Alexkor: briefing

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Public Enterprises

10 March 2000
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Meeting report

PUBLIC ENTERPRISES PORTFOLIO COMMITTEE
10 March 2000
ALEXKOR: BRIEFING

Documents handed out:
Presentation by Alexkor [e-mail info@pmg.org.za for the presentation]

SUMMARY

The Chief Executive Officer and Financial Director of Alexkor presented to the Committee a report on Alexkor's activities. The discussion that ensued centred around various aspects of their presentation.

MINUTES
Mr Larry Niehof, Chief Executive Officer, and Financial Director, Mr Govender, presented (documents to follow shortly).

Discussion
Mr Andile, representative from the Department of Trade and Industry, reminded the Committee of a number of parameters before the members could begin questioning the presenters. He said that Alexkor was a government-owned company. Messrs Niehof and Govender, although effectively the CEO and financial director of Alexkor respective were actually part of a private management team called Nabero that had contracted with the Government to run Alexkor for two years. Any questions concerning issues outside of the management contact should be directed to him and not the presenters. He said the committee was to decide whether to release funding to Alexkor on the basis of the presentations

Business Plan
Ms Taljaard (DP) asked the presenters whether they had prepared a detailed business plan for Alexkor. Mr Niehof explained that due to a change of ownership in Nabero, the management company, there had been a delay in presenting the business plan. Mr Andile added that the Government would only release additional funding to Alexkor upon perusal of the business plan.

Government's decision to release funding
Ms Taljaard said that she had gathered from the presentation that Alexkor's viability was contingent on it becoming involved in areas of activity other than land mining. She question how soon Government was to decide whether to release funding so that the company might engage in these activities.

Mr Andile replied that the Northern Cape Government was in the process of deciding how to maximize the mineral resources of the province and if the management team from Nabero convinced them of the urgency of the funding, they may release.

Mr Niehof added that Nabero had only made suggestions of how to add value to Alexkor. It was Government prerogative whether to take up their suggestions and this was not linked to their primary function.

Contract costs
Other members of the committee noted that Alexkor had made severe losses due largely to an increase in contract costs. They asked what management planned to do to correct this trend.

Mr Govender said that increased costs related to the shallow water contractors taken on by Alexkor. He said that while costs had indeed increased, revenue had increased as well. These initial costs incurred would ultimately result in increased profitability.

Mr Q Kgauwe (ANC) asked why Alexkor chiefly employed contractors for shallow water mining but not for the mining on land. Mr Niehof replied that shallow water mining required specialist services like divers and sailors which were only available through contract services.

Decrease in Personnel costs
Members also noted a decrease in personnel employed by Alexkor. Members asked the reason for this decline and whether social planning had been made to accommodate those people who had lost their jobs. Certain members commented that the Committee would find it difficult to justify increased funding if it resulted in job losses.

Mr Govender replied that the decrease in labour costs was not at the expense of permanent staff but the at the expense of private contractors (e.g. boilermaker services) that had contracts with Alexkor. The services of these contractors were no longer required because the permanent staff had become more productive through the efforts of the Nabero management team and new management techniques such as multi-tasking. He reminded the committee that before Nabero took over management, there had been several retrenchments of permanent staff.

Mr N. van Wyk (ANC) asked whether Alexkor had plans to increase employment in the Namaqualand area. Mr. Niehof replied that ultimately there would be a net gain in jobs. The presence of Alexkor in the area provided business to entrepreneur who ran satellite support services.

Skills transferal
Mr Kgauwe asked whether skills of the Nabero management team were being transferred to permanent staff, seeing as though Nabero's time at Alexkor was limited. In the same vein, it was asked whether Nabero was insuring that the same management problems that bedeviled Alexkor before Nabero took control, would not bedevil Alexkor after Nabero's management contract expired.

Mr Niehof replied that as Nabero's contract with Alexkor was only to last for two years, it would be difficult to achieve a major transferal of skills. The Namaqualand area also had a very limited skills base from which to draw. Nevertheless despite these obstacles, Alexkor had managed to place three graduates who would be put into senior management positions this year.

Mr Niehof also complained that the two-year period time limit resulted in more expensive contractor's fees. Contractors had to accept short-term contract with Alexkor that would expire at the same time Nabero's contract did. For that reason, Contractors charged a premium which they would not, had they long-term contracts

Mr Andile commented it was critical for Nabero to transfer skills substantially within the two-year period. Nabero should look outside Namaqualand, if need be, to recruit staff.

Decrease in Maintenance Costs
Committee members asked Mr Niehof whether the decrease in maintenance costs meant that Alexkor was paying little attention to maintenance. Mr Niehof replied that was certainly not the case. Maintenance had decreased because of planned maintenance schemes. They had also used a bidding process to obtain the lowest tender for maintenance contract that had also reduced costs. Finally, they had decided to use "pirate parts" to maintain old equipment rather than having to replace it.

Future of mining on land
Committee members questioned Mr Niehof on the future of mining on land. Mr Niehof replied that while it was true that Alexkor's future lay in marine production, land mining remained the largest employer. Mr Niehof also suggested that the land boundaries for Namaqualand might be larger than once thought because of changes in the course of the Orange River. This, however, was a political question and was not something for the Committee to take up.

Security Costs
The Committee asked why the cost of security had shown a significant decrease during the 1999/2000 year. Mr. Niehof replied that this was due, firstly to the installation of two new X-ray machines (which had been recorded as irregular expenditure). It was also due to the changing of the security company to Callguard and the retrenchment of some unnecessary contract staff.

Staff morale
Mr van Wyk asked whether staff morale had improved because there were reports in previous years that it was very low. Mr Niehof replied that morale was difficult to quantify. He said that low morale might have been due to uncertainty about their employment contract. It also may have had to with the Namaqualand community's unwillingness to readily accept outsiders. These problems had been overcome with time however. Mr Niehof added that the medical facility at Alexkor was providing free healthcare to the community, which may also have boosted staff morale.

Land Claim against Alexkor
Finally, Mr.van Wyk asked about the reports that groups within the community were instituting a land claim against Alexkor. Mr Andile replied that if the community's claim were shown to have validity, the Government would not oppose the land claim.

The Chair thanked Mr Niehof and Mr Govender for the presentation. The meeting was then adjourned.

Note: The Billiton presentation had been cancelled as confirmation from the Billiton office had arrived too late to schedule a meeting.

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