JOHANNESBURG—Diamond giant De Beers is undergoing “the most significant change of ownership” since its formation in 1888—with a deal to sell 26 per cent of its South African mines to a black empowerment company.
The transaction represents one of the most significant victories for the controversial Black Economic Empowerment initiative introduced by the ruling African National Congress Government in 2003.
“The ambition is not simply to do some tokenism. This is to create real, sustainable jobs and businesses targeted principally at the communities around De Beers’ operations,” said Jonathan Oppenheimer, the head of De Beers Consolidated Mines, the group’s South African business, and a member of the family that owns 40 per cent of the parent company.
The aim of the black empowerment policy is to make up for the injustices of the apartheid era, which put South Africa’s economy in the hands of a white minority.
The movement has been accused of cronyism after some politically well-connected black South Africans became prominent beneficiaries of the drive.
This unequal distribution of black empowerment led the crusading clergyman Desmond Tutu to attack the policy. He said last year: “What is black empowerment when it seems to benefit not the vast majority but an elite that tends to be recycled?”
The South African Government, which rebuked Tutu for his remarks, was quick to distance the De Beers agreement from such charges. Minerals and Energy Minister Lindiwe Hendricks said: “This [deal] is not made up of the usual suspects . . . We have completely new faces and that’s an exciting feature of the deal.”
Under the policy, companies must hand over equity to black workers, use black suppliers and boost the proportion of black employees, all of which win points on a system used to judge whether a business has complied with the Government’s aims.
Although empowerment moves have been made in several sectors, it is a legal requirement only in mining. Mining companies must hand over 26 per cent of their South African assets to black investors by 2014.
Under the De Beers transaction, a 26 per cent stake will go to a new black company called Ponahalo for 3.8 billion rand ($817.5 million). De Beers Consolidated accounted for 29 per cent of De Beers’ diamond output last year.
Ponahalo will be 35 per cent-owned by 9600 employees and 8700 pensioners and 15 per cent by “key” workers (assumed to be mostly management). Among other shareholders, an 8 per cent holding in Ponahalo will go to a group of four women. A 9 per cent stake will be held by Manne Dipico, a former premier of the country’s Northern Cape province and a former electrician at a De Beers mine.
The history of De Beers is tied closely to white conquest of South Africa. Jonathan Oppenheimer’s great-grandfather, Ernst, took control of De Beers in 1929. The company recently said it would replace Jonathan Oppenheimer next year with a black managing director, David Noko.