Alexkor progress report on Deed of Settlement obligations

NCOP Public Enterprises and Communication

06 November 2019
Chairperson: Mr T Matibe (ANC, Limpopo)
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Meeting Summary

The Department of Public Enterprises and the Alexkor diamond mining company briefed the Committee on the progress made in regard to the court order instructing the government to return land and property rights to the Alexander Bay community. Both reports indicated that some obligations had not been fulfilled for a variety of reasons, some of which were of a technical nature.

The Richtersveld community had made a claim against the government for land rights concerning the mining activity in their area in 1998, and in 2003 the government had been ordered to compensate the community for its loss of economic benefits. The claim settlement order was based on eight obligations, but only two had been fulfilled -- the land mining rights had been returned to the community, and the Richstersveld Mining Company and Alexkor had formed a company known as PSJV in 2011. Other obligations yet to be fulfilled included the transfer of R45 million and properties to the property holding company, as well as changing the Richersveld mining area to municipal standards.

Members heard that there were several challenges hindering progress in resolving the issues in the area, including infighting among the members of the communal property association (CPA), a lack of geological information to guide mining operations, and the influence of state capture activities.

One of the Committee’s concerns was who would get the interest that would be accumulated from the R45 million that was currently sitting in a trust account. Other issues raised included the delays in the settlement of land claims and the transfer of deeds, and Alexkor’s financial status.

Members agreed that the presentations had not given them the full picture of the situation, particularly the community’s viewpoint, and resolved to conduct an oversight visit to the area on an urgent basis. They also decided to write a letter to the Department, asking the political leadership to brief the Committee on the status of the Alexander Bay land and property handover processes.

Meeting report

Department of Public Enterprises presentation

Ms Morongwa Mothengu, Director: Mining, Department of Public Enterprises (DPE), said that the Richtersveld community had made a claim against the government for land rights concerning the mining activity in their area in 1998, and in 2003 the government had been ordered to compensate the community for its loss of economic benefits. The claim settlement order was based on eight obligations, but only two had been fulfilled -- the land mining rights were returned to the community, and the Richstersveld Mining Company and Alexkor had formed a company known as PSJV in 2011. Other obligations yet to be fulfilled include the transfer of R45 million and properties to the Property Holding Company, as well as changing the Richersveld mining area to municipal standards.

On the payment of R45 million to the members of the communities, litigation had been implemented against this move. The Department of Rural Development had said that since they were not able to regularise the community structures, they had decided to put the communal property association (CPA) under administration. To regularise the CPA structures, the community would hold its Annual General Meeting in November this year to appoint people so that the structures would be fully functional as a CPA.

Alexcor Company presentation

Mr Lemogang Pitsoe, Chief Executive Officer (CEO): Alexkor, said the R45 million was in the hands of the Legal Trust in Johannesburg, and would be transferred to the CPA over the next 10 years at an average rate of R500 000 a month. This money would be paid directly to the municipality for the electricity and services fees which the community was currently not paying. Community members were opposed to this, even though the municipality said that this arrangement had been agreed upon in the stipulation for the transfer of this amount of money.

Regarding the township handling, government institutions such as the schools, the police, hospital, the cemetery and others had already been transferred to the municipality, because these were already communal properties and it had been easy to do so. The full transfer of all the properties to the municipality would be completed by July 2020, to which the Office of the Premier and the Mayor had agreed. All other services that were rendered to the municipality, such as the upgrading of the roads, would be fully operational once this agreement was fully done.

On the legacy rehabilitation, asbestos had been removed from the area and what now remained was to close the holes that had been dug during the mining processes, and the demolition of old buildings.

Regarding the commercial national agenda, there had been collaboration with other government entities such as the Department of Agriculture, the Institute of Marine Technology, the Transnet National Port Authority and others, to provide work for the township communities of the Alexander Bay municipality.


Ms L Bebee (ANC, KwasZulu-Natal) asked the DPE to update the Committee on the forensic investigations and the outsourcing of the contract of Alexcor. How many people of the Richtersveld had received their compensation since the court order was given in 2003 in their favour? Considering that this matter had been going on for the past 12 years with no resolutions achieved, had the community realised that by the time this matter was resolved, there would be no diamonds to mine?

Mr A Cloete (FF+, Free State) wanted to know if there were still diamonds in the Northern Cape to be mined.

Ms W Ngwenya (ANC, Gauteng) wanted the DPE to elaborate on the African Exploration Mining Company’s operations of supplying the coal to Eskom.

