Local steel giant Iscor has been under less pressure to prove its commitment to black economic empowerment (BEE) than many other companies.
The steel giant may have derived immunity from its close association with the public sector, having been a wholly owned government entity for 61 years.
When the group listed on the JSE Securities Exchange in 1989 it maintained the public-sector association through the Industrial Development Corp (IDC), which held a sizeable stake.
Things will change as Iscor's association with the public sector draws to an end.
The stake held by the IDC has been significantly diluted over the past two years by the entry into Iscor of Indian billionaire Lakshmi Mittal, who bought 49,9% of Iscor, through his company LNM NV Holdings. The IDC now holds less than 10% of Iscor.
With the blessing of government and Iscor, Mittal is bidding to raise his stake to more than 50%.
If granted approval by the competition commission, he might raise his stake to more than 60% and then make an offer to minorities.
National Union of Metal Workers of SA (Numsa) spokesman Dumisa Ntuli says the union is worried that "the Mittal factor may translate into loss of local content in Iscor".
Through his UK-based investment vehicle, LNM, Mittal has established a global steel empire with manufacturing facilities in 12 countries. His footprints suggest he prefers total control of his facilities.
"Right now we do not know of any black empowerment equity plans in the group," says Ntuli.
Iscor chairman and IDC CEO Khaya Ngqula says there is no reason to worry.
Mittal's activities, like any SA business activity, will be subject to the laws of the land, says Ngqula.
"He [Mittal] will find a black empowerment partner," he says.
The problem is that the longer Iscor delays bringing in a black empowerment equity partner, the more difficult it will be to put together a deal because Iscor's share price is increasing. Having touched a record low of 440c in 2001, the share price rocketed to a high of R34,50 this month. Two years ago, when Iscor's share price was hobbling around R4, a 25% BEE entry would have cost about R445,7m. With the present share price, such a deal will cost about R4bn.
Iscor executive director Malcolm MacDonald acknowledges that putting together a BEE deal will be difficult. Steel is a difficult industry and highly cyclical, he says.
"It is only attractive to a few people who understand the industry well," he says.
Surprisingly, the company managed a favourable rating from Empowerdex's broad-based empowerment rankings of JSE-listed companies.
According to the Empowerdex top 200 empowerment rankings, Iscor is the sixth most empowered company on the JSE.
In its sector - basic industries - Iscor ranks as the most empowered company, above gas & welding group Afrox, pulp & paper group Sappi and construction group Murray & Roberts.
Iscor's annual report alludes to why the group achieved a favourable rating in the Empowerdex top 200 rankings. Iscor claims to be compliant with most black empowerment-related legislation, including the Skills Development Act and the Employment Equity Act.
According to the annual report, 1% of the group's labour bill was invested in training and development in the financial year to June last year.
That figure is not remarkable, but the group has established relationships with the engineering faculties of tertiary education institutions across SA to showcase its career opportunities, attract potential graduates and provide bursaries with a bias towards black empowerment. It also has a fair HIV/Aids policy and a commitment to safety, health and environmental management, earning marks for corporate social investment.
In 2001, Iscor set employment equity targets for the end of this year. The target for black representation at board level is 60%. The group says it has achieved 62%, but Empowerdex quotes 33% black representation at board level. The difference lies in Iscor's inclusion of its foreign directors as black directors.
The group says it has achieved 18% black representation at top management level, consisting of 11 individuals. The target is 40%. The target for senior management level, consisting of 173 people, is 30%. The group says it has achieved 15%. Of 1 013 professionally qualified employees, 32% are black, just exceeding the group's target of 30%.
Iscor's skilled workforce of 6 488 people shows black representation of 42%, with a target of 50%.
Iscor has no target for women representation. Empowerdex quotes the group's women representation at management level at zero. This is one of the reasons Ntuli believes Iscor's black empowerment achievements are inadequate.
