Namaqua Diamond Fund Trust: further briefing

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Mineral Resources and Energy

02 November 2010
Chairperson: Mr FGona (ANC)
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Meeting Summary

This meeting was a follow-up to a meeting held the previous week, in an attempt to clarify the various unanswered questions relating to the Namaqualand Diamond Fund Trust (NDFT) and Alexkor Development Foundation. Alexkor did not send a representative to he meeting, and Members agreed that the legal advisors would be asked to clarify what action the Committee could take to compel it to appear before the Committee.

The Namaqualand Diamond Fund Trust noted that its overall objective was to
improve the quality of life of the inhabitants of the beneficiary areas, which was done through an education and training fund, and the other was achieved by the Fund acting as a charitable organisation. The NDFT also contributed to infrastructure projects, had a social welfare programme, offered medical assistance programmes, distributed food parcels and gave support to old age homes and funerals, as well as assisting in rehabilitation of substance abusers and former convicts. It also contributed in the arts and culture and sporting spheres. The NDFT then attempted to explain the reasons for changing its audit firm, and to present details on the actions that led to a qualified audit report. Information was presented on the property investment portfolio, and it was explained that this was a conscious decision by the trustees to diversify the streams of income when it became aware that the royalties would no longer be paid to it. Details of spending on various projects were also outlined.

Members were not happy with the explanations and were
critical of the state of administration in the Fund. Members felt that payments to trustees were excessive, questioned who the trustees were, by whom they were appointed and whether they reported back to the communities. There seemed to be some confusion about the communities whom the NDFT assisted, as two of the areas were privately supported by the mines in the area. Members reiterated their concerns that the NDFT was not directly benefiting the communities, who were still living in abject poverty, but rather seemed to be running as an investment business, and asked when the money would be paid to the communities. They were also extremely concerned that its activities consisted largely of matters that the local authorities should be doing, and requested details about the vehicles provided to municipalities. A lengthy discussion was held on the status of one of the trustees, who had been nominated to represent the province, but his nomination was subsequently withdrawn, but he refused to vacate office. Members considered that the trust deed was quite clear, and there was no need for the NDFT to be taking legal advice, but should let that trustee approach the court if he wished. Members also suggested that this matter should be raised by the Committee during its forthcoming oversight visit to Kimberley. Members also questioned, at some length, the reasons for the NDFT investing in property outside of the Namaqualand region, and in particular the purchase of a house in Bellville, which was being run as a guesthouse and for the trustees, with only a very small profit being made. Members were further not satisfied with the explanation given by the former auditor, and believed that it might be necessary to hold a forensic audit. In general, Members expressed the opinion that they still did not have a clear idea of what exactly the Trust was doing, and felt that some of the questions were not answered.

Meeting report

Namaqua Diamond Fund Trust & Alexkor Development Foundation: further briefings
The Chairperson noted that representatives from the Portfolio Committees on Co-Operative Governance and Traditional Affairs, Public Enterprises, and Members of Parliament from Northern Cape were present at this meeting.

Mr Selwyn Hockey, Legal Advisor, Alexkor, apologised that the Chief Executive Officer of Alexkor, Ms Khetiwe McClain, had to attend another meeting.

The Chairperson said that Members of the Committee had, during an oversight visit to Northern Cape, become aware of two trusts, the Namaqualand Diamond Fund Trust (NDFT) and the Alexkor Development Foundation (ADF). These were intended to benefit the people of Namaqualand, since much income was derived from diamond mining in that area, but communities were still living in abject poverty. Social and Labour Plans (SLPs) were not being executed in terms of the Mineral and Petroleum Resources Development Act (MPRDA) and the Mining Charter. Members had seen development only in one township in Alexander Bay, and that was funded by government. The Committee had held a meeting on 27 October to clarify some of the issues and answer concerns about the trusts and their funds, but it emerged that interaction between trustees and communities was infrequent. Trans Hex contributed to the NDFT and Alexkor to the ADF. Some inconsistencies were shown up in some allegations.

