Repeal of Overvaal Resorts Limited Bill: Forever Siyonwaba Consortium BBBEE Forum briefing & finalisation

NCOP Public Enterprises and Communication

20 February 2019
Chairperson: Ms E Prins (ANC) (WC)
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Meeting Summary

The Forever Consortium briefed the Committee on the Siyonwaba-Forever sale and purchase agreement, and asserted that the agreement contained too many irregularities. They lamented that in 2003, when Aventura Resort was privatised, the employees’ leg of the Aventura Resort Transformation Consultative Forum had been sidelined from participation, whilst Siyonwaba -- which was unknown at the time – had been brought into the picture. Employees did not know this company and it did not represent employees at all.

In 2008, Siyonwaba Resorts and Forever Consortium had planned and intentionally disregarded the seller and purchaser agreement. The 30% black economic empowerment (BEE) shareholding was not handled in the manner that was stipulated in the contract. The Employee Stock Ownership Plan (ESOP) had also been disregarded and had never been adhered to by the new purchaser. Former employees had been fighting this battle for over ten years and had received little to no assistance from the Department of Public Enterprises (DPE) to follow up on the irregularities that had taken place.

Members asked about the DPE’s intentions regarding resolving the matter; whether the Department had treated all Aventuras the same way in all the provinces; whether the repeal of the Overvaal Resorts Limited Bill was in favour of those previously disadvantaged; and whether the consortium’s concerns would be addressed at the scheduled upcoming meeting.

Meeting report

The Chairperson informed Members that the Committee would not vote on the Bill today because there was not a quorum, but the Forever Consortium would give a presentation.

Forever Consortium BBBEE Forum on Repeal of Overvaal Resorts Limited Bill
 

Mr Phineous Manala, of Forever Consortium, which was formed by former and current employees of Forever Resorts with the aim establishing a broad-based black economic empowerment (BBBEE) entity, said that the issue was with regard to the repeal of the Overvaal Resorts Act 127 of 1993.

The Overvaal Resort was agreed to be privatised due to the fact that it had been running at a loss and government at the time could not afford to carry its expenses. With the second privatisation, the employees were left out by the Department of Public Enterprises (DPE) and the Forever Resort management. This meant that the transformation consultative forum had only two legs, and not three legs as before. The management at that time had been misleading, and wanted to get rid of retrenchment in disguise. It had then contracted a private security company, of which only it knew about.

Aventura Resort was privatised in 2003, but the employees’ leg of the Aventura Resort Transformation Consultative Forum was sidelined from participation and Siyonwaba, which was unknown, was brought into the picture. Employees did not know this company, and it did not represent employees at all. Siyonwaba was said to be 100% black owned, and this was a consortium of black businessmen that was led by Mr Leslie Mkhabele, an attorney -- but he asked the Members to underline the word ‘attorney.’

Aventura management disregarded the Employee Stock Ownership Plan (ESOP) but agreed on BBBEE, but the assumption was that the ESOP proposal of 1996/7 contributed to the BBBEE. Employees later discovered that this was not the case.

Long-term employees in the company were encouraged to take early retirement and replaced by casual employees. The simple reason for advising people to take early retirement was sweeping under the carpet the history of the company, because long-serving employees knew its history.

In 2008 Siyonwaba Resorts and Forever Consortium planned and intentionally disregarded the seller and purchaser agreement. The 30% BEE shareholding was not handled in the manner that was stipulated in the contract.

The employees had been fighting this battle for over a decade and government had not yet assisted. He hoped that this matter would be resolved by the DPE.

Discussion

The Chairperson said that although the Department had already explained to the Committee there was no need to deal with the presentation, she was very concerned about what had transpired and it seemed as though history was repeating itself. She appealed to the Department’s legal team to direct the people in the right direction and advise how best they could be assisted.

Mr E Mlambo (ANC, Gauteng) concurred that the matter was serious, and asked if the Members could be taken into confidence by the Department in light of the correspondence that had taken place before. Was the Department aware of that correspondence and what were its intentions regarding this matter?

