Namaqualand Diamond Fund Trust, Alexkor Development Foundation: Department, Transhex, Alexkor briefings

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Mineral Resources and Energy

26 October 2010
Chairperson: Mr FGona (ANC)
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Meeting Summary

The Committee noted that it had recently paid an oversight visit to the Northern Cape. This province, although rich in natural resources, was plagued with desperate poverty of the people. Reports on the  implementation of the Social and Labour Plans had alerted the Committee to the existence of the Namaqualand Diamond Fund Trust (NDFT) and the Alexkor Development Foundation (ADF). Although both were apparently set up to help the communities, they did not know what they were doing and no reports on governance had been received. The Committee thus decided to investigate them. It firstly asked the Department of Mineral Resources (the Department) to indicate the status of the Trusts and the Department’s involvement. The Department indicated that it was never a trustee of the NDFT, and could not comment on its operations, although it was aware that at some point royalties paid by the Trans Hex Group were channelled to the Trust. The Royalties Act now prescribed that the royalties must be paid to the State. Members were very critical that the Department was unable to provide further information, particularly since there did not appear to have been follow-ups on correspondence, and that information which was in the files was not made available to Members. The Department’s representative was directed to go and find more information while the meeting proceeded. The Director General of the Department later reported that there had in fact been no communication with the NDFT since 2001, and that the Department had nothing to do with its operations.

The Trans Hex Group stated that in terms of a lease agreement, Trans Hex had to pay 5% of gross revenue in royalties, of which 0.5% originally went to the State and 4.5% to the former Small Business Development Corporation. The Corporation’s funding was later redirected to Parliament, and in 1994 all royalties had to be paid to NDFT. Since March 2010 the royalties were to be paid to South African Revenue Services. A total of R370 million was paid over. Trans Hex had a trustee on NDFT but had no controlling interest. Members asked about report-backs and who monitored the NDFT, and how the funds were used to develop the community. Trans Hex could not speak on management issues as it had no detail of the Trust’s operations.

The Namaqualand Diamond Fund Trust (NDFT) then briefed the Committee, setting out its history, and noting that the Trust was established to benefit the community of Namaqualand, and its trustees represented most of the region. Local government and the primary benefactor, Trans Hex, were also on the Board of Trustees. It set out a list of projects from 1995 to 2009. The Trust partnered with municipalities, and in some cases with De Beers. The financial statements for 2009/10 were still being prepared. There had been a nett loss of R8.9 million for the 2008/09 FY. There were qualifications in regard to donations and cash receivables. The Committee was unanimous in its concerns that the auditors had not signed the 2008/09 report, nor was this on a letterhead, and some even suggested that there might be a need for a forensic audit, criticised the policy of issuing cash cheques, and .  Members were severely critical that the Trust appeared to be doing the work of provincial and local government, even buying vehicles for municipal use, and appeared to be operating as a business instead of fulfilling its primary intention of helping the community, even to the extent that outside contractors were used instead of local people for local projects. They noted the need to review the old Trust Deed, asked about the term of office of trustees, their remuneration, what accommodation they stayed in, and questioned the huge increase in travel expenses. Members were worried about accountability and agreed that the financial status must be investigated. The Committee ordered the Trust to get the auditors’ confirmation on the financial statements, to produce all the documentation, in English, and to specify what was happening with projects, and, if the NDFT was fulfilling the functions of provincial government, what that provincial government was then doing with its funding allocations. All questions must be addressed in another meeting which would be arranged in the next week.

Alexkor then briefed the Committee on the background to the Alexkor Development Foundation (ADF), which was created through a Trust Deed dated 30 November 2001, in terms of which Alexkor would donate 30% of its profits after tax to the ADF, who would use the money for the socio-economic upliftment of underprivileged communities of the region. Four trustees were appointed by Alexkor and eleven by the beneficiary communities. Alexkor paid R18.5 million to the Foundation, but nothing had been paid from 1999 to 2002 as Alexkor did not make a profit. Following the restructuring of Alexkor, it was then decided that the Foundation would be incorporated into the Namaqualand Development Agency (NAMDA), which was to get a 10% equity stake in Alexkor, but this was discontinued following the Richtersveld claim. In 2003 it was agreed that instead of receiving the 30% profit payments, ADF should instead be given a contract to mine the dump at Witvoorkop. An income statement was presented to the end of 1996, showing R9 million accumulated funds. Alexkor had been unable to obtain anything since then, despite requests. Members asked for clarity on the various contracts, asked whether ADT was dormant, and what its liabilities were, and whether Alexkor was represented by a trustee. Members decided to invite the trustees to brief the Committee, and noted that it would be necessary to discuss the position with other Portfolio Committees.

