Alexkor update on implementation of the turnaround strategy; with Deputy Minister

Meeting report

The Chairperson welcomed the Committee, the Deputy Minister, the Department of Public Enterprises (DPE), and the board and executives from Alexkor. He handed over to the Deputy Minister for opening remarks.

Mr Phumulo Masualle, Deputy Minister, DPE, said he was joined by the director overseeing Alexkor, the interim board Chair, Dr Trish Hanekom, and the interim Chief Executive Officer (CEO), Prof Trevor Fowler. He requested that Dr Hanekom introduce any other board members present. Alexkor had had difficulty producing and submitting financial reports, but work had been done to bring stability to the entity and to consider opportunities that would contribute to the entity’s profitability. The progress made would be reported in the presentation.

Presentation by Alexkor

Dr Hanekom said that the last time they met with the Committee, they had indicated that Alexkor was in an extremely precarious financial position, and had outlined the financial difficulties. Work had been done to ensure they had a proper understanding of whether expenditure and income had been distributed correctly between Alexkor and the Pooling and Sharing Joint Venture (PSJV). Professor Fowler had done incredible work to ensure that irregularities were corrected and that both Alexkor and the PSJV stabilised. There had been a focus on increasing production so that they had profitability. They hoped to be able to share proposals early next year that they would like to make for a change to the institutional arrangements that would simplify the current complexity of having the Richtersveld Mining Company and Alexkor in a joint venture, and challenging issues of how money was accounted for and how staff were employed.

The presentation would focus on what they thought would be important feedback for the Committee and what they were doing for the process of awarding new mining contracts, as most of the mining contracts were coming to an end soon.

Prof Fowler said that the remedial plans undertaken in the Alexander Bay Mining Operations as part of the turnaround strategy were to:

Employ larger contractors to explore and mine the land and marine concessions extensively;
Re-process the tailings dumps;
Increase the diamond mining footprint in the region; and
Invite large contractors for turnkey management.

The progress on remedial plans was to employ larger contractors to explore and mine the land extensively. Current mining operations were conducted by small contractors who mined allocated areas on behalf of the PSJV. Several mining contracts were coming to an end, and on 27 November, the PSJV Executive Committee issued a request for qualifying principal contractors, which would be followed by a request for proposals. Applicants would be expected to submit proposals for one or more mining areas, provided the mining areas were contiguous, in both land and marine mining. Implementation would be during the fourth quarter of the 2022/23 financial year.

He explained that the PSJV resulted from the land claim won by the community and the court order in 2007 that had created the PSJV, which was a 51% interest by Alexkor and 49% interest by the Richtersveld Mining Company, which was created through the court order. The company had become dormant but was being revived. The process of appointing members of the Richtersveld community to the company was complex, and the appointments to the board were still incomplete. There were currently court-appointed board members representing the community.

Re-processing the tailings dumps

The PSJV would be undertaking the rehabilitation of historic mining areas to address its long-term commitment.
Historic and current rehabilitation already overlapped, and the PSJV was already doing some of the historic rehabilitation through current mining activities.
The PSJV used contractors to do the bulk of mining activities. However, the PSJV would undertake its own rehabilitation where it was not necessary to be outsourced, and through rehabilitation, explore for diamondiferous waste.
The diamondiferous waste referred to above was the old tailings dumps.
A seven-year rehabilitation plan had been drafted and implementation would commence during the fourth quarter of the 2022/23 financial year.

To increase the diamond mining footprint in the region, the Alexkor RMC JV were busy engaging with other diamond mining companies in the region. Progress would be reported once engagement had started.

The reason for engaging with mining companies was that the companies that used to mine in the areas contiguous to the Alexkor RMC concessions had stopped mining. De Beers had stopped mining and sold their concessions to West Coast Resources, which was currently under business rescue. Thus, engaging with other mining companies was to ensure security in the area, as there had been illegal mining that took place that had led to fatalities.

An invitation had been extended to large contractors for turnkey management. The above would be implemented by employing large contractors during the fourth quarter.

