Department of Justice 2006/07 Budget and Strategic Plan: briefings

Meeting report

PUBLIC ENTERPRISES PORTFOLIO COMMITTEE
3 May 2006
ALEXKOR LIMITED PROGRESS REPORT: BRIEFING

Chairperson: Mr Y Carrim (ANC)

Documents handed out:
Alexkor Limited Power Point presentation 1
Public Enterprises Portfolio Committee 2006 programme

SUMMARY
The Committee received a progress report from Alexkor Limited management after it had met with the Committee on 26 October 2005. The main topics that were covered included the existing land claims case, recapitalisation and a future business plan.

Members were concerned about the future of Alexkor and its ability to create jobs and remain operational in the face of land claims cases.

MINUTES
Summary of meeting with Alexkor, 26 October 2005

The Chairperson gave a summary of the conclusions from the meeting with Alexkor in October 2005 and highlighted the following issues:
-The high turnover of Chief Executive Officers (CEOs)
-Lack of investment
-Declining production
-Lack of work ethic

The Chairperson wanted to start the meeting with a question session instead of a presentation because in his experience presentations were usually too general and he wanted to make sure the Committee’s questions were answered.

Discussion
The Chairperson suggested that the discussion should evolve around the following key issues:
- Legal cases regarding land claims
- The downward trend in diamond production and exploration
- Future business plan
- Transformation of Alexkor Limited into a municipality

Mr N Moloi (Alexkor Chairperson) opened the discussion by saying that the challenges had not changed much in the past six months. The problems with consistency and lack of funding for exploration still had to be solved. Regarding the land claims cases he noted that one case had been heard in the Cape High Court. The Minister of Public Enterprises is currently in contact with the local communities and a MoU (Memorandum of Understanding) has already been signed.

Mr T Mpnuti (Department of Public Enterprises delegate) added that the Department and two councils representing the communities must sign the final agreement.

Ms E Yengeni (ANC) asked exactly what had been agreed.

Mr M Stephens (DA) asked for how many years the agreement would be valid and what impact it would have.

The Chairperson said that no details of the agreement could be revealed.

Mr Mpnuti added that the agreement was consistent with the Restitution of Land Rights Act of 1994.

The Chairperson asked if the involved communities were in agreement on the issue.

Mr Mpnuti claimed that the Minister had managed to unite the communities.

Mr Stephens asked about the status of operational costs and recapitalisation.

Mr Moloi said that they had suffered losses in their diamond industry but that they were positive about the future and that these issues would be covered in the presentation.

Mr Moloi added that the land claims cases must be settled before a long-term strategy for Alexkor could be decided. He also said that Alexkor would be converted into a municipality. This would happen parallel to the land claim cases. As a result of the conversion Alexkor would no longer be responsible for schools and the airport etc.

The Chairperson raised the question about recapitalisation again and asked what the government’s long-term goal is. He claimed that either Alexkor must recapitalise to create new business or it would be lost.

Mr Mpnuti answered that this depended on what the government wanted to do with the diamond industry. The government’s main goal is to ensure more beneficiation of raw mineral resources, but he added that there was a cost to this also.

The Chairperson asked about Alexkor withdrawing from the agreement with local government.

Mr Mpnuti said that this is a clear separation project. The National Treasury’s separation project means that there will be a clear separation between different institutions and different industries. Because of this project a transfer of assets between industries will be necessary. This will happen between 1 April 2006 and 1 April 2007. It has been decided that this Committee would be briefed on progress with the separation project in about one years’ time.

Presentation by Alexkor

Mr M Mdaka (CEO) gave the presentation. He said that Alexkor was one of three companies working on the beaches of the West Coast. Regarding health and safety, they reported one fatal accident thus far this year.

The following topics were also covered:
the downward trend in production
challenges and future strategies for production
the company’s budget

Discussion

Mr Martins (ANC) noted that there had been a downturn especially in land mining. He asked if people were Alexkor’s basic resource and its strategy for job creation.

Ms C Kondlo (ANC) asked if the assumptions in the presentation were made on normal conditions or if all variables were taken into account. She sensed that the land claim cases were making future business difficult and expressed concern about the future of Alexkor.

Mr Moloi said that Alexkor owns 120 km of the beaches on the West Coast and that only 20 km had been mined. In 1995 it was decided that Alexkor would be restructured and the downward trend with declining production and unwillingness to produce started. All mining companies invest in exploration, but because of the land claim cases, Alexkor could not invest in the past two years. Because of new technologies it has become easier to mine under water, although there are still challenges. 20 km has already been mined, but divers can still be introduced in the additional 100 km.

Mr Mdaka said that the assumptions were made on average numbers based on historical assumptions, but added that the land claim cases made it difficult to predict the future.

A Member asked if Alexkor planned to cut or create new jobs, its strategy to attract young professionals and if it planned to enter the diamond cutting and polishing sector.

Mr Mdaka said that the main challenge when hiring was to find the right person, mainly through interviews. He thought Alexkor was a "good" place to work.

Mr Moloi answered that Alexkor will not invest in the cutting and polishing sector, but that they would supply the local industry with Alexkor diamonds.

Public Enterprises Portfolio Committee Report for 2005 and Programme for 2006
The report was not finished because of technical problems and could not be adopted.

When it was time to vote on the programme for 2006, some of the Members had already left and a quorum could not be constituted to adopt the programme.

The meeting was adjourned.