Mr M Nhanha (DA, Eastern Cape) wanted to know if there had ever been an oversight visit to the Alexander Bay Municipality by the previous Committee to get a clear picture of what was going on in that area, considering that the Committee was hearing only one side of the story from the Department and the Alexcor company presentations, without hearing from the side of the community. He also wanted to know from the CEO about the issue of state capture. It had been reported that well-known actors in the state capture events were situated in the Northern Cape. Could the CEO confirm this? If the answer was yes, what had Alexcor done in trying to push back the state capture actors?

He wanted the DPE to explain the matter involving the transfer of properties to the Alexander Bay community in their names, to make sure that the CPA was active. Regarding the R45 million outstanding that belonged to the community and was currently in a trust account in Johannesburg, who would get the interest that this amount would accumulate? Would it be the lawyers handling this issue, or it would be given to the community? With regard to the court order that every community member was to be compensated by R15 000, were the community members allowed to have any different say about this order?

Ms C Labuschagne (DA, Western Cape) also wanted some clarity on the interest that would be accumulated on the R45 million that was in the trust account. The oversight visit that had been done in the previous Parliament had found some lack of unity among the community members in Alexander Bay Township. Ten years ago, the court had ruled in favour of the community being given back their land, yet up to now nothing had happened. The aim of this court ruling was that the community should be self-sustainable. Could the Department review the settlement deed on agriculture land, and also on setting up the structures for the community, because of the conflict that was happening? On the interest from the R45million that was in the bank account, was it proper that the amount went to a property holding company that was not functioning at the moment? Who would have the title deeds to the houses that were being transferred -- was it the people living in the houses, or the municipality? What would happen to those houses after 10 years?

Mr A Arnolds (EFF, Western Cape) wanted clarity from the Department on the whole process of property involving the beneficiaries, and about the delays in the settlement of claims.

Mr A Nyambi (ANC, Mpumalanga) asked the Department and Alexcor about the current status of the deeds settlement, as no progress had been made apart from the fact that there many challenges were described in their reports. Since they had identified the problems in the Department, what were their suggested solutions? He also wanted some clarity of the current situation from Alexcor, because he noted that as a state-owned enterprise (SOE), Alexcor was one of the companies that had not submitted their reports. He also asked the Department to respond on the issue that some community members had been retrenched.

The Chairperson asked the Alexcor company representatives to comment on the challenges that the company was facing over the next year, especially on what they have done to develop a plan of action to secure the liquidity and solvency of the company. 

Mr Cloete added that the Department and the Alexcor company should put in writing their plan of action to tackle the challenges in 2020.

Department’s response

Ms Mothengu, answering on the question about state capture, said the Department had received an investigating forensic report by Gobodo on 15 October, and some of the issues would be addressed, and these would be made known to the Committee.

On the question about the availability of diamonds in Alexander Bay, she said that one could find diamonds either in the sea or on land. The order of settlement had stated that Alexcor could retain the diamonds that were in the sea, and the community could retain the diamonds that were on land. Regarding the diamonds that were on land, there was a challenge because the information about the geology of places and the availability of diamonds had been lost, so no one knew exactly where to mine the diamonds on land. However, there were diamonds in the sea. The geological exploration to find the availability of diamonds on land had estimated it would be for 10 years, but this was to be confirmed. On the other hand, there were more diamonds in the sea, and it could take years of mining before they were depleted.

On the question of compensation, she said that in 2007 the Department of Rural Development had given each community member R10 000, and there had been more than 3 000 members. There was also R190 million that was held in an investment account managed by the National Treasury, which had now accumulated to more than R300 million. This money would be given to the community should they want to establish businesses.

On the question about the CPA being dormant, the legal adviser had said that should the Department transfer money to the community, they would be taken to court considering that the community was unstable because of the fighting among the community members. This was one of the reasons why they had not transferred the property to the community, because there had been court litigation stopping them from doing this. The Development had approached the court to put the CPA under administration until the community members resolved their differences.

Mr Denzel Matjila, Director: DPE, said that they have not been given orders as to who would get the R45 million in interest that was in the bank's account. It would be the decision of the Department as to who would get the interest.

Mr Matibe said that any interest gained through a bank investment in a trust account was supposed to be given back to the client or beneficiary (the community), and that the legal team would get only 5% of the amount. 

Mr Tshepo Makhubela, Acting Deputy-Director General: Legal, DPE, agreed with Mr Matibe that this was how interest gained from any trust account money was supposed to be distributed. The principle that was followed when one rented a property was that when one paid for security for the property one rented, the amount gained up to the time one vacated the property was given back to the customer. The same principle applied to trust account money.

