10 March 2006
	BASIC INDUSTRIES Head AND shoulders ABOVE By Mzwandile Jacks BEE deal with iLimaMvela is behind Group Five's top ranking in basic industries sector

Group Five, one of SA's top three construction and materials manufacturing companies, heads the basic industries sector in this year's Top Empowerment Companies. Group Five has been ranked SA's most empowered company in this sector on the JSE. Group Five, with an annual turnover of about R4bn, scored 15% in ownership and was followed closely by its small rival, Basil Read, with 14%. Group Five's total black economic empowerment (BEE) score of 63,68% included good percentage gains on last year in management (2,3%), employment equity (3,5%), skills development (17,4%) and procurement (5,6%). But its peers performed poorly in the TEC rankings' overall BEE score. Murray & Roberts (M&R), the second-biggest construction company, scored 33,28%. Aveng, believed to be the biggest construction company in SA, scored 21,59%. Though it tops the basic industries sector, Group Five occupies the ninth position in the overall rankings. All its peers in the basic industries sector, with the exception of chemicals group Omnia, languish outside the top 50. Gas company Afrox is at 57 and steel giants Mittal Steel and Highveld Steel are at 91 and 94 respectively. Paper and pulp group Sappi languishes at position 96. Overall, Aveng is at position 98 while M&R is at 69. Basil Read is at position 87. Group Five's BEE deal with iLimaMvela, a consortium made up of two broad-based empowerment entities - iLima Consortium and Mvelaphanda Consortium - is behind its top ranking in the basic industries sector. Late last year, iLimaMvela acquired 21,5% of Group Five; present and future management and employees bought 4,5%. This meant Group Five now has a direct black ownership of 26% with economic and voting rights. This deal not only received praise from deputy president Phumzile Mlambo-Ngcuka, but left Empowerdex highly impressed, giving Group Five a score of more than 80% at the time. That score related to the ownership component as defined by the department of trade & industry's Codes of Good Practice. Empowerdex was also excited by the fact that this deal came long before SA construction enterprises committed to achieving 30% ownership targets within seven years. The unique manner in which the transaction was financed also impressed Empowerdex. Group Five chairman Dennis Paizes says the deal was a "zero finance" mechanism. This means it was internally funded. "This will reduce the burden to the consortium and facilitate the sustainability of the transaction," he says. The Group Five BEE deal was followed by a number of empowerment transactions from its competitors. M&R announced it was buying back 33,2m shares in an attempt to introduce broad-based direct black ownership in the company. But the deal was not as highly rated as the one struck by Group Five, as evidenced by M&R's poor ranking. Group Five employs more than 11 500 people at its operations in Africa, the Indian Ocean islands, the Middle East, Asia and Eastern Europe.