The Committee and Minister of Mining heard a presentation from Kgosi Nyoko Motlhabane, traditional leader of the Batlhaping Ba Ga Maidi Community, who were unhappy about the Department of Mineral Resources (the Department) actions in relation to prospecting rights that were awarded to Taung Giant Miners, despite not consulting with the community as required by the Mineral and Petroleum Resources Development Act (MPRDA). The High Court had issued an order on 20 October 2008 directing compliance with the Act, supporting the claims of the community. Despite this a second application for a permit was made, again without consultation with the community, which was granted by the Department. In 2006 the Department had dismissed the community’s own application for a prospecting permit, alleging that there were irregularities in the application, and refused to engage further on the matter. A third application to Court was currently pending. The community also claimed that several attempts had been made in the past to deprive it of rights, including building a dam that allegedly concealed a mining site, and spurious complaints against the leaders. The Community requested that the Committee intervene to facilitate a permit being granted to the community. Members were concerned, firstly, that the matter was sub judice, and secondly that it did not have sufficient facts to enable it to make a decision. The Minister of Mining claimed that she had not seen the documents, although the community claimed to have forwarded them to her. Members noted that the Committee could not act as a court of law, although it was concerned to protect the people. They advised the community to re-draw its submission, including all relevant documentation, and forward it both to the Committee and the Minister.
She clarified that LIMDEV was a parastatal managed by the provincial government of Limpopo, which was not controlled by the Department. The Department had not received any application for disposal of the rights, therefore could not comment specifically, and the matter could well lead to litigation. In order to maintain the Department’s objectivity, she asked that the Department and she should be recused. After discussion, this was done, and LIMDEV gave its responses to the questions that the Committee had previously posed. The background was outlined. LIMDEV participated in a number of ventures, including mining, although it always intended to devolve any mining benefits, in time, to the local communities and provincial citizens. Dilokong Chrome Mine, during 2006, had applied for conversion of old order to new order mining rights but was advised that a Black Economic Empowerment (BEE) partner must be identified, and LIMDEV was not considered to be a BEE partner. It continued to engage with the Department on this matter, and advised the Department that ASA Metals, whom it felt complied with the BEE requirements, would give effect to BEE requirements, and requested that other conditions be waived. No response was received from the Department and LIMDEV took the silence as consent. Dilokong’s application was approved in July 2007, but when it attended a meeting in November 2007 to undertake the conversion, the point about BEE was again raised. It was decided to delay the execution but there was now danger that another application for the same rights, by another company, might be granted. LIMDEV in the meantime was working on a deal with ASA Metals, which would assist BEE partners to generate funding, whilst LIMDEV would dispose of some of its ASA shares to a Chinese partner. This disposal, which would result in 60% Chinese ownership, was apparently approved by the Premier for Limpopo, in terms of a joint venture agreement. LIMDEV emphasised that the community would not suffer because the disposing of some interest would spark huge expansion in what remained. The technical nature of the transaction and the bid process were set out. Members were concerned about the exact nature of the deal, the distribution of the shares, and felt that 60% foreign-ownership was unacceptable. LIMDEV explained that it was not initially the intention to dispose of its shares, but this had been done in order to comply with the BEE requirements. It clarified how the deal was brokered and the important role the Chinese played in securing the funds for future expansion plans. Members questioned why LIMDEV had not disposed of its assets elsewhere, and noted that further discussion was needed in general on whether State Owned Enterprises must comply with BEE requirements. Members questioned why LIMDEV had defied a direct order from the Minister, notifying it of the moratorium from Cabinet, not to proceed with the disposal plans. They were not convinced of LIMDEV's commitment to the community or its ability to manage the assets. Members asked who would benefit from the ferrochrome mining, where the funds that were generated from the sale of the shares to a BEE partner would go, and what the consequences would be if the deal was rejected by the Department. The Chairperson questioned how these plans would bolster the State’s decision to own a mining company, and whether this disposal plan was the best option. Members asked for comment from the Limpopo government representative, who said that he was merely asked to note matters, although the MEC would be happy to meet with the Committee if required.
The National Union of Mineworkers asked to address the Committee on the transaction. The community had been concerned about the disposal of State assets, since this ran contrary to the purpose of the moratorium, which was to allow the State to consolidate its mining assets, operate the mines and use the revenue to create jobs, improve education and skills for the nation. It would be a dangerous precedent if LIMDEV were permitted to depart from the directive by Cabinet. LIMDEV was asked to respond on these points.