Ms Z Ncitha (ANC, Eastern Cape) said that the Department needed to share with the Committee its intended steps in light of the information provided by Mr Manala, and Members would be very reluctant to take a decision on the Bill at this point.

Mr O Sefako (ANC, North West) said that the Department had already furnished some of this information to the Committee, but he wanted to know whether it treated all Aventura resorts the same across the provinces. Was the repeal of the Bill in favour of those who were previously disadvantaged?

Mr Mlambo said there had been an Aventura in Gauteng some years back, but there was no knowledge of what had happened to it. It remained a mystery as to whether it was sold or not, because it was now an estate on government land. He then jokingly said that perhaps this matter should be referred to the Zondo Commission. He suspected the land had been sold.

The Chairperson was interested to know what the Department had done to intervene on the Forever Consortium matter.

Department’s response

Mr Denzel Matjila, Directorate: Legal Services, DPE, advised that initially the Aventura had 15 resorts, and the first six had been the first to be sold. That first six had been making serious losses, and government could not afford them anymore. It had then decided to sell them to individual purchasers. The last eight were the ones that were sold to Forever Resort and to private individuals, and once sold every party had to comply with regulations. The money for the six was paid to Treasury.

He said there was merit in what Mr Manala had raised, but the matter had gained traction when Forever Consortium approached the Department last year. Issues such as the 30% shareholding and ESOP had already been raised with the Department. The Department had then followed up on these matters and would be meeting up with the team to report back on the ESOP and the 30% shareholding matter.

The ESOP issue was not part of the transaction – the sale and purchase agreement -- and if there was an issue it was for government to determine how it would deal with this matter. This was not in the sale and purchase agreement, but was between Forever and Aventura. This was something that the Department needed to follow up on, because there had been a mention of it – ESOPs were doing the rounds at a number of state-owned enterprises (SOEs) that were being sold at that time. Therefore, the Department should look into this. However, in terms of the sale and purchase agreement, the DPE was not part of the transaction.

In the early 2000s, the privatisation of SOEs and the 30% shareholding was informed by a policy of government, as well as a number of factors such as the reasons for privatising. The Department would then ensure that when an SOE was going to be sold, a certain percentage of the company would belong to the previously disadvantaged community. At the time Aventura was sold, the Department was satisfied that Siyonwaba Consortium had what was required. In those years the decision to get a BEE buy-in was not a decision taken by the DPE alone -- it was inter-governmental.

There was a provision in the sale and purchase agreement that if Siyonwaba sold the 30% shareholding, it was required to sell to another BEE partner, but Siyonwaba did not inform government and did not sell to another BEE partner. The Department had then followed up on this matter with regard to the sale and purchase agreement, and it was unknown why government had not been informed. The Department would follow up on this matter to ascertain why the shareholders’ agreement was not adhered to. Siyonwaba had sold the 30% BEE shareholding without informing government about it. The Department would seek legal opinion on this matter to ascertain whether the 30% BEE shareholding should have been sold.

It was difficult to answer whether all the Aventura resorts were treated the same way, because now they were no longer owned by government. Previously, for purposes of sale, one could say that they were treated the same depending on how each one was doing financially.

Further discussion

Ms Ncitha said she heard the Department responding to the 30% issue, but it had failed to mention whether it was sold to a foreign company or not. Secondly, she was concerned about the agreement that was consistently being referred to by the Department – the sale and purchase agreement -- because it indicated serious shortfalls on the part of the Department. It was contradictory to what the Department said it sought to achieve. Why were there legal experts when people ended up with agreements that would not achieve what the Department had planned? The Director General (DG) or the Deputy Minister must be present when the Committee dealt with bills, because these were very serious matters.

In the scheduled meeting in March, was the Department going to address all the challenges outlined by the employees? She was reluctant to support the Bill because she feared that perhaps it would cover up this mess.

Mr Sefako agreed with the previous Member, and said he was interested to know what bearing the upcoming meeting of 4 March would have on the decisions that the Committee needed to take.

Mr Mlambo said that the Department needed to be aware that when it came to bills, they affected the people to whom they ought to respond. It would defeat the purpose of rendering a response if the Department was yet to meet with the employees at the scheduled upcoming meeting.