Prof Fowler said that a thorough review was in progress of the financial position of Alexkor and the PSJV to regularise, and if necessary, restate income and expenditure in compliance with the Deed of Settlement and Unanimous Resolution. Significant progress had been made in addressing what they had found in previous years, where some of the financials needed to be restated as the numbers had not matched in all the records of the company. To ensure that they had proper books for the audit, those findings had to be addressed, and would be by the end of the financial year. When the review was complete, a detailed report on any irregularities would be prepared.

Mr Quinton Green, a financial and technical expert brought in to Alexkor to look at the finances, said that the current financial position was presented for Alexkor SOC and PSJV separately for the six months ending 30 September 2022. The year-to-date profit for Alexkor SOC was R3 million against the budgeted R28 million, which was good news. That performance was below budget, but was not in fact correct, because the board had decided not to remove the management fees from the joint venture, nor the commission on diamond sales from their income, as they were a 51% shareholder. If they eliminated those two budget items, which was around R26 million, then the R3 million profit to date was in line with the budget. They were still working on the budgets to correct them so that in future, they would take into account Alexkor’s 51% share of the profits and losses of the joint venture. There was no reason to believe that they would not report a profit for the year ended 31 March 2023 for Alexkor SOC. The PSJV had reported a profit of R3.178 million for the six months ending 30 September 2022 against the budgeted R2.74 million. They believed that the PSJV would also report a profit for the year ended 31 March 2023.

While they believed that both entities would report profits, establishing that position was still dependent on certain information that was required. Firstly, Alexkor had a Rehabilitation Trust Fund to rehabilitate the dune mining areas, and they needed to undertake an independent verification and confirmation of what those rehabilitation costs would be. The current provision was at R202 million, and depending on the outcome of the independent review, there could be adjustments required to top up the fund. Secondly, there were costs of approximately R4.5 million from the Special Investigating Unit (SIU) relating to the Proclamation 45 investigation into Alexkor. They were in discussion with SIU to determine the level of those costs. The final matter that could impact the results was the South African Revenue Service’s (SARS's) recent assessment of the entity’s arrear back payments of about R38 million. They had consulted with a chartered accountant, who believed that the claim of R38 million was overstated by about R15 million, and they were looking at some incorrect accounting treatments relating to the interest charges which had been processed in Alexkor’s books in the last couple of years, which had given rise to the assessment change by SARS. They would have discussions with SARS to determine if they could significantly reduce that assessment claim. Apart from the above provisos to the results, there was no reason to believe that out of normal operations, both Alexkor and PSJV could not achieve the desired results by 31 March 2023.

Prof Fowler said that the diamond production in the year ending 2021/22 was 20 280 carats, and they had reached just over 19 000 carats by the end of November. They would exceed the previous year’s production, but a lot depended on the weather. The state of the seas and floods, like the one that took place down the Orange River, could make it difficult and unsafe for divers.

The Department of Agriculture, Land Reform and Rural Development (DALRRD) had several general meetings with the Community Property Association (CPA), and would be having another on 8 December to establish the members of the board of the Richtersveld Mining Company.

Dr Hanekom concluded the presentation by reminding the Committee that the entity had long outstanding debt, and the attribution of income and expenditure between Alexkor and PSJV meant they had to restate prior financial results. Since the entity had not produced an integrated report and annual financial statements for 2021/22, they had agreed with the shareholders to request the Auditor-General (AG) to opt-in to complete the 2022 financial audit and for future periods. Regarding the SARS assessment, the Commissioner, Mr Edward Kieswetter, had indicated that he would ensure that every assistance was available to ensure that the amount was assessed correctly and, if necessary, for payment to be scheduled over time, given the actual financial position. They would also assist with financial modelling if needed, because they were interested in ensuring that SARS received what was due to it.

There had been discussions with the Director-General of National Treasury, and the view taken by analysts at Treasury was that there was no financial predicament at Alexkor because they had not realised that the rehabilitation funds and the funds for the handover of the township were reserve funds that had nothing to do with the mining operations. While a lot had been done to place the entity in a better position since the last time they presented before the Committee, they still faced financial challenges that they would report on early the following year when information was more complete.

Discussion

Mr S Gumede (ANC) said that the Committee was often presented with turnaround strategies that gave them hope, but crumbled as they were being implemented. Many of the presentations by state-owned entities (SOEs) did not include a feasibility study, which helped with testing the longevity of the studies and the challenges that could manifest on the ground. The financial report also included many items not budgeted for, which further challenged the entity in terms of its financial crisis. Had the entity conducted a feasibility study? If so, what was the outcome?