Members resolved that the Committee should acknowledge that there was a Cabinet decision in the form of a moratorium that bound LIMDEV not to dispose of any State owned assets. It suggested that LIMDEV must seek Cabinet approval to be exempted from the moratorium. It wished the Department to protect and guarantee LIMDEV's right to those shares, and requested that LIMDEV engage with its Chinese partner to review the 60%: 40% deal. The Committee should also investigate the exact intentions of government's moratorium, as well as the management of all State owned mining assets, in order to improve the Committee’s oversight function. Members discussed whether the Committee had the power to give instructions to the Department, and whether it could make a decision or recommendation, and suggested that the State Law Advisors be asked to address the Committee on its legal mandate.
Taung Traditional Leadership briefing on mineral rights in the area
Kgosi Nyoko Motlhabane, Traditional Leader of the Batlhaping Ba Ga Maidi Community, stated that the community was unhappy that the Department of Mineral Resources (DMR) had failed to observe an order from the Mafikeng High Court. He explained that the DMR issued a prospecting permit to Taung Giant Miners (TGM) on 6 April 2006, to prospect on land under the jurisdiction of his people. In December 2007 the community filed an action in the Mafikeng High Court arguing that the DMR violated the Mineral and Petroleum Resources Development Act (MPRDA) because the TMG had failed to consult the community as the lawful owners of part of the land. The High Court issued an order on 30 October 2008 confirming their position and ordered the DMR to pay their share of the costs.
Shortly afterwards TGM re-applied for the permit, again without consulting the community. DMR issued the permit to TGM, knowing that this was in violation of the law. The community wrote to the Minister for Mineral Resources, and both wrote to and met with the Premier of North West, the MEC for Local Government and Traditional Affairs in North West and other leaders but received no response.
In September 2006 the DMR dismissed the Ba Ga Maidi people's own application for a prospecting permit claiming that they had failed to submit an Environmental Management Plan (EMP). The EMP had indeed been submitted to the DMR’s office in Klerksdorp, but the DMR failed to inform the community of an alleged irregularity in the application and instead dismissed it without notice. DMR refused to engage further on the matter and there was currently the third matter pending before the High Court to decide on the matter.
Kgosi Motlhabane continued to provide the Committee with some historical background of his people's fight for justice (see attached presentation). He said a dam was apparently built at a cost of some R300 million to conceal a De Beers mining site. The purpose was to hide the site until a more favourable political environment pertained. This dam had become a white elephant. He shed some more light on the great strides his people had taken over decades. There were attempts to oust him as the leader of his people, including the setting up of commissions of inquiry to investigate him for corruption and maladministration, which resulted in no actions. All these attempts and setbacks were simply attempts to deprive his people from the benefits of the minerals on their land. He hoped, by this submission, to persuade the Committee to assist the community to be issued with a prospecting permit.
Mr H Schmidt (DA) advised Kgosi Motlhabane that everyone was obliged to work within the rules. It was valid for the DMR to dismiss an application because of a flawed EMP. However, he conceded that no proper policing of mining companies had happened. The DMR should have monitored those companies and checked that they implemented and did what they had promised to do in their social and labour plans. He also advised Kgosi Motlhabane that perhaps the community should re-apply, in a professional manner, if they felt entitled to those rights.
Ms F Bikani (ANC) said the Committee would need more information and supporting documents from the Taung community in order to apply its mind fully to the matter, pointing out that the Committee had heard only one side of the issue. The Committee would need documents to support the allegations that DMR was indeed violating the law, as well as documented research that the dam referred to was indeed a white elephant.
Mr C Gololo (ANC) also asked for further clarity on the dam's status. He agreed that DMR should present its version of the matter before the Committee could give any consideration to it.
Mr VV Magagula (ANC) felt that it was perhaps inappropriate for the matter to be brought before the Committee now. He mentioned that the matter could have been directed to the Public Protector. The Committee was not a court, and could not decide on who was wrong or right.
The Chairperson reminded Members that it was the Committee’s duty to protect the poor and defenceless. He said that the matter had already been referred to him in the previous year, and he had asked the DMR to deal with it, but it now seemed that the matter was still not resolved. The Committee was perhaps the last hope for the Taung community. He felt it correct to let the members listen to the allegations and for the Department to give its views.