Meeting report

Chairperson’s opening comments
The Chairperson said that the changes to the Committee's programme had been dealt with at the previous meeting.

He noted that although apologies were received from Mr E Lucas (IFP) and Mr P Dexter (COPE), they had given an indication that their parties had no objection to the passing of the Geosciences Amendment Bill (the Bill).

Mr H Schmidt (DA) said that this Bill would be discussed at the DA caucus the following day. However, the indication was that his party would oppose the Bill.

The Chairperson said that the Committee had a serious challenge as the ID representative did not attend meetings.

The Chairperson noted that the Bill would be debated in the National Assembly the following week.

Northern Cape issues
The Chairperson said that the Committee had learnt much about the situation in the Northern Cape (NC) during a recent oversight visit. The province was wealthy in terms of resources but the communities, even those living close to mines, were living in abject poverty. The implementation of Social and Labour Plans (SLPs) had alerted Members to two trust funds, namely the Namaqualand Diamond Fund Trust (NDFT) and the Alexkor Development Foundation (ADF). The communities, although they knew of the existence of these funds that were allegedly set up to assist them, were seeing nothing from them, nor what they were doing. There were no reports on the governance or other aspects of these trusts. He asked if the trusts were still being funded and how the proceeds were being disbursed.

Comments by Department of Mineral Resources on Namaqualand Diamond Fund Trust
Mr Michael Oberholzer, Chief Director: Mineral Regulation (responsible for Northern Cape), Department of Mineral Resources, said that he had liaised with Deputy Director General Mr Joel Raphela regarding the NDFT. Apparently this Fund had been established with inputs from the former Department of Minerals and Energy (DME), but the Department of Mineral Resources (DMR or the Department) had never been a trustee of the Fund. There was a stage when royalties payable by the Trans Hex Group and other companies were channelled to the NDFT He could not comment on the operations of the NDFT..

The Chairperson thanked Mr Oberholzer for this input. It was a pity that there had been a communications gap. The Committee wanted to understand what role the Department played in the monitoring of the trusts, and if the legal obligations were being fulfilled.

Mr Oberholzer replied that there had been some correspondence relating to the NDTF. The Department's understanding was that all royalties would go to the Trust. There were negotiations with other mining companies on the same issue.

Mr Schmidt was aware that the Royalties Act that had come into effect in February 2010. He asked how this might impact on further payments.

Mr M Sonto (ANC) said that it would assist Members if they could be given the background to the Trust.

Mr E Marais (DA) found the response of the Department strange. There had been no follow-up on correspondence from 2001, some nine years previously. He said that he would be most interested to see the copies of the correspondence that would be provided by Mr Oberholzer.

Ms N Mathibela (ANC) said that it was correct to wait for more information before commenting.

Mr Oberholzer said that the Royalties Act directed that all future payments of royalties should be made to the South African Revenue Services (SARS) and not to the DMR. He sketched a brief background to the NDFT.

Mr E Mtshale (ANC) said that Mr Oberholzer had first indicated that he had no information to share with the Members, and had then produced a file with correspondence. He felt that Mr Oberholzer had access to more information and suggested that he be requested to contact his office and have all the relevant information forwarded by e-mail, so that Members could study and consider it, before the end of the meeting.

Ms L Moss (ANC) agreed with Mr Mtshale. Members had a duty to protect the interests of the people, and he noted that Mr Oberholzer should have come to Parliament fully prepared.

Mr Schmidt said that this was wasting time. He suggested that Mr Oberholzer be excused, must make copies of the correspondence in his possession, and present this to Members to discuss later.

The Chairperson asked that the next presentation be given.