The plan to rehabilitate and re-process the tailing dumps was good, as the strategy would repel the “zama zamas”, but the cost to the entity would be quite high considering their financial challenges. Had the process been budgeted for? The tailing dumps had the potential for residuals from them, but it was uncertain whether such residuals would, in fact, boost the entity.

The entity was doing work that was not assigned to it. The issue of infrastructure and running of the township were meant to have long been transferred to the municipality. The entity could not be the funder to the municipality when that money ought to have been saved and allocated to other items that were critical to the entity. What would their programme be to transfer all those other responsibilities that were not theirs to the rightful party, whether it be the municipality or the community? They were busy inculcating a culture of non-payment as they looked at the townships who were throwing away all the work being done.

Did the invitation to the large contractors not negatively impact up-and-coming small businesses when they came in and did the work in the area? What was the total cost of this turnaround strategy? Was the entity prepared for the costs, or were they expecting assistance from the fiscus? Did Alexkor have a sustainable character?

Mr G Cachalia (DA) said that they needed to know why the audited financial statements were not presented and when they would be presented, otherwise, the Committee could not do its oversight properly. They could not be presented with a piece of paper that stated the entity’s current state of affairs, because legally, it held no water in terms of audits.

The R3 million profit was insignificant in view of entity’s liabilities. What were the liabilities to the PSJV and the Community Trust? How were these intended to be paid? The setup of this organisation was to benefit the community, which has not benefited at all to date. Alexkor needed to clarify why they believed that the SARS liability of R38 million was overstated. How did they intend to deal with this, because this amount was significant compared to the R3 million profit? What were the other long-outstanding debts of the entity in addition to the ones mentioned?

What was the status of the township and the implications of the rehabilitation fund? Many held the opinion that Alexkor was fundamentally insolvent, and they needed to understand exactly what irregularities would add to this. What was the status of any other legal issues and charges that were faced -- for example, in respect of the coffer dams' overuse and the Zondo Commission’s recommendation that criminal charges be instituted in respect of the Scarlet Sky Investments tender?

The presentation was short and had very little detail about what was going to be done about government stating that they would not provide any further funds, the state of insolvency, legal charges, and allegations of ongoing mismanagement and theft within the organisation. Was the board of directors trading recklessly, because action needed to be taken if this was so.

Ms J Mkhwanazi (ANC) acknowledged the progress made. How far was the completion of the other tasks that were due for completion in terms of the Deed of Settlement Obligation? Could the Alexkor team provide clarity about the entity’s financial position? When the Committee had their oversight visit at Alexkor, contractors raised issues about how they were treated and how the entity conducted business with them. Have those complaints been reviewed, and could an update be provided? Pages 11 and 12 of the report indicated that Alexkor and the PSJV had spent a lot of money on legal fees. Why was that? Was there value for money in that exercise? What was the consequence management update from the SIU investigation?

Mr N Dlamini (ANC) said that the Committee needed to be realistic when they spoke. Mr Cachalia had acknowledged that Alexkor had not presented their financial statements, but had assumed that the company was insolvent. The audited financial statements should be presented first before such allegations are made.

The issues raised by the miners on their last visit were not covered in the turnaround strategy. Alexkor wanting to invite big companies to mine on their behalf meant inviting their own competition to do their work for them. How would this help turn around the situation at the mine? How would it fit into the current arrangement with the small-scale miners, who were supposed to benefit from the mining operations in line with the PSJV agreement? The mine was a product of a land claim that was given back to the community, so they had to be the beneficiaries at the end of the day. How would this tripartite alliance work to ensure that?

Had the turnaround strategy factored in the Department of Mineral Resources and Energy’s (DMRE's) idea to explore for oil off the coast of Alexander Bay? If so, how would that affect future exploration? It was concerning that this was the second board within a five-year period, and another board would be introduced soon without seeing this turnaround strategy to fruition. They could also wake up to the Economic Freedom Fighters (EFF) accusing the Department of privatising Alexkor.

