State Diamond Trader & South African Diamond & Precious Metals Regulator: Annual Reports 2008/09

Meeting report

State Diamond Trader Annual Report Presentation
Ms Linda Makatini, Chairperson, State Diamond Trader (SDT), reminded the Committee that the SDT was established in terms of section 14 of the Diamonds Amendment Act No 29 of 2005, to promote equitable access to and local beneficiation of South Africa's diamonds and to promote the South African diamond industry through the necessary research, support and development required by the industry.

She highlighted the objectives for 2007 to 2009 (see attached presentation) and stated that after it had been operating for a year, SDT was able to identify certain areas that needed more focus. For example, it realised that the funding model that had been approved and under which it was operating under had seriously constrained its ability to fulfill its mandate, since this model required it to have a mark up on all diamonds bought. It  therefore realized that it had to attain State funding.

The governance framework was concerned with complying with the provisions of the Public Finance Management Act (PFMA) and she was pleased to announce that the SDT did comply. She stated that SDT had several challenges this year, which she summarised as legislative, funding and problems created as a result of the global downturn. (See slide entitled Challenges Faced by SDT 2008/09).

She said that up to date the SDT had 105 registered customers, of which 68 made purchases during 2009. It  continuously engaged with clients, had meetings with clients every quarter so it could understand what its challenges were. She summarised that these were mainly classed as lack of finances and inability to produce basic business certificates that SDT needed to operate.

Referring to the slide on Financial Performance she explained that the increase of 144% was mainly due to the fact that the entity had not been in operation for the entire year in the previous year, although it had operated for the whole of 2009. She explained that the impairment of inventory of R1 233 817 was recognised, and this contributed to SDT's net loss position of R5 210 964. This impairment was a result of the economic downturn, as SDT had bought goods before the downturn that it then had to sell at a loss. She said that it used secondment of personnel from the Department of Mineral Resources (DMR) and De Beers. By the end of the year SDT had been concerned with the possibility of technical insolvency, and the Auditor-General (AG) had raised concerns about its ability to continue trading. During the 2009 financial period the Board took a decision to trade consciously, but continued to promote local beneficiation strategy. The Board introduced trading on a pre-financed basis for a 6 month period. She stated that despite a few challenges, SDT had not had qualified audits. SDT continued to review its strategy and implementation of cost-cutting measures such as implementing new funding models.

Discussion
The Chairperson thanked Ms Makatini for her precise presentation on the report.

Ms B Tinto (ANC) thanked SDT for an honest report. She said that there was little improvement in SDT over the years. She noted a few losses, which could be expected because of the global financial climate, but said that she did not see any plans to recover losses that SDT had experienced. She stated that it should perhaps look at ways to recover. She did not agree with the AG's suggestion that it should close shop.

Ms Makatini answered that SDT had not been requested to close shop yet. If that was to happen it would be a regression of the vision the Committee previously had when it had created the institution to ensure that South Africans would produce diamonds, and to ensure sustainable access to rough diamonds for local diamond beneficiators. She said that when a business entity experienced such a loss, it was difficult to recover for reasons outside of its control. SDT was trying to recover by looking at whether the funding model, under which it had operated for the last two years, was in fact the optimal model. She stated that SDT would continue to trade but would not be able to recover those diamonds that were sold at a low price.

Mr E Lucas (IFP) commented that the role of SDT was to encourage beneficiation, but this had been unfortunately hindered by the global downturn, which could be the cause of many of the problems. He said that there was the added problem of the secondment of staff, and it had to ensure that when that came to an end, staff costs would not become an added expense.

Ms Makatini answered that Mr Lucas was correct in stating that SDT’s mandate was to encourage beneficiation, and confirmed that this remained as its focus and mandate. To remedy the situation SDT had taken its experience on the ground, seen the challenges and would continue to come to the Committee with ideas. She said that she believed that no one assumed that the funding model should not be changed here and there.

Mr Lucas asked how the Gabarone Project was going, and whether SDT thought it was a good idea.

Ms Makatini answered that De Beers had been adamant in taking the project to Gabarone so it would be difficult for her to comment. In her opinion she would have preferred for those diamonds to have come to South Africa.

Mr H Schmidt (DA) stated that he was concerned about the inherent viability of the organisation. He commented that SDT's mandate had been to facilitate job creation but it appeared that it had created the opposite.

