Alexkor on its 2014/15 Annual Report; Committee Report on Public Enterprise Strategic Plan & Budget

Meeting report

Alexkor Annual Report and Financial Statements

Ms Hantsi Matseke, Board Chairperson: Alexkor, said that the company had done quite well in the 2014-15 financial year. It had surpassed the target of carats that it had been required to produce, which had resulted in its revenues increasing by 49%. Alexkor had only two items that remained to be handed over to the community of Alexander Bay as far as the deed of settlement (DoS) was concerned -- the transfer of municipal services and the transfer of property into the community, which was ongoing work. Alexkor would have executed those two remaining tasks by the end of the following financial year.

Predetermined Objectives

Mr Vimal Bansi, Chief Executive Officer (CEO), Alexkor, introduced the rest of the delegation and took the Committee through the presentation. He said that from the DoS, a resolution had been taken which had intimated in 2011 that Alexkor had to vacate the diamond mining space. At that time, former Minister Malusi Gigaba had impressed upon the organisation to look into alternative strategies for Alexkor’s future. That was when a coal strategy business plan had evolved.

The Pooling and Sharing Joint Venture (PSJV) was the driver of operations for the joint venture between the Richtersveld Mining Company (RMC) and Alexkor, where Alexkor held 51% shareholding and RMC held 49%. PSJV had boats that went out to sea to dredge up diamonds from the ocean floor and if there was a fleet of 20 boats for example, and ten or more boats went out to sea to dredge for diamonds, that was called a “sea day.” Due to the swells of the Atlantic Ocean, it was not every day that boats went out to mine diamonds on the ocean floor, but if one or two boats did go out then “sea days” would be referred to as “boat days.”

The Muisvlak plant was a concession area in Alexkor’s licences which processed diamonds to remove the hydrated gravels around the diamonds before going into the sorting section. The land mining area was outside the Muisvlak plant -- further north, up from Port Nolloth going towards the Orange River. In terms of beach mining, the PSJV had shore units where divers went out from the beach to mine diamonds. 2015 had been a better year compared to the previous three years before it. The organisation’s performance was defined and characterised by ocean behaviour, so he could not say El Niño and other sea weather were affecting Alexkor. However, safety came first and if it was not safe to go dredging, there would be no boats going out.

There were four communities resident in the Richtersveld and it was Alexkor’s alignment strategy with the community to assist where it could to ensure sustainability and the wellbeing of those communities. Its intention with offering the bursaries it had awarded to the students was to absorb them within its establishment at its operations in Alexander Bay.

Ms Zodwa Mbele, Chief Financial Officer (CFO), Alexkor, said that the organisation had received an unqualified audit opinion. The Auditor General had reported material impairment of non-current assets held for sale. She said that there had been properties which had been sitting in Alexkor’s balance sheet which had been transferred to the Richtersveld community (RVC) for which there been no compensation and that had resulted in the impairment, as per accounting jargon. This had had an effect on the operational profits.

Findings, however, had raised an issue of inadequate financial provision for the environmental rehabilitation liability. She said that it was quite common in mining companies to have the rehabilitation liability not being fully funded. However; Alexkor had provisions for that and the fact that it had to date not been fully funded did not mean it would forever be inadequately funded. Alexkor had R233.1 million in rehabilitation liability against a current investment of R118.6 million to complete that work. Moreover, the organisation also had a Medium Term Expenditure Framework (MTEF) allocation that it could use to top up that investment, and every year the liability had to be re-evaluated as well.

Discussion

Ms T Stander (DA) said the presentation had not shown what the costs were in terms of the carat production per mining area. What was the capital expenditure (CAPEX) per mining area, and what were the trends emerging in terms of a decrease versus an increase in yield per mining area?

Regarding Alexkor’s 1C licence, the equipment was quite expensive, and she wanted to know whether the tender had gone out already. If so, who had been appointed, if anyone? Did the appointee comply with the Black Economic Empowerment (BEE) mining charter requirements? What yield forecast did Alexkor have in terms of that 1C concession? Could Alexkor confirm whether or not it would be mining coal?