Mr F Essack (DA) asked how Alexkor was planning on funding the inevitably large SARS obligation from a cash flow perspective. The PSJV seemed to have been operating at a huge loss -- why was that? Had a forensic examination on the PSJV financials been conducted, and should there not be audited financial statements every quarter at least? What was the update on the asbestos removal contract in Alexander Bay that had been raised in April?

The Richtersveld community had not benefited from the mining operations, as the unemployment rate remained high. What was really happening there? Was the Alexkor company secretary also acting as the PSJV company secretary? Could the Committee get clarity on the status around the coffer dams, as there seemed to be huge environmental regulations being flouted? Numerous challenges regarding sustainability remained, and clarity was required on the finalisation of the Deed of Settlement and issues regarding the various investigations into maladministration. What was the feedback from the SIU investigations?

Ms V Malinga (ANC) asked the Deputy Minister if the turnaround strategy had been presented to the executive authority first. Alexkor should move speedily with the rehabilitation of the tailing dumps before circumstances like those of the Jagersfontein dam collapse presented themselves. How often did the Department of Employment and Labour monitor the dumps to determine that they were properly managed? The entity had spent about R877 000 on consultations -- what are they consulting on? The acting chief executive officer (CEO) had mentioned fatalities that had taken place due to illegal mining -- what was their strategy to inhibit illegal mining from becoming a full-blown operation?

Had the funds for the rehabilitation of historic and current areas been ring-fenced? How much would it cost, and how long would the rehabilitation take? The strategy highlighted the handling of residential and business properties, as well as the municipal infrastructure of the Richtersveld community. Why was this the case, given that the maintenance of these properties and infrastructure resulted in unbudgeted expenditure? Did the strategy to engage other diamond mining companies to increase their foothold in the region hinge on the R88 million funding application to National Treasury regarding the capital investment required?

Were the large contractors going to be detrimental to the emerging mining contractors, especially the mining contractors that were black? One of the key issues raised by the local community was the small contractors and the mine not providing them with opportunities. Would the large contractors absorb the local people?

The Chairperson advised that when the Committee dealt with these issues, they needed to link the information provided in the current meeting to the information provided in previous meetings. He alluded to the statements made by Mr Cachalia that Mr Dlamini had pointed out. The Committee had been presented with a positive presentation that sought to help them understand the efforts the entity had made to turn their situation around and be profitable. Members should not lose sight of the fact that a lot had happened in the entity, and that it was a result of State Capture. They should not play an opposition role in the Committee, and leave any political agenda to Parliament. While they would like to apply pressure to receive the financial statements as part of their oversight, they could not do that without understanding the efforts made for those financial statements to be presented.

Mr Cachalia raised a point of information and a point of order, saying that he did not make any political statements and had asked questions related to the presentation and the lack of financial statements.

Ms Malinga said that she did not recall the Chairperson mentioning any one Member that had made a political statement. Commotion ensued amongst the Members.

The Chairperson closed the dialogue and handed over to the Deputy Minister and Alexkor for their responses.

Alexkor’s response

Deputy Minister Masualle asked Alexkor’s Board Chair and CEO to answer the questions raised, particularly the assumptions underpinning the strategy and the progress recorded thus far that had been interrogated. He appealed to the Members to have their internal exchanges when the business of the meeting had been concluded so that the officials present did not leave with a bad impression of Parliament.

Dr Hanekom welcomed the questions, and said they would have probably raised the same questions had they been part of Parliament and not board members. The SOE and its interest in the PSJV, which was for the benefit of the community, had to be uppermost in their minds, and she hoped that the Portfolio Committee would have some comfort that, notwithstanding the difficulties, progress was being made.

They were sitting with a situation where governance had not been in a good state when they were appointed as a board at the beginning of the year, and had moved extremely speedily to get an interim CEO in place. They had also managed, with the help of the Department, to contract high level experts' input to assist with fixing what was severely broken and was still quite broken in the entity.