The Chairperson also asked Kgosi Motlhabane to provide more clarity on what responses they received from the DMR after the court order and their applications for permits. He also asked clarity on who exactly submitted the applications, and whether this was done by the leaders or by the BaGa Maidi Tribal Trust. He also asked how the Trust was constituted and managed.
Ms Bikani felt that the Department should have briefed the Committee before the community version was given. She reiterated that the Committee could only respond effectively after receiving the necessary supporting documents, and warned that the Committee should not be seen to be taking sides in the matter.
The Chairperson explained that it was not a case of taking sides but rather an attempt to get clarity on some matters. It was not the intention to take decisions, but to give both parties the opportunity to put their versions forward. The Committee would then decide what action it should take.
Kgosi Motlhabane said the Trust was established by 12 villages in his community with the mandate to do business, including mining, on behalf of the community. On the death of his father in 2005, he took over the leadership. Despite the court case, mining by outsiders was still happening.
Kgosi Motlhabane said that he would like to give some background to the questions about the dam.
The Chairperson asked him not to do so now, as the Committee wanted DMR to provide the Committee with its responses.
Kgosi Motlhabane said he still needed to answer the question about the EMP. He began to speak about the experiences he had at the DMR regional offices and stated that he often felt the community was “pushed” into doing certain things. There were issues around the registration status of the entity that submitted the applications.
The Chairperson felt the Committee had heard enough, and that the Department should now respond.
Mr Gololo suggested that the Committee should not put the Department in a compromising position by asking them to respond now. Instead he proposed that the Committee visit the Taung area in order to obtain first hand evidence of what had transpired to that point.
The Chairperson noted Mr Gololo's proposal, but still felt it fair that the DMR be given a chance to respond.
Hon Susan Shabangu, Minister of Mining, stressed that the government was committed to redressing poverty in this country, and that the DMR, as part of that government, was similarly committed, although it did not have a budget for poverty alleviation projects. The DMR did not get involved with social delivery in the same way as other departments. DMR remained the regulator for mining. She pointed out that the court case was still pending, and so the entire matter was sub judice. She concurred with other Members that it would be inappropriate for her to respond at that juncture. Like the Committee, the Department also needed a chance to investigate first hand before responding. Lastly the Minister repeated her previous request that the Committee should provide her with all relevant documents well in advance of such hearings, and that these could be submitted by the Committee through the parliamentary liaison office. She introduced the new Parliamentary Liaison Officer, Ms Vuyiswa Mdemka. She noted that she would be happy to report back at an appropriate time, and that the Kgosi should also be present.
The Chairperson responded that he had submitted all the documents he received from Kgosi Motlhabane to the Director General of the Department, and was surprised that the Minister had not had sight of these. He urged Kgosi Motlhabane to make a new submission to the Minister's office as well as to the Committee, including all the requested supporting evidence.
Ms Bikani warned that this case was not an isolated incident; there were other communities who had similar complaints. She felt that this was perhaps an opportunity for the Committee and the Department to look more closely at the manner in which beneficiation and prospecting rights were handled by the Department. She suspected there were some grey areas that needed attention.
Mr Schmidt said it was useful that the Minister was present because she needed to know that many mining companies did not even inform the affected communities of their social labour plans. He said there would always be two sides to the coin, and as much as it was important to encourage investments it was also important to respect the rights of the local communities.
Mr Percy Matshane, Member of the Bag a Maidi and Advisor to the traditional leaders, expressed surprise that the Minister claimed she never received any documentation. He personally had sent the same documents to the Minister's office and her own email address.
The Chairperson reiterated the statement that new and expanded submissions should be made to the Committee and the Minister.
Ms Bikani asked if the Committee researcher could gather information around the dam and other relevant matters and make it available to the Committee.
Mr Gololo felt that the Committee should arrange a trip to the Taung region to get first hand information on the matters raised by the Kgosi.
