The Gupta family, friends of President Jacob Zuma, were key to the agreement to sell controversially acquired prospecting rights at Sishen to steel conglomerate ArcelorMittal South Africa for R800-million plus a hefty BEE stake in Arcelor.
In an interview on May 21 this year the family patriarch, Ajay Gupta, was scathing about the ability of Imperial Crown Trading 289 (ICT) to exploit the rights lost by Arcelor and claimed his family had nothing to do with the deal.
Arcelor failed to convert its old order rights by the April 30 deadline last year and lost the right to exploit a 22% share of the Sishen mine.
Both ICT and the mine operator, Kumba, applied for the rights, which were controversially awarded to ICT.
In the interview Gupta distanced himself from ICT and any possible deal with Arcelor. He said his employee Jagdish Parekh's 50% stake in ICT had nothing to do with the Gupta family.
"I'm telling [you] that if this deal comes to me, I will not take it. There's nothing in this deal -- finally you will not get anything ... That's why I'm not interested in this deal. Who will take money to him [Parekh], tell me?"
Gupta said steel magnate Lakshmi Mittal, ArcelorMittal's founder, would not be interested in dealing with ICT.
"Mittal will not talk to him at all ... I know Mittal also. It's a small world, man. We are both advisers to the president of Mozambique ... Why will Mittal talk to me? He has a direct contact to Kumba ... these are big guys, they will shake hands and they make you [into] fools.
"There's nothing there, except embarrassment. You are telling me billions and billions, I tell you billions and billions [of] embarrassment. That's why I must feel angry that they must link this to me ... I'm not interested in a deal like this.”
But last week Arcelor announced its multibillion-rand BEE deal, which included sizeable stakes for the Gupta family's Oakbay Investments, Mabengela Investments, jointly controlled by Duduzane Zuma and Gupta's brother Rajesh, and Parekh's Pragat Investments -- the same vehicle through which Parekh held half of ICT. In a related transaction Arcelor is acquiring ICT for R800-million.
Parekh has repeatedly stated that he is the sole shareholder of Pragat Investments.
Last week Nonkululeko Nyembezi- Heita, ArcelorMittal SA's chief executive, told Moneyweb that the Guptas had been cut in as "major facilitators" of the deal.
This week she confirmed that the Guptas had been central to the deal.
"We've only ever dealt with those two individuals or entities ... By the time we did start engaging with ICT, we were engaging with the Guptas and Parekh."
Nyembezi-Heita said talks had started in about March or April this year.This means that when Ajay Gupta was distancing himself from ICT and the possibility of it making a deal with Arcelor, he — or his family — was already involved in those negotiations.
Originally ICT seems to have included only Northern Cape business interests, which involved Archie Luhlabo, a former Mineworkers' Investment Company chairperson, and Prudence "Gugu" Mtshali, reportedly Deputy President Kgalema Motlanthe's romantic partner.
On March 12 this year Pragat Investments secured 50% of the shares in ICT, which had already received provisional approval from the department of mineral resources for its application for prospecting rights at Sishen.
This was shortly after Nyembezi-Heita, Ajay Gupta, Parekh and Kumba chairman Lazarus Zim had been part of the business delegation that accompanied President Jacob Zuma on a state visit to the United Kingdom in early March.
The Gupta group chief financial officer, Ravendra Nath, was nominated days later by ICT to sign documents formalising the department's award of the prospecting rights to ICT.
Nath confirmed this week that he had gone to Kimberley to sign the documents as a witness on March 16, but said he had done it as a favour for Parekh and that the Gupta group had no interest in ICT.
Duduzane Zuma this week refused to comment on the controversy surrounding him, saying he felt ill- treated by the Mail & Guardian.
Its report last week on the matter, he said, "was blown out of proportion and the focus was misplaced ... It leaves a bad taste, at least in my mouth."
Nyembezi-Heita said both the BEE deal and the ICT acquisition would have to pass an internal due diligence investigation in terms of the United States Foreign Corrupt Practices Act and satisfy South African anti-corruption legislation before coming into force.
The Act enjoins companies to take special care when so-called "red flag" issues are present, which include circumstances where benefits flow to the relatives of politicians or decision-makers.
"We do have legal firms working on that as we speak, to pick up on the red flags that you've just mentioned now and quiz those and probe them closely to make certain that the answers we get are satisfactory," she said.
"If they're not, we are not going to go ahead with the transaction."
But Nyembezi-Heita denied Arcelor's intention had been to acquire political connectivity to help it with its problems.
"It [connectivity] was completely and entirely missing from any of our calculations and assessments, as we were deciding how to go forward with the BEE transaction. The only thing we considered was what the BEE partners could bring to the table."
What they could bring, she said, was mining sector experience and that the acquisition of ICT would "give us the opportunity to recover our mineral right ... The actual shareholders in ICT were immaterial."
This article was produced by amaBhungane, investigators of the M&G Centre for Investigative Journalism, a non-profit initiative to enhance capacity for investigative journalism in the public interest. www.amabhungane.co.za.
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