They were dealing with a mine that had been mined for over 100 years, and because mines were not mined forever, there were big economic succession plans on the West Coast, most specifically in Boegoebaai and the Green Hydrogen project. The Green Hydrogen Conference had occurred in Cape Town the previous day, and members of the Communal Property Association (CPA) were present. Some of the plans for that area would take shape on community land, and the benefit to the CPA was very important. It was probably the economic succession that was going to be of more benefit economically and socially to the Richtersveld community than the mine could ever be. However, until those projects came online, they had one challenge, which was profitable mining and ensuring that through the profitable mining activity, there was not a complete breakdown of law and order and rampant illegal mining. The context of the turnaround was that even if they could not have profitable mining, it would be critical to ensure that until those other projects materialised, there was the best possible management of the mining operation at Alexander Bay.

The challenges the management team faced could not be overstated and were not anticipated when they agreed to serve on the interim board. The management team was currently faced with a new crisis every day and was punching way above their weight and systematically solving problems. They also had a supportive board that was self-critical and was doing its best to ensure that they were systematic in identifying the problems and solving them. It was uncertain what the concerns were relating to mismanagement, and detail from the Members would be appreciated.

Prof Fowler said that the sustainability of the mine was based on ensuring that they were able to mine and retrieve diamonds which were then sold. Until recently, there had been 145 small contractors who were attempting to mine with limited resources. He gave an example of someone who had been awarded a contract to mine two years previously, but was still looking for money to mine, which was the key reason why Alexkor was looking for large contractors. The process of awarding contracts to contractors included having to show that they had funds and equipment to undertake the work. They were required to partner with smaller contractors, particularly from the Richtersveld. These small contractors would have funding and support for their development and ensure that in the future they would be able to become larger contractors and more effective at their work. There was an area mined by a local contractor who was able to get support from a large investor, and had started mining and processing 320 000 tons per month, which was almost a third of the total contracts and the number of diamonds produced by the company as a whole. Thus, the aim was not to exclude small contractors but to empower them to be part of a large operation that ensured that both the Richtersveld mining company and Alexkor were sustainable.

The final audited financial statements were indeed a challenge, but they had had to look at the previous financials and found errors that needed correcting. Mr Green would expand on that.
In terms of engaging with the previously large mining companies, De Beers and Trans Hex, both had sold their concessions to small junior miners. In the sale of De Beers to West Coast Resources, that company was now in business rescue, but they were big, and it was largely due to their inability to secure the area that they were in.

The fatalities referred to in the presentation were not in Alexkor concessions and the areas they mined, but in the areas contiguous to the concessions of Alexkor RMC where the illegal mining took place. Because they were adjacent to Alexkor, they had to engage in providing security to ensure that other developments that the government was undertaking were able to proceed. Investors from all over the world came to Alexander Bay following the Green Hydrogen Conference in Cape Town, who were looking at putting in a deep-sea port in Boegoebaai, and the investment alone was about R5 billion. This would not be able to take place without proper security measures in place, as the place would be overrun by people who were unable to mine safely, leading to more fatalities. Thus engagements with the larger companies were necessary to ensure that they fulfilled their obligations of rehabilitating the area once mining was complete, and not selling the mine off to smaller contractors who would be unable to undertake the liability.

The entity had looked at its cash flows and there had been progress due to an increase in actual revenue for the previous year ended 2022. While the entity had been in a loss position in the previous year, they were currently making a profit. It was indeed costly to rehabilitate the tailing dumps, but that was part of mining operations. As mining was completed in an area, it had to be rehabilitated immediately to ensure it was done concurrently. The entity was currently faced with historic rehabilitation for periods prior to 2007 and 1994. Government had provided funds to ensure that those areas were rehabilitated, and these funds had grown in a rehabilitation fund over the years. They would be investing in post-mining economic activity, using new technology to find residual diamonds in the dumps that were quite valuable during the rehabilitation process.

In terms of the township handover, the responsibility of the mine currently was to provide water, electricity and roads to the town of Alexander Bay. Alexkor had had discussions with the municipality and had been assisted by the provincial government of the Northern Cape to ensure that electricity was at the point of being handed over. The work done to refurbish the transformer lines was being completed. All that remained was for a community meeting to take place for the community to understand the handover process. One of the biggest challenges that should be considered was that the cost of providing those services by the municipality to the community was much higher than what was currently being paid by community members, because the mine had been subsidising it over the years. Thus, they had to ensure a transition period of moving from the current costs to what the municipality would have to charge to make it a viable option.