ASA Metals & Limpopo Economic Development Enterprise matter
Chairperson’s opening remarks
The Chairperson sketched the background for the presence of both the Minister and the Limpopo Economic Development Enterprise (LIMDEV). He explained that the attempted disposal of the State's shareholding in ASA Metals was highlighted by the media in the previous month. Subsequently there was communication between the affected community and Parliament, leading up to the briefings that would be given at this meeting. The Department would be asked to give some clarity about Cabinet's moratorium on the disposal of State owned mines, and LIMDEV would be asked to explain its plans. He noted that unfortunately the Committee had not invited ASA Metals, an important role player, to this meeting, although he acknowledged the presence of an ASA Metals employee on the LIMDEV delegation, who would not be expected to provide official responses on behalf of ASA Metals.
Hon Susan Shabangu, Minister for Mineral Resources, said she was not happy to follow the line the Chairperson proposed. She explained that LIMDEV was a parastatal managed by the Limpopo government. It owned various assets, including some in mining. The Department of Mineral Resources (DMR) was not in control of LIMDEV. However, the DMR was, in terms of the Constitution, responsible for mining rights in South Africa.
On 9 August 2009 Cabinet had placed a moratorium on the disposal of any State owned mining assets. Subsequently a letter to this effect had been sent to LIMDEV. Cabinet also instructed DMR to do an audit of all State owned mining assets, in order for Cabinet to reach a decision on how best to deal with all the State’s mining assets.
The Minister also wished to inform the Committee that DMR had not received any application for such disposal from any party. The absence of any formal application made it difficult for the Department to respond to any questions regarding the matter. Participation in the consultations would therefore seriously compromise the Department's legal position, should the matter resort to litigation. On those grounds the Minister asked the Chairperson to recuse the Department from the proceedings.
The Chairperson noted the request from the Minister to be recused but felt that it could be useful for the Minister to remain and clear up some issues. He suggested the Minister should listen to LIMDEV's submission, and afterwards decide whether she could make any input, or still wished to recuse herself.
The Minister did not agree with the Chairperson's suggestion. She felt that her Department's mere presence already affected its objectivity. The issues that LIMDEV would raise were matters that the DMR would have to regulate on, and the DMR needed to retain its impartiality.
Mr Schmidt noted that whilst he would like to see the Minister at more of the Committee’s meetings, he agreed with her submission. He agreed that the Minister should be recused, but suggested that LIMDEV still be allowed to make its presentation to the Committee. The Minister could then be recalled to a future meeting in order to respond to matters.
Mr E Mtshale (ANC) agreed with Mr Schmidt that the Minister should be recused and then re-discuss the matter when appropriate.
Ms Bikani suggested that LIMDEV should present now, but that the Committee would also need to hear the Department’s submissions. She agreed, however, that the DMR should be recused at this point.
The Chairperson noted the consensus amongst members and recused the Minister and Department.
The Chairperson then requested that LIMDEV brief the Committee.
Limpopo Economic Development Enterprise (LIMDEV) briefing
Mr Stan Mathabatha, Managing Director, LIMDEV, was accompanied by Mr M Thobakgale, Acting Head of Limpopo Economic Development, Environment and Tourism Department (LEDET), and Mr Matome Moremi, Parliamentary Officer, both of whom were representing the major shareholder, the Limpopo Government. Mr Adolphus Munyai, Senior Corporate Manager, ASA Metals, was also part of the delegation.
Mr Mathabatha said that his presentation would answer the questions that the Committee had submitted to LIMDEV. Although no answers had been prepared to the questions raised by the National Union of Mineworkers (NUM), the delegation could address these during the meeting.
The Committee had asked why LIMDEV continued with the disposal process, despite a letter from the Minister instructing LIMDEV not to continue. Mr Mathabatha explained that the letter from the Minister was received on 23 August 2009 and that Mr Malabela, Chairperson of LIMDEV, had replied the next day requesting an urgent meeting with the Minister to engage on this directive. The meeting would seek clarity on the implications of non-compliance with the provisions of the Minerals and Petroleum Resources Development Act, 28 of 2002 (MPRDA). This was prompted by the fact that Dilokong Chrome Mine (Pty) Ltd (DMC) lodged an application, on 28 April 2009, for a conversion of its old order mining rights into new order mining rights as prescribed by the MPRDA. A previous application from DMC for prospecting rights on Driekop 253 KT, during December 2006, had met with the response that a Black Economic Empowerment (BEE) partner should be identified. The Department stated that LIMDEV was not a BEE partner, and encouraged it to leave the mining arena.