Three years ago, Alexkor had received about R350 million in taxpayer bail outs and towards the end of 2015, it had presented a request for another bail out from National Treasury (NT). What was the process in that regard? She had also found out that the organisation had put out a tender for research consultancy and professional services regarding marketing and post extraction treatment processing and beneficiation. Was that tender aimed at getting the necessary expertise to turn Alexkor not only into a raw material mining company, but to develop industry skills in area that was exceptionally impoverished?

Was Alexkor going ahead with looking for a buyer for a 51% stake in its business? How would that affect the PSJV? If there were current negotiations in that regard, who were they with? 

She was aware that Alexkor consistently stated that only 10% of its diamonds were lost without recovery, whereas mining insiders had estimated that loss to be as high as 50%. Therefore, while an increase in carat production was commendable, could it not have been much more? Was Alexkor 100% certain that it was doing all it could to limit loss due to theft?

Apparently there were deep sea boats where the RVC had been told that the jobs on these vessels were for six months, until the alleged sale of the 51% stake took place. What would happen after that six months? How was the jobs process handled by Alexkor? Did the jobs go to locals?

When would the proclamation of the town take place so that residents could get their title deeds?

Mr N Singh (IFP) said that Alexkor’s loan to joint ventures had almost doubled, from R38.1 million to R68.4 million. Since the CEO had alluded to the PSJV not being a properly constituted company, he wanted to know who those loans were connected to.

Had any rehabilitation been done, since the amount spent for that work had reduced since 2014? Had Alexkor calculated what the contingent liability would be to rehabilitate any damage that might have been caused, because the Committee had noted that acid mine drainage was a major problem in many of South Africa’s mines, and contingent liability there ran into hundreds of millions of rands.

Did the Department of Economic Development see Alexkor winding down as a state-owned entity in the short to medium term, and equity being transferred directly to the communities at RVC? 

Ms D Rantho (ANC) said that  Alexkor had received Government funding for the execution of the land claim, and had reported that it had refurbished phase 4 of the township, and asked whether there were timeframes for the completion of all the required work that the organisation had to do at RVC. Over and above what had been reported, what additional beneficiation from Alexkor’s production was the community enjoying? What processes would Alexkor follow in terms of the material impairment of non-current assets held for sale, or had the organisation decided that the properties would be given as transfers to the community for free -- had they been transferred with their title deeds?

Ms G Nobanda (ANC) asked what other obligations were still outstanding on the DoS. She also wanted clarity on why the approved targets had decreased. Was Alexkor supposed to give residents money or land as part of the restitution settlement? In either case, how would that process have unfolded?

Mr T Rawula (EFF) asked whether Alexkor’s employment demographics reflected the areas in which it worked across all levels. He was also curious as to the type of housing that Alexkor was providing in establishing the township. He also reiterated Mr Singh’s concern about the community shareholding within Alexkor. He also noted that only two bursars from the Northern Cape were being supported for studies into the core skills required by the business of Alexkor. What was the reason for that? Were the learnerships and internships offered by Alexkor around its core business, or were they auxiliary soft skills interventions?

Mr R Tseli (ANC) asked Alexkor to elaborate on the litigation that had been dormant for more than three years, which it had alluded to in the report. How would the State-Owned Mining Company (Somco) Bill affect the operations of Alexkors coal mining if it were to be passed as it had been introduced?

Alexcor’s response

Ms Matseke replied that the capex costs of land mining were quite high, as well as with marine mining. Alexkor would certainly share the actual numbers before the end of the week, outside of the meeting. The organisation had commissioned an exploration machine to direct Alexkor as to where the diamonds were located. It was learning that where it had previously mined and achieved good yields, there had been such a decrease that much of Alexkor’s operations were now sea based.