Ms Makatini answered that SDT's responsibility was to access up to 10% of all production from all producers in South Africa. In the first two years it had not been able to complete agreements to access the 10% from all producers. She found it hard to understand the debate that the current situation had anything to do with its existence. She said that what SDT did with the 10% was to make it available to cutters and polishers.

She said that the assertion that SDT did not create jobs was just a myth that she had been hearing since she had started chairing SDT. The largest problem was that cutters and polishers complained that a De Beers-run company was unable to provide enough diamonds to the cutters and polishers, as De Beers was rather exporting them. SDT only sold to cutters and polishers with factories in South Africa, and if it was certain that the buyers would beneficiate the diamonds in South Africa. She admitted that it was possibly responsible for losses in India and Israel. Since SDT had come on board factories had been closing down, but the cause of this could be the global recession.

She stated that the reason for the backlog she referred to was that SDT had had the diamonds available for buying onshore for a very low mark up. SDT reduced the mark up from 3% to 2% and then finally to whatever was offered. Those diamonds were stored for four and a half months without being sold.

Mr Schmidt stated that SDT had itself short circuited its existence, as it was now merely acting as a passive purchaser. He said it was now nothing more than a facilitator.

Ms Makatini stated that it had been a difficult decision to be a passive purchaser. The mandate of SDT created a double edged sword as it was expected to operate within a profitable margin, whilst still creating sustainable access to rough diamonds to local diamond beneficiators. She said that if SDT focused on the profitability alone, it would not be able to sustain the industry for local beneficiation. She said that it was not the best way, but it allowed SDT to be around for a long time and to focus on its mandate. She added that the risk of holding stock was that money could be lost.

Mr Schmidt said that the model seemed to be flawed, as SDT was meant to buy at fair value but was still expected to sell at fair value, so he wondered how SDT made profit. He asked what made it a profitable organisation.

Ms Makatini responded that perhaps consideration ought to be given to whether SDT should be forced to make a profit. She said it made just enough profit to pay rent and electricity. She suggested that it should perhaps work on being a developmental State diamond trader, instead of a profitable one. She said that there were some hidden costs that were incurred, as it had to pay for the consultation fees for an Independent Diamond Valuator (IDV) when a producer and Government Diamond Valuator (GDV) failed to reach an agreement. She stated that it was currently showing a profit because of the current model that was used.

The Chairperson asked why SDT was responsible for costs that occurred when the fair market value was determined after an IDV was brought in.

Ms Fathi Zikalala, Chief Executive Officer, SDT, explained the legal steps of determining fair market value. Section 59 of the Diamond Second Amendment Act provided that all producers had to declare their production cycles and to invite SDT to inspect 100% of their products. The SDT could then select 10% of the production, and the selection had to be a representative sample. As the producers presented their full stock, they had to declare the fair market value. SDT would then do its own valuation, so there would be two market values calculated, one by the SDT and one by the producer. The legislation said that the Government Diamond Valuator (GDV) had to then verify the two values. Even if there was an agreement on prices or values stated by the producer and GDV, SDT still had the liberty to make the choice as to whether it thought the product was valuable enough, or not. If no agreement was reached, then the regulator had to come in with a process of finding and selecting an IDV. SDT would then withdraw from the whole process for the moment. The IDV was selected by the regulator and the producer, who would then agree on valuation as stipulated in Section 59. The responsibility for the costs of such valuation was shared by SDT and producer equally. SDT did not pay for the cost of the GDV.

The Chairperson said that he had read that there were court cases involving disputes over fair market value that were pending, and asked if Ms Makatini could clarify this matter. He also asked her to comment on the profitability of fair market value.

Ms Makatini said that there were challenges that led to court cases, despite the law being clear on the matter. She said that a couple of years ago some producers said that fair market value should not be determined by the GDV, but through a tender process. The challenge the Committee had was that the tender process did not determine the actual value.

She said that SDT still faced resistance from some producers who refused to give a price for the 100%. After SDT selected its 10%, the producers would put their goods on tender then return to say that the price of the goods was determined by the tender process. Some producers followed the whole process of finding the fair market value, but, if the outcome of the process did not match their expectations, was unable to reach an agreement on the value with the IDVs, and would then refuse to comply with the IDV’s recommendations. She said that another problem that SDT encountered was that some producers refused to supply SDT with its production timetable, so that SDT was unable to send people to inspect the goods. She did stress that it was attempting to engage with the problematic producers.

The Chairperson said some of the producers maintained that both GDV and IDV played somewhat of a mediation role. He asked it was true that they sought an in-between price instead of determining the price or value of the goods.