Mr Mathabatha explained at this juncture that LIMDEV never had any intentions to stay permanently in mining matters, but instead always intended to devolve any mining benefits to the local communities and provincial citizens. The leaders of LIMDEV were aware that the people of the province would always lose out on mining benefits if they did not do something drastic. For that reason, through LIMDEV, they had established a company, Corridor Mining Resources, with the sole aim of acquiring mining rights, developing them, and then distributing them to the communities.
Mr Mathabatha then continued with the history of the disposal process. After the meeting in December 2006, LIMDEV continued to engage the Department. In February 2007 it had submitted a letter detailing the shareholding structure of ASA Metals, and how that would give effect to the BEE requirements. LIMDEV requested that DMR waive other conditions, believing that the BEE structure was a sound one. The Department did not respond, and LIMDEV assumed that the request for waiver was granted. On 18 July 2007 DMC's application for prospecting rights on Driekop 253 KT was approved, without any reference to the BEE partner conditions contained in Section 2(d) of the MPRDA. The DMR’s letter of approval indicated that DMC could make arrangements to have the rights executed through the DMR’s regional offices in Polokwane. A date of 14 November was set for a meeting to do this, but DMC was told on this date that the execution of the rights could not happen because ASA Metals had no BEE partner.
DMC and LIMDEV then decided not to challenge the regional manager of DMR, but to wait for their own BEE deal with ASA Metals to be completed, and then again seek to have the rights executed. During 2008 LIMDEV had several meetings with DMR in the region to plead their case. The rights were now at risk, since a second company had instituted a legal challenge to receive prospecting rights on the same land.
Mr Mathabatha turned to the second question posed by the Committee, whether the investor was also disposing of some of its shares, in order to comply with Section 2 (d) of the MPRDA. He said that when ASA Metals announced the expansion plans, which were worth nearly R3 billion, LIMDEV arranged that ASA Metals should generate the funding, whilst LIMDEV would be the partner to dispose of its shares in accordance with the MPRDA. Both parties would make a sacrifice. ASA Metals also promised that it would assist the BEE partners with funding, and such agreements were contained in the shareholders agreement.
In response to the Committee’s query whether the disposal process had been transparent, Mr Mathabatha said that as his presentation progressed, there would be a demonstration that the process was transparent.
In answer to the fourth question about approvals, Mr Mathabatha said that LIMDEV strongly believed that all the approvals had been in place.
The Committee had asked whether the community was participating in the transaction. Mr Mathabatha said that perhaps the 5% interest of the Ga-Maroga Community seemed small, but that it actually amounted to about R130 million, which would treble after the expansions. The other 25% would be owned by broad-based community groups from the entire province.
Mr Tshepo Phetla, Acting Chief Operations Officer, LIMDEV, briefly described the technical nature of the transaction. He also explained the bid process as well as the shareholding in the future. [See attached document for further details.]
Mr Adolphus Munyai, Senior Corporate Manager, ASA Metals, explained that the shareholding of the BEE partner was greatly enhanced because it not only had shares in the mine itself but also in the entire value chain within ASA Metals.
Ms Bikane asked for more detail on the distribution of the shares and how it was possible for 60% of the shares to be owned by foreigners.
Mr Mtshale also found it unacceptable that locals would only own 40%.
Mr Mathabatha responded that although the local community would only own 5% of the shares, the broader Limpopo community would own more than 80% of the BEE shareholding. He explained that the 60%:40% split was negotiated between China and the previous Premier of Limpopo, with the approval of national government, since a joint venture agreement was in place, and was therefore enforceable by law. LIMDEV had entered into expensive deliberations with the Chinese around the redistribution of shares. The resultant deal should not be seen as having compromised the people of the Limpopo province.
Ms Bikani wished to know who would benefit from the ferrochrome, and whether it would simply be exported.
Mr Mathabatha stated that the ferrochrome was mainly exported to China, as this was the main market for that metal.
Mr Mtshale said he did not understand the purpose of the letter of 18 March 2010 to the MEC, Mr P Moloto, which was attached to the document.
Mr Schmidt remained unsure of the motivation behind the deal. He said that LIMDEV should perhaps do an assessment of the fair value exchange in the deal. He felt that the 60% partner should contribute a corresponding amount of shares towards a BEE partner.
