Picture the scene – a newly despised BEE beneficiary is being interviewed by a journalist. The antagonism towards this person increases with every interview, but the beneficiary maintains his composure consistently. The interview now turns to the fact that the BEE deal might not generate that many points. Cue in interview.
BR: Some of the BEE score agencies rate it as not a particularly good deal with low scores.
SZ: (Defends himself – although it’s not clear what he is saying.)
The transaction is not completed, that’s the problem. As ArcelorMittal has indicated, they have only now just commissioned a rating agency to do their scoring. This thing is not an overnight thing, it’s a process, and in the fullness of time I think people will be very pleased indeed that this transaction would score highly.
I probably let this article go by although I was very aware that BEE’s most recognised “expert” had blogged about the deal and hence must have passed this information onto the press (who seem to rate his and Udge's opinions). Said “expert” had suggested that the deal was worth 4.95 points. I let that go too because this deal has very little to do with points and everything to do with currying favour with Zuma. To quote Justice Malala
Poor Nonkululeko Nyembezi-Heita. Just when the ArcelorMittal SA CEO thought she had bought herself political cover — through a black empowerment deal in which family and friends of the president become instant billionaires — it now emerges President Jacob Zuma may be shown the door. What is a woman to do? Is she going to do another deal with the friends and benefactors of the incoming lot?
But a reader sent me an email pointing out the error in this “expert’s” opinion
Levenstein has (no) knowledge of Code 100. The Mittal deal is worth around 17 points. He does not understand the difference between net equity and economic interest, nor does he have the slightest comprehension of vendor financing.
The Levenstein referred to here is the leader of Eco nob ee, self-professed providers of numerous products, courses and high quality BEE consulting. To the rest of us he is close to the laughing stock of the BEE world – not very clued up and a source of much mirth with his (very regular) misguided warblings.
Actually dear reader, Levenstein’s misguided expertise extends far beyond a lack of understanding of the most basic principles contained in Code 100. He has no idea of how to make use of mandated investments and where to include them in any ownership calculation. Compound this with his general knowledge of law, the constitution etc you really begin to wonder what on earth this person is an expert on – because it certainly ain’t black economic empowerment.
I asked a few verification agencies to come back with a score on this deal based on the same information Levenstein other had access to or could have had access to. And this is what they came back with
|
Indicators |
Weighted Points |
Compliance Target (%) |
Company Performance (%) |
Company Score |
|
|
Voting rights of black people |
3 |
25.1% |
26 |
3 |
|
|
Voting rights of black woman |
2 |
10.0% |
5.25% |
1.05 |
|
|
Economic Interest |
4 |
25% |
26% |
4 |
|
|
Economic Interest - black woman |
2 |
10% |
5.25% |
1.05 |
|
|
Economic Interest of black designated groups, |
1 |
2.5% |
5% |
1 |
|
|
Ownership Fullfillment |
yes |
no |
0 |
||
|
Deemed Nett Value |
7 |
Year 3 |
0% |
7 |
|
|
Bonus Point : Black new entrants |
2 |
10% |
0% |
2 |
|
|
Bonus Point : Ownership Scemes, Employee Ownership scemes, Co-Operatives |
10% |
5% |
1 |
||
|
TOTAL |
23 |
|
|
18.10 |
|
I know that Levestein won’t agree with this and will probably come running back with the Gupta’s shareholding and how this impacts on the deal (he remains convinced about his brilliance). But then we can’t expect Levenstein to understand that the Gupta’s shareholding actually makes no difference to the score and this is because of the mandated investments in ArcellorMittal itself.
ArcelorMittal is listed on the stock exchanges of Paris (MT), Amsterdam (MT), New York (MT), Brussels (MT), Luxembourg (MT) and on the Spanish stock exchanges of Barcelona, Bilbao, Madrid and Valencia (MTS).
The mandated investment rule actually allows us to exclude mandated investments up to 40% of the available shares. Even if we excluded 20% of these mandated investments then we’d be looking at 26% of 80%.
|
Indicators |
Weighted Points |
Compliance Target (%) |
Company Performance (%) |
Company Score |
|
Voting rights of black people |
3 |
25.1% |
32.5% |
3 |
|
Voting rights of black woman |
2 |
10% |
6.56% |
1.31 |
|
Economic Interest |
4 |
25% |
32.5% |
4 |
|
Economic Interest - black woman |
2 |
10% |
6.56% |
1.31 |
|
Economic Interest of : black designated groups, |
1 |
2.5% |
6.5% |
1 |
|
Ownership Fullfillment: |
1 |
yes |
no |
0 |
|
Deemed Nett Value |
7 |
Year 3 |
0% |
7 |
|
Bonus Point : Black new entrants |
10% |
0% |
0 |
|
|
Bonus Point : Ownership Scemes, Employee Ownership scemes, Co-Operatives |
1 |
10% |
5% |
1 |
|
TOTAL |
23 |
|
|
18.63 |
Anyone want to go on his action-packed and informative BEE-deal course?
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