Richtersveld Community benefits from Pooling and Sharing Joint Venture: briefing by Alexkor

NCOP Public Enterprises and Communication

12 October 2016
Chairperson: Ms E Prins (ANC, Western Cape)
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Meeting Summary

Alexkor gave a presentation on the status of the Deed of Settlement, the Pooling and Sharing Joint Venture (PSJV) of which Alexkor owned 51% and the RVC owned 49%, corporate social investment (CSI), and its social labour plan (SLP). The presentation stressed the importance of the community-owned nature of Alexkor, and its accountability to the community through the PSJV. In addition, it emphasised the benefits that Alexkor has given to the community, such as social investment, job creation, and increased revenue. Lastly, the presentation dealt with the R45 million settlement by Alexkor to the community, and the challenges around how that money should be allocated, and transferred to the Richtersveld Community.

Members were concerned about how the settlement money process was being dragged out; recent financial losses; that Alexkor’s operations were not benefitting the community to the extent that they should; whether mismanagement or graft had contributed to a revenue loss and lack of reinvestment in the community; security measures; how it would ensure the community is able to sustain itself in 15-20 years after the mine is no longer producing diamonds; that government investment had not produced tangible results in the community. The Committee offered its assistance to swiftly resolve how to allocate the R45 million and insisted that it had to happen within six months.

Meeting report

Ms E Prins (ANC) stated the importance of this hearing, and the importance of MPs visiting Alexander Bay and the Alexkor sites personally, as opposed to relying solely on briefings presented in Parliament.

Richtersveld Community and the Pooling and Sharing Joint Venture (PSJV): briefing by Alexkor
Mr Vimal Bansi, Acting CEO of Alexkor SOC Ltd, noted the importance of the deed of settlement which transferred Alexkor’s land mining rights to the Richtersveld Mining Company. The two companies formed the PSJV which is an unincorporated joint venture controlled by the Joint Board, with Alexkor’s movable assets transferred to the Richtersveld Community (RVC). In this way, Alexkor will be liable to the RVC through the PSJV, and with oversight by the Joint Board.

Mr Bansi stated that Alexkor has been struggling to get the R45 million cash payment associated with the deed of settlement to the recipients because of a lack of proper procedure by the Joint Board.

Mr Bansi noted that revenue growth and job creation has steadily increased over the last eight and three years, respectively. In addition, 90% of the jobs created are filled by residents of the RVC. He explained that there was a fine line between ensuring retention of skilled labor and efficiency, and ensuring that the community was getting the best “bang for its buck.”

Mr Bansi stated the need to work together with the Department of Rural Development and Land Reform (DRDLR), so that Alexkor can deliver the R45 million that it has been mandated to deliver to the RVC.

Mr O J Sefako (ANC, North West) thanked the presenters. He agreed with Ms Prins’ earlier statement on the importance of visiting the Alexkor site and the Richtersveld community, and providing parliamentary oversight. He asked about Alexkor’s relationship with the Joint Board, and the RVC in general. There needs to be a better relationship between Alexkor, the RMC, the PSJV, and the DRDLR. He asked what the current pressing challenges are in getting the R45 million cash payment to the RVC, and what attempts have been made up to accomplish that task.

Mr A Singh (ANC, KwaZulu Natal) thanked Alexkor for their presentation. He noted the need to bring in efficient contractors. He asked about the measures being taken to secure the mine area, and to halt the illegal diamond trade at the source.

Mr J Julius (DA, Gauteng) asked why the RVC was not represented in the Committee hearing, and advised that the RVC should be present in the future. He questioned Alexkor about the state of their relationship with the RVC. He asked how well the independent contractors were performing, if they were meeting their anticipated targets, and what challenges Alexkor faced when dealing with independent contractors. He asked for an explanation about the financial decline from the 2015 to 2016 financial years.

Mr E Mlambo (ANC, Gauteng) asked for an explanation about the temporary Alexkor employees, specifically how long those jobs were held, and why they were not permanent positions.

Ms Z Ncitha (ANC, Eastern Cape) inquired about the state of RVC participation in mining matters. She asked about Alexkor’s involvement in the community in regards to youth unemployment. She mirrored Mr Julius’ question about the 2016 revenue loss, and the challenges Alexkor faced leading to the loss.