Presentation by Trans Hex Group
Mr Llewellyn Delport, Chief Executive, Trans Hex Group, said that the Trans Hex Group (Trans Hex) had been granted a lease agreement in 1990 in terms of the Precious Stones Act of 1990. Clause 8 of the agreement stipulated that Trans Hex had to pay 5% of their gross revenue in royalties. Of this, 0.5% would go to the State and 4.5% would go to what was then named the Small Business Development Corporation (SBDC). In 1991, the Department had changed the policy to divert the SBDC funding to the then-House of Representatives. In 1993 the Department had decreed that the 0.5% portion was stopped. In 1994 the Department had stated that the royalties must now be paid into the NDFT. In terms of the legal obligations, Trans Hex was still paying royalties to the NDFT. It made its own calculation as to the value of 4.5% payment. Since 1 March 2010 a new legal formula had been in place. The royalties would now be paid to SARS. To date some R370 million had been paid to the Trust.

Mr Schmidt said that the position of Trans Hex was very clear. He asked if Trans Hex had any other dealings with the NDFT, and if it had any interaction as a trustee or shareholder or in any other capacity. He asked if NDFT was accountable.

Mr Delport replied that Trans Hex was represented by one trustee but did not have a controlling interest. This rested with the community. Most of Namaqualand was represented.

Ms Mathibela asked if Trans Hex received any report-back from the NDFT, and who monitored the fund.

Ms Moss asked who had been the beneficiaries of the SBDC.

Mr Delport replied that the SBDC had operated across the country. It had been created by a State decision in 1990.

Mr E Nyekemba (ANC) asked how the funds received by the NDFT were being used to develop the community.

Mr C Gololo (ANC) asked whether Trans Hex or Parliament decided what to pay to the Trust.

Mr Marais noted that Trans Hex had been contributing to the NDFT since 1994. He asked if Trans Hex had ever received statements from the Fund, or if there was any correspondence on the use of the fund.

Mr Delport replied that Trans Hex did receive financial statements.

Mr Sonto said that Trans Hex seemed to be the source of funding for the NDFT. He asked if the royalties were still being paid to the NDFT rather than SARS.

Mr Delport replied that the condition that Trans Hex would be a source of funds was part of the lease agreement. It was meeting its legal obligations. It would continue to pay the royalties to the NDFT until instructed to pay to SARS by the DMR. There had been discussion on the matter. He believed that there was a good chance that the State would still allow payments to the NDFT. If not, then Trans Hex would continue to make a nominal contribution to the Fund. Rights went with obligations. Trans Hex understood the provision of the Royalties Act and would abide by any government decision.

Mr Schmidt asked which trustee could account to the Committee. He asked if Trans Hex could speak on behalf of the NDFT.

Mr Delport replied that Trans Hex could not speak on behalf of the NDFT. Whilst there was a trustee in the NDFT, he suggested that management of the Fund should speak on the issues, as they were present. He did not have the detail of the operations of the NDFT.

Mr Sonto asked if the funds were being used correctly and if they were serving the required purpose.

Mr Delport said that Trans Hex had not followed the pattern of SBDC disbursement in great detail. Trans Hex did not have a controlling strategy but had tried to influence some of the decisions.  He could not say if the NDFT spending was correct. Deals were done with the community. It would be bad business practice on behalf of Trans Hex to pronounce on decisions made by the community.

The Chairperson asked if the figure of R370 million covered the period since 1994, or included previous years as well.

Mr Delport replied that the figure was only for payments since 1994.

The Chairperson said that the Committee needed the total picture.

Presentation by Namaqualand Diamond Fund Trust
Ms Margaret Williams, Chief Executive Officer, NDFT, gave a presentation on the NDFT. This Fund dated back to 1964, when the then Coloured Development Corporation had been granted 5% of prospecting rights. In 1981 this had migrated to the SBCD. After broad consultation the NDFT had been formed in 1994. Its objectives included the establishment of an education fund and co-operation with like-minded bodies. The Board of Trustees comprised fourteen non-executive members. Nine of these were elected in terms of the Trust Deed by the main beneficiary communities. Provincial government nominated four trustees and there was one representative from Trans Hex. The trustees served a five year term.

Ms Williams said that the role of the trustees was to determine policy and to act in an oversight role. They met each second month and were required to provide feedback to the areas they represented at least once a year. An executive committee of four persons handled administrative, financial, project and investment issues.

Ms Williams said that regulatory matters affecting the NDFT were the Trust Properties Control Act, the Constitution and the Trust Deed. Funds were to be used for the exclusive benefit of rural inhabitants. Here were three areas of operations: namely, administration, education and training, and charity. The NDFT played a role as an empowering agent. Spending on projects was R8 million in 2008/09, but this would decrease to R5.4 million in 2010/11. One of the roles of the NDFT was that it strengthened local government. Other assistance to the community included heavy subsidisation of school sport and financing the Kuboes dancers on their visit to Turkey.