Indeed, sea mining equipment was expensive and Alexkor had recently appointed a company, IMD SA, to do deep sea mining. The appointee had assumed site a week before the briefing and Alexkor was hoping to mine about 12 000 carats per month. Only in the next three months would Alexkor be able to say the target would be achievable, as it would be undertaking trials. IMD SA had complied with all the requirements, as asked by Ms Stander.

On the capacity to beneficiate, Alexkor had appointed another company to market its diamonds, where the partnership was based on an agreement that a certain percentage of the diamonds which Alexkor was mining would be for local beneficiation. There had also been another agreement for locals to be introduced to how they could take some of Alexkor’s diamonds through the beneficiation process locally. Alexkor was intent on ensuring that beneficiation was eventually done locally.

On the call option and whether Alexkor was planning to sell a 51% stake, the DoS had been very clear that after five years, any party could exercise the call option. Alexkor had received requests from different sectors from within RVC and its partner, which was the Richtersveld Mining Company (RMC), and the Richtersveld Self Development Company (SELFDEVCO). Those requests would be tabled to the board, which would make information available to whoever was planning to exercise the call option.

Dr Roger Paul, Non-Executive Director, Alexkor, said that the international figure for diamond theft worldwide was approximately 10%. One could never be exactly sure how much theft was occurring at a particular mine because all that one could do would be to put the appropriate control measures in place, and to take the necessary scientifically approved ways of analysing diamond distribution to determine whether there was systematic theft taking place. As a means of controlling access into the mine, Alexkor had installed low dose X-ray machinery which had been approved by the unions, to X-ray employees as they entered and left the mine. There were also Closed Circuit Television (CCTV) cameras extensively installed, and two different security companies were managing that CCTV system. The first company was providing security staff on the ground who monitored and patrolled the 90 km land concessions, looking for illegal “zama zama” miners. The second security company manned the CCTV cameras, and that was to prevent collusion from occurring. When systematic theft of diamonds took place generally, the trend was that big stones would be the target. The penalty for being caught with a diamond was irrespective of the size of the diamond. Recently, a scientific way of measuring and plotting the distribution of diamonds according to size had been introduced, so if a theft of big diamonds was taking place, the curve would deviate from a straight line. Nine months earlier, Alexkor had employed a specialist company in Cape Town to go on site to measure Alexkor’s previous three years of diamond distribution. The report they had issued indicated that there was no evidence of systematic diamond theft at Alexkor. Opportunistic diamond theft fell within that 10% global threshold, because anything above that was systematic theft through syndicates.

Regarding rehabilitation, diamonds had been mined at Alexander Bay since 1927. Diamonds that had been uncovered since then had surpassed approximately 20 million carats. RVC had laid a land claim for all of the land, and the Constitutional Court had finally found in RVC’s favour on the claim. This had started a process that had been concluded with the DoS, which had become an order of the court. The DoS had awarded all the land to RVC and the mining rights -- which had been Alexkor’s alone -- had had to be transferred to the RVC. Alexkor had retained the mining licence for the marine diamonds. RVC had set-up a mining company called the RMC, where the mining licence had become lodged. The DoS had said that the diamonds mined from the sea and those mined from the land would be pooled and shared on a 51%:49% basis between Alexkor and the RVC respectively.

The RVC had indeed benefited from the diamonds directly through its 49% shareholding, its ownership of all the land and the land mining licence. Typical of previous regime mining companies, Alexkor had built approximately 200 houses for its staff complement during its formative years. The houses were brick and mortar, with typical tin/asbestos roofs, and as long as the asbestos roofs were not drilled into or modified in any way, the asbestos was perfectly safe. If there was to be any demolition of such buildings, professionally accredited contractors specialising in the handling of asbestos had to do that work, so that the asbestos could be disposed of in an approved asbestos waste disposal site.  

If those houses had been passed to the RCV, it had to be established who the community was and who was the owner of each individual house. In response to those questions, the DoS had said that the title deeds of those properties had to be lodged in the name of the RVC, but for ten years the PSJV would occupy those houses and collect rent from the people occupying them as though they were the owner. PSJV had to maintain those houses to ensure that after ten years, when they were transferred to the RVC, they would still be in as good a state of maintenance as at the time the title deeds had been lodged in the name of the RVC.