Ms Prins questioned the Alexkor delegation about the 2016 financial year loss. She asked how Alexkor is coping following Treasury’s unwillingness to provide bailout funding. She requested that Alexkor give an overview of the company’s relationship with the RVC, or if Alexkor was still experiencing disagreements with the Joint Board in particular, and the RVC in general. She asked which companies benefitted from Alexkor contracts, asking if they were local community organisations, or if they were non-local white owned companies. She wanted those companies to be present in future Committee meetings.

Ms Prins asked Alexkor to address a media report that the CEO was earning more than the President of South Africa. She asked for clarification on his current salary, emphatically stating that the benefits from the mines must go to the communities where the mines are located, and not large companies. The RVC is not benefitting from the mines. She explained that on its last visit to the Richtersveld area, the Committee was not shown a number of sites, and the impression given was that Alexkor was hiding something.

Ms Prins concluded by noting that the media keeps reporting on ANC corruption, asking what is going on with mining in the Northern Cape. She maintained that this Committee was unwilling to overlook corruption if it was present. The media keeps reporting on corruption and wants to know what is going on. She ended by declaring that the media cannot generalise about corruption in the ANC, stating that, “My name is Ellen Prins and there is no mention of my name [in any media reports on corruption]. I am not corrupt!”

Mr Bansi responded by thanking the Chairperson and the Committee for their questions.

Mr Mervyn Carstens, CEO of Alexkor RMC PSJV, responded by reassuring the Committee that he lives in Alexander Bay and that there has been proper spending in the community, with all of the community projects documented in the Alexkor Richtersveld Mining Company Pooling and Sharing Joint Venture Annual Report. There is a RMC committee which handles community oversight, and signs off on any project before it commences. That committee is responsible for communicating with the community on a daily basis.

On the R45 million settlement, Mr Bansi replied that there are monthly meetings with the DRDLR with the sole goal of resolving how the settlement should be paid out. He argued that Alexkor is hampered by community structures, and that there is not a clear system for paying out the money. The court ruling decreed that the full sum had to be paid out. However, the community wants each of the roughly 3 000 people to be paid individually, to the sum of roughly R15 000 each. He maintained however, that Alexkor would need a court re-ruling, otherwise Alexkor would be in violation of the original court order.

A Department of Public Enterprises representative stated that the Richtersveld Communal Property Association had discussed the matter and wants each individual beneficiary to be paid out, as opposed to having it paid to a single entity, such as the RMC, and allocated from there. This, however, has caused friction between the different stakeholders. It would be possible for Alexkor to go to the courts and have them amend the deed of settlement, so that they can pay out the beneficiaries directly.

Ms Prins expressed concern about the lengthy nature of this process, asking how many beneficiaries have passed away, and how many more would not be there to collect, if this process was dragged on for years and years. She asked Alexkor to give a timeframe for resolution of this. She wanted to be able to tell the community that this will be resolved within six months. She did not want to go up to Alexander Bay without being able to give a definitive answer on how long this process was going to take, arguing that the MPs cannot go up there year after year and keep telling the people the same thing.

Mr Sefako argued that they need to host another committee meeting with the DRDLR present. He asked Alexkor to articulate exactly what assistance they would like from the Committee in resolving this issue.

Another ANC member stated emphatically that the R45 million is a drop in the water compared to the billion rand that government has spent on assistance to these public enterprises, in building mine infrastructure, roads, et cetera. In addition, government has given in excess of R200 million rand to benefit the community. Those funds are accounted for, but are rarely spoken about. Parliament must be vigorous in its determination to see those funds reach the community. Mines have a limited lifespan, and in 15 to 20 years those mines will no longer function, and then the people from the RVC will rely on government for economic assistance. If these businesses had been run properly, the RVC could be one of the wealthiest communities in the country. Things need to be done properly so the community can be successful and their children can have a future.

Ms Prins asked, “Who is eating the money? We must go to the Richtersveld. We are used to traveling long distances. I’m telling you, we are going there!”

Mr Mlambo agreed with the Chairperson, stating that all of those who are responsible must come and account. “Let us show them how effective Parliament can be.”

Mr Bansi thanked the Committee for their feedback, and noted that they were in agreement that a solution had to be found to deliver the R45 million to the recipients.

Mr Carstens, in answer to Mr Singh’s earlier question about independent contractors, stated that the business model of using independent contractors has always been in place. He noted that since 2007, no active mining has taken place on the land reserve. Many of the independent contractors are from the RVC.

