Updates on the Grootvlei and Orkney mines: briefings by Department of Labour, Provisional Liquidators & NUM

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Mineral Resources and Energy

26 March 2013
Chairperson: Mr F Gona (ANC)
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Meeting Summary

The Department Of Labour (DoL) told the Portfolio Committee (PC) that they had brought a claim for unpaid wages at Grootvlei to Court. A Court order was obtained, and R2.03 million could be paid to 1287 workers. It was declared in October 2011 that the mine was not operational, and workers could claim Unemployment Insurance Fund (UIF) benefits, and claim for retrenchment packages. The DoL had issued a compliance order for payment of workers at Orkney mine, and the Labour Court issued an order in their favour in June 2011.

Liquidators had informed the DoL that Aurora did not have assets to sell to pay workers. Liquidators had instituted a criminal case against Aurora directors for fraudulently paying monies into accounts of directors. Kaunda Global Mining Resources and Aurora Empowerment Systems were not to be confused.

In discussion, Members were confused by the fact that Kaunda Global Mining resources had existed side by side with Aurora Empowerment Systems, without that being generally known. There was interest in the prosecution of fraudulent directors, and legal proceedings against erstwhile liquidators.  A member enquired after the current living conditions of miners. The PC wanted to know how many workers had currently not been paid out. There was concern that payout at only one mine would create expectations at the other. There were questions about the recourse of workers, with Aurora not having assets to sell to pay them. The Chairperson asked what could be done to unblock and expedite a process that could drag on for three of four years.

The Provisional Liquidators noted in their briefing that criminal charges against Aurora directors were lodged with the Serious Crimes Unit of the SAPS. There had been Section 89 payments to workers, and Pamodzi East Rand assets had been sold to Gold One. Behaviour of erstwhile liquidators were under investigation. There was current litigation for the free residue account to benefit destitute workers.

In discussion, it was asked if new mine owners would have to wait for the final liquidation to start mining and employing workers. There was confusion about liquidators assigned to companies, and questions about liquidator fees. There was a question about the nature of the assets sold to Gold One. There was concern about the fact that liquidators were investigating other liquidators, and about who were paying for that. There was the plea that worker’s interests be prioritised. The DMR had to say what Parliament could do.

The NUM briefing was severely critical of the role of liquidators. They had nominated Aurora as preferred bidder, without considering if they really had secured financial backing and experience. Later it had turned out that Aurora was merely a legal entity. Liquidators stated that a mine had been bought by Gold One, but they had only bought a new prospecting application, and did not yet have a licence. The NUM proposed changes in insolvency legislation. Liquidators had to be civil servants under the DoL, and there had to be strict regulations for them. Currently they were a power unto themselves. The Department of Minerals and Energy had to expedite licencing.

In discussion, there was a call for executive intervention. The dragged out process amounted to a human rights violation. A Labour Portfolio Committee Member referred to Aurora as a human tragedy. He suggested that workers be taken up in training schemes while laid off, to make them more employable. The Chairperson concluded that matters could become clearer when the Commissioner’s report appeared in June. There could then be assessment and clarity on who would be responsible for what, and more certainty for workers.

Meeting report

Briefing by the Department of Labour (DoL)
Mr Sam Morotoba, Deputy Director-General of Public Employment Services, DoL, updated the Committee on nonpayment of wages and salaries to workers at the Aurora Grootvlei mine and Aurora Orkney. The DoL had brought a claim for unpaid wages successfully to court. A court order was obtained and the DoL was to pay 1287 Grootvlei miners who earned below the threshold a total of R2.03 million towards unpaid wages. The Department had received new claims since June 2011 from miners not included in the first claim. Miners who earned above the threshold could not be assisted with unpaid wages.

It was declared in October 2011 that the mine was not operational, and workers were not receiving salaries, therefore they qualified to receive Unemployment Insurance Fund (UIF) benefits, and could still claim for retrenchment packages. The claims were paid out in November 2011.