Ms Makatini answered that if that was true, it was only because the value had fallen in between the two prices that were given. In terms of the law, the IDV's decision was final, yet producers who failed to get their desired outcome cried foul play, despite having been part of the process. She said that before the days of SDT, GDVs were accused of undervaluing goods. Since inception of SDT, GDVs were now said to be overvaluing goods. SDT was on most occasions satisfied with the process.

Mr E Mtshali (ANC) commented that SDT had said that it should not worry about profit. He asked what the use was of a business that did not run on profit.

Ms Makatini clarified that she believed that SDT should not focus on profitability to such an extent that diamonds would be made so expensive that people could not afford to buy them. She said that SDT’s main mandate was local beneficiation. She was not discounting the need for government to get returns. However, she did believe that SDT should focus on being a developmental State diamond trader. SDT must be reassured that it would receive funds to pay rent and salaries of staff, so that it did not have to do excessive mark-ups.

Mr Mtshali reiterated that the State wanted to make a profit, and he saw no point in SDT if it failed to do so.

Ms Makatini answered that she believed that its ability to meet the beneficiation strategy and goal of Government would be extremely hampered if it was to increase mark-ups. She said that the suggestion for a new funding model was just a proposal.

Mr Mtshali asked where De Beers was going once it pulled out, and he sought more clarification on the Gabarone Project.

Ms Makatini answered that in its contract with De Beers, it was stated that SDT would be allowed to use De Beers' resources for a period until October 2010. She said that there was always going to be a limited period, which was intended to allow SDT to set itself up. There would be renegotiation, after this period, as to whether SDT would buy De Beers' machinery or seek an extension of the contract. She reiterated that she was unable to speak about the Gabarone project as it was a private company in a foreign country.

Ms J Ngele (ANC), referring to the second bullet on the slide on Trading Performance, asked if SDT found the Board's introduction of trading on a pre-financed basis for a six-month period to be helpful.

Ms Makatini replied that trading on a pre-financed basis had its advantages and disadvantages. The bank balances looked better and that it had less risk of losing money. If SDT had not taken this strategy it would have been closed for technical insolvency. Where is had not worked was that she did not think this was an alternative to the way that SDT had been trading, as it compromised its ability to attract new players. Even though it had its advantages, it was not a good long term strategy.

Ms N Mathibela (ANC) remarked that the aim of SDT was to address beneficiation. She had gone to Kimberley in 2005 and had been shown a building there, under the Provincial Government, that she had thought SDT was going to use for beneficiation. She wondered what happened to that building.

Mr Schmidt said he was on the same trip with Ms Mathibela, and had also received the impression that it would help enforce beneficiation.

Ms Makatini said that the Board had expressed the need to relocate to Kimberley but the challenge was that De Beers had donated equipment and a building that were located in Johannesburg. Kimberley would only be an option if SDT bought its own equipment. She stated that the building needed a diamond entrepreneur, but sadly no one had yet made a proposal that they would like to use the building for its goods, cutting or polishing.

Mr Schmidt said that it appeared that SDT was unable to stand on its own two feet. He asked what SDT had done since the Act was passed two to three years ago, to actively facilitate diamonds for small players in the field, such as cutters and polishers.

Ms Makatini said SDT was in open and ongoing discussions with small players, especially previously disadvantaged craftspeople. It had brought in institutions such as First National Bank to advise them what to do. The small players had challenges with finances, equipment and documents that they needed to operate and once they had goods they also needed a market. SDT was trying to open up markets to them.  As far as possible, SDT attempted to assist small players. She said there was a wider challenge of beneficiation.

Mr Schmidt said that it seemed that not all big traders were approached, because SDT did not have funding or was not viable. He remarked that it appeared that SDT was a white elephant.

Ms Makatini said she did not believe it was a white elephant, as it was still operating and showing a profit. It  still operated on a purely commercial basis. Instead of draining funds, she believed that the proposal to receive funding from the State would in fact make it into a better facilitator of the mandate of the State permit beneficiation.

Mr Lucas asked what South Africa was dong wrong. After a visit to India he was impressed by India's productivity.

Ms Makatini agreed with Mr Lucas that India was a good model. She stated that there was a presentation in Parliament where some people offered to cut anything as they did not want diamonds to leave South Africa. Those people who had offered to do the cutting now seemed to have disappeared. SDT now had people who only cut certain goods. She noted that SDT did not necessarily want to learn from India, but rather wanted to get into the situation where everything would be cut in South Africa. Currently, SDT was training people. In the meantime it would need to consider being able to sell the goods outside South Africa.

