For over a year now the Industrial Development Corporation (IDC) has been seeking strategic equity partners for its struggling steel subsidiary Scaw Metals, which reported a loss of over R1 billion for 2016.

The restructuring of its steel subsidiary Scaw Metals into three standalone entities is now at an advanced stage with plans to secure strategic equity partners (SEPs) for each of the units said CEO Geoffrey Qhena while presenting the IDC’s results in Polokwane, Limpopo.

In a recent emailed letter to Scaw Metals’ suppliers the company says that the IDC had reached an agreement with the Barnes Southern Palace Consortium to dilute its shareholding in Scaw’s rolled products and wire rod products businesses, which employ more than half of Scaw’s 3 500 workforce.

The letter continues: “Following IDC’s strategic decision to dilute its shareholding in Scaw, through the introduction of Strategic Equity Partners (SEP) an agreement has been concluded with Barnes Southern Palace Consortium (BSP). BSP has lodged an application with the South African competition authorities ‘to approve its application as the SEP for Scaw’s Rolled Products and Wire Rod Products businesses’.”

“Through the SEP process the IDC has sought to identify partner’s that have proven operational experience, local and global market reach and a willingness to invest, grow and add value to the Rolled Products and Wire Rod Products businesses of Scaw.”

“BSP is comprised of the Barnes Group and Southern Palace. The Barnes Group is a South African company with significant industrial interests, Southern Palace is a black owned and managed diversified industrial holding company, and is one of Scaw’s current BEE partners. BSP will acquire a controlling interest in Scaw’s Rolled Products and Wire Rod Products business. BSP has a track record of successful business achievements and, as its members are sizable local companies in both the steel value-addition industry and other related industries, its combined reach and experience will provide additional markets and opportunities for growth. The IDC will continue to hold significant share holding in the Rolled Products and Wire Rod Products businesses alongside BSP.”

“In the meantime, the separate corporatisation of Scaw’s Grinding Media and Cast Products businesses will commence and an announcement relating to the SEP transaction/s relating to these businesses is expected to be made in due course. As such the existing Scaw Metals Group will evolve into separate focused businesses, thus leveraging the Strategic Equity Partnership strategy and focus sought by the IDC.”

“The IDC will remain a significant shareholder in all the businesses and will continue to play a key role in these entities.”

“We would like to assure you that Scaw remains committed to the partnership with you as a supplier. While some changes to our systems are necessary to effect this transaction it is our intention to make this transition as seamless as possible for both parties. You will be notified timeously of any alterations.”

According to reports, discussions with two other SEPs for Scaw’s grinding media and cast products divisions were at an advanced stage, with Qhena indicating that the competition authorities would be notified about these transactions in the not-too-distant future.

He indicated that, all going to plan, all three transactions should be finalised by year-end.

The Scaw Group reported a R787 million loss in 2017. The IDC, meanwhile, reported a R2.2 billion profit for the year, up from R223 million in the previous year.