At Aurora Orkney, 1170 workers were owed a total of R8.65 million. Aurora paid out 25 percent of this in December 2010. The Department issued a Compliance Order, and in June 2011 the Labour Court issued an order in favour of the Department.

The Aurora mine had been liquidated. The liquidators informed the DoL that Aurora did not have assets to sell to pay employees. A criminal case had been instituted by the liquidators against the directors of Aurora for fraudulently paying monies into accounts of directors.

Mr Morotoba stated that Kaunda Global Mining Resources and Aurora Empowerment Systems were not to be confused.

Mr R Sonto (ANC) said that slide 12 stated that Aurora had been liquidated, whereas Slide 14 indicated that it was still under way. If Aurora had indeed been liquidated, he asked what that would mean in terms of outstanding claims.

Mr Martin Dzumba, Senior Legal Officer, Department of Labour, replied that the final liquidation order had not yet been granted.

Mr Morotoba conceded that Slide 12 should not have been phrased the way it was. Aurora was still in the liquidation process.

Mr Sonto asked about the distinction between workers below and above the threshold, and what constituted the threshold.

Mr Dzumba replied that the threshold had been set at R149 000 by the Conditions of Employment Act, but was currently R183 000 per annum.

Mr S Motau (DA, PC Labour) said that there had been mention of people losing applications, wages and Unemployment Insurance Fund. He asked how many workers drew UIF at the two mines, currently.

Mr Kenny Fick, Chief Director: Gauteng, DoL, said that at Grootvlei no workers had been paid out, but their applications had been registered until claims were settled.

Mr Motau said that people wanted some form of redress. He asked who were being criminally prosecuted, and for what. He asked about the status of criminal charges.

Mr Motau asked what had been done to trace workers.

Mr Fick answered that there were workers who feared being discovered as being illegally in the country. The UIF Act required of them to have a valid ID. But the situation was that up to three people could claim a single identity.

Mr Dzumba replied that liquidators had proof obtained from an enquiry at the Master of the High Court that profits had been channelled to a trust account. Cases had been opened against directors. He was not aware how far the cases had progressed.

Mr A Williams (ANC, PC Labour) said that he did not understand how people could be employed but claim UIF. He asked about their legal status.

Mr Fick replied that it was not a closed situation. Legally, the workers were still employed. Workers could claim retrenchment packages. UIF was being paid out on the basis of not earning an income. Once employment was terminated, there were problems.

Mr Williams asked if workers would automatically become employees of the mine’s new owners.

Mr Sam Phuthi, Regional Manager, DoL, replied that a new buyer would have to go through the process with the DoL. Aurora was never owned in the sense of having a workplace. The only contact with them was through the NUM offices.

Mr H Schmidt (DA) asked if the liquidation of Aurora referred to in Slide 12 meant that there had been a final order of liquidation by the High Court.

Mr Dzumba replied that liquidators were still busy with a first meeting of creditors with the Master of the High Court.

Mr Schmidt said that he had never heard of Kaunda Mining Resources. He asked what the link was.

Mr Dzumba replied that Kaunda Mining resources and Aurora Empowerment  existing side by side, which often caused confusion. It was hard to establish which part of the liquidation dealt with which of the two. When an order from the Labour Court had been received, it would be submitted to the liquidators.

The Chairperson asked who owned Kaunda Mining.

Mr Dzumba replied that the liquidators could answer that question.

Mr Johan Engelbrecht, liquidator, Icon Insolvency Practitioners, answered that Kaunda and Aurora were one company, although they were two legal entities. The liquidators would make the two one. The process was known as piercing the corporate veil. It was to the detriment of creditors.

The Chairperson asked if the directorship of the two were the same.

Mr Engelbrecht replied that Mr Ngubane and Mr Mandela were the directors of Kaunda. Wages would some months be paid from the one entity and some months from the other.

