BBBEE Forever Consortium: DPE briefing - 31 July 2019 meeting report
The Department of Public Enterprises reported back to the Committee that after the meeting of 31 July 2019 its officials had not been able to acquire a copy of the 2001 shareholder agreement between Forever Resorts and Siyonwaba. These were the two purchasers of eight holiday resorts previously owned by the former state owned company, Aventura. Forever Resorts had only permitted the Department to view the shareholder agreement in their offices, and not to make a copy. This was not acceptable to the Committee which expressed dissatisfaction with the failure of the Department to produce the required documents. The Select Committee concluded that Parliament has the power to summon people to appear at a meeting. It decided that it would summon Forever Resorts and the dissatisfied employees who had written a letter to the Committee dated 29 July 2019. The Committee would seek to uphold the rights of the disgruntled employees who were attempting to achieve settlement of their share of a transaction (involving Aventura) which had expired years ago, for which no one seemed to be able to give any proper account.
The Select Committee consensus was that:
The Department of Public Enterprises would first come back to the Committee with a legal opinion. This would guard against the Department and the Committee duplicating actions.
The internal legal team in Parliament had to look at the powers vested in Parliament, and whether Forever Resorts would have to bring the shareholder agreement when summoned by Parliament and not say that they may only view it.
Both Forever Resorts and the Forever Consortium BBBEE Forum had to do a presentation. When they had seen the documents and the presentation from Forever Resorts and the workers, the Committee could formulate a conclusion.
The Chairperson welcomed everyone and acknowledged several apologies.
He then thanked the Deputy Minister for being able to attend and handed over to him.
Mr P Masualle (Deputy Minister, Public Enterprises) stated that the Department of Public Enterprises (DPE) had followed up as much as they could. The [Aventura] properties were disposed of in 2001 and the matter had come to the legislative process in the fifth Parliament. The Deputy Minister’s words were hard to follow. He said “At the time considered, being the actual transfer, so as to really deal with the issue of the ownership that is to be handed over to the parties that were part of the sale that was the transaction itself”. This [transfer of the properties] was achieved through a process of liquidation that the Department had to undertake and which then finally led to that matter being laid to rest through legislation [on 19 September 2019 when the Repeal of the Overvaal Resorts Limited Bill was signed into law by the President and became Act 23 of 2019].
There were issues that emanated from concerns that had been expressed through the Committee which the Department had to follow up. They had gone at length, even getting back to the transaction advisers to the Department at the time , to try and understand exactly what transpired at that time. They did find in the information they were able to glean, that at that time, these Aventura properties were not worth retaining by government, given that they were not financially viable at the time. Treasury was no longer able to provide funding to sustain them, hence they had to be disposed of. Owing to the operational environment at the time, the sale itself was not on favourable terms for government. To clarify this, the Deputy Minister said “favourable terms in that you could be able to impose a plethora of conditions as you would see fit at the time” – Government sought to absolve itself of an asset which, at the time, was considered a drain on the fiscus. The suspensive conditions that were attached to that transaction only required that there be a 30% Black Economic Empowerment (BEE) component as part of it. The disposal of these 14 assets was in two tranches, one consisting of six that were sold to individual entities showing an interest to purchase, and a conglomerate of eight that was then part of the sale and purchase agreement with Forever Resorts as well as Siyonwaba consortium. This conglomerate of eight resorts was dependent on the 2018-2019 legislative process for the vesting of ownership.
The Department went as far as getting back to Forever Resorts regarding the matter of the content of the shareholders agreement post the sale of these assets. They found that the only provisions that were there, related to the point that if the parties to the shareholders agreement were to dispose of their shares, they were obliged to sell the shares ’to each other’. It is in that sense that Siyonwaba, after a minimum period of 5 years had elapsed, then sold its 30% share back to Forever Resorts. This was in 2008. Many years after that transaction, officials could not find any instrument available to government, or to the DPE in this instance, to go back and reopen that transaction, because that transaction was completed with only those conditions attached and no other.
Mr Denzel Matjila, Director: Legal Services, DPE said that government was a signatory to the sale and purchase agreement with Forever Resorts, but government was not a signatory to the shareholders agreement [which was between the new shareholders who bought the eight resorts]. The shareholders agreement was between Forever Resorts and Siyonwaba. However, the sale and purchase agreement which government is a party to, makes reference to the shareholders agreement, it says “subject to the shareholders agreement, Siyonwaba may not sell its shareholding to any company which is not a BEE partner”.
