BBBEE Forever Consortium: DPE briefing

NCOP Public Enterprises and Communication

31 July 2019
Chairperson: Mr T Matibe (ANC, Limpopo)
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Meeting Summary

The Department of Public Enterprises (DPE) briefed the Committee on concerns raised by the broad-based black economic empowerment (BBBEE) Forever Consortium over challenges arising from Cabinet’s decision to dispose of eight Aventura Resorts to the Consortium in 2001, which had remained unresolved for almost 20 years.

Some of these challenges involved incorrect property descriptions and land claims. The transfer had been protracted, resulting in the Minister deciding in 2016-2017 to dispose of Aventura by way of liquidation. Liquidation had been completed in 2018.. To complete the winding up, Aventura’s founding legislation – the Overvaal Resorts Act 197 of 1993 – had needed to be repealed. The Department had embarked on the Parliamentary process in April 2018 to repeal the Act. The Portfolio Committee and the Select Committee had approved the repeal in 2018 and March 2019 respectively.

However, although the repeal had been approved by both Committees, concerns had been raised during public hearings by a group of former disgruntled Aventura employees. These had included the 30% shareholding from Siyonwaba that Forever Resorts was holding, the employees’ share ownership scheme, and the perceived failure by government to protect the interests of employees.

Forever Resorts had stated that the new BEE company was going to be in place by the middle of November of 2009. When the DPE had sought to establish why it was not fulfilling these undertakings, it had replied that the Department was misconstruing the sale transaction, insisting that this was regulated by a sale and purchase agreement (SPA), and that the issues raised by the Department in relation to the empowerment of communities were not provided for in the SPA.

When Members of the Committee took issue with the DPE for the excessive delay in resolving the issues, the Department conceded that perhaps it ought to have a copy of the shareholder agreement, but it was not a party to this agreement – only to the sale and purchase agreement. The preliminary legal opinion was that there was merit in Forever Resort’s contention that it could not finalise the identification of another BEE company until the land claims were resolved and its asset base finalised.

The DPE was advised to first obtain the shareholder agreement, either voluntarily or through the Promotion of Access to Information Act (PAIA), and also to obtain the agreement pertaining to the sale of Siyonwaba’s 30% shareholding to Forever Resorts. Aventura had given the Department the undertaking that it could view the shareholder agreement in September, and it would at that point be able to trigger its own legal processes.

The Committee said that once the Department had viewed the shareholder agreement and had finalised the legal opinion, they would have to report back so that all the challenges could be addressed.

Meeting report

The Chairperson welcomed everyone, and commented that the presentation by the Department of Public Enterprises (DPE) followed concerns that had been raised by the BBBEE Forever Consortium.

Department of Public Enterprises briefing

Mr Denzel Matjila, Director: DPE, gave a background to the matter, which dated back to 2001, when Cabinet had taken the decision to dispose of Aventura. Aventura had 14 resorts. Six were loss making, and were the first to be sold to different purchasers. The remaining eight were all sold to the Forever Siyonwaba Consortium for R200m, which had a black economic empowerment (BEE) component. The transfer of those resorts to the Consortium had encountered serious challenges from 2001 up until 2018. Some of these challenges involved incorrect property descriptions and land claims. The transfer had been protracted, resulting in the Minister deciding in 2016-2017 to dispose of Aventura by way of liquidation. Liquidation had been completed in 2018. It had been sold lock, stock and barrel. To complete the winding up, Aventura’s founding legislation – the Overvaal Resorts Act 197 of 1993 -- needed to be repealed. The Department had embarked on the Parliamentary process in April 2018 to repeal the Act. The Portfolio Committee and the Select Committee had approved the repeal in 2018 and March 2019 respectively.

However, although the repeal had been approved by both Committees, concerns had been raised during public hearings by a group of former disgruntled Aventura employees. These were related to:

  • The 30% shareholding from Siyonwaba that Forever Resorts was holding;
  • The employees’ share ownership scheme;
  • The perceived failure by government to protect the interests of employees;
  • A complaint that a company owned by a managing director of Aventura was providing services to the company. 