Mr Sonto asked how the two separate legal entities could be made one.

Mr Engelbrecht replied that the process of piercing the corporate veil meant that the court would be asked to view them as one. There was evidence that they were operating as one company.

Mr Motau asked why Kaunda was only heard of at such a late stage.

Mr Engelbrecht directed him to the Commissioner’s report. There had been fraudulent intent on the part of Aurora.

Mr Schmidt asked about the threshold and who could claim UIF.

Mr Sam Phuthi, Regional Manager, DoL, replied that those above the threshold were outside of DoL jurisdiction.

A DA Member asked about the living situation of miners, whether they were still staying there, and whether they had water.

Mr Fick replied that there were challenges at Grootvlei. Illegal miners were occupying the hostel. The DoL had visit there with the South African Police Service (SAPS) and the municipality. The municipality were connecting and disconnecting water. They did not want to provide water for illegal miners. It was not known whether people emplpoyed by the two mines were currently on the site.

The Chairperson asked how many workers had not been paid out by both mines. One mine had paid out. He asked if outstanding claims would have to wait for the process.

Mr Morotoba responded that the DoL had received money to pay out at Grootvlei. New claimants then started to come in. Some had been dismissed earlier, some had never worked. All worker’s money had not been paid at Orkney. There were 1170 on the DoL books. He was not aware of other claimants. The true reflection was in the books of the company.

Mr Schmidt commented that it was indeed a confusing situation. Grootvlei had been paid, and that would create expectations for Orkney to be paid as well. Once the provisional liquidation order was granted, all creditors would submit claims. After the final order only UIF would be paid. That would create tension in the future. Orkney was apparently in a new joint venture with a Chinese concern. If Aurora were to be paid from November 2011, Orkney could well expect the same for themselves. If he was right, a new legal precedent was being created.

Mr Morotoba responded that the DoL was not supposed to get involved with payments to workers, but they did. An amount was granted through a court order.

Mr Sonto remarked that the DoL would have to monitor an extensive cleaning up process. He referred to Slide 13, which stated that Aurora did not have assets to sell to pay workers. He asked what recourse workers would have. If it was so that some would benefit from the process, whilst others would lose out, seeing that the DoL had declared that workers above the threshold were outside their jurisdiction.

Mr Morotoba replied that the DoL could not intervene on behalf of those above the threshold. The unions could affirm that. There were legal issues related to those above the threshold. The law only covered the most vulnerable. Unions could also institute claims. The process was a challenge to the DoL, as they were involved in unpaid wages. There were a number of parties involved in the process. The Department of Mineral Resources (DMR), the NUM and the liquidators all had different roles to play. The DoL priority was to see a court order for Orkney. Workers could then get their fair share under the Basic Conditions of Employment Act.

The Chairperson remarked that it was bound to be a long drawn out process. The question was how it could be expedited. The final situation depended on the liquidation process. It could take three or four years. He asked what could be done to unblock the situation.

Mr Morotoba replied that the sooner the liquidators could resolve the matter in court, the better for the workers. The DoL had been in control as far as UIF was concerned, and they had managed to assist with that.

Mr Motau referred to charges against Aurora directors. He asked who they were, and what the charges were. He asked if the eyes and ears of the DoL were in the criminal case. It was an important case. It was necessary to look at the charge sheets.

Mr Morotoba replied that whatever had been gone through in the three previous briefings, could be recirculated.

Briefing by the Provisional Liquidators
Mr Barend Petersen, liquidator, De Beers Consolidated Mines, and Mr Johan Engelbrecht, liquidator, Icon Insolvency, noted that criminal charges against Aurora directors were with the Serious Crimes Unit of the SAPS. Pamodzi Orkney assets had been disposed of. Section 89 payments to workers had been made. Pamodzi East Rand remaining tangible assets had been disposed of. There was a current focus on litigation. Pamodzi East Rand assets had been sold to Gold One . Behaviour of erstwhile liquidators was investigated subsequent to their removal, in terms of Section 381 of the Companies Act. There was an enquiry in terms of Section 417/18 of the Companies Act. Litigation included Section 424 summonses against directors of Aurora, for intent to defraud creditors. Litigation was for the free residue account to benefit destitute workers. Final liquidation of Orkney and Pamodzi East Rand was anticipated for June 2013, and would ensure closure.

