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MINERALS AND ENERGY PORTFOLIO COMMITTEE
31 August 2005
PUBLIC PROTECTOR’S REPORT ON PETROSA/IMVUME TRANSACTION: CONSIDERATION; DIAMONDS AMENDMENT BILL: DEPARTMENT BRIEFING
Chairperson: Mr E Mthethwa (ANC)
Documents handed out:
Report of the Public Protector (Cover page)
Report of the Public Protector (Body of this text )
Briefing on the Diamonds Amendment Bill
Report of the Public Protector on Imvume Transaction
The Committee considered the Public Protector’s report on the transaction between Imvume Management and Petroleum South Africa (PetroSA). The Public Protector had launched the investigation after a formal complaint had been laid by Mr W Spies (FFP), a Member of this Committee, and a subsequent complaint laid by the Leader of the Opposition, Mr T Leon. The (DA) complaints had been lodged on the strength of Mail & Guardian reports on alleged irregularities in the transaction between Imvume Management and PetroSA.
After lengthy discussion, several ANC Members moved for the adoption of the report. FFP and DA Members objected, but the Chairperson ruled that the noted objections were not justified. The report was then adopted.
The Committee was then briefed on the Diamonds Amendment Bill by a delegation of officials from the Department of Minerals and Energy (DME). Officials of the SA Diamond Board (SADB) and MINTEK were on hand to answer questions. The Amendment Bill would grow the diamond beneficiation industry in SA to create jobs, increase access to rough diamonds for manufacturing, and also turn South Africa into a major international diamond beneficiation centre.
Members applauded the move to greater local beneficiation, but raised concerns about the unintended consequences of the new legislation; the constant monitoring of increased beneficiation; socio-economic empowerment; international experience; the level of foreign involvement, and whether mining companies would be forced into downstream activities.
Consideration of Public Protector’s Report
The Committee considered the Public Protector’s report on the transaction between Imvume Management and Petroleum South Africa (PetroSA). The Chairperson reminded Members that the Public Protector had launched the investigation after a formal complaint had been laid by Mr W Spies (FF+), a Member of this Committee and a subsequent complaint laid by the Leader of the Opposition, Mr T Leon. The (DA) complaints had been lodged on the strength of Mail & Guardian reports on alleged irregularities in the transaction between Imvume Management and PetroSA in terms of which PetroSA had advanced an amount of R15 million to Imvume Management for the procurement of oil condensate from Glencore, a foreign company. Imvume had failed to procure the oil condensate as agreed, and PetroSA were taking legal action to recoup the advance. It had further been alleged that Imvume had channelled R11 million of the advance to the ANC for its 2004 election campaign.
He said that the purpose of the investigation by the Office of the Public Protector was to investigate whether there was anything untoward about the Imvume transaction with PetroSA. The allegations of corruption and fraud had emanated from newspaper reports which the Mail & Guardian had published about the Imvume transaction. The Mail & Guardian had also insinuated that a Member of this Committee had been denied documents that pertained to the Imvume transaction. The Chairperson stated that the newspaper reports were mislead since no such documents existed
The Chairperson invited Members to briefly give their reactions to the Report of the Public Protector. He emphasised the significance of the Office of the Public Protector as an institution supporting democracy. The Report found that there had been nothing ‘illegal’ about the Imvume transaction with PetroSA.
Adv. H Schmidt (DA) stated that the investigation of the Imvume transaction had been based on a narrow interpretation of the provisions of the Public Protector Act. Such a narrow interpretation of the legislation had resulted in the Public Protector failing to investigate key elements of the transaction.
He expressed concern over the failure of the report to take into account pronouncements made by the Auditor-General. His contention was based on the failure of the Public Protector to consult the Office of the Auditor-General. The Auditor-General had found that there had been a lapse in accounting standards when the Imvume transaction with PetroSA had been concluded.
Therefore, he expressed reservations about the circumstances under which the transaction had been concluded. Members wanted to know about the 11 million allegedly paid by Imvume Management to the ANC
The Committee needed to summon PetroSA to answer various key questions concerning the balance of R4 million still owed to PetroSA. He urged the Committee not to adopt the report and called for the Public Protector and PetroSA to appear before the Committee to answer their concerns.
Ms N. Mathibela (ANC) stated that the amount in question was a payment to Imvume and ‘not borrowed money’. It was no the responsibility of PetroSA, but rather of Imvume to explain the matter in question. She did not see the need to go back and forth on this issue and suggested the adoption of the report
Mr W Spies (FFP) stated that the Public Protector was human, and was thus susceptible to making mistakes. He agreed that all parties should maintain the integrity and dignity of the Office of the Public Protector. However, he indicated that there were some parties who were considering taking legal action against the Public Protector in regard to his Report. The Mail & Guardian newspaper apparently planned to take the findings of the Public Protector on the "Oilgate Scandal" on review to the High Court. On the basis of this pending legal action, he implored the Committee to postpone the adoption of the report to a future date.
He referred the Committee to National Assembly Rule 67 that covered the "sub judice rule. Any attempt to adopt the findings of the report would be to disregard the independence of the judiciary. He appealed to the Committee to defer its decision until the courts had decided the matter. He suggested that the Committee seek legal opinion on the "sub judice rule before adopting the report.