Mr Lucas remarked that since SDT came out openly, the gaps had become apparent. He would like to promote beneficiation. He suggested that the Committee should perhaps look again at the legislation with a clear headed approach.

Ms Makatini stated that a change in legislation would allow SDT to gain value. Some people bought SDT's diamonds, and then took them to be cut in India, in order to make money out of the process. The Board wondered why it should not be the only institution allowed to take the goods out. SDT believed that if goods were not saleable in South Africa, then there should be given the choice to take those goods elsewhere.

The Chairperson stated that there were some areas that needed clarification. He stated that he was not convinced that the legislative requirement of obtaining 10% of the products was an unattainable goal. Apart from the problems caused by the global financial downturn, the Committee needed to know what the other impediments were, as he believed that SDT had the capacity to attain its goals. He asked if SDT knew where the process of beneficiation strategy currently was, as the last time it had been informed that it was at Cabinet level.

He stated that the Committee had heard that SDT wanted legislative changes, and so he requested that SDT should bring the proposals to the Committee for a thorough engagement with them. South Africa was a developmental State, so it was imperative that it had strong State organs, including SDT. Instead of working on the same objectives, perhaps SDT needed to work on a turnaround strategy.

He remarked that SDT was basically complaining about funding yet the Industrial Development Corporation (IDC) was its main funder. Considering SDT's remark that IDC charged high interest rates, he asked what the mandate of IDC was, and if it was operating as a developmental finance or profit-motivated institution. He remarked that SDT had not mentioned if it had approached the Development Bank of Southern Africa (DBSA) and that no financial institution would want to assist SDT if it did not have a funding model.

He added that SDT also needed to work on the concept of fair market value. It was not correct that people could participate in the process and then cry foul when the outcome did not suit them.

He stated that he was worried about human resources development and the pulling out of De Beers. He asked if there was a contingency plan that SDT had worked out with De Beers, as the objective of transferring skills had not yet been realised. He asked what roles other players might have, in terms of assisting SDT, so that it could operate more viably.

The Chairperson said he had also been worried about governance issues, as some Board members seemed, by not attending meetings, to be displaying lack of commitment. He said that it was impossible to overlook the AG's statements and asked if SDT was working on the AG's recommendations. When SDT returned to the Committee, the Members would like to get complete clarity on the issues outlined, to be able to work with SDT to map the way forward. There was a need to strengthen, not close the institution.

South African Diamond and Precious Metals Regulator (SADPMR or the Regulator) Annual Report 2008/09 presentation
Mr Billy Manoko, Deputy Chair: South African Diamond and Precious Metals Regulators, extended the apologies of the Chair of South African Diamond and Precious Metals Regulators (Regulator or SADPMR) for his inability to attend the meeting.

Mr Simon Sikhosana, Acting Chief Executive Officer, SADPMR, stated that SADPMR was established in 2007 to administer the Diamond Amendment Act, Diamond Second Amendment Act, Precious Metals Act and the Diamond Export Levy Act, in collaboration with South African Receiver of Revenue (SARS). He listed the functions of SADPMR as issuing licences for diamonds and precious metals, controlling imports and exports of diamonds, and facilitating and selling of diamonds at the Diamond Exchange and Export Centre, (DEEC). The functions of the Regulator were fully set out in the presentation (See slide “Functions of the Regulator”). SADPMR also valued diamonds presented by producers, and diamonds confiscated by the police, and also would give testimony in courts of law when required. Finally, SADPMR promoted beneficiation of diamonds and precious metals by conducting research for best practices.

He listed the achievements of the SADPMR. These included the appointment of the GDV and the issuing of 1009 new diamond licences during the 2008 transitional period. The challenges were listed as including issues around legislation, funding, access to funding, rough diamonds and markets, and the refining of illegal gold.

Mr Johnson Mthethwa, Chief Financial Officer, SADPMR, briefed the Committee on the Annual Report and said that he was only going to focus on the recommendations of the Auditor-General. Although SADPMR had received an unqualified audit report, there were some general issues that needed to be addressed. He said that the AG had said that proper process had not been followed when a firm of auditors was appointed by SADPMR. This was because the Regulator had taken urgent steps to fill an important post that had been vacant. He explained why it had opened a separate bank account and why it had allowed a director of a consulting firm become part of the audit committee. He covered key governance issues such as the transfer of R10 million to Mintek, a transfer that was justified by SADPMR's need to stop illegal diamonds from entering South Africa.