Mr Phetla said that the amount that LIMDEV had to invest to make up its share of the investment would have equated to about R800 million. It did not have the cash to put in. The value of LIMDEV in the company could be equated to about R800 million.
Mr Schmidt asked where the funds that were generated from the sale of the shares to a BEE partner would go.
Mr Phetla replied that the funds would go into LIMDEV's account, and that such funds would be used to further grow the business interests of LIMDEV.
Mr Munyai added that the funds would be used to create more access into mining for the communities. Large amounts of capital were needed to begin prospecting and the only way for communities to benefit from a license would be to have a body like LIMDEV facilitate the process. Once the mine was productive the community was ready to start its involvement on a full time basis.
Mr Schmidt asked what the consequences would be if DMR rejected the deal.
Mr Munyai responded that ASA Metals would have to close its doors should the BEE deal be rejected by the DMR. They could not be expected to keep operating without a prospecting license. Another consequence would mean large scale retrenchments for the people of the province. He complained that they were in a Catch-22 situation, because whilst government was on the one hand demanding BEE involvement, it was also making it difficult for companies to comply with BEE. Rejection of the deal would also mean the loss of the large investment. Furthermore, the expansion plans would grow the annual output from 120 tonnes to 360 tonnes, which in turn would create large scale job opportunities and foreign investment for the country. Without a license those spin offs would not come into being.
Mr Gololo asked what LIMDEV was doing besides mining.
Mr Mathabatha said that LIMDEV was established as an intervention from the government of Limpopo in response to the needs of large scale rural and impoverished communities. The difficulty that the communities had in securing finance needed to be addressed, and therefore LIMDEV was positioned to engage in revenue making projects. LIMDEV had interests in housing construction, shopping mall construction, public transport and other social responsibility programmes.
Mr Gololo needed clarity on the terms “active” and “passive” as used in the document by LIMDEV.
Ms Naniki Rampedi, Acting Chief Executive Officer, Corridor Mining Resources, (an affiliate of LIMDEV) explained that the two terms were referred to in both the Mining Charter as well as the MPRDA. “Active” involvement meant active employment, involvement in senior management and active procurement. “Passive” referred to the involvement of Historically Disadvantaged South Africans as shareholders.
Mr Mtshale bemoaned the fact that it was common knowledge that shareholders in broad-based deals ended up with very little money when dividends were declared. He asked if LIMDEV could expand upon the future cash values of those shares.
Ms Bikani was still not sure about who owned the 60%.
Mr Mathabatha explained that the Chinese owned 60%. South Africa’s contribution to the deal was rights in the form of a dormant and closed mine. The Chinese partners had brought in the capital.
The Chairperson said that he still had not received sufficient clarity as to why, despite receiving the letter from the Minister directing that the disposal process must cease, LIMDEV was still pushing ahead with the disposal process.
Mr Mathabatha replied that several factors were taken into consideration when that letter was received. Much money had already been invested in the process, and the Public Finance Management Act (PFMA) warned against fruitless public expenditure. LIMDEV had not expected that the government would refuse the application, and therefore had continued with the process, assuming that at the same time it could engage with the Minister on the matter of the BEE partner. Political leaders, when consulted, advised LIMDEV to continue. Whilst LIMDEV was aware that it must still apply for Section 11 rights, it had felt that it was reasonable not to halt the other elements of the process whilst awaiting a meeting with the Minister. In the end result, that meeting had not taken place.
The Chairperson did not understand the BEE status of LIMDEV, a State owned entity.
Mr Mathabatha argued that LIMDEV was a State owned entity, whose only shareholder was the government of Limpopo. This government was voted in by the very people who must be empowered. On that basis, he believed that LIMDEV should have been exempted from the BEE requirement.
The Chairperson referred to the Cabinet resolution in 2007 where it was decided that the State should own a mining company and asked LIMDEV how its plans contributed to that resolution.
Mr Mathabatha emphasised that LIMDEV indeed was the leading supporter of government's initiative to own its own mining company. LIMDEV had already acquired a mining business on behalf of the Limpopo government. He also felt that disposing of a 30% share did not mean that LIMDEV was diluting government's share in that mining asset. He claimed that the remaining 10% would grow to a figure even larger than the 30% being disposed of, after the expansions.
Ms J Ngele (ANC) said she still did not understand who LIMDEV really represented.