As the PSJV would be occupying the houses for ten years, it had to pay R45 million in rentals to the RVC for that time. That was the money which was often in media, with RVC saying that Alexkor was withholding that money.  The DoS had been very explicit that that R45 million had to be paid to the property holding company, which fell under the SA Diamond Corporation (Safdico) which was the top development structure, under which lay the RMC, the property developing company and the agricultural holdings. To date, all of those institutions had not been properly constituted in terms of directors. In particular, the property company had a single director that had signing powers to the property company’s bank account. This meant that if Alexkor were to transfer that money – when it had in fact done everything to comply with the lodging and transfer of the deeds -- it would be held liable in terms of the Public Finance Management Act (PFMA) of passing money to an improperly constituted body. Alexkor had, together with the Departments of Rural Development and Land Reform (DRDLR) and Public Enterprises (DPE), engaged the RVC in Cape Town in a lekgotla in an attempt to induce the RVC to properly constitute their companies with directorships so that Alexkor could with safety transfer the R45 million. That process was still ongoing.

Furthermore, everything from the land, house, farms, other building structures, together with agricultural equipment, had been transferred to the RVC. The value of those assets was around R162 million. The DoS had also stipulated that all legacy rehabilitation from the start of mining until 2007, when the DoS had become an order of the court, had to be carried out by Alexkor. At that time, the rehabilitation had been estimated at R258 million, of which Alexkor had in its trust R58 million. The state therefore had allocated R200 million to Alexkor over 20 years for the completion of the rehabilitation. This had sat in a Government fund, where Alexkor’s financials indicated the amount as cash or cash equivalents. Added to that was the R45 million in rentals, as well as R350 million of liable Value Added Tax (VAT) for which Alexkor had never been compensated. There had been post retirement medical aid which had been guaranteed to the retirees of Alexkor going back many years historically as well. There had been an assertion that Alexkor had had a bail out of R350 million, but that had been not been the case. The organisation had not been bailed out because the mine had been insolvent, but the costs had been directly associated with the DoS and those monies had all been ringfenced for those particular applications.

In terms of the Nabera Mining Company litigation, from 1998 to 2001 the Government at the time had not been happy with the performance of the mine management at Alexkor and had decided to appoint Nabera to oversee management control at Alexkor. That had meant that Nabera would bring in its own CEO, operations manager, chief engineer, human resources (HR) manager, geologist and about 15 members of senior staff to manage the mine. That venture had never been successful, as there had been a three-part payment schedule negotiated with Nabera. They would receive a fixed monthly amount to cover the 15 employees, a bonus if they had exceeded targets, and there was an added value of 33% that they would have obtained for the added value they would have brought to Alexkor as part of their expertise. To date, there was a R4.5 million claim from Nabera that the monthly management fees had not been fully paid by Alexkor to Nabera. Through their exploration efforts, Nabera was claiming that it had added about R800 million of extra diamond reserves. In effect, Nabera was claiming nearly R200 million in added value. Alexkor was strongly disputing whether there had been any added value, and a company from Cape Town that had subsequently reassessed the exploration data believed that there had been manipulation and assumptions made by Nabera which had then boosted the diamond resources. The case had been virtually dormant since 2003 when Nabera had served its intention to lay claim to the added value, as alluded to above.

There were two possible outcomes to the matter: Alexkor could approach the court to have the case thrown out, as there had been no action since 2003 from Nabera, and Alexkor was disputing the claim anyway. Alternatively, Alexkor could wait for Nabera to take action as the matter was costing the organisation nothing, and it had all the evidence to disprove Nabera’s case. The decision that had been taken was to follow the alternative of waiting to see.