Ms Williams said that challenges faced by the NDFT included legislation changes, the closing of mines and a resulting increase in the dependency of rural communities on the NDFT, the lack of accommodation for students wishing to attend the Namaqualand Further Education and Training (FET) College, and the establishment of partnerships.

Ms Williams said that the NDFT was investing in property and domestic products. It had tried to increase its income by the establishment of the NDFT Property (Pty) Ltd company. One of the projects was an office park in Springbok. The only way forward was to establish partnerships and support government. It was important to ensure the continuing availability of royalty payments.

The Chairperson was impressed by the illustration of community involvement. It was encouraging that the people of the area were taking their future in their own hands. The standard of the presentation was also high, despite the fact that NDFT operated as a non-profit organisation. However, Members wanted to see what the real situation was, having visited the area. He thought that the presentation lacked figures and there were no audited financial statements.

Ms Williams presented a list of projects undertaken from 1995 until 2009. Many of the local people had been employed and involved with these projects. The projects included construction and improvements to schools, clinics, sports facilities, mortuaries and graveyards. An internet café had been established in Kuboes. Nine main areas had been defined but other areas had been adopted. The Trust was doing its utmost to control the quality of the projects. It was in partnership with the municipalities. Some projects had also involved De Beers.

The Chairperson noted that some financial statements had been included. He asked what the status of these statements was. He wanted to see the sources of NDFT's income and what other contributions had been made.

Ms Williams agreed with the statement that R370 million was paid by Trans Hex. The financial statements had been audited by PriceWaterhouseCoopers (PWC). The current auditors were Laubscher and du Plessis (LDP).

Ms Judy Hollenbach, Manager: Finance and Investments, NDFT, said that PWC had been the auditors until the end of the 2008/09 financial year (FY). LDP had since been appointed. The NDFT was still awaiting the 2009/10 financial statements. The statements for the 2008/09 FY had been signed off by the previous Chairperson in November 2009. Income in the last FY had been R25.2 million from Trans Hex. Operational costs were R46.9 million. There had been an income of R15.2 million from investment income. This resulted in a nett loss of R8.9 million for the 2008/09 FY.

The Chairperson asked if the charity fund was the general account.

Ms Hollenbach replied that it was. The other account was the education fund. The expenses on the education fund were R8.2 million. The total assets were R160 million. Current liabilities were R79 000.

Mr Sonto noted that the financial document had not been signed.

Ms Williams said that the financial report was always signed off before it became part of the Annual Report. She did not know how this could have happened.

Mr Sonto said that an audit report must always be signed by the auditor.

The Chairperson said that the financial report had been signed by the Chairperson of the NDFT. It should be signed by the auditor, especially the section listing the auditor's opinions.

Ms Hollenbach noted the comment and undertook to provide an explanation.

Mr Marais said that a qualification had been mentioned. Donations and the cash receivables declaration had been the crux of the audit qualification.

Ms Hollenbach replied that the donations could not be included in the records as the exact figures were unknown. There was not enough documentation regarding cash cheques. This matter would be corrected.

The Chairperson said that there was a need to ascertain the status of the financial statements before the Committee could accept them. The audit report was not printed on the letterhead of the auditors nor had they signed it. He asked if the Board had approved the statements.

Ms Williams replied that it was standard procedure that an audit would be done. For fifteen years she could not remember an audit being missed. The Board had approved the statements, which had then been signed off by the Chairperson of the Board of Trustees. All non-government organisations (NGOs) relied on donations. The donations were one of the areas in which the report was qualified. Donations could not be accurately predicted, as they were dependent on the diamond price and interest rates. She had asked the auditors to attach a document to explain the situation. She had brought additional supporting documentation for the Members' attention. The donations could only be recorded after they were received.

Ms Moss asked why the auditors had been changed. Funds were limited to the extent of the trustees dipping into the investments in order to cover costs. She noted that the PWC audits of previous years had been signed off correctly, but not the audit submitted by LDP. There was not even the name of an auditor on the report. She proposed that the financial statements be rejected and that a forensic audit be conducted. Members did not have the time to read through the pack of documents that had been provided.

