Mzi Khumalo in new BEE share-sale controversy

controversial businessman mzi khumalo’s metallon made an estimated profit of more than r70m during an eight-month stint as a 25% black empowerment shareholder of construction company basil read, which came to an end yesterday.

the unhappy saga leaves basil read with a diminished black shareholding and is bound to reignite questions over the ethics of black economic empowerment (bee) deals while focusing attention on how much specific individuals have made from empowerment.

khumalo and former national prosecutions boss bulelani ngcuka bought 51% of basil read in september from french company bouygues travaux publics for r22m. at the time, basil read ceo marius heyns said the deal would give his company an advantage as it could claim it was black-controlled.

khumalo’s metallon ventures and ngcuka’s amabubesi investments got the shares for 82c apiece and were understood to be tied to a lock-in clause preventing them selling their shares for a certain period. but khumalo began selling his basil read shares as the price climbed above r5 this year. by april 24, he had sold more than half of the shares.


yesterday, heyns confirmed khumalo had sold his last remaining stock to ngcuka and “another black investor”.


it is likely metallon made profits of more than r70m, considering it paid r11m for its 25% and that the stock flitted between r6 and r7 a share in april. after funding costs, this profit is likely to be closer to r40m.


this is similar to khumalo’s antics in harmony gold in 2002 when he bought into harmony’s empowerment deal, then sold the stock at a hefty profit as the share price rose, leaving harmony without black investors.


while basil read was 51% black-owned in september, this is now 36%, and the company will again embark on a process to increase its black shareholding.


heyns said he was pleased to see the back of khumalo “as we could not predict what was happening with our empowerment status from day to day, while he was selling shares”.


metallon ceo andile reve defended khumalo, saying metallon was not a “classical empowerment company”.


“it was not a classic bee deal and we don’t do deals on the basis that we will become a black empowerment partner. we would never do a deal that ties us into something like that,” he said.

reve said that, like any other company, metallon could buy and sell shares as it chose. but the question is whether metallon misled basil read to make it think it had a long-term black investor. reve denies this.

“we never had any deal with basil read and we never pretended we would be a bee partner in the classical sense. we did a deal with bouygues.”

he also said that there was no “lock-in” clause.

“our agreement with bouygues said only that the parties recognised the need for basil read to be an empowerment com-pany, and that if metallon sold its shares, we would tell bouygues,” he said.

bouygues had not raised any objection.

profits from the basil read sale will help relieve the financial pressure on khumalo. negotiations with the reserve bank over repatriating $200m that khumalo has overseas have delayed metallon gold’s jse listing, and a zimbabwe court ruled last month that metallon must pay $7,4m in damages to a former partner.