Alexkor Restructuring Update

NCOP Public Enterprises and Communication

15 September 2009
Chairperson: Ms M Themba (ANC)
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Meeting Summary

Alexkor briefed the Committee on its restructuring process. This process had commenced 10 years ago, and had only been viably active for the past two years. The structure of the financial separation packages offered to employees and administrative mechanisms in place were outlined. The history of the Richtersveld Community Claim to the Alexkor, as well as provincial and State land, was outlined, together with the ruling given by the Constitutional Court, and Alexkor outlined the terms of the Pooling and Sharing Joint Venture in terms of which the community was entitled to get mining rights through partnering with Alexkor, to resume mining operations on the land. The transfer of the farms and development of the community infrastructure was also described.

The Committee questioned the retrenchment of workers and asked what had happened to them, and whether they had been satisfied with their packages. The Committee expressed concern about the 51%: 49% divide in the venture, in favour of Alexkor, asking why the community was not the majority holder. Members questioned the criteria used for the R20 000 compensation, whether workers received any training, and if they could secure jobs after they were trained. They also asked about progress regarding the Memorandum of Understanding between Alexkor and the Development Bank of Southern Africa. The Committee expressed concern about the rehabilitation process at mines and asked for the respective responsibilities in this regard, questioned the lack of profitability of mines that had been described by Alexkor, asked if the situation was likely to be any different when the community took over the mining, and asked also whether the farming activities were likely to succeed, given the long distances to the new markets. The Committee asked for time frames regarding the restructuring process, the status of the transfer of managerial skills. the safety on mines and how water resources were being used by the company. Finally, Members asked the company to provide demographics for the situation at Alexkor, and were promised a gender breakdown.

Meeting report

Ms Khetiwe McClain-Maseko, Chief Executive Officer, Alexkor, briefed the Committee on the progress of the restructuring process at Alexkor. The structure of financial separation packages offered to employees and the social and labour plans were explained to the Committee (see attached document for full details).  The briefing also outlined the progress report on stakeholder engagement and Alexkor’s administration processing plants. She explained the terms of the Richtersveld Community settlement, and explained that the interim measures in place would continue with the Pooling and Sharing Joint Venture (PSJV) with the community. Full details of this were contained in the attached document.

Discussion
The Chairperson asked for clarification from the Department of Public Enterprises and Alexkor regarding their intention to ensure ongoing access to opportunities for job creation.

The Chairperson asked further what would happen to the 144 persons who received training, after they were trained.

Ms McClain-Maseko said that of the 114 persons who had received training, 111 were still at Alexkor.  Some of the training would involve upskilling the people in those posts. Of the 111 persons still at the company, some were employed at the plant and some were located at the workshop. There were large numbers employed with Health and Safety, as the company was looking at best practices from the United States Marines.

The Chairperson asked whether the 43 employees who had been retrenched had found employment, and how many of them would remain with Alexkor Mining after the retrenchments.

Mr M Sibande (ANC Mpumalanga) asked what criteria were used to decide on the minimum amount of R20 000 as compensation for workers. Mr Sibande asked further why there were feelings of “dejection” amongst people when they were paid this compensation.

Ms McClain-Maseko said that the restructuring process had impacted negatively on some employees and community members. The process was initiated about two years ago, when people were feeling very insecure, not knowing what their future was. Some staff, when the restructuring process started, were happy to get some closure or finality in respect of Alexkor, but, despite the packages, their morale was not very high because they did not know whether they were necessarily going to be employed. People were not unhappy about the amount of the packages, but continued to be plagued about the uncertainty that had been going on for the past two years prior to restructuring.

Mr H Groenewald (DA, North West) asked Alexkor to explain how it had derived the minimum allowance or package of R20 000 given to the people.

Mr Danie van Zyl, Acting CFO: Alexkor, said that the packages that were granted allocated money for two weeks for every year of completed service. There was an ex gratia amount of 80% of two weeks of the Voluntary Severance Package amount, so R20 000 was set as a sub-minimum for farm workers who had not worked for long, perhaps for a year or less. This was why a sub-minimum of R20 000 was allocated. A further consideration related to the affordability of that amount.