Mr Schmidt again asked for more clarity on the true ownership of LIMDEV. He regarded LIMDEV as a separate entity, in which government happened to have 100% shareholding, but failed to see how it could be viewed as a state owned entity.
Mr Mathabatha explained that LIMDEV was a State Owned Entity in terms of the PFMA. Since South Africa was a unitary State there was no need to transfer the Limpopo government shareholding to national government, as this was already in the hands of the “State”.
Mr Schmidt felt that the value of the shares was not fairly distributed and needed more clarity on that matter.
Mr Mathabatha said it seemed that there would always be divergent views on the matter. LIMDEV believed that there was no dilution of the true value of the shares. The community was not compromised in the process. He said that any directive from Cabinet would be welcomed by LIMDEV, who would then work with the political leadership of the province to implement such directive.
Ms Bikani asked LIMDEV if the disposal plan was the best option available. She asked if it would not have been a better option to simply transfer the 40% to the State.
Mr Mathabatha said that there had been no other option. Initially, it was never LIMDEV’s idea to dispose of the assets early on during the expansion. Good business sense meant that it would be preferable to wait for the expansion first, which would greatly enlarge the assets, and only then distribute to the community. However, the law forced LIMDEV to find a BEE partner and to dispose of the requisite shares.
Ms Bikani reminded LIMDEV of the government's priority to uplift the communities. LIMDEV spoke about its involvement in buses, housing and malls but never explained precisely how the community would benefit. She was not convinced that LIMDEV was managing this project very successfully, and thought it wise that LIMDEV should simply hand it back to the State.
Mr Mathabatha clarified that he had only mentioned the buses and malls in response to a specific question from a Member and that there was no intention to cite these as examples of community involvement.
Ms Bikani said she did not get a clear enough answer on why LIMDEV did not simply transfer the asset to the State.
Mr Mathabatha stressed that LIMDEV was owned by the State, in the form of the Limpopo government, so there would be no point in transferring the asset to another State body.
Ms Bikani noted that the Limpopo government was part of the delegation and asked for their opinion on the matter.
Mr Mtshali said he did not have much faith in BEE. He had recently heard that someone who had shares in a BEE company had received only R284 by way of dividends after two years. He asked for further explanation on the BEE aspects.
Mr Schmidt noted that LIMDEV wished to be exempted from the BEE requirements set out in Section 2(d) of the MPRDA. He thought that the exemptions set out in the Act did not cover the situation presented by LIMDEV. Cabinet would, within the next month, be discussing the BEE status of State Owned Entities and LIMDEV should perhaps have waited for that process to have run its course.
Mr M Thobakgale, Acting Head of Department, Limpopo Economic Development, Environment and Tourism Department, said that he was at the meeting in his capacity as a representative for the MEC, who had instructed LIMDEV to attend this meeting and had asked Mr Thobakgale to note any relevant matters. The MEC would be willing to attend a future meeting with the Committee if required. His role as HOD was to at least open the channel for communication.
Mr Frans Baleni, General Secretary, National Union of Mineworkers (NUM), requested that the Union be permitted to make a brief submission. He noted that Section 2 of the Constitution stated that everyone has inherent dignity and the right to have that dignity respected and protected. That could only happen in the absence of poverty and the absence of unemployment. Many South Africans were stripped of this dignity through abject poverty and continued unemployment. He then asked whether the right to minerals below the earth was a blessing or a curse to the people.
Mr Baleni said that the planned disposal of assets by LIMDEV was extremely disturbing to the community. This was an asset owned by the State. Through the moratorium on disposal, the State could consolidate its mining assets, operate the mines and use the revenue to create jobs, improve education and skills for the nation. He would not like to see LIMDEV go ahead with the disposal process without receiving specific approval from Cabinet. He asked whether Mr Mathabatha was suggesting that Limpopo was an independent federal State that could disregard a directive from Cabinet.
Mr Baleni felt that a sale of assets, at the time when the State needed to consolidate its assets, would be counterproductive. He mentioned the stake in De Beers, Alexcor and the coal mines owned by Eskom. He asked whether it was indeed necessary to sell the assets in order to fulfil the objectives of the Mining Charter. He asked what “law” was referred to by LIMDEV when it stated that the “law” stated that it should dispose of the assets. He felt that LIMDEV's actions were bordering on delaying the truth and the Code of Good Practice. He said that LIMDEV should be called to order, and must comply with the directive from Cabinet, otherwise it was setting a precedent for other State Owned Entities to act in similar fashion, thus undermining the authority of the shareholder.
