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MAN Ferrostaal, Mbeki and The Big Silence

Roughly nine days have elapsed since a South African newspaper published its first claims of bribery involving the SA president Thabo Mbeki and the German company MAN Ferrostaal on 3 August.

(According to the paper MAN Ferrostaal gave Mbeki R30 million for a arms contract. In turn, Mbeki gave Zuma R2 million and the rest to the ANC.)

In South Africa the media have been buzzing ever since. On 10 August the same newspaper came with more specific "revelations". Again the SA media scene was abuzz.

And in the German media world? Until the time of this blog contribution (12 August) not a single newspaper or any other medium has reported about the MAN Ferrostaal debacle (or alleged debacle) once. Nothing.

Maybe, because the German media believe MAN Ferrostaal when it says the reports are all fabrication? OK, but even then the media should at least have taken notice of the allegations and MAN's denial.

After all, MAN Ferrostaal said it's considering legal action against the paper. And it insisted on a correction being published by the paper, which (as far as I know) the paper has to date refused to do. So, "groot kak" is coming, one way or the other. But, the German media is mum. Not a word. Very strange behaviour, to say the least.

For the sake of the journalistic principle that all sides must always be given a fair chance to comment (which the particular newspaper only did very half-heartedly), here the complete declaration of MAN Ferrostaal in response to the allegations of bribery (this appeared on the company's website shortly after the second round of allegations on 10 August):

"On Sunday, August 3 and August 10, 2008, allegations appeared in a South African newspaper that MAN Ferrostaal had bribed SA President Thabo Mbeki, Jacob Zuma and others in the ANC. These allegations are wrong and entirely unfounded.

"MAN Ferrostaal never made any payments to SA President Thabo Mbeki, to Jacob Zuma or to any other member of the ANC or to any other public official. MAN Ferrostaal in addition states that the articles mentioned contain a large number of factual errors with regards to MAN Ferrostaal and therefore violates the basics of journalistic accuracy.

"The company has requested the newspaper to publish a rectification of the article. The options of legal action are currently being evaluated.

"Contrary to what the article on August 10 claims, both of the offset programmes MAN Ferrostaal is pursuing in SA are well under way. The one for ARMSCOR, the national procurement office, has successfully been fulfilled, and, as stated in a letter by ARMSCOR, actually has been overfulfilled. As stated by the DTI a few days ago, the DTI had rejected an originally planned steel works in Coega. MAN Ferrostaal is successfully pursuing projects to replace this.

"With its offset projects executed so far, MAN Ferrostaal has made a substantial contribution to the SA economy, having invested several hundreds of million Rand and having saved and created several thousands of jobs. Examples of these projects are a production facility for microchips in Pretoria, tea plantations and a fabrication yard for oil and gas platforms in Saldanha Bay, Western Cape, which was handed over to the local operator late last year. The yard is now negotiating its first contracts.

"These contracts will give South Africa the possibility of participating in the booming African oil and gas market. The first yard will be supplemented by a second facility for the maintenance and service of oil and platforms in Cape Town Harbour. The company is currently working on obtaining permission to build this second yard. Together, the two yards and supplying local companies are expected to create several thousands of jobs in the mid term.

"Due to the success of the current projects, MAN Ferrostaal was invited last year by the DTI to enter into a strategic partnership with the Department in order to continue the cooperation after all offset obligations have been fulfilled."

end of declaration

Who is MAN Ferrostaal?

With 4,200 employees MAN Ferrostaal is represented in more than 60 countries. The company achieved a turnover of EUR 1.4 billion in 2007. It is a subsidiary of MAN Aktiengesellschaft, Munich. The MAN Group is one of Europe's leading manufacturers of engineering equipment and vehicles, generating annual sales of around EUR 16 billion.

MAN supplies products, systems and services to the capital goods industry and employs approx. 55,000 people worldwide. The core areas operated by the MAN Group (commercial vehicles, industrial services, diesel engines and turbomachines) all hold leading positions in their markets. MAN is a member of the DAX German Share Index, Germany?s top 30 public limited companies.

I should, perhaps, add that it was reported on 23 June (by Handelsblatt and Financial Times Deutschland) that MAN has employed investment bank Goldman Sachs to help it sell its division Ferrostaal. The process is underway. Finally, Volkswagen has been trying for a while now to buy MAN (or parts of it).
12.8.08 10:24


Tony Twine is in for a surprise

Germany's biggest national business daily newspaper Handelsblatt asked the question this morning 'whether economic policy will make a jump to the left in the post-Mbeki era, and if, how big that jump will be'.