Mr Sibande asked how far the preparations had progressed regarding the Memorandum of Understanding signed between ALEXKOR, the Development Bank of Southern Africa (DBSA) and some of the structures, as Alexkor  had been tasked with preparing a report on all the work undertaken on the infrastructure and accompanying costs.

Ms McClain-Maseko said that Alexkor was now running with the process of township establishment, and had partnered with the DBSA and another engineering firm in this regard. The tendering process was due to start soon, and the tenders would be advertised on 25 September 2009. The Alexkor Board had been meeting to discuss the criteria, and to ensure that most of the employees were from the area. The final criteria still had to be finalised. The actual construction of the first phase would start in January 2010 and be completed in June 2011.

Mr Sibande asked how many people from the community were appointed on the company Boards directly.

Mr Groenewald said that there were many mining activities on the West coast, and asked what type of agricultural activities were prevalent in those areas.

Mr Groenewald asked what was being done about the rehabilitation process on the mines, and who the responsible persons in this process were.

Mr Anthony Kamungoma, Chief Director: Department of Public Enterprises said that in regard to rehabilitation, the Department had submitted the amendments in the Environmental Management Plan (EMP) to the Department of Mineral Resources. There were huge liabilities in that area, and the Department was putting aside R2 million per month to cover those costs. There were environmental projects under way and the Department was looking at re-vegetation in the area with the local communities involved in the PSJV, so that the community would be responsible for rehabilitation once the mining had started, or once there were any new disturbances to the land.

Mr Groenewald said that Alexkor had indicated the non-profitability of mining activities, and asked why this activity was continuing if profits were not forthcoming.

Mr Groenewald asked about the safety and sustainability of jobs, and how profitable farming was in those areas. Mr Groenewald added that most activities took place on the eastern side of South Africa, and asked what Alexkor was going to do to increase investment on the western side of South Africa, such as creating jobs.

Ms McClain-Maseko said that there was a little bit of farming on the West coast. There was some goat farming, and Alexkor had transferred dairy farms, ostrich farms, and citrus farms. The obvious problem faced in those areas would be the distance to the markets, because previously those farms had been set up by the mine itself and the market was really the mine employees, and some of the surrounding mines. Given that there were only 111 employees on the mine, and the scaling down of neighbouring mines, the distance to commercial markets was further than it used to be.

Ms McClain-Maseko said that under the social and labour plan, the company had looked at what the Integrated Development Plans were, and what the needs were regionally in terms of the social and labour planning commitments. The R80 million for the township establishment was a substantial amount of money, and the company was anticipating the inclusion of foreign investment. The R80 million was already considered to be quite a sizeable intervention in the area. Alexkor would also be engaging with other mining companies to see how to jointly look at projects. The projects would also involve electrification and the upgrading of roads.

Mr O De Beer (COPE) asked when mining operations would be handed over to the community, as the presentation was vague on this issue and no time frames were provided.

Ms McClain-Maseko said that applications had been submitted for the conversion, and some of the suspensive conditions for the transfer of the joint venture transfer to the community. The company was in discussion consistently with the Department of Mineral Resources, who had indicated that this process could take up to eight months.

Mr De Beer said that there had been an emphasis on training, but no indication was given on the transfer of skills to managerial levels, and providing technical skills to run the mines.

Ms McClain-Maseko noted that with regard to the transfer of managerial skills, not a lot of work had been done in the last year, as there was a focus on Health and Safety, where training was concentrated. Human Resource Development had been limited to what Alexkor  had thought the PSJV might require, and consultations had been conducted regarding training in this regard.