Ms Moss asked who the permanent trustees were. While they might have five year terms they might be serving several consecutive terms.

Mr Marais agreed that Members needed more time to study the documents. He asked what the policy was for cash awards. The practice of issuing cash cheques was dangerous. The NDFT was based in the Northern Cape but was investing in other provinces. It had property in Boksburg in Gauteng and Cape Town. The provision of infrastructure was the main purpose of provincial and local government. The NDFT had executed a number of wonderful projects but he felt that its role should rather be in areas such as bursaries and job creation. There were some projects in this field. This would ensure that people had better incomes. It was wonderful to see the development of infrastructure to benefit the communities, but he asked what the municipalities were doing. He wanted to see more detail on the property at 5 Green Whale Drive. He was not satisfied with the explanations offered to date.

Ms Mathibela felt that the presentation concentrated too much on the history of the NDFT. She asked how many students were being assisted. She agreed with Mr Marais on the role of local government. The NDFT was doing its work, even to the extent of buying vehicles for local government use, but she was worried that children were being deprived of education and food.

Mr Schmidt asked how much was being spent on the projects. He asked if there was any interaction with other trust funds such as that in the Richtersveld.

Mr V Magagula (ANC) was unhappy with the documents presented, and went so far as to suggest that the NDFT delegation “was lying”. He was also concerned that the auditors had not signed the report. The trustees seemed to be operating as a business, holding shares in Gauteng, apparently driving expensive cars, and were not acting in the interests of the people. He thought questions must be asked about the declaration of interests of the Board members. The NDFT was dealing with local government. Cars were being given to local government rather than the money being spent on the local people. There was no proof of what the Trust was doing. He was tempted to call for a serious investigation.

Mr Gololo said that advanced technology was being used. He asked how many people were benefiting. He noted that the representatives from the different communities were present, and he asked if these people were awarded a salary. The Members had visited the NC and had seen how many community halls there were. There were no jobs for the local people, yet outsiders were doing the construction. He asked if local contractors were being used. He was worried that one of the charity functions was assisting refugees with documentation.

Mr Sonto said that the evidence presented was suggesting that there was not a clean bill of health in terms of finance and operations. He asked when last the Trust Deed had been reviewed, commenting that it was old. He was afraid that the current legislative measures would impact negatively on the region. He asked if the Mineral and Petroleum Resources Development Act (MPRDA) would shake the pillars of the Trust. He was also under the impression that it had been a presentation of local government. The Trust was doing what government should be doing. He was concerned that the NDFT was being left to build police stations and schools.

Mr Sonto reiterated that the NDFT was buying cars for local government. He asked if government representatives had influenced this purchase. It was not clear which municipality had the use of the vehicles. There was a need to check on whether the impression created about local government was true. The founder of the NDFT was the government, and government was the first benefactor. The Deed said that the Board should deal with government money exclusively. It was not clear to whom the NDFT should report. He asked if the Trust Deed should be reviewed or even set aside.

Ms J Ngele (ANC) repeated some questions that had not been answered satisfactorily. She asked if Board members were re-elected after serving their five year terms, and how often this could happen. She felt that some trustees may retain their position for life.

Mr Marais said that in terms of the Trust Deed the NDFT could not purchase property for rental. The financial statement reflected payments of R3 million on subsistence and travel expenses for the fourteen trustees. He asked if the trustees decided what was reasonable. He asked how trustees were remunerated, or whether they received fees for attending meetings. He asked if there was a prescribed accommodation standard. He noted that the travel expenses had increased from R2.5 million to R3.2 million.

Mr Nyekemba asked about the accountability of the Board. Trans Hex had been at pains, in its presentation, to say that it was paying money into the NDFT but they did not know what was being done with the funds. The NDFT was taking on some of the responsibilities of local and provincial government. He asked if there was any partnership with the Trust. He asked which departments were involved with the car purchases and infrastructure development. Money intended to develop the community seemed to be spent on doing the work of local government. The membership had elected the leaders and feedback was needed.

Mr Mtshale asked why the Committee was wasting time on this issue. A lot had been spent on what was really the responsibility of municipalities. There was no official report from the Auditor General (AG) so the documentation was flawed. The NDFT must first get a signed audit report before he would reconsider his objection.