The Chairperson said that the trustees of the NDFT had attended the meeting on 27 October, and were again present. At the previous meeting the NDFT had made a presentation but could not answer a number of questions raised by Members to their satisfaction. There was insufficient information and the financial statements could not be accepted, and the audit report had been signed by the Chairperson of the Board of Trustees and not by the auditors. There were also qualifications raised.

The Chairperson said that the trustees of the ADF were “playing a game of hide and seek”. The Committee could not leave the situation as it was. The Committee would seek legal opinion on the powers that Parliament could invoke to ensure that those invited to appear before the Committee did so, as also whether the Committee had the power to place the trust’s funds under administration.

Mr A Kamungozi, Deputy Director-General, Department of Public Enterprises (DPE), apologised to the Chairperson that he was unable to stay at the meeting.

The Chairperson said that the Committee wanted the DPE to be part of the process. The Department would be kept informed.

Namaqualand Diamond Fund Trust (NDFT): briefing
Ms Margaret Williams, Chief Executive Officer, NDFT, said that a number of questions had been raised at the meeting the previous week. The overall objective of the Namaqualand Diamond Fund Trust (NDFT or the Fund) was to improve the quality of life of the inhabitants of the beneficiary areas. This objective was served in two manners. One of these was an education and training fund, and the other was achieved by the Fund acting as a charitable organisation.

Ms Williams said that bursaries were provided for secondary and tertiary education, as well as for skills training. There were programmes for Grade 12 pupils, primary schools and for persons with special needs. The Fund supported the Namaqualand Further Education and Training (FET) College. There were programmes for internships and learnerships, and financial assistance to schools and support for scarce professions were offered.

Ms Williams said that the NDFT also contributed to infrastructure projects in the beneficiary regions. These included clinics, schools, libraries, community halls, mortuaries, dams, tarring of roads, electrification of some areas, water pipelines, housing and satellite towers for television reception.

Ms Williams said that the NDFT had a social welfare programme. Medical assistance included HIV/Aids programmes, support of CANSA and primary health care. Food parcels were distributed. Support was given to old age homes and funerals. The Fund assisted with the rehabilitation of victims of substance abuse and former convicts.

Ms Williams said that the NDFT also made several contributions in the sphere of arts and culture. Athletes were provided with assistance for local, regional, provincial and national events. NDFT sponsored events such as the Daisy Marathon. Various sports grounds had been upgraded. A budget of R250 000 was set aside for 56 primary schools and twelve secondary schools for participation in events at all levels. Some 1 180 organisations had benefited from approximately R6 million that had been spent on charitable causes during 2010.

Ms Williams said that the next question the Committee had raised was the rationale for the change of auditors. During December 2009 Minister Trevor Manuel had recommended that organisations should change their auditors after a five year term. PriceWaterhouseCoopers (PWC) had served the NDFT well from 1994 to 2008, but the trustees followed the Minister's advice and, after due process, the firm Laubscher and du Plessis (LDP) was appointed as the new auditor. Criteria for the selection of an audit firm included cost effectiveness and whether it offered specialist services.

Ms Williams agreed that the audit report had not been signed off. The normal practice was that the draft copy of the financial statements would be presented, and amended if needed. The Chairperson of the Trust would then sign the statements. This process was followed in the year in question. PWC had sent the NDFT a letter on 27 October 2010 confirming that they had audited the NDFT accounts from 1995 until 2008.

Ms Williams said that the next questions raised by the Committee had been the qualification to the audit report. The audit report by LDP was qualified because of the problems with cash grants and donations. In relation to donations, she said that it was impossible to record the exact amount of donations until the money was received. For example, the primary source of funding was royalties from Trans Hex. The amount of royalties depended on factors such as sales and the diamond price. The audit opinion over the period of the Fund’s existence was that the figures presented were a reasonable representation of the actual figures.
In relation to the cash payments, she confirmed that cash grants had been made to certain beneficiaries, despite the risks involved. Many of the beneficiaries did not have bank accounts. These people were now being asked to open bank accounts so that payments could be made directly. The trustees had also been paid cash grants in the past, but this practice had also been stopped in favour of payment into accounts.