They had received some support from the National Electricity Regulator of South Africa (NERSA) who had indicated that the process had to include the community, and they had been part of their meetings. They were at the first phase where electricity could be handed over. The next phase related to the water that the community of Port Nolloth depended on from Alexander Bay. The Richtersveld community had been assisting when there was extensive load-shedding, which had created a problem in pumping water for about 90 kilometres to Port Nolloth. They had to ensure that they purchased generators to continue pumping water for the periods when Eskom generated no electricity. Hopefully, that cost would be transferred from Alexkor to the municipality at some point. An issue to consider was how Parliament would support the municipalities to address the transition from a subsidised cost to full cost recovery.

Ms Leilani Swartbooi, Environmental Manager, Alexkor RMCJV, responded to the question regarding the asbestos removal. The tender was awarded in 2017 and was part of phase 1A for demolishing buildings and structures and removing asbestos through the Fish Hoek registered asbestos site in the Western Cape. The work was completed in December 2018, and the entity signed off all the documentation. Input was given from the DMRE and National Treasury; the CEO of Alexkor at the time had done the final sign-off, and National Treasury had made all the payments. There was extra work identified when the contractor was busy with the demolition, and removal of asbestos, which was not included in the scope. The work was done for about R6 million or R7 million extra that was paid to the project, which National Treasury had approved.

Mr Green responded to questions about the finances of the entity. They still had a long way to go regarding the restitution of their accounting system, but had made much progress. They had established a list of the 25 most critical items they needed to deal with, and they would be tackling them in the following few months. Responding to the issue raised about the insolvency of the entity, he said that insolvency was defined as liabilities exceeding the assets of the company. On 30 September, Alexkor SOC’s assets exceeded its liabilities by R307.2 million, which made it significantly solvent. In contrast, the PSJV’s assets were less than its liabilities by R54.5 million. Therefore, the overall solvency of Alexkor consolidated as at 30 September was R252.6 million, which was not a bad figure.

Questions had been raised about the long-outstanding debts and the entity’s ability to pay the SARS value-added tax (VAT) assessment if they could not reduce the assessment. About three to four weeks ago, they did a month-by-month line-item cash flow projection until March 2024 to look at their monthly cash flow situation. They had provided R45 million for arrear payments to creditors, which was more than sufficient to meet their arrear liability. They had provided for a rate of R2.5 million per month until March 2024, which was built into their cash flow projection. They had further provided in December 2022 for a payment of R38 million to SARS if they were unable to reduce the amount of that assessment. After the work done by an independent auditing firm, they were reasonably confident that the assessment should at least be reduced by R15 million. The cash flow up until March 2023 would, at worst, reach a situation in a month that required a R10 million to R15 million overdraft, which was unlikely to occur given that their revenues were conservatively done at an exchange rate of R13 to the US$. Good financial management would manage cash flows to the extent of circumventing a situation like that. Overall, he believed they did not have cash flow concerns arising out of operations this time.

The prior year adjustments referred to by the CEO and Board Chair were related to interest charges on the rehabilitation loan which they believed had been accounted for incorrectly in the past couple of years. If they made those adjustments to correct them, it would result in SARS adjusting in favour of Alexkor, and they believed that would be the case.

Responding to whether the cash flow projection made provision for the additional amounts required for the rehabilitation costs, he said that an independent assessment was last done in March 2020. The assessment was done at R200.5 million, which could be measured against the current ring-fenced bank account for rehabilitation of R204.9 million. The adjustments they planned to make in respect of interest on the rehabilitation fund would increase their provision even further and adequately cover R200.5 million. They were currently engaged in an exercise to see if that rehabilitation cost instrument was still reasonable. Even if it needed to be significantly increased, the original rehabilitation trustee provided for any additional costs that would be incurred above the original estimate would be accrued over the remaining life of the mine. Since they did not need all this cost immediately, they would be able to approve any such additional costs over the remaining anticipated life of the mine, which was a very sound accounting principle and did not require an immediate cash flow position arising from the rehabilitation.

Prof Fowler responded to the questions about the State Capture Commission findings. They had had a briefing by the SIU, which was undertaking a detailed investigation, and had provided them with the documents required. They had undertaken to ensure that the National Prosecuting Authority (NPA) was briefed upon conclusion of the investigation, and that charges were brought against the people listed in the State Capture report. They had indicated to Alexkor that they did not need to do that because they had all the documentation, which would result in duplicate efforts by two different arms of the state.