Mr Schmidt supported Mr Mtshale. He had not been on the oversight visit to the NC. The NDFT was still receiving funds from Trans Hex. Local government could not help itself. It was correct to interrogate the financial status of the Fund, but the question was which Department was responsible.

The Chairperson said that the NDFT delegation must go back to the auditors to confirm the financial statements. All financial statements must be provided. Members needed an English version of the documents. There was a lack of clarity on the Trust's objectives. The Committee was particularly concerned that some R2 million had been spent on building community halls, yet the Committee found that people did not have houses. Only thirteen had been built by the Trust. The NDFT was taking over the jobs of government in such areas as electrification. He asked if government was working out the programmes and then handing them over to the NDFT. If that was the case, he wanted to know what the NC government was doing with the funds that were allocated to it. While there were still problems with dirt roads and the lack of running water, he felt that at best the Trust should meet government half way. He asked how many jobs had been created by the brick-making enterprise started by the NDFT.

The Chairperson instructed the delegation not to answer any of the questions, except the one dealing with remuneration. The NDFT would be invited to meet with the Committee the following week. The Committee would also look at the Trust Deed during that meeting.

Ms Williams said that trustees were paid R3 334 per meeting, before tax. The travel rate was R7.20 per kilometre. Trustees lived between 50 and 630 km from the meeting venues. Members were entitled to three-star hotel accommodation. The full Board met every second month, while the executive met every month. Trustees also served on various standing and ad hoc committees.

Comments by Department of Mineral Resources
Adv Sandile Nogxina, Director General, Department of Mineral Resources, agreed that the origins of the NDFT dated back to 1964. Certain leases had been granted in coloured areas. The royalties were based on the sale of diamonds. This function had been handed over to the SBDC in 1981 at which point Trans Hex had been founded. The SBDC was found not to be doing enough to uplift the Namaqualand community. This had led to the funding responsibility being shifted to the House of Representatives as from 1 April 1991. After 1994 the name of the Department had changed. Various functions were inherited by the new Departments. None of the funds from Trans Hex were transferred to the DME.

Adv Nogxina said that the then-Department of Minerals and Energy had nothing to do with the NDFT. It was found that the DG of the NC Department of Local Government, Housing and Agriculture and some Department officials were the trustees. The funds were only intended to enhance the quality of education and improve the quality of life for the community. The funding did have an impact on the people. Royalties would now be paid to the State in terms of the new Act. It would be up to the State to determine how the money was spent. One of the cornerstones of the MPRDA was that the country's mineral wealth was the heritage of all South Africans. A project in Lebowa had been terminated because of its ethnic nature. The same had happened with a project in KwaZulu-Natal.

Mr Schmidt asked if this meant that there would be no more payments to the NDFT.

Adv Nogxina replied that at face value that seemed to be the case. Royalties would now accumulate to the State. The National Treasury (NT) could then make its own arrangements with the community. There would be no special dispensation. He told Mr Schmidt that the NDFT must approach Treasury.

Mr Sonto said that royalties were going to non-accounting trustees. He asked if the measures would be implemented retrospectively.

Adv Nogxina said that there would be only one collector of royalties. The NT would be this collector, through the SARS. NT would be accountable.

Mr Magagula said that the DMR was not aware of the NDFT. There had been no contact since 2001. He asked if there was any correspondence with other Departments. He asked what follow-up action the DMR had taken.

Adv Nogxina replied that the DME had received a letter from the DG of the then-Department of Local and Provincial Government. There was a complaint that some companies were not paying their royalties. The DME was responsible for the collection. He did not think any other follow-up was needed.

Alexkor Development Foundation (ADF): Presentation by Alexkor
Ms Khetiwe McClain, Chief Executive Officer, Alexkor, said that the Alexkor Development Foundation (ADF) had been created through a Trust Deed in 2001. Alexkor was the promoter and the people of Namaqualand would be the beneficiaries. In terms of the original Deed, Alexkor would donate 30% of its profits after tax to the ADF. The ADF would use the income for the socio-economic upliftment of underprivileged communities of the region. Four trustees were appointed by Alexkor and eleven by the beneficiary communities. For the first three years Alexkor would appoint the Chairperson. Alexkor would also manage the Trust, but not be involved afterwards.