Mr Geoff Davies, Mine Manager, Alexkor  said that in so far as training management and mentorship was concerned, a programme was in place and one of the bursary recipients had graduated at the beginning of the year. This person was currently going to departments to get exposure, with a view to taking over as the financial accountant. In addition, one of the graduate engineers was also going through various departments, with a view to taking over as the engineering manager. Mr Davies said that there was an active programme in place as far as management was concerned.

Mr De Beer asked if any research was being done regarding the safety of workers on mines.

Mr Davies said that over the last five years the number of reportable accidents had decreased from 42 in the last year, to 10 this year. There were over 300 divers, so these reportable numbers were a good safety record.

Mr De Beer asked about the scaling down of infrastructural development, and where the money was going to come from for this process.

Ms McClain-Maseko said that water and electrification in the township establishment had been mentioned, and the Alexkor  was actively upgrading whatever structures they had had formerly.  In order to hand them over to the municipality, they had to be at the municipal standard. There was not a dependence on the mine as was the case previously. This process was actually upgrading the infrastructure, not down-grading it.

Mr Groenewald asked what was being done about water resources.

Ms McClain-Maseko said that Alexkor supplied water to the neighbouring town of Port Nolloth, and not only to the mine, but also to surrounding towns around the Orange River.

The Chairperson asked for an indication of the demographics of the process in terms of gender.

Ms McClain-Maseko said there had been an improvement in the numbers of women in the organisation. Alexkor would send a gender breakdown in the company to the Committee.

The Chairperson asked if there were any vacant posts.

Ms McClain-Maseko said there were no vacant posts, as the company was going through a transition period. The company was creating a post for a person to deal with monitoring and compliance and could not employ new people right now because of the Joint Venture.

Mr Kamungoma provided a context to the restructuring process.  He said that the land claim was first lodged in 1998, and the process went right up to the Constitutional Court, which ruled that the community had a right to the mineral resources on the land, not just the land. During the process, it was found that under the Land Restitution Act, there was no mechanism to give ownership of the mineral rights to the community, because of the promulgation of the Minerals and Petroleum Resources Development Act. This latter Act required that before anyone could take on the mining rights they had to have the technical competence to actually mine the resource as well as the financial capability to do so. This was why this Joint Venture was created, to enable the transfer of those mining rights to the community because then everything on the land would be allocated to the community. Alexkor would not own the land mining rights. However, Alexkor, as a mining company, would bring in the technical expertise to add to the Joint Venture. It could then be demonstrated that the community had a partner who could do the actual mining. The Minister of Mineral Resources could thus transfer the mining rights to the mining company.

Mr R Tau (ANC Northern Cape) said that Alexkor had been very irresponsible as a public company. The Department and Alexkor had contested the claim by the Richtersveld community as strategic partners, for obvious reasons. He thought that the contestation was in effect continuing, because although the Department and Alexkor  were ensuring that the land mining rights were transferred to the community, they were not providing the structure for this engagement, including decisions on who was going to receive the land on behalf of the community and what form of organisation had been put in place, to prevent a situation where people were further isolated from the proceeds of this hand over. Mr Tau asked why Alexkor was going to own 51%, instead of the community getting 51%. Mr Tau expressed concerned about the Black Economic Empowerment (BEE) situation and asked where young people were located in this process.

Mr Sibande asked about the involvement of local people in the structure, as there were serious concerns about transfers from Alexkor  to the people on the ground. Mr Sibande asked if the Alexkor could submit a breakdown of the farms in the area and what was farmed there.

Ms McClain-Maseko said that the main market for farms was Alexkor. The dairy farm and citrus farm were closed, but the ostrich farm and oyster farm were doing very well.

Mr M Jacobs (ANC) also thought that the percentage divide between Alexkor and the community was unfair, with 51% for Alexkor and 49% for the community. Mr Jacobs asked about profitability.

Mr Kamungoma explained the issue around the land claim and elaborated on the structure of the community. Mr Kamungoma also talked to the issue of profitability to attempt to provide an understanding to the Committee.