He could not answer about oil exploration off the coast, as he was unaware of it. He emphasised that there had been no fatalities in any concession areas mined by Alexkor.

Dr Hanekom said that current mining contracts were not compliant with the Deed of Settlement and Unanimous Resolution, as mentioned in a previous meeting with the Committee in August. They were currently employing the expertise they had at their disposal to rectify the legacy of what took place before, with contracts that were set up with ulterior motives, including the benefit to the contractor that was disproportionate to the benefit to the community. The expertise included alluvial diamond mining and finance experts, and they would be obtaining legal experts as well.

The turnaround strategy and plans had not been discussed with the CPA because they had not been properly constituted. The annual general meeting (AGM) was supposed to take place on 8 December, and they hoped that that would allow representatives to be appointed to the Richtersveld mining community to better represent their interests in the PSJV board.

The governance arrangements had been set up in 2007, and what had been appropriate then was not appropriate now. Should they continue with the current arrangements, the management of Alexkor and PSJV would not be able to get work done, because they would spend all their time accounting to the various structures of the RMC, Alexkor and the PSJV. There was a need for a fit-for-purpose institutional arrangement to ensure the benefits of the Richtersveld community materialised and were better protected. When the interim board was appointed, there had been a collapse of governance, as no board was in place. The PSJV board had the CEO of Alexkor representing all three directors. There were matters previously referred to which were in the annual reports for the period ended before they were appointed interim board members, indicating the commitment to consequence management for those irregularities that had been uncovered.

As indicated by Mr Green, regularising the finances included correctly attributing income and expenditure, because there was a unanimous resolution to distribute the costs and income from mining on a 51:49 ratio. She acknowledged the need for audited financial statements and integrated reports for proper accountability and full sight of the entity's financial position. There had to be concurrence from the AG on the appointment of an external auditor if it was not the AG performing the audit, which had been received. However, the concurrence was conditional due to concerns that the AG had, and they were not in a position to do the 2022 audit themselves, as the application was meant to have been put in by October 2021. They had prevailed upon the AG to opt in for the 2022 audit which they declined, but they were now considering the application because of the concerns that they had and the extra cost that would have been incurred which was unaffordable if they continued with the external auditor. The board was committed to ensuring that the information in the financial statements was made available to the Committee and that irregularities were fixed, although the financial statements for 2022 had not been audited. They would ensure that consequence management materialised.

Prior to the appointment of the interim board, the role of the company secretary had been outsourced for both Alexkor and PSJV. They had asked the interim CEO to determine whether it was more cost effective to have a full time internal company secretary. They would submit in writing what legal fees had been incurred. There had been considerable legal expenses incurred for trying to resolve the issue of the PSJV court-appointed non-executive directors who continued to serve.

Dr Hanekom thanked the Chairperson and Members of the Committee for allowing them to present and for the discussions that had taken place.

The Chairperson thanked the Deputy Minister, the board, and executives from Alexkor for their work. He hoped that the entity would continue to improve and progress as the SOE it was intended to be. Alexkor was excused from the meeting.

Committee matters

The minutes of 16 and 23 November were considered and adopted.

The Portfolio Committee Secretary mentioned that one of the documents from the Speaker was corrupted, and would be re-circulated in due course.

The Chairperson said that the Members would have received correspondence from the Speaker of Parliament which they were supposed to present in the meeting, but he was still waiting for legal advice to move on that correspondence. They would be able to provide them with the way forward in the following meeting.

Mr Gumede asked if that was their last meeting, which the Secretary confirmed, as this was according to the programme.

The Secretary updated Members about the study tour to South Korea. The Committee was still waiting for responses to the letters sent to the Embassy of South Korea, and had been advised that it would take more than a month to receive quotations. Before submitting anything to the Presiding Officers in Parliament, they should have quotations from the Embassy. They had been advised to look for a date during the break in March, as no one would be working in the Embassy during December. As soon as feedback was received, they would communicate with the Members and make the necessary arrangements to ensure that they all had an official passport to travel.

The meeting was adjourned.