Members had also raised questions about the investments of the NDFT. She said that set selection criteria had been applied in choosing property investments. Property in the Northern Cape (NC) was preferred and some projects in the province were still being considered. These were in Springbok and Upington. However, none of the properties were found to be viable at present.  

The Chairperson interrupted at this point, noting that the font of the presentation papers was very small, and he asked that the Committee clerk should make more legible copies.

Ms Williams continued that the scope of property investment had been widened. A residential property had been bought at 5 Greenway Drive in Bellville, Cape Town. This would serve as housing for the trustees when they were on visits to Cape Town, and, as well as being an investment, it would help to save on accommodation costs. It had been set up as a self-catering establishment. It was also available for service providers to the NDFT, and business partners.

Ms Williams said that Members had questioned what they saw as the NDFT taking over the functions of local government. Projects undertaken by the Trust were determined by the beneficiary communities themselves. The full board visited each of the beneficiary areas at least once a year. The selection of projects was not made by the municipalities.

Ms Williams said that annual meetings were held in beneficiary communities. The four provincial representatives on the Board kept the channels of communication open with all tiers of government. Financial statements and annual reports were provided to the Auditor-General (AG) and the province. The trustees representing the communities conducted meetings in their areas.

Ms Williams said that it was standard practice to remunerate trustees for their attendance of meetings. They were also compensated for travel expenses. The tariffs recommended by the Automobile Association of South Africa were used as a guideline. The trustees played an active role in their communities as consultants, in liaison and counselling. There was no tangible compensation for these activities. She presented a schedule of meetings for 2010/11. The schedule was flexible. In 2010 the trustees received R3 334 per meeting and a travel allowance of R7.20 per kilometre. These allowances were taxable. She pointed out that this was in line with the Trust Deed, which made provision for reasonable compensation for travel and accommodation.

Ms Williams said that there were sixteen trustees. Eleven of these represented the beneficiary communities, four were appointed by the province and one was nominated by Trans Hex. There were five beneficiary municipalities.

Ms Williams said that when projects were undertaken, local labour was used as far as was practical. Preference was given to local contractors. Procurement was done in accordance with empowerment legislation. She listed four projects that had been undertaken. A number of jobs had been created

Ms Williams said that since 1995 some R51 million had been spent on bursaries for secondary and tertiary students. A further R5.7 million had been spent on investment in projects related to procurement of equipment and programmes. Skills training covered a variety of trades and crafts. On average, three courses were presented between 1997 and 2001, in each of 23 towns. A total of 3 074 students had been trained. Between 2005 and 2008, 282 learners had been accommodated in development programmes, of whom 249 had then been placed in jobs.

Ms Williams described the election process for the Board. Communities elected trustees for a five year term. They could be re-elected.

Ms Williams said that changes had been made to the Trust Deed since its inception. These included the definition of the Namaqualand region, the terms of office of trustees, the requirement to submit tax returns, a provision that trust funds would not be paid to any individual, and provision for surplus funds to be invested.

Ms Williams said that if the NDFT was to become financially compromised, the lives of 81 000 people would be affected. This was a possible consequence of the termination of royalties payments.

The Chairperson noted that there were still big gaps in the financial figures. The numbers for 2009 were missing.

Ms Williams replied that 1999 had been a bad year. There had been no money available for investment in educational programmes. Only the bursaries had been paid.

Mr JF Basson, Deputy Chairperson, NDFT, said that the figures for some financial years had been combined.

Mr V Magagula (ANC) said that it was clear that the Chief Executive Officer did not know what was happening in the NDFT.

Mr Basson said that where the years had been combined, the figures could be split. The documents from which the figures were compiled were currently in storage.