Mr Pitsoe said that this amount had been invested by the legal team, and any interest gained should be given to them. If there were any agreements to be otherwise, he did not see any problem with that.

Mr Matibe suggested that they should come back and deal with the issue of the trust account.

Mr Pitsoe said that on the land rights, the Department had said that the community must be given the mining rights and not the farming rights, and this had led to a loss of an investment of about R80 million from the ostrich farm and the oyster farm, because of the handing over processes by the CPA. Similarly, the CPA had appointed people to manage the mining asset, and this had led to a R63 million loss.

Regarding the geological information about the mining on land, there was no known information of where to mine, and because of this lack of information, there was a loss of the R63 million. This loss of resources and revenue indicated that there was a lack of management and administration skills.

One of the questions they were faced with was why Alexcor did not help the community to improve their mining operations. The reason for this was because they had been told by the legal team to back off and not get involved in community issues.

On the question of state capture, he said that it was a departmental matter, and it was not their responsibility to look into it. Alexcor was responsible for doing the geological exploration to find out where to mine, and was not getting involved with other issues that were not their concern.

On the structural changes, he said that two parallel structures were operational in the same mining area. Alexcor had hired 200 people in 2014 from the community to empower them and, at the same time, they had resourced for mining jobs as well. This had resulted in them employing 200 people with nothing to do except to sit down and watch television, waiting for the availability of jobs because the market and foreign exchange were down. This had led to restructuring, because of the two crews that were working, only one crew was generating money because they knew where to mine, while the other crew was clueless about where to mine.

The transactional agreement would be signed with the mayor on the transfer of property to the community. On legacy rehabilitation, he said that only the removal of asbestos had been done, and nothing else. There were technical reasons for this. For them to hire an outside company at a cost of R18 million to do the job, instead of allowing the community members to do the job, had seemed more reasonable, so they had applied for a deviation for this to be done, to save the R20 million cost.

Follow-up questions

Mr Nhanha said that some questions had not been answered. He therefore proposed that the Committee should remain behind to have a meeting to consider a way forward.

Mr Nyambi and Ms Ngwenya seconded the proposal. Ms Ngwenya said the answers they had received had not answered anything they expected to hear from the representatives of both the DPE and Alexcor.

Mr Cloete wanted clarity regarding the loss of geological information, and whether it was some sort of industrial espionage.

Mr Pitsoe said that it was more to do with malice than espionage, because white-owned companies were making money while others were not because they did not have the geological information of where to mine.

The Chairperson thanked the representatives from both the DPE and Alexcor for making their time to give a presentation of what was happening with regard to the Alexander Bay community. He finally released them to go, after which the Committee remained behind.

He said the Committee would write a letter to the Department, asking the Minister and the Deputy Minister to come and answer some of the questions that had not been answered by the DPE and Alexcor representatives. He also agreed to the proposal made by the Committee about an oversight visit to the Alexander Bay township to understand what the province was doing to the community, as well as hearing from the community members themselves.

Mr Nyambi said that he agreed to the oversight visit, but this did not mean that they were excluding the political leadership because they would invite and engage with other political structures that were in the community and come up with solutions that would help to deal with some of the challenges that they were facing.

The Chairperson said that this proposal needed urgent attention.

Ms Labuschagne said everybody should know that the way forward was not just a matter of giving people land or the resources in it, without giving them the required training and skills development for them to run and manage their resources. She therefore proposed that the Committee should request a list of all the companies that had mined in that area for the past 10 years in order to find the information which was said to be lost. Someone had to have this information.

The Chairperson agreed, and said that by following the proper channels, this could be done urgently.

Mr Nhanha said that for the Committee to get the kind of report they had just received, considering the number of hours they spend in preparation for the meetings, he gets annoyed. The presentations indicated that they were exploring the availability of diamonds at sea while they were busy mining on land, which showed some lack of consistency.

Mr Nyambi said that presentations of this nature perpetuated that narratives that say MPs did not know much about mining, and therefore one could say whatever one wants because the Parliamentarians do not know anything.

Committee matters

The Chairperson asked the Committee to adopt the minutes of the previous meeting.

Ms Bebee moved their adoption, and was seconded by Ms Modise.

The Chairperson moved on to the minutes of the oversight report, where he had co-chaired with Mr Nyambi.

Ms Bebee moved to adopt the report as a true reflection of what had taken place, and was seconded by Ms Modise.

The Chairperson said that there was an iKamva Digital Skills Institute Bill which had been revived. The Committee would be briefed on it on November 20.

The meeting was adjourned.

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