price of steel, Mittal's pricing power has the effect of exporting these job opportunities to those countries that can access the cheaper supplies of steel.
Communication between Mittal and the government appears to have been quite problematic or perhaps it is just that Mittal can chose not to hear what government wants from this monopoly supplier of steel.
Of course, government should have made sure at a much earlier stage that Mittal could not only hear what it was saying but was going to adhere to what it said.
That earlier stage was when the government was in negotiations with Mittal about taking a significant stake in a very troubled Iscor. Perhaps government was so desperate to be shot of the old management that it didn't put too many demands on Mittal. And now the consequent mess is in the tribunal's lap. - Ann Crotty
Grindrod The shipping and logistics company has canned its plans to list offshore, which hardly generated any enthusiasm from the market anyway when it was first reported in 2004.
It appears there never was a particularly strong case to list offshore except that it may have bolstered the profile of Grindrod's international shipping operations Island View Shipping and Unicorn.
These businesses are already well regarded and hardly short of business if their whopping 89 percent contribution to the group's R851 million earnings is anything to go by.
Maintaining one listing is pretty onerous, what with all the reporting requirements listed companies have to meet. Two listings would increase this burden and raise costs.
The cost of maintaining an offshore listing could be about R20 million a year.
This cost may well be justified if there was compelling need to raise funds or secure a higher rating.
Shipping companies offshore are rated on average at a price:earnings ratio of 8 and Grindrod is currently at 7.
The group also has no need for cash. Ivan Clark, Grindrod's managing director, said: "We have got enough money from profits giving us the ability to gear so that we do not need to seek shareholders funds."
The market agrees. Peter Armitage, a fund manager at Investec, said: "The most attractive thing about Grindrod is their cash flow." Grindrod plans to spend R5 billion over the next three years on ships and land based logistics businesses.
The group, which has had a sterling performance in the past few years, is now expected to show earnings growth of between 10 percent and 20 percent as it is coming of a high base. That, of course, may be revised upwards if Grindrod spends the cash on what Armitage calls "the next big thing". - Samantha Enslin
sanlam This Cape-based financial services group that owes its roots to Afrikaner nationalism may have notched up another first this week by beating some of the transformation targets set out in the financial sector charter two years ahead of the deadline.
Sanlam said on Wednesday that outgoing Anglo American South Africa chief executive Lazarus Zim, Eyesizwe Coal chief executive Sipho Nkosi and Raisibe Morathi would join its board.
Morathi, an executive of the Industrial Development Corporation, is currently seconded to the office of deputy president Phumzile Mlambo-Ngcuka as an economic adviser. The fourth appointee is Anton Botha, Gensec's chief executive.
Zim, Nkosi and Morathi join Patrice Motsepe (deputy chairman), Manana Bakane-Tuoane and RV Simelane. Motsepe, Bakane-Tuoane and Simelane are members of Ubuntu-Botho, the black economic empowerment consortium that owns 10 percent of Sanlam.
Their appointment increases the number of black Sanlam directors to seven, which is equal to 35 percent of the total board of 20. The number of black women increases to three, or 15 percent of the total number of directors.
Both numbers exceed the board representation targets set for 2008. The financial sector charter says that black directors must represent 33 percent of the boards of financial institutions by 2008. Black women directors must account for 11 percent.
It will not be the first time that Sanlam scores a first on black economic empowerment. It was the first company to sell shares in one of its subsidiary to black investors. Sanlam did this by selling an initial 10 percent of Metropolitan Life to a consortium led by Nthato Motlana. Motlana would later increase the initial shareholding to effective control of Metropolitan. That deal laid the foundations for the creation of New African Investments, which was once one of the biggest black-controlled companies listed on the JSE.
A boer always makes a plan. - Jabulani Sikhakhane
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