Ms Matseke said that Alexkor still had struggles with the RVC because of the challenges within the RVC itself, and not because of Alexkor. As alluded to earlier, RVC institutions had not been properly constituted and there were issues around some community members wanting the money to be paid into their personal accounts and others saying that it would be better for it to be paid into the property holding company, which had a sole director.

Alexkor was employing about 500 locals directly, so that 1 200 were benefiting indirectly. 

Mr Bansi said that responsible mining had to have environmental back up, and in the mining professions there were environmental scientists and engineers that had to guide the mining company in terms of the future sustainability of mining operations. In the Northern Cape, Alexkor had already identified environmental scientists, but that did not mean it would stop looking to see if it could not support engineers as bursars. In terms of Alexkor’s responsibility it had to prioritise employing all the disciplines that supported the mining of diamonds.

Regarding RVC’s sewer system upgrades, Alexkor had done upgrades to the existing pipelines and pump station, and completed the construction of the new oxidation farms. It had also addressed road infrastructure improvements, including the patching of potholes, resealing of old roads, new road markings and repairs of road signs. On water supply and distribution upgrades, there had been new production boreholes that had been drilled and a new 500 000 litre reservoir had been established. New water pipelines had been installed and there had been ongoing rehabilitation of existing pipelines. On storm water and surface water drainage, Alexkor had addressed the cleaning of existing systems and the provision of open drains and minor underground systems. It had upgraded the medium voltage network to 11 Kilovolts, and carried out the upgrading of all substations and the provision of new individual service connections to houses. Service and repairs had also been effected on the street light poles. Alexkor envisaged completing all that work by the end of September 2016, provided everything went well.

Ms Mbele said that every year Alexkor had to re-evaluate its rehabilitation liabilities as part of its accounting requirements. That work was completed by an independent environmental company.

Ms Stander reiterated her summary of questions relating to costs in terms of the carat production per mining area. Her question regarding coal mining operations by Alexkor had not been answered. How would that affect Alexkors relationship with Eskom? How much was the new application for bail out before the National Treasury (NT), and what would be its intended purpose by Alexkor? Holding the lekgotla in Cape Town as alluded to by Dr Paul, would have certainly resulted in the representatives not being representative of the entire RVC. Her appeal was for Alexkor to call a public meeting, explaining all that it had reported to the Committee in terms of directorships, and the proper establishment of the companies that held in trust all the assets as per the DoS ruling.

Dr Paul said the second application to NT had been for R162 million, which was the value of the properties that had been expropriated without compensation. The previous board Chairperson of Alexkor had written a number of letters to the previous DPE Minister, making a case for Alexkor to be compensated for the properties. The final letter to Alexkor from the NT had said that the organisation had to consider the R350 million as the full and final settlement of all obligations in all financial matters related to the DoS.

Ms Mbele interjected that that letter had resulted in the R162 million impairment, which had been the value of the houses that had been expropriated.

In respect of a coal strategy, Alexkor had completed a business plan. This had been embellished with assistance from the DPE and had been lodged with Minister Lynne Brown, where it was receiving third party consideration.

Mr Bansi said that the involvement with IMD SA was forward looking, meaning beyond the period under review, as per the briefing. Troyeville, Alexkor’s deep sea mining vessel, was under the organisation’s 1C-1B concession off Alexander Bay. Dredging operations had commenced with hiccups emerging, but these were being ironed out.

On clear communications channels between the RVC and Alexkor, the DRDLR was assisting the organisation in addressing the different communities making up the RVC and the meetings occurring in Cape Town would probably be for the entire RVC Communal Property Association (CPA). However, communication with different communities generally was on site.

The Chairperson said that the Committee would be closely monitoring how the exchange of assets as per the DoS and other social responsibilities were being handled between the communities of the RVC and Alexkor.

Ms Stander noted there had been an issue with South African Revenue Service (SARS) penalties, that had been successively repeated, though there had been a commitment that this would not happen twice.