In terms of the Land Restitution Act the land claim was brought against the State. Alexkor happened to be the land owner at that time. That process went to the courts, and when the Constitutional Court ruled in favour of the community, the Constitutional Court referred the matter back to the Land Claims Court to determine the nature of the restitution package to the community. It was after this that the Department of Public Enterprises (as the sole State shareholder) got involved in the negotiations, to attempt to achieve a reasonable restitution package to put to the Land Claims Court.

Mr Kamungoma said that in terms of the structure of community, what was required was an indication that the community was legitimately constituted, so as to satisfy the Land Claims Commission’s requirement that a registered Community Property Association (CPA) existed.  In terms of the court order, the Land Claims Court did much in ensuring that the whole community would benefit and all its structures would be protected. The Richtersveld community was set up, with the CPA at the top of the structure, followed by the Community Trust. From this Trust there were other entities, like an investment trust to which money was paid by the State for reparation. This was an independent trust with directors, some of whom were appointed from the respective towns in Richtersveld. There were also some independent directors on the investment trust and two State representatives who served as directors: one representing the National Treasury and one representing Land Affairs. There also some peripheral companies consisting of the Richtersveld Mining Company, the Richtersveld  Property Holding company, the Richtersveld Rehabilitation Company and the Richtersveld Agriculture Holding company, to which the agriculture and mining assets,  previously owned by Alexkor  were transferred. The Richtersveld Mining Company would take transfer of the land mining rights once they were converted by Alexkor.  The Court order had certain thresholds inserted for any community decisions, which had to be put to a general meeting in the community before any transaction deemed material could be undertaken, to ensure broader participation in the decision-making process.

He explained that in terms of the PSJV, land mining and all that land would be owned by the  community.  Alexkor would only have the marine mining rights, the infrastructure and off-shore mining concessions. It was not only Alexkor land that was transferred to the community, but Provincial land and State land were also transferred, as they were included in the claim.  Effectively Alexkor only had marine mining rights, and these rights were being contributed to the Joint Venture. After the transfer was complete, the community could decide if they wanted their own mining partner. There was an interim period of five years attached to the agreement. The PSJV was formed to bring into effect the transfer of mining rights to the community.

With regard to profitability, this land claim has been continuing for more than ten years. Alexkor did exhibit some profitability in the early years, but the land claim created a lot of uncertainty, and certain areas could not be mined because the community would bring interdicts against the company. The whole mining operation was therefore constrained. This was the kind of environment that Alexkor started operating in, hence it was difficult to show proper profits. Extensive exploration would be needed to identify the proper reserves. The interim Joint Board had been looking into exploration programmes regarding both land and mineral resources.

Mr Jacobs asked what had happened to the workforce, which was reduced from 276 to 111 persons.

Ms McClain-Maseko said that those people had all left Alexander Bay, except for six people who were still in the houses.

Mr Groenewald asked if the 300 divers were part of the workforce.

Ms McClain-Maseko said that Alexkor did not own mining teams. There was a lack of funds for business to be recapitalised. There were 350 contractors in total for land and marine, of whom 73 were on the land and 335 on the sea.

Mr Kamungoma provided clarity on the Memorandum of Understanding between the DBSA and the DPE and the township infrastructure. The infrastructure plans were initially done, but the expertise of the DBSA in township development had to be considered. A partnership with the DBSA was therefore put in place to bring this expertise into the project. The DBSA had committed an engineer and a town planner, in compliance with the minimum municipality standards. The component of capacity building in the municipality was therefore also brought on board to ensure sustainability.

Mr Tau asked if Alexkor was still a public company.

Mr Kamungoma said that it was.

Mr Jacobs asked what were the chances of the Joint Venture company succeeding in making profits if it was handed over to the community.

Ms McClain-Maseko said that to succeed the company was obviously going to look at a strong technical partner. A lot of exploration still needed to be done to secure profitability.

The Chairperson emphasised the need to do oversight in the area to develop an understanding of how the community was feeling about the whole restructuring process.

The meeting was adjourned.


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