The Chairperson said that the Bill was a cleaning up the mess that had previously existed.

Mr Manala said that, as already pointed out, it was not so simple for the Forever Consortium to have a meeting with the Department, but due to the repeal of the Act, the team had sent some comments to Parliament. It had then been requested to meet with the Portfolio Committee. It had previously requested to have a copy of the sale agreement, but the Department had refused to do so until the Portfolio Committee had intervened and instructed it to do so.

Mr Matjila said that the sentiments regarding this matter had been expressed by all the parties, but as the Bill currently stood, nothing really stood in the way to having it repealed. The Bill was currently being cancelled because Aventura had been sold. Irrespective of whether the Bill was repealed or not, these issues would still be pursued. Some of the issues had a bearing on some of the government departments. The Bill was being struck off and would cease to exist.

These transactions had occurred in 2000/01. Forever Resort had needed to have a BEE partner. On the contract, government should have made it clear that if a BEE partner was brought in, the contract should have been drafted in a way that required the buyer to bring another BEE partner on board when it was being altered.

He understood the frustrations Mr Manala had gone through with the Department, but he had written to the Minister and outlined the issues. The most important thing had been addressing the critical issues, such as the 30% BEE and ESOP. However, some of the matters that were raised overlapped with other departments, such as the Department of Labour. Therefore, the upcoming meeting had no bearing on the decision of the Committee or the Bill.

The Portfolio Committee had requested the Department to produce a progress report on some of the issues that had been raised by Mr Manala, so these issues were actually being dealt with outside the Bill itself and the Department was obligated to furnish that progress report to the Committee.

The Chairperson said in light of these matters, it seemed as though history was repeating itself with these resorts. Members were realising that people had been neglected because their rights were not being protected. How did government expect people to believe in it if it could not protect people’s rights? Something definitely needed to be done, and hopefully the Department would assist.

Mr Matjila proposed that the Bill could carry on, but the issues being raised would be addressed by the Department, and then the Committee could require the Department to provide some form of progress report on this matter. Perhaps the other party could be subpoenaed to come and answer to these comments.

The Chairperson said that these matters had been raised over and over for ten years. These were not new issues. There was no quorum to make a decision, in any case.

Mr Sefako asked Mr Manala about his understanding of the repealing of the Bill.

Mr Manala said he was frustrated. This matter had been on-going for over ten years, and the Department had deliberately left them outside. There was more to this matter. They were dealing with a matter of a “corruptor and corruptee,” and the company was sold as a going concern.

Mr Matjila said that it was important that information was not misrepresented to the Committee, or created confusion. If one sold a company to another as a going-concern, it meant one was selling it as it was, and nothing prevented the buyer -- as the new owner -- from retrenching employees. Government had ensured that irrespective of economic conditions, no retrenchments would take place for three years.

The principal Act merely sought to set up the SOE that would run the resorts, and the resorts had been disposed of through sale agreements. On the statute book, one had a company that no longer existed, and whether or not steps were taking to repeal the Act or Bill, the concerns raised by the team would still need to be dealt with. Even if one repealed the Bill and found out that the sale agreement did have certain clauses that could assist the aggrieved, government could still seek recourse in law. Therefore, the repeal had no bearing on the matters raised by Mr Manala.

Mr Manala said that the contract of sale was clear. It clearly stated that if one party was in breach it would be granted 14 days to rectify, and failure to do so would render the contract null and void. Therefore, the DPE was obliged to follow up on clause 28 of the purchase contract. Though the letter had been written to Forever Resorts, was now over 14 days. This meant that the DPE, as a signatory to the agreement with Forever Resorts, was the party obliged to follow up on what was stipulated in clause 28 of the agreement. That was what the team was looking forward to.

The legal official suggested that the Department needed to get a report on whether all the terms and conditions had been complied with, and if not, whether the Department had taken any steps. This was not something that Parliament could do, because it was not party to the agreement.

Ms Ncitha asked whether the Members could be furnished with the sale agreement so that when following up on these matters, they could also be factual.

The Chairperson agreed.

The meeting was adjourned.


 

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