In between the almost complete pursuit to acquire Scaw Metals SA and a bid for Palabora Mining Company, the Industrial Development Corporation has moved closer to realising the ambition of setting up a steel dealing empire.
The IDC was expected to play a critical part in the South African states ambition to establish a new steel giant which will compete with ArcelorMittal SA. This ambition is pursued after an apparent failure to force ArcelorMittal into development friendly steel pricing. The pricing of steel plays a critical in the development of the country’s downstream manufacturing industries.
It emerged this week that the IDC is a leading partner in a consortium set to acquire Scaw from Anglo American for R3.4bn. The development finance institution (DFI) has teamed up with yesteryear Anglo partners which are Cyril Ramaphosa’s Shanduka Resources and Sipho Pityana’s Izingwe Holdings. The makeup of the consortium also takes care of South Africa’s ambition of grooming black industrialist under the black economic empowerment (BEE) paradigm.
The Anglo subsidiary Scaw is a leading South Africa based integrated steel maker producing specialized consumable components for the mining, rail, power, offshore oil and gas, construction, commercial and other industrial sectors. The business operates through four product focused business units.
IDC CEO Geoffrey Qhena said “The IDC endeavours to promote the establishment of domestic-based manufacturing industries, supporting the infrastructure expansion programmes of both Eskom and Transnet. In this regard, Scaw South Africa is well positioned to take advantage of long term growth trends in the mining industry, as well as in the railway and power generation sectors, and is aligned to our primary objective of creating balanced, sustainable economic growth in South Africa and across the African continent.”
It has been reported that the IDC has made a bid for Limpopo based copper manufacturing operation PMC. In addition to the copper IDC may be interested in PMC’s magnetite stockpiles. Realised as a by-product of copper production these magnetite stockpiles present an opportunity for beneficiation towards iron ore production. The opportunity to acquire PMC arises as its anchor investors Anglo and Rio Tinto have taken a decision to exit the operations saying it is not of a scale suitable to their strategies.
Izingwe chairperson Sipho Pityana said the Scaw transaction provided an excellent platform for the strategic positioning of a BEE player in the manufacturing sector. “We commend Anglo American for demonstrating a readiness to embrace the transformation vision by allowing us, as their partners in Scaw, to buy their interest in the business with suitable partners and we are grateful to the IDC and the government for their strong support.”
Anglo CEO Cynthia Carroll said “I am particularly pleased that the manner in which we conducted this divestment reinforces our ongoing commitment to South Africa. This acquisition will contribute positively to the South African government`s industrial development objectives by enabling the IDC to play a meaningful role in the strategically important steel industry”.
Anglo disposal of Scaw SA forms part of its broader programme to shed so called noncore assets.