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Mittal is trying to pull the steel wool over our eyes
March 31, 2006
By Jabulani Skhakhane and Ann Crotty
So how many versions of reality do you think there are? Judging from the evidence presented to the competition tribunal, it seems that there could be several. Which version you happen to be exposed to depends on your station in life.
Consider, for example, the case of Mittal Steel South Africa. If you are an investor, you will only hear about the excellent profits that are achieved by Mittal SA and will be reminded that one of Mittal SA's key objectives is to be "one of the highest operating margin steel producers globally, while controlling the steel market in sub-Saharan Africa".
And as an investor, you will see from the income statement and balance sheet how strongly cash-positive this business is and that there are more than sufficient cash resources to cover any capital expenditure requirements.
If you are a government or department of trade and industry official, you will be told how appallingly difficult it is to earn any money in the steel industry and that a more realistic approach to depreciation would put you out of business.
And then there's the taxman. Presumably the Receiver is paying close attention to the activities being played out before the tribunal.
There was much discussion yesterday about the controversial business assistance agreement that enabled Mittal SA's international shareholder, Mittal, to siphon off R1.3 billion from the local operation.
The SA Revenue Service (Sars) reckons the R1.3 billion payment is of a capital nature and wants Mittal to hand over R403 million of it. Mittal argues that it is of a revenue nature and therefore tax deductible.
According to Sars, in general, one test is whether the payment relates to an enduring benefit that has been created. If so, the payment would be capital in nature.
And then there's the small matter of the outlook for the global steel industry. Last year Mittal executives were very upbeat about prospects and the ability of the Chinese to curb steel production and thereby keep global prices buoyant. This week at the tribunal they indicated they were very pessimistic about China and global steel prices. - Ann Crotty
Simmer & Jack A team of security professionals armed with debugging equipment was seen giving the grand old Victorian offices of this mining company a good going over.
With the amount of sensitive information making its way into the public domain, Simmers is clearly concerned about the potential leakiness of its systems.
Or perhaps Simmers believes there are those within its own cosy little camp whose interests are not entirely aligned with the management of Simmers - who happen to feature very largely in one of the two warring parties within Jaganda, Simmers' empowerment partner.
Having certainty that it is not a listening device that is spreading information may see a change in the behaviour and the interactions between the members of the voting pool and Simmers management in general.
Undoubtedly an unenviable and untenable position to be in.
But on the lighter side of this hullabaloo that the headline-grabbing fight between Simmers shareholders - and the directly attributable hit that the share price has taken over the past month, down as much as 40 percent to about R1.25 in the middle of this month - it is good to see that while shareholders may be losing money, at least somebody is making a bit of money. - Nicky Smith
sual It used to be said that one should not believe everything what one reads in newspapers. But for the dedicated hacks, it must be heartening to read that this Russian company still believes what journalists write and even makes business decisions on the basis of news reports.
Sual president Brian Gilbertson told Bloomberg yesterday that the company had dropped plans for an aluminium smelter in South Africa. All because Sual executives had seen increasing reports that electricity was not freely available in South Africa.
BHP Billiton also said it might have to put on hold plans to expand its Mozal smelter in Mozambique and the Hillside plant near Richards Bay because of concerns about security of electricity supply.
To go ahead with the expansion, the world's biggest mining company would want Eskom to guarantee it 675 megawatts for 30 years.
The Bloomberg report coincided with the release of President Thabo Mbeki's answers to questions from members of parliament.
One of the issues he had to deal with was electricity outages in the Western Cape. In addition to defending Eskom as "a flagship entity with a solid track record internationally", Mbeki reiterated an earlier statement by the government that the Russian company had never approached Eskom about its plans in the first place.
Mbeki was responding to a question whether the electricity outages had affected foreign investors' confidence in South Africa.
"In regard to the purported aluminium smelter that is looking elsewhere, we need to point out that that company has not approached Eskom.
"In any event, the government is currently negotiating with one potential aluminium smelter investor. This is with Alcan regarding the establishment of an aluminium smelter at Coega and this negotiation is on track," said Mbeki.
He added that there were very few countries in the world that could host a smelter the size of the one being planned for Coega.
Mbeki said approved projects by Eskom, including those under construction, would add 7 260MW in the next few years and projects that would produce 10 382MW of electricity were being planned.
Eskom had been asked to speed up the building of this additional capacity. - Jabulani Sikhakhane
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