Ms J Ngele (ANC) found it strange why the figures were first calculated on an annual basis, but were combined in later years.

Mr E Marais (DA) concluded that there would be no more cash grants. He asked if there would now be a paper trail to track payments. He asked what the income and expenses were in regard to the residential property in Cape Town. He noted that the Trust Deed made provision for capital investment, but excluded speculation. He felt that the NDFT should rather be investing in job creation. Trustees could stay in a hotel when visiting Cape Town.

Mr Basson replied that the trustees had been remunerated in cash. There was enough evidence of the receipt of the cash. Many of the support services required were based in Cape Town. The Trans Hex group was also based in that city. The trustees had deemed it better that the NDFT should have its own properly in Cape Town where the trustees could stay, but he noted that they did pay for their accommodation and the money reverted to the Trust. It was also open to other guests and represented an income stream.

Mr Marais asked how the four provincial representatives were elected or appointed, whether they were government employees and what their occupations were. He asked if they received the same remuneration as the other trustees. He noted that payments to the trustees had been approximately R3 million. He noted that according to the schedule, the full Board met for two days every second month. He asked if this was regarded as two meetings or one, for payment purposes.

Mr Basson replied that only two of the four provincial representatives were employed by government. They were also remunerated, although they did not always actually accept payment. They normally only took travel expenses.

Mr Marais said that during the oversight visit he had asked the communities how often they met with their elected trustees. The answer was that interaction with the trustees was very poor. It sounded to him as if the trustees were making their own decisions, and were not representing the interests of their communities.

Mr Basson asked which communities Mr Marais was speaking about.

The Chairperson directed Mr Basson to answer the questions.

Mr Basson said that there seemed to be some confusion. The communities visited by the Committee were not the beneficiary communities that were serviced by the NDFT. The trustees were available to their communities 24 hours a day. There were seven main beneficiary communities, and seventeen adopted communities. This did not represent the entire area.

The Chairperson said that the Committee had visited Port Nolloth, Baken, Alexander Bay, Aggeneys, Kamagas, Kleinzee and other communities.

Mr Basson replied that towns like Baken and Aggeneys were mining towns. Some areas had been adopted. De Beers took responsibility for the Kleinzee community and Black Mountain for Aggeneys.

Mr Marais said that the fees payable to trustees had been increased. This was not a problem in itself, but he questioned the magnitude of the increases. The travel rate for Members was R4.40 per km, but the NDFT trustees were paid R7.20 per km. This was not acceptable.

Mr Marais noted that the Kuboes pipeline project in 2009 had created 62 jobs. He said that this was the type of project that should be the main focus of the NDFT.

Mr P van Dalen (DA) said that it sounded as if the intention of the NDFT was to invest money, draw a return and spend it on the community. The Trust was supposed to look after the community and should use the community for all of its projects, not just occasionally. He asked what the value of the property portfolio was. He was worried that the NDFT seemed to be pursuing a goal of making profits, which was disturbing. He asked why, if the NDFT had been doing its work properly, the area was still plagued by poverty.

Ms M Phaliso (ANC) said that an Afrikaans translator should have been arranged. This was the language of the area.

Mr Basson replied that the property investment was necessary. The income of the Trust would be affected by the implementation of the Royalties Act. Royalties would no longer be paid to the NDFT. The NDFT had been alerted to this development by Trans Hex. In addition, the life span of mines was limited. This had motivated the trustees to plan for another income-source. The property arm had resulted from these plans, and the Trust Deed had been amended to allow for this.

Mr Marais was not satisfied with the answers given. He asked if there were not enough professional services, such as lawyers, available in the Northern Cape. The trustees had been paid R3 million in the last financial year. He needed a breakdown of how this had been spent. He was also still waiting for the breakdown of expenses and income for the Greenway residence.