Mr Matjila said that Parliament had processed the repeal of the Bill, as the concerns raised did not have a direct bearing on its repeal. The Department had undertaken to look into those concerns and report back to Parliament, and had advised Parliament that the key concerns that should be addressed were the employee share ownership schemes and the 30% shareholding.

Delay in transfer of 30% shareholding

Regarding the delay in the transfer of the 30% shareholding, Mr Matjila explained that the Department did not have any authority, as Aventura had been sold and was currently under the control of a private company. The 30 % shareholding had previously been held by Siyonwaba, but was currently purchased by Forever Resorts. Several letters had been exchanged between the Department and Forever Resorts regarding this shareholding, reminding them that the government's objective with the sale of Aventura included the empowerment of previously disadvantaged individuals.

Forever Resorts had been referred to the information memorandum issued at the time of the sale of Aventura. It had also been reminded of its statement on its black empowerment status in February 2009 in which it had stated that it believed in the upliftment of previously disadvantaged communities and community involvement, that it supported the BEE programme, and that the 30% shareholding would once again be transferred to a BEE company. Furthermore, in response to an enquiry by the Department of Trade and Industry (DTI) in 2010, Forever Resorts had advised that efforts were under way to put a new BEE structure in place, and that plans were afoot to transfer the 30% shareholding to a trust, whose beneficiaries would be employees of Forever Resorts.

The DPE had reminded Forever Resorts that it had stated that the new BEE company was going to be in place by the middle of November of 2009. When the Department had sought to establish why it was not fulfilling these undertakings. Forever had replied that:

  • The Department was misconstruing the sale transaction, insisting that the transaction was regulated by a sale and purchase agreement (SPA);
  • The issues raised by the Department in relation to empowerment of communities were not provided for in the SPA;
  • Forever Resorts was cognisant of the policies of the Government, such as empowerment, and subscribed to such policies;
  • Its plans to introduce a BEE company had been constrained by things such as unresolved land claims and uncertainty as to the final make up of the asset basket of Forever Resorts;
  • It also continued to evaluate its position, and would make a decision regarding the introduction of a new BEE company at the appropriate time; and
  • The Department was urged to allow Forever Resorts space to manage the process on its own.

The delay since 2009 in the transfer of the 30% shareholding to another BEE entity/Aventura employees had prompted the Department to seek a legal opinion in the matter.

Legal Opinion

Mr Matjila said that the preliminary view was that there was merit in Forever Resort’s contention that it could not finalise the identification of another BEE company until the land claims were resolved and its asset base finalised. The DPE was advised to first obtain the shareholder agreement (SA), either voluntarily or through the Promotion of Access to Information Act (PAIA), and also to obtain the agreement pertaining to the sale of Siyonwaba’s 30% shareholding to Forever Resorts. The DPE was advised to consider triggering the dispute resolution provisions of the agreement through arbitration, or to bring an application in court to compel Forever Resorts to procure another BEE company. However, this was dependent on giving consideration to the matter as a whole, including having had sight of the SA.

Adv Melanchton Makobe, Chief Director: Legal Counsel, Department of Public Enterprises, stressed that although the workers had concerns, the Department did not have the legal authority to resolve these matters. The only issue that the Department was taking forward was the 30% that was supposed to have been sold to a BBBEE company. If it was necessary, the Department would go to court.

Discussion

Ms L Bebee (ANC, KwaZulu-Natal)) asked for more clarification on whether the concerns that had been raised had come up before or after they had sold it. How many times had the Department met with the former employees of Aventura before bringing them to engage the Committee, especially to explain what was happening with regard to the issues they had raised? What had been their response to the Department’s engagement?

Mr A Arnolds (EFF, Western Cape) said the matter under discussion had a long history and had been dragging on since the Fourth Parliament, yet there was still no conclusion that would allow them to move on and find a solution for the workers. It was unacceptable that after so many years the Department still did not have the shareholder agreement. In 2001, the government had made a promise -- what had happened to that promise? Could the Department clarify the process it had followed with the workers once the complaints were raised?

