Alexkor Development Foundation on its operations, governance structure & audited financial statements from inception to date

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Mineral Resources and Energy

17 November 2011
Chairperson: Mr F Gona (ANC)
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Meeting Summary

The Committee expressed its dismay at the fact that the delegations from Alexkor Development Foundation (ADF) and Namaqualand Development Agency (NAMDA) were not accompanied by their financial officers and were unable to provide audited financial statements. As a result, many questions posed by the Committee went unanswered, or received unsubstantiated responses.

At one stage, the chairperson of NAMDA claimed it was his constitutional right not to answer questions dealing with the finances of the entity, but the Committee Chairperson pointed out that Parliament was the highest authority in the land, and this imposed a constitutional obligation on him to be open and honest with the Committee.

The chairperson of ADF said that right now, neither NAMDA nor ADF was functioning, and there were no staff members. The previous staff of ADF had been absorbed into NAMDA, but this entity had not been operational for the past two years. The Committee Chairperson responded by revealing the Committee had conducted its own investigation and while it was claimed that ADF and NAMDA were no longer functioning, investments were being made. The Committee wanted the delegation to provide details of these investments, as this information was not in the financial statements.

During discussion, members of the delegation explained how ADF had been absorbed into NAMDA, and then NAMDA had been transformed into a proprietary limited company in order to conduct business operations, such as loans to emerging business, following financial support from the South African Micro-Finance Apex Fund. Although neither NAMDA nor ADF was functioning, they had not been dissolved and were legally operational. It was claimed that ADF was still owed R38 million by Alexkor mine, dating back to royalty agreements in the 2006-08 period.

The Committee Chairperson issued a stern warning to the chairpersons and trustees of both entities to ensure that all the information required by the Committee was made available at the next meeting, which was scheduled for 24 January 2012.

Meeting report

Ms F Bikani (ANC) suggested that the letter indicated those involved did not understand the seriousness of the situation. The picture that was emerging was that the Committee was already wasting its time. She asked whether trustees could be retrenched and, if so, what process was followed.

Mr Losper, ADF trustee, said neither Mr Strauss nor Mr Wilson were trustees, but employees of NAMDA and Alexkor.

Ms Beverley Vries, chairperson of ADF, said that right now, neither NAMDA nor ADF was functioning, and there were no staff members. The previous staff of ADF had been absorbed into NAMDA, but this entity had not been operational for the past two years.

The Chairperson asked who was responsible for handling the assets of these organisations.

Mr Losper responded by outlining the process which had resulted from a mandate for NAMDA to be created to replace ADF, the movement of staff to NAMDA, and the change in income from a 30% royalty arrangement to a 10% shareholding in Alexkor.

The Chairperson said that despite the mandate, the entities were established in terms of the law and the process followed was outside of the law itself, and the trust deeds. The Committee had conducted its own investigation which had unearthed some interesting information. While it was claimed that ADF and NAMDA were no longer functioning, investments were being made, and the Committee wanted the delegation to provide details of these investments, as this information was not in the financial statements. The Committee also had information of income distributions being made up to December 2010. For instance, ADF received R6,1 million in March 2009, yet it said it had “closed shop” in 2004. This was over and above the R18,5 million it had been given by Alexkor since its establishment in 1993. In 2010, ADF received more than R900 000, so the Committee did not understand how ADF could be “closed”. There were also transactions with Gariep during 2010. The Committee wanted to know what had happened to the R18,5 million which was paid by a state mining company, and this meant it wanted upfront, honest and truthful answers.

Mr Lakus van Rooi, chairperson of NAMDA, said the Committee would need to put these questions formally to NAMDA, and that it was his constitutional right not to engage on the matter at this stage.

The Chairperson said it appeared Mr Van Rooi did not understand the position he was in. He had been subpoenaed by Parliament which, in terms of the Constitution, had the right to summon any person or institution to provide information under oath. If Mr Van Rooi did not provide the information requested, the Committee could launch its own investigation.

When the Chairperson asked Ms Vries to respond on behalf of ADF, she began to explain that ADF was absorbed into NAMDA. However, Mr Losper attempted to interrupt, and was cut short by the Chairperson who asked him not to try to tell the Committee how to run the meeting. Ms Vries then described how NAMDA became the business arm of ADF, which did not close officially because it still had the 30% royalty agreement with Alexkor mine, and payments had not yet been received. The only money it had received was a share of R250 000 from the Witkop fluorspar mine. When ADF was absorbed into NAMDA, its funds were transferred across to pay for salaries and operational costs, but the assets remained in ADF’s name.

