The shareholders of ArcelorMittal SA, the country's biggest steel maker, voted 99.9% in favour of the company's R2.2bn broad-based black economic empowerment transaction on Friday, 18 November.
The deal signed in September with Likamva Resources, a 100% black-owned and 58% black woman-owned company, whose principal members are active in the industrial, mining and banking sectors, will see Likamva initially hold a 17% stake in ArcelorMittal SA.
This will be through notionally funded shares issued by the steel group worth R1.75bn.
Within 24 months, Likamva is required to introduce broad-based shareholders primarily from communities in areas around ArcelorMittal SA operations. Following this, Likamva's shareholding will be reduced to 12%, and the broad-based parties will hold 5%.
The newly established ArcelorMittal SA Employee Empowerment Share Trust will also buy a 5.1% stake in the company through notionally funded shares worth about R525m and issued by ArcelorMittal SA.
The new employee share scheme is in addition to the existing Ikageng Employee Share Option Scheme, which was introduced in 2015.
Wim de Klerk, ArcelorMittal SA CEO, says the broad-based transaction will contribute to the government's ambition to create black industrialists.
"The fact that our employees and, at a later stage, the communities in which we operate stand to benefit through their participation in this transaction means that it is truly broad-based and inclusive," he says.
Noluthando Gosa, chairman of Likamva, says the overwhelming approval of the deal is proof that shareholders believe that, working together, the partners can deliver great value to the business and the industry.
"We are encouraged that a journey which started a little over a year ago has been concluded. We are, however, aware of the amount of work which is ahead of us. But we are in this for the long haul and are confident that the principals within Likamva can make a significant contribution in strategic areas of the business," Gosa says.
Last week, ArcelorMittal SA announced price increases of steel products with effect from December 1, saying they were in line with movements in international markets.
In 2015, ArcelorMittal SA and its Luxembourg-based Indian-backed parent, the global ArcelorMittal Group, made record losses. The South African unit made an R8.6bn loss in the year to December 2015, while the global group lost nearly R8bn in the same period.
The local company says the continuing downturn in the global economy and the sustainability of the domestic steel industry are among factors that led to the price increases.
A deal with the government has seen ArcelorMittal SA agree to pay R1.5bn in competition authority fines, invest R4.6bn in plant and restrict steel price rises according to agreed basket prices over the next five years.
"We are basically a price-regulated industry," says De Klerk.
The group says it is awaiting final approval from the Department of Trade and Industry and the Department of Economic Development on the pricing mechanism for domestic flat steel products, as agreed with the state.
"[However] we have been careful to ensure that our increases remain within the boundaries of the committed pricing principles and the sustainability of our business, particularly on flat steel products."
The company says there have been "significant increases" in the international prices of raw materials since June.
It says the costs of iron ore and coking coal have on average increased 54% and 243%, respectively, which has led to an international raw material input basket increase of 98%.Source: Business Day