Ms M Modise (ANC) said she was confused as to why the Department did not at least have a copy of the shareholder agreement. It was supposed to have had a copy at today’s meeting. It was the owner of that property. It was supposed to have everything that pertained to it. Furthermore, it seemed that the Department had not adhered to the promise it had made. Who was it who had made that promise?

Ms W Ngwenya (ANC, Gauteng) asked what the Department needed from the Committee in the form of assistance. It was important for both of them to work together. This was the Sixth Parliament, and the fact that this Committee had not been part of this programme originally made it difficult to know where to start. Was this problem out of the Department’s hands? Did it have any legal obligations? This issue had continued for ten years. It was a big challenge, and it would not help to deal with it superficially. It was important to know exactly what was happening. What must be done to solve this problem? The Department must be open with the Committee.

She commented that it was not acceptable for an Acting Director to occupy a position for an extended period. The Department was given funds to employ staff. It was a huge challenge when the Committee always had to engage with acting officials. If these positions were funded, why was a permanent post not advertised by the Cabinet? If the ‘acting official’ was not recognised, even over a period of five years, this was a challenge. 

The Chairperson asked whether the issues of the workers have been addressed if the Department had not come to Parliament regarding the repeal of the Act. It seemed like these concerns would have been swept under the carpet had the Department not come to Parliament to repeal the Act. Was it legal to liquidate Aventura while the workers did not benefit? The main concern of the Committee was the welfare of the workers. Moreover, the legal opinion the Department had reported to the Committee was still preliminary. When would the Committee get the final legal opinion? The Committee could not give direction based on a preliminary legal opinion. The Committee’s view was that if it had been a final legal opinion, the Committee could have said what to do. Regarding timelines, both the Committee and the DPE had to treat the matter as urgent, because the workers were disgruntled. It was good that the repeal of the Act had brought the concerns of the workers to the awareness of the Committee.

Additionally, what were the issues regarding the land claims? These things were dragging on and the land claims which were arising now may become the result of not addressing the initial concerns. What were the timelines of the Department for dealing with the legal opinion? What was it that could be put on the table? The employees of Aventura want to know after this meeting what the outcome from the Select Committee would be.

Department’s response

Mr Matjila responded on what the DPE wanted the Committee to do for it. He said the Department was here to give a progress report on the matters raised in the presentation. This was what Parliament mandated the Committee to do. Regarding the nature of the land claims -- whether they arose before or after Aventura was sold in 2001 -- it had been discovered that in two of the resorts there were land claims. It had been only after the sale of the resorts that these land claims were mandated.

Concerning how the Department had been engaging the workers, the workers had starting approaching the Department about last year to complain about their issues, and it had then started addressing them. It had had more than 5ive meetings with the employees. Each time, it had updated them as to the developments. Every step of the way, it had given the workers feedback, whether it was positive or negative.

Adv Makobe advised how the Committee could assist the Department. While the Department could come and account on certain issues, it was not possible for it to account for issues that pertained to Aventura. It was important for Aventura to come themselves and account for their actions. The Department had the sale and purchase agreement which it had entered into, but it did not have was the shareholder agreement. It had written many letters requesting the agreement. Once it got the agreement and found that it had something to work with, then it could trigger the legal processes.

Mr Matjila conceded that perhaps the Department ought to have the shareholder agreement. However, it was not a party to the shareholders agreement. It was a party to the sale and purchase agreement. Nevertheless, the sale and purchase agreement made reference to the shareholder agreement. Be that as it may, this matter was about 19 years old. The people who were working on this particular transaction were no longer there. This was being addressed by the Department.

Adv Makobe said this also begged the question as to why there was an unwillingness to give the Department the shareholder agreement. The DPE was prepared to use every legal avenue.

Mr Matjila said if one looked at the sale and purchase agreement, it was stated that it was the responsibility of Aventura Resorts to identify another BBBEE entity, and not the responsibility of the government. It was not the government that had decided on the 30% BBBEE share. Government had found out about that years down the line. It was not the government’s responsibility, and this was why Aventura Resorts was dragging its feet in identifying another BBBEE entity.