Ms Bikani proposed that the Committee should conclude the matter at this point because the facts were overwhelmingly clear.
The Chairperson acknowledged her view, but noted that one or two members had further questions.
Mr Schmidt felt that the Committee could not tell the Department what it could or could not do. He said that Cabinet must first decide on the issues of State Owned Entities and historically disadvantaged South Africans, and that the Department should then brief the Committee. LIMDEV could at that point also be invited to make further submissions.
The Chairperson reminded Mr Schmidt that Cabinet had already made a decision that no State owned mining assets should be disposed of. The Cabinet's discussions in the following weeks would deal with far broader issues than this matter. He reminded the Committee that LIMDEV had not applied to Cabinet at this stage and encouraged LIMDEV to do so.
Ms Ngele was under the impression that LIMDEV would be asked to respond to the presentation by NUM.
The Chairperson invited LIMDEV to respond to the NUM submission.
Mr Mathabatha first addressed the question on the “law” relating to disposal; if this impression was created then perhaps there had been a slip of the tongue. He clarified that the law stated that LIMDEV would have to be BEE compliant before it could receive new order rights.
It was never the intention of LIMDEV to defy Cabinet's directive or the instruction from the Minister. LIMDEV always intended to apply to Cabinet for exemption. He stated that LIMDEV understood the concerns from NUM, and invited them to engage on such concerns.
Ms Bikani said that she remained unconvinced of several of the issues in LIMDEV's submission. She felt it best if LIMDEV simply abided by Cabinet's decision of a moratorium. She also complained that the Limpopo government could have made a better presentation to the Committee, and if their failure to do so was perhaps an indication that Limpopo provincial government wished to distance itself.
The Chairperson invited members to help with the formation of a resolution on the way forward. He would not want the Committee to overstep its mandate, but felt that they had to look after the interests of the poor.
The Chairperson proposed that the Committee should:
a) acknowledge that there was a Cabinet decision in the form of a moratorium that bound LIMDEV not to dispose of any State owned assets.
b) suggest that LIMDEV should seek Cabinet approval to be exempted from the moratorium.
c) request that DMR protect and guarantee LIMDEV's right to those shares. Failure to do so could mean the lapse of those rights, which could then well end up in private hands, contrary to the State's intention to own its own mining business.
d) request LIMDEV to engage with its Chinese partner to review the 60%: 40% deal in order that the local people should get fair value for their mineral rights.
The Chairperson invited members for their input on his suggestions. Once the Committee had finalised its position it would convey this to the Department, as part of its exercise of oversight over the mineral rights of the people.
Ms Bikani referred to a comment by the Minister that many of the State's assets were poorly managed and suggested that the Committee should also investigate the exact intentions of government's moratorium, as well as the management of all State owned mining assets, in order to improve the Committee’s oversight function.
The Committee moved to propose and second the suggestions of the Chairperson coupled with Ms Bikani.
Mr Schmidt said that while he would not like to object to the suggestions, he did feel that the Committee should “recommend” and not “decide” and proposed that these be couched as recommendations. The Committee should also distinguish between executive and legislative powers, and he pointed out that the Committee could not perform an executive function by telling DMR what to do.
Mr Gololo stated that the Committee would make recommendations to the Minister, who would then take the recommendations to Parliament, where the decisions would be taken.
The Chairperson felt strongly that since the Committee consisted of parliamentarians, it had the power to make decisions. It was part of the Committee’s oversight role to ensure that the Department implemented the laws of the State. He said that there was perhaps a need to ask the State Law Advisors to address the Committee on its legal position around decision-making, and that if there was any doubt whether the law mandated the Committee to make decisions, then it should be amended to allow it to do so. He pointed out that the Committee was taking resolutions, not issuing instructions.
The Chairperson asked LIMDEV and NUM if they understood the Committee's resolutions.
Both parties agreed that the position of the Committee was clear.
Mr Madoda Sambatha, Pillar Head, NUM, asked if these resolutions would also apply to the MEC.
The Chairperson said that all official decisions must be applied by all government officials, including MECs. They could not afterwards claim that they were not present and blame another official.
The meeting was adjourned.
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