Two private sector economists and the DA were quoted. All three parties said there will be a jump to the left. But, and this is the important point, the two private sector economists guessed it would be a small jump to the left, while the DA warned a radical jump was on its way.

I'm afraid, this time around the private sector economists "het die pot misgesit", as they say in the classics on the other side of the Du Toitskloof.

Like the DA, I spent the vital first four years after 1994 in parliament, where I witnessed how it came that SA didn't get "populistic policies", but IMF-endorsed policies. I saw how arrogant and aggressive and cock-sure Cosatu was up to that vital day in 1996 when the private sector-friendly policy was published, how they were absolutely convinced that "their way" was going to happen, and I saw how angry, shocked and surprised Cosatu was when things didn't turn out the way they had expected them to, and how they withdrew their representatives from parliament from the very next day the 1996-document was published, and how they vowed to revenge this "betrayal of the workers".

In short, I know that SA was only spared the populist economic policies (propagated before 1994) for a short period. That period is about to end. The private sector economists are in for a big surprise.

I observed in parliament that SA got the policies it got, only thanks to a small number of senior politicians (lead by Nelson Mandela) and that this policy-selection was not supported by many outside this small group of (very influential) individuals. In short, free markets have never been "in the blood" of the majority of ANC supporters.

So, the direction taken after 1994 (and especially after 1996) was connected to a few leaders, the last of whom will be in retirement by next year. That's also when the last defences against "socialism" will fall.

Now, the article quoted the private sector economists as saying SA's economy cannot easily be "sosialized". I differ again. All that has to be done, is for prices to be fixed in a few sectors.

As the government is about to do in the health sector (where they want to prescribe to the private hospitals how much they may charge....with the result that Medi-Clinic effectively "emigrated" to Switzerland last December) and wants to do in the building sector, food sector, energy sector and a few others (take a look at the economic decisions taken at Polokwane in December last year).

(And what are Cosatu's efforts to prevent Tito Mboweni from raising the interest rates other than attempts to fix the prices banks charge for money?)

To devastate supply, dictate to suppliers how much they may charge for their products, without fixing their input costs. That's essentially what Mugabe did in Zim in the 90s. We all know how that experiment ended.

Nevertheless, that seems to be the way the "new" (really "old") ANC wants to go.

Here a section of the abovementioned article as it appeared in the Handelsblatt this morning. I'll translate, if anyone has the need. Ask me, I'm at e-mail: editor (at) ntsnn (dot) com

"Die Cosatu selbst plädiert seit Jahren für eine stärkere Intervention des Staates und höhere Sozialausgaben; letztere wollen die Gewerkschaften aus dem gegenwärtigen Haushaltsüberschuss finanzieren. Daneben wehrt sich die Gewerkschaft vehement gegen eine strikte Inflationsvorgabe. Offiziell hat die Zentralbank am Kap den Auftrag, die Teuerung in einer Spanne zwischen drei und sechs Prozent zu halten. Momentan liegt die Inflation mit 11,6 Prozent jedoch weit darüber. Dies hat die Zentralbank zu einer restriktiven Geldpolitik veranlasst, die bei den Gewerkschaften auf wenig Gegenliebe stößt.

Trotz des immer stärkeren Einflusses der Gewerkschaften auf die Wirtschaftspolitik des ANC rechnen namhafte Ökonomen nicht mit einem dramatischen Linksruck der Partei unter Zuma. "Ich sehe nicht, dass sich Südafrika auf eine Planwirtschaft nach Vorbild des früheren Ostblocks zubewegt", sagt Colen Garrow, Chefökonom beim Investmenhaus Brait. Allerdings erwartet er unter Zuma eine Wirtschaftspolitik mit stärker populistischen Elementen. Radikale Schritte wie die Gewerkschaften sie fordern, würden von den Finanzmärkten jedoch schnell bestraft. Zudem sei Südafrika bei seinem Wachstum sehr stark auf ausländische Investitionen angewiesen.

Auch Tony Twine vom Wirtschaftsberatungsinstitut Econometrix warnt vor einer Überreaktion auf die von den Gewerkschaften angeschlagenen radikalen Töne. Zwar habe am Kap vor 14 Jahren mit dem ANC eine im Herzen sozialistische Bewegung die Macht übernommen, doch habe er sich immer mehr in Richtung Sozialdemokratie entwickelt. Anders als der Agrarstaat Simbabwe verfüge Südafrika auch über eine starke industrielle Basis und sei viel stärker in die Weltwirtschaft integriert. Dies begrenze das Interventionspotenzial des Staates beträchtlich.