The Chairperson asked if NAMDA’s audited figures supported Ms Vries’s assertion that the funds had been transferred to NAMDA.

Mr Van Rooi responded by insisting he had never been subpoenaed, and needed to know his constitutional rights, as he did not understand why the Committee was “against us” and that it seemed they were considered as “bandits”. He felt he needed someone to protect his constitutional rights, and that he could not be interrogated in this manner.

The Chairperson said Mr Van Rooi had constitutional obligations as well as rights. When ADF had alerted the Committee to the fact that NAMDA had taken over from ADF, it had sent out invitations to the chairpersons of both entities, along with trustees and officials, to discuss the operations, governance structure and audited financial statements. The letter was dated 10 October, so Mr Van Rooi could not say he did not understand why he was at the meeting. As a trustee, he had fiduciary duties and could be held personally liable. NAMDA was handling public money, which was why the Committee needed to know if it was being handled to the benefit of the public.

Mr Van Rooi said he wanted to cooperate and provide the required information, but he appealed for a request to be put in writing because he wanted a lawyer to protect him and he “did not know what was going on.”

The Chairperson asked if he had received the letter inviting him to the meeting, which had spelt out the requirements. When Mr Van Rooi admitted he had, he asked what he did not understand, and Mr Van Rooi said he had not read it properly.

The Chairperson said a legal representative was present, and trusted he was taking notes of the proceedings.

Ms Bikani said the Committee had made several attempts to accommodate the ADF and NAMDA in an effort to reach a compromise solution. They had been asked three times to bring their financial officers and documents to explain the situation, but the scenario was just getting worse. The bottom line was that there had been a gross violation of the way in which money had been handled in relation to the Public Finance Management Act (PFMA). There was also a violation in terms of their relationship with Alexkor, as well as several other legal and financial issues. As the required information was not forthcoming, she suggested that the trusts be terminated and legal processes be allowed to take their course.

Mr Losper complained that the “playing field” was unfair, because the Committee had a legal representative present, while the entities did not. He repeated that if they received a written request for information, they would respond.

The Chairperson pointed out that all communication between the parties had been in writing.

Mr E Marais (DA) said it had been made quite clear at the previous meeting that the chief financial officers of both entities had to be present, along with audited financial statements. He asked what the actual balance of investments in NAMDA’s account was. He also referred to a property bought by ADF for R3 040 000, in violation of the Trust Act, and subsequently cancelled following legal action, and wanted to know what had happened to the interest which had accrued as a result of the transaction.

Mr Losper tried to interrupt, leading to a heated exchange with the Chairperson, who at one stage threatened to call security to lock him up.

Mr Marais asked the chairperson of NAMDA to respond to his questions.

Mr Van Rooi said he understood the questions, but begged to be allowed to get his legal representative to provide the answers.

The Chairperson said that as chairperson of NAMDA, he was responsible for decisions regarding the entity’s investments, not the lawyer, and he should answer the question.

Mr Van Rooi said he refused to respond in the presence of the Committee’s lawyer.

When pressed by the Chairperson for an answer, he responded, “I don’t know”. He admitted he had been a trustee and chairperson of NAMDA since 2008, and that the trustees were responsible for investment decisions, but he did not know the balance of the investments. He looked at the annual income and expenditure statements, but he did not understand them. He also conceded that no trustee meetings had been held since 2009.

The Chairperson asked who handled NAMDA’s finances, as the chief financial officer had been retrenched in 2010.

Mr Van Rooi said the organisation had no money, and although the bank account had not been closed, there was no money in it. He was not aware of an amount of R700 000 being paid into the account in 2010.

The Chairperson said that as the money would have been paid to ADF and then transferred to NAMDA, he asked Ms Vries if she could clarify the position.

Ms Vries said the money had been used to pay staff salaries and pay operational expenses, but she was not sure if it was officially transferred to NAMDA.

Ms Bikani asked for details of this issue to be confirmed in writing.

Ms Vries said that since ADF had stopped operating, it did not have the funds to produce financial statements.

The Chairperson said the problem was that the delegation had come “empty-handed” to the meeting, and claimed they could not answer questions because they did not have the necessary documents. If they cooperated with the Committee, they could deal with matters satisfactorily, but if they did not, they could not expect cooperation themselves. He asked if there was a reason for the non-attendance of the finance officers.

Ms Vries said they had been advised informally of the meeting some time ago, but they had claimed they received the letter of invitation only a week ago. She added that she did not have the power to force them to attend, and suggested that Parliament should deal directly with this. She apologised for what had transpired, and assured the Committee that the ADF was not “playing games”.