Mr Phillip Kempen, former Director of LDP, said that there was no specific reason for the audit report not being signed. There were some questions about the finances. He had translated the audit report into English as requested by the Committee. He would distribute the translated report. He would sign the report before the end of the meeting. He had not had a chance to prepare the breakdowns requested by the Members, but he did have the figures with him.

Ms Ngele said that the Committee had asked for the breakdown a week previously.

Mr Marais assumed that the auditor had not received this message. He still could not see how the costs for the trustees could amount to R3 million. He asked about the composition of the various committees.

Mr Magagula said that the NDFT should be making the explanations and not leaving it up to an external auditor.

Ms Phaliso said that the audit report was still not signed. She could not accept that situation.

The Chairperson said that it was important to clarify the difference in the figures.

Mr Kempen said that the Greenway residence had not been part of the last audit. He would provide the Committee with a breakdown of payments to trustees, as he had not been informed of this request. He notified the Committee that he had in the meantime left the partnership of LDP, but confirmed that he had been the partner involved with the NDFT audit.

Mr Basson said that the Greenway residence had nine beds. The cost ranged between R175 and R350 per night. On average there were ten meetings in Cape Town, involving accommodation for ten to twelve nights. Private guests were also accommodated. The income was R35 000, and expenditure R30 000. Costs included cleaning, security, DSTV subscriptions and garden services.

Mr Basson said that there was a note on the slide regarding the R3 million for the trustees. Meetings were not restricted to the schedule. Ad hoc meetings also took place. The costs for all of these meetings together came close to the figure of R3 million. Then the meetings with Trans Hex must be factored in. The NDFT had not interacted with Trans Hex since the final royalty payment in March 2010.

Mr Basson said that the executive committee took decisions on financial projects and investments. This committee comprised five or six trustees. The administration, sport and marketing committees had now been merged to save coasts. The Board had scheduled meetings every second month, but unscheduled meetings were also called if they were needed.

Ms Williams said that the income from Trans Hex in the last year was between R30 million and R35 million. The amount had been stated in every annual report and financial statement. The investment portfolio included the BMW building in Boksburg, Gauteng.

Mr Basson said that this building had cost R41 million. NDFT had put in R20 million from its own funds and had secured a loan for the remaining R21 million. There was a ten year lease agreement with BMW. Taking into account the bond, rates and cleaning, the turnover was R1 million.

Mr van Dalen said that the Trust seemed now to be becoming an investment company. He asked for whom the money was being saved. People needed houses and upliftment now.

Ms Leonore van den Heever, Provincial Trustee, NDFT, said that the current trustees had only been in office for four months. The executive committee comprised six or seven trustees. The administration, sport and marketing committees were separate. Each had seven to nine members. Each trustee served on two sub committees.

Mr Basson said that the trustees had realised that the NDFT faced an uncertain future. It could not do without the royalty payments. There was another investment in Illovo, Johannesburg. This was an office block development. It was a good investment that would generate extra funds. It was still subject to a public participation process and an environmental impact assessment (EIA). The NDFT could withdraw from the project without making a loss. The value of the investment was R25 million. If the project reached its next phase, the Trust would make a profit. There were still non-income returns from the Boksburg and Cape Town properties. The NDFT was looking at other options. Projects in Springbok were on hold.

Ms van den Heever remarked that the Fund's asset managers were present in the meeting.

Mr C Gololo (ANC) had heard that the NDFT was contemplating listing itself on the Johannesburg Stock Exchange. He was looking for an explanation on the assistance the Trust was giving to refugees in obtaining travel documents. He asked who decided on the character of the NDFT. It was being run like a municipality with its own Integrated Development Plan (IDP). He asked if the communities were involved. In terms of job creation, the Trust had reported that it had spent R3 million on empowerment deals involving four contractors, that had led to the creation of eighty jobs. He asked if these jobs were sustainable and if the people were still employed. He asked why the money going to the community was seen as donations, when in fact it was their own money.

Mr Magagula felt that the Committee should make a serious recommendation regarding the involvement of youth in projects.