Mr Williams referred to the situation at the Orkney mine, as set out on page four. Assets had been sold. He asked about the relationship between the DMR and the new owners. The final liquidation was to be in June 2013. He asked if the new owners had to wait until then to operate. He asked when the new miners could start mining and employing workers.

Mr Wang said that he was confused. He asked if there were in fact several liquidations running at the same time. He asked who the liquidators were, and who were involved with which company.

Mr Wang asked whether all the liquidators were paid the same fees.

Mr Engelbrecht replied that liquidator fees were statutory, regulated by the Act.

Mr Motau said that he was not surprised that the docket had got lost. He asked if there had been efforts to see how the docket had disappeared, and to see if someone had taken a bribe.

Mr Engelbrecht replied that the liquidators had anticipated that it could happen, and had made copies of the docket.

Mr Schmidt remarked that Pamodzi was formed in 2008 under provincial legislation. Aurora Empowerment System was said to have run the mine on behalf of the liquidators. Aurora was run to the detriment of the liquidators and the mining company in litigation. Pamodzi was never liquidated. For the provincial liquidation of Aurora, a new set of liquidators were called in. He asked who the current liquidators for Aurora were.

Mr Petersen said that Messrs Motala, Pallow and Enslett were appointed by the Master of the Court in March 2009 as provincial liquidators. Messrs Botha, Allan, Gainsford, Engelbrecht and himself were appointed in April 2009. There were three liquidators for Pamodzi East Rand and six for Pamodzi OFS. Each estate was a separate legal entity. Aurora Empowerment Systems had been the preferred buyer for Orkney. Pamodzi OFS was sold to Harmony. There were problems around Aurora. It was put under liquidation by Vaal Trust Liquidators. Before that the Master of the Court  examined the liquidators, and removed Mr Motala and Mr Gainsford in Orkney and East Rand. The liquidators for Aurora had an interest, which was monitored. Cooperation between liquidators was a high level process.

Mr Schmidt asked about assets sold to Gold One. But it had been said that Aurora had no assets. What assets had been sold?

Mr Engelbrecht replied that Aurora had never been a mine, but a legal entity that was never capitalized. It could not commit to transactions signed. Details were in the attached Commissioner’s report. There had been an agreement with Gold One to sell assets to them. Gold One was a major player, and the aim was to get them in to revive mining. They had a good name and a good relationship with labour. They could pay their commitments. There was a need to put assets in the hands of one who could pay and give security. The Master of the High Court was also a watchdog in the matter.

Mr Sonto asked if Gold One was currently operational. He asked if they had taken over workers, if that was the case.

Mr Engelbrecht replied that Gold One could not yet operate. There were regulatory requirements for the transfer of the right to be there, which were lodged with the DMR. There was an environment liability problem. When an asset was disposed of, the question was who took the environment liability. It went to the purchaser. With regard to workers, there were agreements with purchasers and discussions with organised labour. There was a recall agreement that stated the need to take back workers. It was signed with Gold One, the Joint Provisional Liquidators, and organised labour. Liquidators could not force owners to employ, but the recall agreement was secured for workers.

Mr Sonto asked about the rehabilitation process engaged in with the DMR (page five). He asked if money would come from the sale of assets.

Mr Engelbrecht replied that there was a rehabilitation fund in a trust account that the liquidators were privy to. It was hard to sell certain assets. The DMR had suggested that the liquidators sell the assets, but the liquidators had not created the problem. Interaction between the liquidators and the government departments had improved.