Addressing security, Mr Carstens explained that there are stringent security measures in place, with a demarcated “red zone” through which access can only gained by going through a security corridor and being x-rayed going in and out. He clarified the difficulty of securing a 90km coastline and listed the many different ways in which they patrol the area: with vehicles, motorcycles, and on-foot patrols. However, he cautioned that the illicit diamond syndicates are becoming increasingly technologically advanced, and that Alexkor was looking into drone technology as an option for surveillance.

Mr Bansi, continuing to answer Mr Singh’s question about independent contractors and whether or not they are meeting their targets, explained that the marine diamond operation was extremely complex and difficult, and that it had been contracted out to an organisation called International Mining and Trading South Africa (IMTSA), which specialises in deep sea mining. It has a fleet of specialised ships which can mine at depths of 120-130m, which is what is required to mine in the RVC marine region. He restated that the mining is extremely complex and difficult, and very expensive, but that after some initial struggles, the independent contracted company has been able to mine at a rate of about 25 000 carets per month, two and half times their target rate. In addition, he stressed that Alexkor has weekly meetings with their independent contractors.

Mr Carstens stated that Alexkor was meeting all of the requirements set out in the charter, with the RMC owning 49% of the Joint Venture. He noted that in a declining industry Alexkor has created over 200 jobs, with 90% come from the RVC. Addressing the temporary positions, he explained that they are six-month fixed positions, and if they last longer than that, the employees become permanent employees of Alexkor.

Mr Carstens explained that many of the challenges can be attributed to divisions within the RVC. He argued that there are many opportunities outside of mining, and that the fixation on this issue has meant that other opportunities for economic growth were being overlooked.

Mr Bansi, addressing the loss of revenue from 2015 to 2016, explained that in 2015, 74 000 carets were produced, of which 33 000 carets were from land mining. In the 2016 financial year, mining moved out of the high grade area and into a low-grade area, and the carets from land mining were very low, resulting in a corresponding drop in revenue.

On the question about which companies were benefitting from Alexkor contracts, Mr Carstens agreed to provide in writing a list of contracts that have been handed out to individual companies.

Mr Carstens continued that Alexkor is paying the salaries of teachers in all four towns, who are not being paid by government. They found that in Richtersveld there was no maths teacher at the high school, and since there is a need for employees with maths skills, Alexkor is paying the salary of a qualified maths teacher.

On the Chairperson’s question about the CEO’s salary, Mr Bansi stated that there has been a recent rationalisation of costs in the Johannesburg office. Three senior employees accepted voluntary severance packages, bringing the total number of Alexkor headquarter employees to six, with permanent mine employees numbering 46.

Ms Prins asked that he inform the Committee about the salary structure of Alexkor employees, noting that the Committee is worried that companies are reaping the economic benefits, while the community is suffering.

A DPE representative replied that the salaries are informed by the following standards: the complexity of the business, the challenges the entity is going through, the experience and the calibre of people required, and finally salary standardisation through the forces of market pressure. However, he did acknowledge that the question of whether the company, and by extension the RVC, was getting value for its money, was a valid concern.

Ms Prins stated that she was concerned that the Committee did not get the Annual Report (which was not available prior to the Committee meeting), and asked how the Committee can exercise proper oversight when they do not have the necessary documents in front of them.

On how Alexkor is sustaining itself without a government bailout, Mr Bansi replied that they are sustaining themselves with difficulty. The bill at the Alexkor head office has been reduced by R3 million a month. Additionally, Alexkor sells diamonds in US dollars, and therefore they are able to more easily weather the fluctuation in the rand.

Ms Prins, returning to the question of future opportunities for Alexkor and the RVC, noted that diamond mining in the RVC will only last another 15 years, and asked what contingency plans Alexkor had in place for the future, such as a discussed agreement between Alexkor and Eskom to deliver coal.

Mr Morongwa Mothengu, Director with the DPE, noted that Alexkor is not sustainable in its current form and DPE has encouraged Alexkor to restructure the company. Alexkor in turn identified coal as future business opportunity.

Mr Bansi, in conclusion, thanked the Committee for the opportunity to explain their side, and for their questions.

Ms Prins, in closing, stated that the Committee needs information on the court case, if Alexkor is going to ask the court for a re-ruling, stating that the Committee needs to interject to bring this issue to a swift resolution which they can. She restated the need to prioritise oversight on the money settlement and on the RVC in general, as well as the need to bring stability and promote cooperation between Alexkor and the RVC. She added that by Christmas she would like a resolution to this matter. She concluded by thanking her fellow MPs and the delegates.

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