Ms Phaliso said that the NDFT was not investing in its own province. Northern Cape was a vast area riddled with abject poverty. She asked if the communities had been consulted on the investment issues. Members of surrounding communities had attended the various meetings held by the Committee. She did not find that the explanations for the audit procedure were clear, although it was correct that explanations had been received from both the previous and current auditors. It would be a waste of time to interrogate an audit report arising from a flawed process. The Committee still needed the information. She also said that the Members needed to see the bank statements. She asked if there were copies of the statements available.

Ms Phaliso asked what criteria were used for selecting projects. She asked where the partners and service providers were located. She asked who the beneficiaries were of NDFT funds. The sole province that should benefit was the NC. She perceived an attitude that the NDFT felt it was doing the communities a favour.

Ms Phaliso said that even the auditor could not provide the answers to the financial questions. The Committee could not put a rubber stamp on poor decisions. It was not good enough that answers could be provided. The NDFT was playing games with the Committee. She was disturbed to hear of the lack of capacity and investment. She too felt that the NDFT was becoming an investment company. She asked if the communities fully understood what was going on at the top level and asked again if they had any meaningful input.

Ms Ngele said that the situation was even worse than she had thought previously. She was concerned that the books had not been signed. From browsing through the list of projects it seemed that the Pella region was getting a lot more attention than other regions. She asked if the NDFT managed funeral parlours, seeing that it assisted with funerals.

Mr M Sonto (ANC) felt that he was listening to the presentation of a sub-council. He questioned the overall purpose of the Fund. The presentation sounded too good to be true. He asked where all the capacity came from. One of the programmes was rehabilitation of prisoners, and he asked how many prisons were to be found in Namaqualand. He asked the NDFT team if it was saying that the Committee had visited the peripheral areas only, during its oversight visit. He asked why these communities had not been uplifted in some way. The same things seemed to be being done by the mining companies. The communities had lost hope in the mines, and the Trusts were drifting away from the people.

Mr Sonto asked why the change of auditors had been made. He did not believe that the correct decisions had been cited in the report. The reason stated was that the trustees had followed the Minister's recommendation to limit the terms of an auditor to five years. However, PWC had only been associated with NDFT for three or four years.

Mr Sonto asked what had been done to address the weaknesses raised in the audit report, and what measures were being put in place to prevent future problems. Members would still have to see the advantages on the ground. It was a question of how information could be verified. He asked how the Trust could be aligned to the main reason for its existence. The NDFT had only provided half answers or none at all. The clinic in Kuboes had been closed and the people were complaining. He asked which municipality had been provided with cars.

Ms Williams replied that the Kuboes Transitional Council had requested a vehicle which could be used to provide transport for schools and which would enable municipal officials to attend meetings.

Mr Sonto said that the explanation offered the previous week was that the purchase of vehicles was to make municipalities more mobile.

Ms Williams replied that only one minibus vehicle was involved.

Mr Marais wanted some answers from the provincial representatives. He asked what they were and from which Department they came. He asked which of them were full-time government employees. He did not believe they should be remunerated, other than being reimbursed for subsistence and travel allowances.

Mr Marais still wanted to question the Greenway Drive property. The nett income was only R5 000. He asked if the return on the investment covered the cost of accommodation for trustees. He felt that the NDFT should be using professional services in Kimberley rather than Cape Town. Given the number of meetings involved a trustee could easily earn up to R20 000 per month. There was a spiral of income. He felt that there was a temptation to generate unnecessary meetings in order to earn more in the form of fees. He felt that it would be cheaper to employ some administrators to oversee the management of the NDFT.

Ms van den Heever said that there were currently three provincial trustees who had been nominated by Premier Ms Hazel Jenkins. The fourth provincial trustee, Mr Losper, had been nominated by the former Premier Ms Pieters, and he was of the opinion that his nomination could not be withdrawn. She named the other provincial trustees.

The Chairperson asked how this abnormal situation had arisen.