Mr Sonto remarked that liquidators were investigating other liquidators. He asked who was paying for the investigation process, and whether money would be taken from money owed to workers.

Mr Engelbrecht answered that the creditors in the estate were banks, preferrent creditors, such as the South African Revenue Service (SARS) and employee claims. There was a creditors account. Assets sold were bank securities and money went to them. Money had to be directed to the free residue. The money of secured creditors was used for the investigations, not that of the workers. Security was visible assests. Disposal had started. Banks were told that their mine had been sold to another. Things would make sense when the Commissioner’s report came out.

Mr Williams remarked that there was a lot of process, with vulnerable workers waiting. Things were beyond their powers. The DMR had to explain why there had been delay. Workers had to be prioritised. There was impact on worker’s lives. The DMR had to say what Parliament could do.

Mr Engelbrecht replied that liquidators could not tell purchasers who to employ. There was a recall agreement. Orkney had come to a complete halt. It could not be fired up again. Such matters had been properly ventilated between the liquidators and the purchaser. There was a responsibility to employ.

The Chairperson said that the matter would not be closed before the Commissioner’s report roundabout June.

Briefing by the National Union of Mineworkers (NUM)
Mr Joseph Montisetse, regional secretary of the National Union of Mineworkers in North-West Province, noted that Aurora had never been a title holder in any mine, yet they were the preferred bidder nominated by liquidators. Human rights had been violated. The state had to consider the role of liquidators. They dealt with the lives of workers. Liquidators under Mr Motala had claimed that Aurora had R600 million and muscle. It was not disclosed that it was only a legal entity. Liquidators had to be civil servants under the Department of Labour. The question was why government had not acted, through appointing a special court. Aurora assets could have been confiscated. Liquidators had to consider whether a bidder had experience and secured financial backing.

Mr Montisetse said that China-Africa Precious Metals (CAPM) had made an offer to purchase Pamodzi Orkney. They would consider absorbing workers, but no law compelled them to do so. Gold One had supposedly bought Pamodzi Grootvlei, but it was in fact a new prospecting rights application and not yet a transfer of the current mining licence.

The NUM argued that there was a need for change of insolvency legislation. Liquidators were powers unto themselves. They chose what and when to report. Liquidators were not to act on their own interests, nor those of creditors. There had to be stricter qualifications and rules to regulate liquidators.

Mr Maja Mpahlele added that the DMR had to expedite the issue of licences. The DMR and the DoL had to fast track the process to resuscitate the production process.

Mr Williams commented that people were suffering under abhorrent conditions. To keep dragging the process out was a human rights violation. The Portfolio Committee had to demand executive intervention. The executive had to be told that workers had to get their lives back.

Mr Montisetse responded that union interventions included going to good samaritans for groceries for workers. However, that was on an ad hoc basis. A relief fund had run for a while.

Mr A Van der Westhuizen (DA, PC Labour) remarked that it was a human tragedy. Workers did not know what the future held. They did not know if they had to look for other work. He asked if it was possible for workers to take up a laid off training scheme. The training could be under the Sector Education and Training Authorities (SETAs). A stipend could be provided. The unions could start the discussion about efforts and progress made with upskilling.

Mr Mpahlele replied that the NUM welcomed the innovation to capacitate workers and make them more employable. The initiative to escalate matters, coming from Mr Williams, was also welcomed.

The Chairperson commented that the Portfolio Committee had wanted to close off the matter, but it was not yet possible. Actions had to be taken. The Committee needed recommendations not included in the briefings, to help them trigger processes. There would be an assessment after the Commissioner’s report in June. By then it would be known who had to do what. He hoped that there would be more clarity about new buyers by then, and certainty for workers. The directors of Aurora had to be located. The matter was in the hands of the Master of the High Court. The future of workers had to be dealt with. The process had to unfold, and the Justice system was slow. The NUM had to give a list of necessary actions.

The chairperson adjourned the meeting.


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