Mr S Louw (ANC) reacted that it was unfair to defer the adoption of the report as all parties had had ample opportunity to study the report. He argued that the Mail & Guardian was not part of Parliament and submitted that the legal proceedings affected the Mail & Guardian and others outside Parliament. The DA had had ample time to engage with the report. Any statement calling the report a "whitewash" undermined the Constitution and other democratic institutions. He moved that the Committee should adopt the report.
The Chairperson remarked that the Committee could still seek legal opinion on the validity of the report. He was reacting to statements suggesting that there were irregularities in arriving at the outcome of the report.
Mr L Greyling (ID) expressed concern over the suggestion that the integrity and the dignity of the Office of the Public Protector could be undermined by the comments of Members. None of the comments sought to undermine the integrity of any Chapter 9 institution. He wanted clarity on the process to be undertaken by the Committee in considering the report.
He and other parties had made numerous requests for documents related to the "Oilgate Scandal". However, such requests for documents had never been met by the Committee or the Standing Committee on Public Accounts (SCOPA). The Chairperson responded that no such documents were available to any of the Members of this Committee. He insisted that the Committee should proceed with the adoption of the report.
Mr Matlala (ANC) moved [for] the adoption of the report. This was seconded by Professor I Mohammed (ANC).
Mr Spies (FFP) objected to the adoption, as did Adv Schmidt (DA). The Chairperson noted the objections, but stated that they were not justified. The report was adopted.
Diamonds Amendment Bill: Department briefing
Adv Sandile Nogxina, Department Director-General, said the Amendment Bill largely sought to increase accessibility to rough diamonds for manufacturing and to grow the beneficiation industry in South Africa to create jobs. The Department saw the need for increased participation throughout the value chain, thus making SA a major international diamond beneficiation centre.
The objective of the Bill was to establish the SA Diamond and Precious Metals Regulator, and to empower the regulator to establish a Diamond Exchange and Export Centre. It also sought to establish the State Diamond Trader and to review different types of licensing. The State Diamond Trader would be established to promote equitable access to unpolished diamonds and the local beneficiation of South Africa’s unpolished diamonds. Its main function would be to purchase a portion of unpolished diamonds based on local requirements and to sell these to local beneficiators as well as to promote the industry. An independent and representative board would govern the State Diamond Trader.
Mr A Mngomezulu, Department Deputy Director-General: Mineral Policy, noted that the SA Diamond Board’s (SADB) income was derived largely from levies collected. The Bill would create a Consolidated Diamond Beneficiation License that would be a license for cutting and/or setting in tools or jewellery of an unpolished diamond. The license would be valid for five years as opposed to one year for the existing two licences issued under the Diamonds Act, namely for diamond cutting and for diamond toolmaking. Department objectives included creating equitable access to rough diamonds, maximising value addition and separating the regulatory function from the promotion function.
Mr C Kekana (ANC) inquired about the involvement and interaction of the SADB with tertiary institutions to ensure that students received practical and technical experience that provided them with adequate training for the job market. Mr L Selekane, SADB CEO, replied that they had training programmes in partnership with three accredited tertiary institutions. One of these, the Harry Oppenheimer Diamond Training Programme (running from January to December annually) currently had 57 full time students from South Africa and the African continent.
Adv H Schmidt (DA) inquired about the number of export and exchange centres currently in South Africa. Secondly, he asked for clarity regarding the demand and supply mechanisms in the process of diamond trading. Mr Selekane replied that the Board had renamed the ‘Diamond Exchange’ into ‘Trading houses’ with a willing buyer, willing seller focus.
Adv Schmidt(DA) asked how the Board controlled the issue of stockpiles. Secondly, he asked for clarity on the monitoring of licensing. Mr Selekane replied that currently, companies did not keep stockpiles, and with regards to licensing, the Board used to have a system of issuing ‘indefinite lifetime licensing’; however it was now up for review since lifetime licensing had proven problematic.
Mr C Molefe (ANC) asked what protective measures the Board was taking to ensure that diamond producers did not move rough diamonds out of SA before the Bill could be implemented. Mr Selekane responded that the authorities were aware of this potential and the security establishment were taking the necessary steps to prevent it.
Mr C Kekana (ANC) inquired about South Africa’s quality of rough diamonds in comparison to international diamond producers. Mr Selekane responded that South African rough diamonds were of the highest quality in the international market.
Adv Schmidt sought clarity on the duties currently paid on exported uncut diamonds. Mr Selekane responded that those goods deemed uneconomical to cut and polish in South Africa were exported ‘duty free.’ However, duties should be paid on any raw material exported from South Africa.
Mr Matlala (ANC) asked what mechanisms were in place to distinguish synthetic diamonds from natural diamonds, and which of the two was more marketable. Mr Selekane responded that natural diamonds were still more marketable than synthetic diamonds. The SADB was investing in the latest equipment to ensure compliance regarding the detection of synthetic diamonds. They had recently purchased two machines, namely Diamond Sure and Diamond Tech from Gemini in the USA that were able to distinguish synthetic diamonds from natural diamonds.
The Chairperson announced that the Committee would hold public hearings on the Bill following the October recess.
The meeting was adjourned.
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