Weit weniger optimistisch zeigt sich die liberale Demokratischen Allianz (DA). Die offizielle Oppositionspartei befürchtet unter Zuma eine viel stärkere Interventionspolitik des Staates und die Etablierung einer strikten Planwirtschaft. Zum Beweis führt die DA die nun geplanten Landenteignungsgesetze an, die die Verstaatlichung von Farmland fast völlig in die Hände des Staates legen und ein Affront für weiße Farmer sind."
7.8.08 10:06

Robert Hersov takes another financial knock

For London-based Robert Hersov, member of the well-known Hersov family of Anglovaal fame in South Africa, the year 2008 is slowly turning into an annus horribilis as far as his business activities in Germany are concerned.

After pocketing a 30 million Euro loss in April this year from an investment he had made in the German airline Air Berlin a short four months before, a Berlin court gave a ruling today which effectively forces Hersov to pocket another 18 million Euro loss from a second, unrelated business deal.

The court case was about a deal involving 3 million shares in a German listed company called Curanum. (Hersov was ordered to fork out just over 29 million Euro for shares only worth 11 million Euro at close of trade today.)

That brings his (realised and unrealised) losses in Germany this year to 48 million Euro (about R570 million) - probably enough to give even a Hersov a sleepless night or two. Definitely enough to buy a handful of prime wine farms in the Boland.

And, to make matters worse, these deals were not really Hersov's, but deals made by a "good friend", the 31-year-old Lars Windhorst, a German with a long history of bad business deals. Hersov had appointed him to lead Vatas Holding, a subsidiary of Hersov's UK-based investment vehicle Sapinda, which he started in 1999, after completing a stint at Italian businessman-turned-politician Berlusconi's media empire. And Vatas was the principle in both deals.

But, like with all good stories, this one also has a positive ending: Had Hersov not sold his Air Berlin stake in April, his loss would now have been double the realised 30 million Euro.
1.8.08 18:47

Anglo's Tarmac still for sale

According to Cynthia Carroll, chief executive of Anglo American, said in London yesterday the sale of Tarmac, its UK-based aggregates and asphalt company, was still on the cards - the process has just been delayed by the credit crisis.

When Tarmac was put up for sale 12 months ago, analysts estimated it could fetch more than $6 billion.

Anglo American, the world's fourth-biggest miner, is expecting resource-hungry China to continue to hold up global demand as rising output and record prices for iron ore and copper propelled its profits nearly 15 per cent higher.

Pre-tax profits rose from $4.9 billion in the first six months of 2007 to $6.4 billion in the same period this year.

The base metals division, including copper, zinc and nickel, was the biggest contributor to group operating profit, accounting for 41 per cent, followed by the Anglo Platinum unit, making up 25 per cent.

Carroll said the company's $45 billion pipeline of new and expansion projects, including $15 billion of approved projects, had risen by $3 billion since February.

Kumba Iron Ore, 64 per cent owned by Anglo, posted a 75 per cent increase in first-half earnings last week. Anglo also owns 45 per cent of De Beers, the world's biggest diamond supplier, whose first-half sales increased by 10 per cent to $3.3 billion.
1.8.08 10:49

Diamonds are forever...and now also exclusive

First, De Beers teamed up with Louis Vuitton for a foothold in retail and now they upped their game another notch.

Look at this and smile. The report was posted on the National Jeweler Network site on 30 July.

"Forevermark, a separately managed division of the De Beers Group (formerly known as De Beers Group Marketing) announced the opening of the first Forevermark diamond-grading laboratories this week.

The two labs, located in Antwerp, Belgium and Maidenhead in the United Kingdom, will grade only diamonds meeting Forevermark standards.

Graded diamonds will be inscribed with the Forevermark icon and an identification number.

To be considered a Forevemark diamond, stones must be at least 0.18 carat, SI2 clarity, J color and have a cut rated "good."

Forevemark diamonds are available only at selected jewelers and De Beers' retail stores.

In a statement Forevermark CEO Francois Delage said: "By offering Forevermark diamantaires the opportunity to have their Forevermark diamonds accompanied by Forevermark grading reports, we are meeting the needs of consumers, jewelers and diamantaires."
31.7.08 20:19

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