Ms McClain said that until the end of 2002 Alexkor had granted R18.5 million to the Foundation. Of this R17.3 million had been earmarked for developmental projects and R1.25 million for educational projects. Nothing had been allocated in 1997, nor from 1999 until 2002 as Alexkor had not made a profit in those years.

Ms McClain said that Alexkor was restructured in 2002/03. It was envisaged that a Strategic Equity Partner (SEP) would be introduced. It was decided that the ADF would be incorporated into a Section 21 company known as the Namaqualand Development Agency (NAMDA). NAMDA would be allocated a 10% equity stake in Alexkor. As the restructuring proved to be unsuccessful it was discontinued. In 2002 ADF was granted a contract to mine the dump at Witvoorkop, instead of receiving the 30% contribution.

Ms McClain presented an income statement to the end of 1996. R15.5 million was received to end of 1995, of which R2.8 million was spent on applications. In 1996 a further R3 million was received of which R2.0 million was spent on applications. The total of accumulated funds, at the end of 1996, was R9.0 million.

The Chairperson asked Ms McClain if she had the Trust Deed.

Ms McClain said that it was not to hand, but she could provide the Committee with a copy.

The Chairperson asked what had happened to the existing contracts during the years in which no profit was recorded by Alexkor. It seemed that contributions to the ADF had ceased.

Ms McClain explained that the 10% stake in Alexkor had now replaced the 30% of profits. The contract at Witvoorkop had come about as a result of the failure to restructure Alexkor as anticipated.

Mr Selwyn Hockey, Legal Advisor to Alexkor, said that there had been a lot of negotiation in 2003 on the possibility of finding a SEP. The Department of Public Enterprises (DPE) had been involved. An agreement had been reached with the Trustees to change the 30% profit clause to the 10% equity for NAMDA clause. This was the current legal position.

Mr Schmidt asked what the status of the Trust was. He asked if it was dormant or would be closed. He asked if NAMDA had been successful or not, and what liabilities the ADF had. He asked if the mining rights at Witvoorkop were in lieu of the 30% share of profits.

Ms McClain replied that the ADF was not dormant. It could only be terminated by a 75% vote. This had not yet happened. She did not have much insight into the management of the ADF. Alexkor had requested financial statements. NAMDA was part of the process of addressing the liabilities of the ADF. The operations at Witvoorkop were generating some income, but she did not have any specific details.

Mr Sonto asked if it was correct that Alexkor had left the ADF with R9 million in the bank. He asked if the changes to the Trust Deed regarding the mining contract had ever come to fruition.

Mr Marais asked where the R9 million balances were held. He asked if it was accumulating interest. He asked if the trustees were still being remunerated. He asked if the 10% equity was generating an income for the ADF.

Ms McClain replied that the 10% equity had not come into force. The Richtersveld claim had superceded this arrangement. She could not answer on the question of remuneration or provide any other financial information.

Mr Marais asked that whether, since the ADF was not dormant, there were still active trustees. If so, he asked if they had been invited to attend the meeting. He still wanted to know if the trustees were being remunerated and how often they met. He asked when last Alexkor had received financial statements.

Mr Gololo asked why the Chief Executive Officer of Alexkor was responsible, and if there was not a Board for the Trust.

Ms McClain said she was not representing the Trust. Alexkor was no longer involved in the administration. The trustees had been invited to attend the meeting. There was no trustee from Alexkor. This represented a challenge, since Alexkor was also not invited to the meetings. She only had old financial statements. Alexkor had been asking for updated financial statements for the last three years, without success.

Mr Schmidt asked if the current interdict on reporting on the Fund was still current. There was a lag in detail since 1996. He asked if a different entity was involved.

Ms McClain said that the interdict matter referred to by Mr Schmidt was in relation to the Richtersveld dispute. It was a completely different matter.

The Chairperson said that he had not yet gained a comprehensive picture. Many problems had been raised. The trustees of the ADF did not have the resources to attend a meeting at Parliament. The meeting would reconvene the following week. Another invitation would be sent and a legally binding summons might have to follow that. People with information must appear before the Committee. The Royalties Act was putting current arrangements into a new light. The presence of the Portfolio Committees on Co-Operative Governance and Traditional Affairs and on Public Enterprises was needed. Government needed to intervene in some way. Decisions would be based on the information presented.

The Chairperson said that the Committee needed to concentrate on the Trust Funds. It would discuss the oversight reports during the following week.

The meeting was adjourned.


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