 

Dr Paul said that most of those issues had been VAT-related involving invoices had not had the proper registration numbers. Alexkor had claimed for VAT but had not been able to substantiate this, which had been the reason for the penalty. The organisation had established appropriate policies and procedures in the risk and audit subcommittee to ensure clarity on the issuing of legitimate VAT invoices, but due largely to turnover of staff, some of the policies had not always been followed. 

 

Portfolio Committee report on DPE Budget Vote 9 and Annual Performance Plan

Mr Disang Mocumi, Committee Secretary, took the Committee through the draft report. He read out the outline, and said that the Content Advisor would speak to the DPE policy priorities for the 2015/16 financial year.

3.1 Programme 1: Administration

Ms Lee Bramwell, Committee Content Advisor, went through the priorities as per the DPE’s Annual Performance Plan (APP). She said that the Committee had to note that the administration programme still received the largest portion of the budget, totalling 57.7%. That was down from 59.3% in the previous year. DPE maintained that this was because of the labour intensive nature of its establishment and that most of the subprogrammes within its structure were located under administration. People would be moved from administration to the portfolio management and strategic partnerships (PMSP) programme going forward. That programme would get 32.8%, which was the second largest portion of the budget.

DPE expected to decrease expenditure on consultants by 12.6% over the medium term due to the Cabinet’s approved deductions, though that expenditure still remained at just over 7.8% over the medium term.

3.3 Programme 3: Portfolio Management and Strategic Partnerships

Ms Bramwell said that the programme’s 84% decrease in budget -- from R23.1 billion in 2015/16 to R93.9 million in 2018/19 -- was skewed because of the R23 billion which had been transferred by NT for Eskom.

3.3.1 Sub-programmes

A possible question could arise regarding the R33.1 million which the Manufacturing Enterprises sub-programme had received during the adjusted appropriations for the indemnity payment to Denel, and when the said indemnity payments would be concluded, as Denel had received those payments with each adjusted appropriation in the last few years.   

The figure for personnel in the sub-programme Strategic Partnerships, though projected to remain constant at 79 over the medium term, was skewed as the DPE had said it would shift people from Administration to this programme, so that employees under the Administration programme would reflect a change correspondingly.

3.4 Budget

The table with the projected percentage amounts totals was skewed due to the Eskom transfer and the fact that it moved from R23 282.6 million in 2015/16, to R274 million in 2016/17.

Mr Mocumi said that the Committee had observed that DPE was quite bloated in the administration programme. He then read the rest of the observations, as per the draft report.

Discussion

Mr Tseli said that the approach was a bit frustrating, as recommendations emanated from observations. He said that the 65.9% of the Administration Programme being allocated to the personnel budget was quite worrisome for him. He had not seen a recommendation speaking to a budget for sector specific specialists. He was also concerned that there was no recommendation speaking to the filling of vacancies in the executive positions of State Owned Companies (SOCs). He then advocated the inclusion of that recommendation.

He also said that he would have appreciated a situation where all the recommendations of the Presidential Review Committee (PRC) that were relevant to the DPE would be implemented, without the Committee singling out the salaries of executives only. The increased use of consultants by 9.5% over the medium term -- from R16.1 million in 2015/16 to R21.1 million in 2018/19 -- even if they were for specialised services in transport, manufacturing and energy sectors, was too much.

Mr Rawula said he had found it challenging to follow the summary as given by Ms Bramwell. He would have appreciated a breakdown of the challenges for each SOC, because the blanket observations he had read affected how he would possibly have liked to propose recommendations in respect of a specific SOC. He had also seen concurrent references to consultants and their expected decrease and increase in the administration programme and the strategic partnership subprogramme, respectively. However, he would have appreciated the knowledge of which specialisation within which sector those consultants came from, respectively.

Ms Rantho proposed that the Committee should include a recommendation that would speak to the skills needed within the DPE, as she felt that it continued to use consultants as a result of a skills incapacity within its establishment. Attaching a timeframe for such a recommendation would also be useful. She also commented that Budget Vote 9 was an overall proposal for DPE by the Committee and not for the specific SOCs within the DPE.