He stated that many of the issues raised in previous Annual Reports had been substantially addressed. He reassured the Committee that the Regulator was in the process of addressing issues as soon as they were raised.

Discussion
Mr V Magagula (ANC) asked why SADPMR had opted to fill the vacant post the way it had, rather than using the tender process. He asked if it was solving the problem or rather aggravating it.

Mr Mthethwa answered that an auditor was a “watch dog” and had to be present at all times. There were times when SADPMR had not had an auditor, and it had picked up many problems arising from this. The appointment of the first auditor was done in a proper manner, and he noted that it had taken a long time. However, that person had resigned, giving very short notice, and had only in fact done 30% of the work that had been allocated to him. If SADPMR had waited to appoint an auditor through the full tender processes, it would only have been able to make the appointment in April. Its financial year-end was in March. For this reason, it had asked that an auditing firm should appoint an auditor in the meantime, whilst it was looking for an auditor through the correct process. The appointment in this way was a way of ensuring that the Regulator was covered, and that it would have continuous audit services.

 Ms Mathibela said that the financial statement was confusing, as many things had been done incorrectly. She said that R10 million had been given to Mintek, but at the same time this was not done in the correct manner. She commented that she did not know how the Committee would deal with the report.

Mr Mthethwa answered that the R10 million was an important investment, as the presence of illegal diamonds in South Africa posed a serious danger. It needed to establish that diamonds being processed in South Africa were from the country's mines. South Africa was one of the founding members of the Kimberley Process Scheme. There were no longer so-called “blood diamonds” but there were still illegal diamonds. It was impossible to go to court to prove that those illegal diamonds were not South African in origin in the absence of scientific methods that had been tested and proved as reliable. He said that SADPMR needed to protect the South African industry by ensuring that diamonds coming into the country were properly licensed, and had all the proper documents.

Ms Mathibela said that SDT had spoken about small parcels which should be made, and she wondered if these parcels would be an efficient way of dealing with the problem of people selling illegal gold.

Mr Sikhosana clarified that he had not been talking of small parcels of gold but rather of diamonds. SADPMR had suggested that producers should make smaller parcels, so that diamonds could be more affordable. He announced that some of the producers had already started making smaller parcels.

Ms Mathibela asked that the Regulator identify which parts of the legislation were loose, so that the Committee could get some idea of where the legislation needed to be tightened.

Mr Sikhosana answered that Section 59 of the Diamond Second Amendment Act was very loose. It did not specify that the valuation made by IDV was final, and he stressed that matters should never simply be left to be taken to court as it defeated the whole process. He also had a problem with the fact that the legislation did not specify a timeframe stipulating how much time could pass until an IDV had to be selected, or how long people had to reach an agreement. He said that the process dragged on as people failed to reach an agreement.

He said that it was not a regulated industry. In order to save money, the IDVs charged what it felt like to save costs. He believed that the industry should be more strictly regulated, as to how rates were determined.

Mr Sikhosana commented that the issue of fair market value was becoming a problem for SADPMR. He said GDVs conducted research globally to get international fair market prices, and then calculated an average from them, and this was how it approached goods that were supplied by producers. It  was difficult to say that this was in fact fair. A “fair market value” made by one tender house could be biased because of other interests, and thus tilt the value. He said that SADPMR also ensured that diamonds that left the country did so at fair market value as money was at times laundered through diamonds.

Mr Lucas asked if it was possible to set up a process, similar to the Kimberley Diamond Process, in respect of gold and if it was possible to determine where gold originated.

Mr Sikhosana replied that there was a Forensic Unit in Pretoria that helped determine the source of gold. It was a legal requirement for all gold producers to submit samples of their gold, which were then fingerprinted. Only properly producing mines submitted their gold. SADPMR had suggested that the Forensic Unit should also take samples from defunct mines.

He said that the gold equivalent of the Kimberley Process was part of the project and that the Regulator wanted to engage with Mintek. SADPMR wanted all African gold to be fingerprinted so that it could ascertain where all gold in the country came from.

Mr C Gololo (ANC) asked how it could be established if gold was legal or not.

Mr Sikhosana answered that there were some small refineries that claimed to get their gold from scrap metals, but the pile of scrap metal did not correlate with the amount of gold produced. The SADPMR also checked the accounting books to ensure that the figures matched the size of the establishment. However, at the end of the day it was up to the South African Police Service (SAPS) to determine where this illegal gold emanated, as it was beyond SADPMR's capacity.