Ms van den Heever said that the previous Premier had nominated four trustees but had subsequently withdrawn all four. The new Premier had nominated four different trustees but Mr Losper considered that he still held office. She and Mr Lena were employed by the NC government. They had requested permission from their respective Heads of Department (HoDs) to serve as trustees and to perform remunerative work. Their requests had been approved by the Members of the Executive Council (MECs) to whom they reported. They took leave in order to attend meetings and other business.

Ms Ngele said that Members had been told that trustees served a five-year term. She asked how long Mr Losper had served.

Ms Williams said the term for trustees had been three years, but this had been subsequently been extended to five years. Mr Losper was currently in his third term and had been a trustee since 1998.

Mr Marais said that some trustees were elected by their communities but the Premier appointed four trustees, and said that when the new Premier appointed the four, then the current four must surely have to vacate their office. Trustees appointed to represent provincial government became employees of government. It was not up to the HoD to grant permission. The provincial trustees could be granted leave and travel costs, but should not be entitled to meeting fees. In the case of Mr Losper it was surely the prerogative of the Premier to appoint and dismiss trustees.

Ms D Mathebe (ANC) asked how long the CEO had been in office.

Ms Williams said she had been appointed to the NDFT in 1995, as the head of education and training. She had been Acting CEO for a while before being appointed permanently. She served as a trustee ex officio.

The Chairperson asked who had raised the dispute over Mr Losper. He had not appointed himself. The Board was bound to appoint those trustees nominated by the founder, which was the NC government.

Ms Williams said that the former Premier had appointed Mr Losper. She had withdrawn the nomination of the other three. No reasons had been given to the trustees. The new Premier had appointed four new Trustees. The Council had decided to get a legal opinion as a decision needed to be taken on Mr Losper.

The Chairperson said that the Trust Deed should direct the actions of the trustees.

Mr Marais asked when the legal advisor had advised the Board.

Mr Basson could not remember the dates. The Board had received various opinions. When the current Premier had made her nominations the Council had discussed the matter and informed Mr Losper. He had said that he would raise a dispute. He claimed that none of the reasons for the removal of a trustee were applicable to him as was not incapacitated, of unsound mind or convicted of corruption. The Board had tried to address the situation in the third revision of the Trust Deed. The Deed was confusing in places. The procedure had taken approximately eighteen months.

Mr Sonto said that when the founder nominated the four provincial trustees then the Board was compelled to accept them. If Mr Losper was not one of the four then he must go. The legal opinion was in conflict with the Trust Deed. At present there were five provincial trustees, namely the four appointed by the new Premier and Mr Losper. He asked how this could be explained. It was wasteful expenditure to obtain legal opinions when the Trust Deed was clear.

Mr Marais said that it was clear that a new set of four provincial trustees had been nominated. He warned the trustees present that they were liable for any award that might be made to Mr Losper, in their personal capacity. He noted that the Committee would shortly be holding an oversight visit in Kimberley. He suggested that the Members should meet with the Premier and the responsible MEC. He suggested that Mr Losper should be dismissed. He could then challenge the decision in court at his own expense.

The Chairperson agreed that the trustees had been put in positions of trust. They had a fiduciary duty to manage the Trust and could be held personally liable. The national laws transcended the provisions of the Trust Deed. There was no reason to seek a legal opinion. The nomination of the four provincial trustees by the Founder was not the business of the other trustees. The Founder had the right to change the nominated trustees. The remainder of the trustees could not argue these decisions. In the same way the communities could recall their nominated trustee if they felt it appropriate and call a new election.

Mr Willem Cloete, Trustee, NDFT, said that the Board had gone to the Master of the High Court. The Master had confirmed the appointment of Mr Losper. Only the Founder could deal with appointment of a trustee. The trustees were laypeople and did not understand the law. They needed help and direction from the Committee.

Ms Phaliso asked who had corresponded with the Master to express an opinion on the assimilation. The Master would not have made a decision on this matter without being approached.

