State Government warned not to give Sanjeev Gupta’s GFG $50m for Whyalla transformation over non-payment to SA businesses

Sanjeev Gupta’s GFG wants $50m from the taxpayers to help transform Whyalla – but it’s been warned the company isn’t paying SA businesses.

SA Small Business Commissioner John Chapman has told the state government to hold fire on any funding assistance to Whyalla steelworks owner and UK billionaire Sanjeev Gupta’s ‘transformation’ plans.

As part of the purchase of the former Arrium businesses by GFG, the previous state government had committed to provide $50m funding as part of a transformation package for the region.

“I have formally raised my concerns that this funding should not be provided until there is a clear and cast-iron commitment by GFG that it will substantially improve its payment times,” Mr Chapman said in his annual report, released this week.

Sanjeev Gupta, executive chairman of Liberty House Group and GFG Group. Photographer: Brendon Thorne/Bloomberg

“Unfortunately, there remain ongoing payment issues with the GFG group of companies which own the Whyalla Steelworks and associated iron ore mines.

“I continue to deal with complaints about non-payment of accounts from suppliers and contractors to the GFG companies on a regular basis.”

Mr Chapman wrote to Mr Gupta earlier this year seeking clarification and explanation of a number of financial matters and was provided with a “fulsome response”.

However, this was followed by another correspondence in May due to continued concerns about late payments of South Australian suppliers and contractors.

“Mr Gupta’s subsequent response committed that extra funding had been secured to ensure payments would be made.

“However, despite my request to GFG that payment terms be reduced from a standard 62 days to 30 days to assist small businesses, this has not been agreed to.”

In early June this year, Treasurer Rob Lucas told parliament both parties were in discussions about a “sustainable” proposal before any money was handed over.

Within days, Mr Gupta revealed the details of a proposed $1bn revamp, which include a “direct reduced iron facility” to produce iron from gas and later hydrogen at Whyalla, as well as an electric arc furnace to replace the existing blast furnace.

These will sit alongside a $600 million steel rolling mill.

At the time, Mr Gupta said the new projects had not been exactly costed but would be in the $1 billion-plus range, and were a key plank in the company’s strategy to produce carbon-neutral steel by 2030.

Mr Gupta said at the time he had never asked state or federal governments for handouts, though underwriting support might be required.

A GFG spokeswoman said the group is “committed to” paying suppliers in full and most are currently being paid within 30 days of the due date, with a focus on paying small businesses.

“GFG continues to work hard to secure the future of Whyalla and following a 3 month review, we have implemented a comprehensive Transition Program that is resulting in immediate uplift in the Whyalla Steelworks operating performance and its financial position,” she said.