So the question becomes “who’s who between the shareholders agreement and the sale and purchase agreement”. The sale and purchase agreement makes it very clear that any sale that is made, is subject to the shareholders agreement and the shareholders agreement clearly says “if the parties are going to sell the shares, they must sell them to one another”. Even if Forever Resorts was going to sell its shares, it was going to be required to sell first to Siyonwaba. Unfortunately in this case, he concluded, it was Siyonwaba who sold its shares, so it was required to sell its shares to Forever Resorts.
Mr A Arnolds (EFF; Western Cape) said that it seemed to him that since the last meeting (on 31 July), the requirements requested of the DPE by the Committee had not been met. The Select Committee had asked for information about the shareholders agreement. The DPE was not in possession of the required document. He recalled that the Select Committee had requested that the DPE arrive with that agreement.
The Chairperson asked if Members can deal with the issue of Shareholder purchase agreement.
The Deputy Minister (DM) stated that they had set out to acquire some of the key documentation to be able to share it in the meeting, particularly the shareholders agreement, but that government was not a signatory to the shareholders agreement. The signatories to that document were Forever Resorts as well as Siyonwaba. “They were quite apprehensive about giving that document to us”.
The DPE were only permitted to go and view it on site without being able to retrieve it or copy it. The DPE could impose no rights in order to compel them to give them the document, but he thought Parliament was in a different position in so far as that matter is concerned.
The Chairperson reminded the Members that they were having a problem with access to the shareholder agreement, reflecting that they do not have access to the document.
Mr Arnolds felt that the absence of the document would not assist. In accordance with government policies, the purpose of the exercise was to capacitate and uplift local communities and workers. He was concerned about who had made the promise of the 30% shareholding for employees and about who was going to report the outcome to the workers.
Mr M Nhanha (DA; Eastern Cape) said that there was ambiguity regarding which document should take precedence – the sale and purchase agreement or the shareholder agreement, He was curious as to why no action had been taken to resolve the ambiguity. The matter needed to be disposed of because it had been under consideration since the fourth Parliament. He also commented on the public hearings which were held, wondering if the Department had taken into account all the concerns that were raised by the employees.
The Chairperson asked the DM how he thought they might get hold of the shareholder agreement so that when they had it, they would be able to inform the workers of what it contained. To see how they could take the matter forward, was there anything which could be done within the law?
The DM said that although the required information was privately owned, he thought that Parliament had the power to summon the concerned parties to furnish it. There was the predicament that there were no conditions imposed on the transaction by government policy, which would have defined the employee share of the 30% BEE shareholding. It was merely stated as “the BEE component”. The five year prescribed holding requirement (during which the BEE shares were locked in and could not be sold) had been met, before the (2008) sale (of the BEE shares to Forever Resorts) was transacted. Although the DPE are not ignorant and unsympathetic, the original transaction (in which the government sold Aventura to Forever Resorts and the Siyonwaba Consortium) took place 17 years ago and there are doubts as to the conditions underpinning it.
The Chairperson said that the Committee would not be able to deal with the matter fairly before they had seen the shareholder agreement and this would only be possible when they had called Forever Resorts to appear before the Committee.
Ms M Mokause (EFF; Northern Cape) said she did not have the background of the whole matter but got the sense that this came a very long way. For them to call a meeting every now and then and call the Department before them and none of the requested documents came forth; it was really unfair to Parliament’s fiscus as well as the Department’s fiscus. It was pointless for them to sit, without the Department presenting the documents that were requested. She thought that they needed to minimise such fruitless expenditure and get to where the problem is. Get Forever Resorts to come and sit before them and come with the necessary documents so that when they engaged with them and the Department, they would have a proper understanding of what they were dealing with.
Mr A Cloete (FF Plus; Free State) said that he was not present at the previous meeting, and he was also trying to figure out what was going on. He thought that they needed to be mindful of the possibility that this was a civil matter. He also wanted to know what it was that Siyonwaba wanted from the Committee? Because he did not understand what it was that they wanted from this.
Mr Nhanha said that there was an issue he raised about ambiguity and what needed to be done, because there seemed to be uncertainty as to which took precedence between the sale and purchase agreement and the shareholder agreement. If they could deal with that, it would give them a much clearer picture of what needed to be done to clear the air.