The Chairperson said money was currently flowing between Alexkor and Witkop and going to NAMDA, yet NAMDA said it had closed shop in 2009 and had no money. This made it important for NAMDA to cooperate with the Committee, as it could take a decision to hold the trustees personally liable, and not NAMDA as a body. The fact that the trustees could not account to the Committee meant that the people in the trust did not know what was going on.

The Chairperson said the South African Micro-Finance Apex Fund (SAMAF) had reported experiencing problems with NAMDA back in 2009, and asked what these were.

Ms Delie, NAMDA trustee, said the problems related to money lent to people in the community which had not been paid back. Neither she nor Mr Losper could recall the amount involved, but Ms Vries said R4 million to R5 million was outstanding and records were available.

Ms Bikani took issue at the fact that information was not being provided, that financial officers were not present and audited statements not available, and complained that the meeting was a waste of taxpayers’ money.

Mr C Gololo (ANC) said the two entities were said to be defunct since 2009, yet loans were being issued to the community. He asked who was responsible for handling these funds.

Mr Van Rooi said NAMDA had no money, while Ms Vries said there was around R1 000 in the ADF account, although there were funds owing to them at Alexkor which they had not yet received.

Mr M Sonto (ANC) asked what had happened to all ADF’s investments and properties which had been transferred to NAMDA, and ultimately to a third body, NAMDA (Pty) Ltd. The trustees were now collectively responsible for answering questions about these investments and properties. The founding documents of ADF and NAMDA should be inspected to see whether, in the process of dissolving these trusts and establishing another, the trustees adhered to the trust deeds or were in breach of the founding principles.

There was no response from the trustees.

Mr Marais asked for clarification on the recipients of the SAMAF funds channelled through ADF to NAMDA.

Ms Vries said that in order to interact with SAMAF, NAMDA had had to become a proprietary limited company. It had used the SAMAF funds to lend amounts of up to R250 000, at 6% interest, to small, medium and micro enterprises (SMMEs). Loans were supposed to be paid back, but so far only one recipient had done so, which accounted for the amount of around R1 000 in the account. Others had started repaying, but when they found out that others were not, they also stopped. The loans had been recorded, but no one was following up on defaulters, apart from a letter having been sent to a lawyer in Springbok.

Mr Marais said the outstanding amounts could legally be recovered, and asked whether the entities had any other investments.

Ms Vries said she recalled an overseas investment of R70 000 being made by the CEO, although she never got clarity on this. There were also assets in the form of office equipment, such as computers and furniture. Mr Losper added that there was a building in Springbok worth about R1 million.

Mr Marais asked whether loans had ever been made to staff members.

Ms Vries said NAMDA (Pty) Ltd offered staff members the option of applying for loans. She and Ms Delie had received R10 000 loans which they had not paid back.

Mr Marais asked under what terms bursaries were issued by the entities.

Ms Vries said there were both bursaries and loans. In the case of the loans, a lenient approach was taken when students were unable to repay. Mr Losper added that in those cases, students were encouraged to make good by engaging in some form of community service.

Discussion then focussed on the various sources of funding since the establishment of ADF as a trust in 1993, with Mr Losper asserting that Alexkor owed R38 million from the 2006-08 period.

The Chairperson commented later that if Alexkor did indeed owe R38 million, it was a wise decision not to dissolve ADF, to whom the funds could be due.

Ms Bikani said a study of the names of those receiving bursaries, going back to 1995, revealed long lists of people with the same surnames, and only the initials being different. She asked whether several members from the same family were benefiting, or whether they were individuals from different families.

Ms Vries said there was a lot of inter-marriage in Namaqualand, and in the absence of detailed background information on recipients, one “just went with the flow.”

The Chairperson said the meeting had reached a stage where there was understanding of the serious responsibilities of trustees. The Committee bore in mind that the trustees came from previously disadvantaged communities and lacked expertise in handling community matters. However, the law had to be complied with, and this placed a mammoth burden on their shoulders. Working together, the issues raised could be resolved, so it was essential that senior management and financial officers were present at the next meeting, along with the required documents. NAMDA had to provide audited financial statements for 2008, 2009 and 2010, which was required in terms of the Trust Act. With the formation of NAMDA (Pty) Ltd, it would also be necessary to see what the agreement was between ADF and NAMDA.

He warned the trustees to be prepared to justify their claim for R38 million from Alexkor, as the mine would be invited to send representatives to the next meeting.

He spelt out in detail all the other information which the Committee would need to consider, and set a date for the next meeting: Tuesday, 24 January 2012. He asked for all information to be submitted at least two weeks before the meeting, at which the way forward would be decided.

The meeting was closed.

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