Mr Cloete said that in terms of the Trust Deed there had to be a minimum of five trustees on the Board at any one time. Several trustees were coming towards the end of their terms. The Board had therefore approached the Master for guidance. Mr Losper was one of the names submitted.

The Chairperson said that, on receipt of the letter from the Premier, the Board needed to appoint the fourth provincial trustee. Mr Losper must approach the Court if he had an issue with this decision. Clause 10 (b) of the Trust Deed was clear. The remaining trustees were bound to appoint trustees to succeed those whose terms had lapsed. He reiterated that since this clause was clear there was no need for a legal opinion. They should go to the Master with the Premier's letter. Mr Losper must be notified that he had been withdrawn. Once another trustee was appointed by the Premier that was the end of his appointment. An arbitration process could be followed. Failing that Mr Losper would have to take the Premier to court.

The Chairperson said that matters were not correctly handled. The trustees did not seem to understand their duties. They were ignorant of the proper procedures to be followed with the audit report. A forensic audit would give a clear picture of the situation within the Trust. The Committee could not go to the National Treasury (NT) to advocate funding without a clear picture of the organisation's financial situation. The Committee could intervene. Audits must be completed. For clarity of mind he asked if the NDFT's financial systems were adequate. There were required standards that must be maintained, in order to detect corruption. Members were trying to dig through the information being made available, but there was no clarity on the overall situation.

The Chairperson said that decisive intervention was needed. The Committee needed legal advice, but it would use Parliament's legal services to obtain this opinion. Parliament would decide on whether there was a need for a forensic audit if the NDFT did not. The Auditor-General could conduct the audit and could place the Fund under administration. Parliament would not help the NDFT to breach the law. The Committee would engage with the NDFT on any decisions.

The Chairperson asked if any companies were contributing to the NDFT, apart from Trans Hex. This company was not present at the meeting. Trans Hex seemed to have washed their hands of the NDFT but Clause 8.6 of the Trust Deed still placed an obligation on them. He asked if this clause had ever been invoked. Alexkor was in a similar position.

Ms Williams said that at one stage in the past Trans Hex had asked the Trust to tar the road between Baken and Alexander Bay. She could not recall any other requests from Trans Hex.

Mr Hockey said that Alexkor had the right to appoint five trustees to the ADF. They had been appointed in the past, but the current trustees were all former employees of Alexkor. The matter was on Alexkor's agenda.

The Chairperson said that the last contribution of Alexkor to the ADF had been in 1998. The form of benefit had since changed. The original arrangement of 30% of Alexkor's profit had been changed to a 10% equity share. The next benefit was contract work on a mine. There had been a gap since then.

Ms Williams said that there was no arrangement with Trans Hex. There had been a suggestion that the NDFT would be given 5% interest in mining operations at Kleinzee.

Mr van Dalen was not surprised that Alexkor was not contributing to the NDFT, as the Trust was not doing anything. The Board should develop a business plan for their charitable works.

The Chairperson told Mr van Dalen that Alexkor did not contribute to the NDFT. It had set up its own Trust Fund.

Mr Marais asked if other companies also paid royalties, apart from Trans Hex. This should be discussed during the visit to Kimberley later in the month.

Ms van den Heever said that fourteen days notice was necessary to call a special Board meeting.

The Chairperson said that the visit to Kimberley was planned to start on 22 November. There would be sufficient time to advise the trustees.

Ms Williams said that a programme for regional visits had already been published.

The Chairperson said that decisions must be taken.

Ms van den Heever said that the Board would decide on the programme and advise all parties involved.

The Chairperson advised the CEO that it was up to the trustees to make decisions and to answer to Parliament. The Committee had to be happy with the situation at NDFT before it could intervene.

Ms Phaliso said that a subpoena should be issued to Alexkor. It was not fair to the committee that they had neglected to attend the meeting. Even this engagement with NDFT had been a waste of time.

The meeting was adjourned.


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