Ms M Modise (ANC; North West) said that although Aventura was sold by Government 18 years ago, she thought that they should have retained the documentation pertaining to the sale.
She agreed with the Chairperson that Forever Resorts should be summoned.
There was no way of proving truth or falsity in the absence of information.
Ms LC Bebee (ANC; KZN) the Select Committee Whip apologised for having been in another meeting and said having read through the document, she had two questions. She asked of the DM what legal opinions he had in resolving the matter? Having viewed the shareholders agreement, had he communicated his opinion to the employees of Aventura or would he be able to do so after having engaged with the Select Committee.
Mr Matjila responded that beginning with the last two questions,
First: DPE promised in the last meeting (on 31 July 2019) to bring a legal opinion, which it had not succeeded in doing because it could not get hold of the shareholders agreement. That is why there is no written legal opinion as yet. But nonetheless, when DPE went to view the shareholders agreement it went with its counsel who is assisting in this matter. He did indicate that he has a sense of where the matter is going but he needs a legal opinion so that he can put it down in writing.
Second: Yes they did speak to the employees and reported to them what was discovered in the shareholders agreement.
Two issues need to be clarified.
Firstly, this transaction is not about Siyonwaba. This transaction is about the 30% in Aventura that was previously held by Siyonwaba which Siyonwaba decided to sell back to Forever Resorts after which the issue was raised by the employees during the public hearings The question being; Why is Forever Resorts buying back the 30% shareholding from Siyonwaba when it is not supposed to in terms of the shareholders agreement, which conditioned the sale and purchase agreement? Why was it not sold to another BEE company? That was the issue raised by the former employees during the public hearings.
Secondly, employees were never promised 30% shareholding because there is a misunderstanding. The 30% was always allocated to whoever was going to partner with Forever Resorts when Forever bought Aventura. It was never promised to employees. This needed to be clarified, because it seemed that the 30% was meant for employees, but this was definitely not the case. It was meant for whoever was partnering with Forever Resorts as the BEE partner, which in this case was Siyonwaba. The other thing he wanted to comment on was the issue of ambiguity He said that there was no ambiguity. The sale and purchase agreement subjects itself to the shareholders agreement. When you read the sale and purchase agreement it says “Subject to the shareholders agreement Siyonwaba may not sell to any other person except a BEE” entity. Therefore there is no ambiguity.
The DM said that they needed to be clear about what they were pursuing. The DPE is in a predicament, because the sale transaction took place in 2001, and only in 2013 did the employees come forward. This was after a liquidation process which arose because the transfer of the assets (to Forever Resorts) could not take place smoothly because issues around title deeds and transfers were holding matters up. Administrative difficulties led to the Department opting for liquidation of those assets. Once the legislation had come before the 5th Parliament there followed public hearings and at the public hearings, employees picked up that they had been promised a share which should have been protected in terms of government policy. Siyonwaba, which held the 30% BEE component, decided to sell their shares after the five year “lock in” period had lapsed, which was provided for in the shareholders agreement. The shares were bought by Forever Resorts, in keeping with the shareholders agreement. People get empowered only to take the money and leave where the work is taking place. From the point of view of the Department, that transaction, in those circumstances, perhaps there should have been more clarity in securing some of the rights pertaining to that, particularly when it relates to employees. It seems that the only condition in respect of employees (that was set for the purchasers in the sale and purchase agreement) was that as they buy these properties they must safeguard employment. If you are trying to get out of something that is loss making and you have no means to capitalise it at the time, those to whom you sell it must make sure to guarantee employees continued employment. That was all that there was to this.
The Chairperson said that, in his understanding, before they could call Forever Resorts, the DM must have pursued their legal opinion so that they didn’t do parallel processes. The main issue for the SC was that they were looking out for the interests of the employees who might have had challenges emanating from the transactions. How might the employees have been covered after the sale of the 30%.
Mr Arnolds asked whether there was any progress regarding the outstanding land claims on two of the properties?
Mr Matjila said that this was also followed up with the Department of Land and Rural Development, and that they were still involved in their own processes, identifying settlement offers from the land owners. They were still busy with the process. They were having challenges in reaching agreements with the land owners, but they were looking for a way to resolve it.
Ms Mokause said she was not so sure, but the matter had been going on for a very long time and they could not still be asking these questions. Unless there was someone who was dedicated to this case, it was shifted to one Department and then another. They were dealing with new people here. The importance of this case had to be reiterated. They needed to close on the matter. This had to be followed up if there was information requested from past meetings, especially meetings of the fifth Parliament, this information should be available now. What they were doing was extremely wrong.