Ms N Mazzone (DA) said that she recalled Ms Stander asking Minister Brown for the shareholder compacts to be made available to the Committee, the last time the Minister had been before the Committee. The Minister had said that she would comply with the request and that had been the third year the DPE had said that to the Committee. She did not think the Committee realised how adverse an effect the non-issuing of shareholder compacts to the Committee had on its oversight work. There had to be a firm and concrete recommendation from the Committee regarding the provision of those shareholder compacts and contracts urgently. 

She would not say that the introduction of the Shareholder Management Bill had been too slow, but rather that the information around that Bill had been slightly clouded because Government had gone through an entire Presidential Review Commission (PRC) and while that had been done in 2012, even the implementation of that PRC had been clouded. The Committee did not know how far that process had gone, what it meant and the kind of impact it would have. The DPE could cease to exist if the PRC was considered seriously, as its SOCs could be moved to other Departments. In terms of the vacancies in executive positions, no learned professional could be expected to go into a Department to take up a position in an entity that could cease to exist, and that was possibly the reason creating a great deal of uncertainty even within DPE. The Committee in its recommendations had to ask to get clarity in terms of the implementation of the PRC, and where the DPE saw itself within the next two years.

Mr Singh reiterated Ms Mazzone’s sentiments, saying that all the entities for which the DPE was responsible would be taken over by the line function Departments within the next two years. In light of that, expenditure on consultants was increasing instead of moving in the opposite direction. He also agreed with Ms Rantho and Mr Tseli that there had to be a strong recommendation on the use of consultants by the DPE. Was there a hands-on approach from Minister Brown, because the excuse was that the SOCs had their own boards and the DPE could not interfere? That arms length approach was not doing the fiscus any good. It was also unacceptable for a Minister to keep saying she had not been briefed on issues.

The Chairperson said that she needed the Committee to adopt the Budget Vote 9 report with the amendments it had made.

 

Ms Mazzone said the DA was reserving its right to vote on the report.

Mr Singh said that the IFP would support the report of the budget vote, but would express its reservations on some issues moving forward.

Mr Rawula said that the EFF was also reserving its right to vote on the report.

The draft report of the Public Enterprises’ Budget Vote 9 and its annual performance plan for 2016/17 were adopted with substantive amendments, and with the DA and the EFF reserving their right to support the report.

Consideration of DPE Strategic Plan

Ms Mazzone asked the Committee to ensure that Members’ individual copies of the strategic plan document had similar information and was correct, as she had noted an error regarding her record as a DA representative at local government level. She commended the work of the support staff in the preparation of documents and bemoaned the performance of Members of the Committee who stayed away from work without submitting apologies in time or at all, because that affected the reputation of Parliament.

The Chairperson asked for comments from the Committee regarding its strategic plan (SP). She said that it was a living document which could be changed from time to time.

The matter was shelved, as the Members wanted more time to go through the plan.

Consideration of Committee minutes for the 6 April 2016

The Chairperson asked the Committee to consider its minutes for the 6 April 2016.

The Committee adopted its minutes with technical and substantive amendments. It felt that Minister Brown had always been concerned about the commercial interests needing protection in her making available the shareholder compacts publicly. Members recalled that they had appealed to her to still make the documentation available all the same, but in closed Committee proceedings where there would be no media. 

The Chairperson then requested the Committee Secretary to brief the Committee on the remaining work it needed to complete within the remaining weeks that the House was in session.

Mr Mocumi outlined the remaining work of the Committee for the last weeks of Parliament before local elections.

The Committee had no new input in that regard, and the Chairperson went on to explain the last item of that days agenda. She said that she had received a letter from Ms Mazzone requesting the Committee to summon the Guptas to come to the Committee and account on Denel’s Asia-Africa laser project.  After seeking legal advice from Parliament’s legal advisors, she had been informed that it was not permissible for a Portfolio Committee to summon a member of the public to account in this manner.