Mr Mtshali asked if the Annual Report had been signed by the AG.

Mr Mthethwa answered that he had not brought the signed copy of the report to the meeting.

Mr Mtshali suggested that the Committee should then not accept the report until it received the signed one.

 Mr Gololo asked who was going to be accountable for the irregular expenditure arising from the irregular appointment process.

Mr Mthethwa answered that when the AG had looked at how the firm was appointed the comment was made that the process had been short-circuited, but the AG was satisfied that the money was in fact correctly paid for the internal audit function.

The Chairperson suggested that the Committee must flag Mr Mtshali's suggestion and asked SADPMR to clarify whether the report that was presented was similar or the same to the one that was signed.

Mr Mthethwa answered that it was exactly the same report as that which had been signed. The SADPMR had responded on the unsigned report, because this was the one that was sent by e-mail. He said that he could fax through the signed report, to prove its authenticity, and that he was willing to come back to the Committee if it found any discrepancies.

The Chairperson thought that the Committee had agreed that it needed the original documents that were traceable back to the AG. He suggested that the two institutions should send the unsigned reports and then a small sub-Committee would peruse the reports. If that sub-Committee found any disparities there would be dire consequences. The decision on whether the adopt the Committee Report would only be made once that processes was complete. He said that he had not been entirely happy that although the audit report was unqualified, some serious concerns had been raised.

Members agreed in principle, but suggested that there should be a timeframe.

The Chairperson agreed that the signed reports should be sent to the members by Wednesday 18 November and the Committee would meet with a delegatation from the two institutions to look at the reports. He reiterated that if the reports did not correlate they would be rejected and there would be dire consequences.

The Chairperson asked if the achievements were set out in terms of the targets.

Mr Sikhosana answered that the targets that SADPMR set for itself were theoretical. The target set for licences for diamonds was exceeded, as many people had applied for them.

The Chairperson asked for clarity on the question of court challenges.

The Chairperson commented that the financial statements did well in providing management comments but that even so, fell short. Referring to point number 8 in the presentation, that detailed the need for the preparation of financial statements, he stated that the document did not indicate how far SADPMR was in that process.

Referring to point number 11 the Chairperson noted that SADPMR had said that the account was closed and that all the moneys in it were used up, but the requirement made reference to the revenue fund that should be administered by the main Department. He said that he felt that the Committee had not been properly assisted in understanding the process.

The Chairperson remarked that he was troubled by the tender process in which a member of the tender adjudication process had disclosed vested interests in one of the companies. All that SADPMR had offered by way of explanation was that that particular member had declared his interests, but it was never stated if he had chosen to recluse himself.

Mr Mthethwa answered that the company had been appointed to do the work first. When the SADPMR had looked at the capacity of the audit committee, it had approached this particular member to join the Committee because of his experience and knowledge. SADPMR had then terminated the contract with his company, but had chosen to retain him. If he had resigned, there would not have been a quorum in the Audit Committee and the Audit Committee would have returned to its earlier dysfunctional state.

The Chairperson asked why the R10 million was written off as, as SADPMR was not clear on that issue.

Mr Mthethwa responded that the AG had suggested the write-off. In its contract with Mintek, there was provision for royalties of 25% to be paid back to SADPMR. SADPMR was expecting the project to bear fruit only five years down the line. The AG had told the SADPMR to rather impair the funds (by keeping them in the balance sheet, but not list this as an asset in the true sense of the word) as SADPMR should not invest too much hope in the project, which would only be viable once it was in use. If neighbouring countries wanted to use the project they would have to pay a fee. There was nothing tangible at this stage that suggested funds would be flowing into SADPMR anytime in the near future.

The Chairperson noted that the AG had raised concerns on non-compliance and other issues. He asked why SADPMR was still working on the previous year's recommendations and how sure could the Committee be that the concerns presently raised would be acted upon.

Mr Mthethwa said that there were a number of issues, and gave the example of the resignation and non attendance of members so that the SADPMR was unable to make decisions. He emphasised that SADPMR did not deliberately ignore the challenges. He said it became frustrated and did not know what to do as it would employ and train people, but they failed to commit as expected.

The Chairperson reiterated that the Committee would await the signed documents. He asked that SADPMR  send at least one delegate to assist the Committee in perusing the reports.

The meeting was adjourned