The Chairperson said he thought they were all in agreement, they needed to close the matter. As the Committee they were going to look at how they called Forever Resorts. The DPE would be doing their part in terms of legal opinion and other matters so that when they came back they would have feedback on it. When they called Forever Resorts they had also look at that committee of employees so that all of them could come and make a presentation.
Mr Cloete said that he would like to propose that the SC also speak to their legal advisers to make sure that the process the SC was following was correct and so that the SC did not expose itself to illegal opinion.
The Chairperson thanked the DM and DPE group, he was very happy that the DM could avail himself for the meeting despite having many other meetings to attend.
The Chairperson said that Members should also look at the research document of the Research Unit, because members had highlighted sections. There was a need to call Forever Resorts because Siyonwaba Consortium was not relevant. Forever Resorts and the Workers Committee, both had to do a presentation. When they had seen the documents and the presentation from Forever Resorts and the Workers, the Select Committee could formulate a conclusion.
Besides that, the Select Committee also had to look at the legal issues so that they did not interrupt any legal issues. The workers needed to be accommodated within the 30% which Siyonwaba had already sold back to Forever. Resorts They needed the shareholder agreement; they needed workers and they also needed Forever Resorts, and the internal legal team should also look at it.
Mr Cloete asked if there was a dispute here. Who was Forever Consortium? Who was the Forever Consortium BBBEE Forum? What was the difference between Forever Resorts and Forever Consortium BBBEE Forum?
Mr E Boskati (Content Advisor) said that the Forever Consortium BBBEE Forum were former employees of Aventura. Aventura was once a subsidiary of Transnet. At the time it was sold, those employees engaged with the management that were selling Aventura. In the documents they sent to the Committee, they showed that they called this a consultative transformation forum. They were promised that when this Aventura was sold, there would be a share ownership scheme for them as employees of Aventura. In 2001, when Aventura was sold, it was only the 30% BEE component that became a reality which was then taken up by Siyonwaba. Siyonwaba bought the 30% shares and then merged it with the 70% share of Forever Resorts which is a private company owned by an American.
In 2018, Forever Resorts wanted the title deeds of all those resorts because there were 14 in all [eight of which are part of the transaction here]. When they wanted the title deeds and approached the deeds office, it showed that the properties were still owned by the government. So they had to engage with the Department in order to transfer the properties into the ownership of Forever Resorts. Because Aventura was established by an act of Parliament, which was called the Overvaal Act, government had to repeal that act in order to nullify it, so that the properties could be transferred to the actual owners.
DPE developed a Bill to repeal the Overvaal Act. The former employees, who had previously been promised, but were not, in fact, given any share ownership scheme, took that opportunity and brought their matter before the Portfolio Committee. They said to the Portfolio Committee that if they went ahead with the repealing of this Act whilst there were these outstanding issues they would feel aggrieved. The workers had been promised that there would be a share ownership scheme for them, but it never materialized,
The Department had said to the Portfolio Committee that repealing the act had no bearing on the share ownership scheme, because the assets had already been sold and were not government assets any longer.
So the Portfolio Committee agreed to process the Bill and pass it, but they had to attend to the issues raised by the former employees. The Department promised to engage with them.
Then the NCOP said that they wanted a time frame in terms of how they engaged the former employees. They Select Committee had engaged with them up until this point.
So the dispute was actually not between the Committee and Siyonwaba. It was the former employees who were promised that there would be a share ownership scheme when the assets were sold to a private company, but that promise never materialized.
The Department was suggesting now, that it does not have any legal standing with respect to addressing the issue that affected the workers.
The Chairperson asked Mr Cloete if he had the background and said they needed to look at where the matter was legally and engage their legal team. It seemed there was something hidden somewhere. It was hidden in that document that they were not seeing. They needed that document in order to assist the employees.
Mr Nhanha said that he was very pleased by the manner in which they had summarised the meeting. He wanted to know a bit more about the role of their internal legal team.
Considering that Forever Resorts had allowed the Department only to view the shareholder agreement and not retrieve it, the legal team had to look at the powers vested in Parliament, and whether Forever Resorts would have to bring the shareholder agreement when summoned by Parliament and not say that they may only view it, otherwise it would be an exercise in futility.
Three sets of minutes were adopted.
The meeting was adjourned.
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