She had then responded to Ms Mazzone, citing the advice from the legal advisors of Parliament, and could make available the correspondence between herself and Ms Mazzone. Ms Mazzone had responded to the Chairperson, quoting the Acts of Parliament that would allow for her request to be granted. However, the Chairperson had also been quoting the same Acts as the basis of the advice which had come from the legal advisors.

The Chairperson then read Ms Mazzone’s response to the advice from the legal advisors of Parliament on her request, and asked for the Committee’s input on the matter.

Mr Mocumi interjected that the letter from the legal advisors was not saying the Committee could not summon the Guptas, but rather it had been regarding this as a legal inquiry, which was a legal investigation. The Committee did not have the power to inquire, but it could enquire. The letter from Ms Mazzone had been asking for a parliamentary inquiry, which the advisors said could be affected only through a House resolution.

Mr Singh said that he had been writing notes and coincidentally he would be formally challenging the Minister during the debate of the following week, to recommend to the President of the Republic to establish a commission of enquiry into those allegations. Only after such an inquiry could it be proven that there had been untoward dealings or not, because the Minister of Finance had declared that the partnership between the Guptas and Denel had been illegal.

Ms Mazzone said that a lot of time and effort had gone into her two letters to the Chairperson in that regard.  She also understood the very legitimate legal semantics between “enquiry” and “inquiry” and the legal advisors had been quite correct, which was why in her responding letter she had stated clearly where she respectfully disagreed with their opinion.

After sitting on the review of the rules of Parliament committee for two and a half years, she had been thankful that she knew the rules of Parliament, especially in that situation. There were processes that had to be followed regarding what could and could not be done by committees. It was the Portfolio Committee’s job to exercise oversight by summoning any person before it. The Committee would need prima facie proof to ask Parliament for a Parliamentary enquiry to investigate something. Everything at hand concerning her request was allegations against the Guptas. Furthermore, only two of the DPE entities had not yet been tainted with any allegations of Gupta involvement. There were allegations from Transnet, Eskom, Denel and South African Express Airways (SAX) and the amounts were not small -- the laser deal alone amounted to R10 billion. She reiterated her proposal that the Guptas be summoned to the Committee to give evidence to the contrary of what was being alleged in an orderly, transparent and fair manner, in consultation with State as well as Parliament’s legal advisors. Certainly it would be precedent-setting for a Committee to execute that rule, which was in Parliament’s rules. Though she understood that would not happen within a week, it had to happen eventually because she felt it would be a dereliction of duty by the Committee to not embark on this action.

Mr Rawula said he had heard no contradictions in the report by both the Chairperson and Ms Mazzone, because on the basis of an inquiry, could the Committee advise Parliament on whether there was a need for an enquiry or not?

Mr Tseli said that some of the issues raised by Members were suggesting that the Committee was challenging a legal opinion, which did not sit well with him.

The Chairperson interjected that possibly Mr Mocumi should be allowed to read the letter again, as it had been clarifying two separate processes.

Mr Mocumi read the letter from the legal advisors for the Committee’s consideration.

Mr Tseli continued that while he understood the serious nature of the matter before the Committee, some Members were a bit disadvantaged in dealing with it, as it had not been on the agenda. His proposal was for the Committee to shelve any decision on the matter, as it had been initiated by Ms Mazzone with her letter.

Ms Rantho concurred with Mr Tseli, adding that possibly it would be better to invite Denel first, so it could account before summoning anyone else in that regard. Only after that had been done would it be fair to go on with the matter if the Committee was still dissatisfied with Denel’s account.

Ms Stander agreed with postponing a decision on the matter to allow the Committee to read the correspondence as individual members outside of proceedings, and rather to invite Denel.

Mr Singh emphasised that Denel had to be briefed specifically on what the Committee would be requiring in terms of allegations, as the Minister of the DPE had no information in that regard.

The Chairperson said there had been other disturbing developments at Denel, with the firing of its CEO. She proposed that the Committee invite the board of Denel during the week of 4 May 2016 on the CEO and laser contract issues.

The Committee agreed and the meeting was adjourned.