The Chairperson asked what the Department’s timeframes were in terms of following the legal processes so that the Committee could follow-up with it on progress.

Mr Matjila responded that the challenge which the Department faced was that it had been asking for the shareholder agreement, and Aventura had said the Department could come and view the agreement but it was not prepared to give it a copy. As things stood, the managing director was coming back only in September. The Department could therefore view the agreement only in September. The Department could request the information, which had to be provided within a 30-day period. If the information was not provided, Aventura would be taken to court. The fact that this was a private company complicated matters.

The Chairperson wanted a timeframe for, among others, the finalisation of the legal opinion. The Committee would like to put this matter to rest. It could do this only as and when the Committee received feedback stating how far the Department was in addressing the matter, what the issues were, and what kind of intervention was needed. With a timeframe, the Committee could schedule its meetings and accommodate this matter in its programme. It was not acceptable for this matter to have continued for almost 20 years without being resolved.  

Adv Makobe commented that since Aventura had given the Department an assurance that it would give it sight of the shareholders agreement in September, the Department could account to Parliament by the end of September. It knew what the issues were and would be able to finalise the matter quickly, so that when it reported back it would have finalised the legal opinion on the agreement.

Mr Tshepo Makhubela, Acting Deputy Director-General: DPE, added that since Aventura had given the Department the undertaking that it could view the shareholder agreement in September, it would at that point be able to trigger its own legal processes. It was clear to everyone that Aventura was applying delaying tactics to prevent it from viewing this document.

The Chairperson responded that the DPE would be accommodated in the Committee’s schedule to report back in September.

Mr Matjila stressed that the key difficulty was that Aventura was in private hands.

The Chairperson said that whether or not it was in private hands, the main concern was the 30% BBBEE share and the employee shareholders’ agreement. The government was able to comment on this. As it stood, the current agreement did not encompass the 30% BBBEE requirement.

Mr Arnolds again asked who had made the initial promise to the workers. The workers had been left in the cold. What was the Department doing about this promise?

Mr Matjila replied that the DPW had learned from the workers that, during a government road show, they had been promised 30% in the ownership scheme at the time. It had not been provided for in the shareholders agreement. The Department had compared this transaction to the sale of other state-owned entities. In these other cases, provision had been made for the employees. Provision had not been made in the case of Aventura. Maybe the 30% that was the bone of contention at the moment could be used to address even the employee shareholder ownership scheme.

Adv Makobe added that this was one issue that could be explored in the legal opinion. The Department took the plight of the employees very seriously. It was important to get the legal opinion to say that the 30% would be used as the employees’ share in the ownership scheme. The Department felt very strongly about this issue, which was why it was looking at the legal avenues.  

Ms Modise suggested that the Department be given a chance to report back in September, once they had viewed the shareholders agreement and had finalised the legal opinion.

Ms Ngwenya agreed that there ought to be a timeframe, and that the DPE would need to report back to the Committee. She pointed out that the report had now been approved without a thorough examination. They had been rushed to pass the Bill.  

The Chairperson concluded that the Committee Secretariat would communicate with the DPE regarding when it should come and report back to the Committee. This matter should not continue into the Seventh Parliament -- it must be dealt with so that other issues could be addressed. As soon as the Department was ready, it must contact the Secretariat and not wait to be invited.

Mr Matjila said that when the bill was accepted in Parliament, it had passed through the Portfolio Committee, the Select Committee and the State Law Advisors. This issues which were under discussion had nothing to do with the Bill.

The Chairperson said that the Committee did not need to go back to the Bill and the discussions that had taken place. The Committee still had a serious concern about it. If Aventura had been holding up the land claims, the Bill could have been used to make them deal with the matter. If the Department was experiencing challenges, it could approach the Committee and it could see what could be done to resolve the matter.

Consideration of minutes

The minutes of the meeting held on 24 July were adopted.

The meeting was adjourned

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