Alexkor Restructuring Update

Meeting report

Alexkor Restructuring Programme: Update Briefing
Ms Khetiwe McClain, Executive Chair, Alexkor, Mrs I Pillay, Consultant for Resolve Group, and Mr Geoff Davies, Mine Manager, Alexkor, presented an update on the company’s restructuring programme in the Richtersveld, which had been ongoing since the Order of the Court in 2007 had transferred Alexkor’s land mining rights to the Richtersveld Mining Company (RMC). They explained that the terms of the final Deed of Settlement involved land mining rights being transferred from Alexkor to the RMC, although Alexkor would retain its marine mining rights and remaining mining assets. Alexkor and RMC were to form a Pooling and Sharing Joint Venture (PSJV), and put their respective marine mining rights and land mining rights under the control of a Joint Board for purposes of mining both marine and land diamond resources. All land and marine mining rights would be pledged to the PSJV. The movable assets relating to agricultural and maricultural businesses were to be transferred also to the Richtersveld Community.

The transfer of agricultural and maricultural assets took place at the end of January 2008. The current restructuring focus was on the people affected by restructuring initiatives. This would have to ensure fairness and dignity of treatment, financial packages, support initiatives such as training and transition support, engagement with key stakeholders and ensuring legal compliance at every stage of restructuring.

The financial consequences of restructuring were that Alexkor mining operations were not profitable and funds were limited. However, it wanted to ensure that the restructuring was holistic and integrated, involving full stakeholder engagement.

Charts of the employee numbers were given, together with diagrammatic representations of the development paths. The original financial offers were set out, and it was explained that a Voluntary Separation Package (VSP) was then structured, firstly for the farms, and then to include the mines. After negotiation, organized labour had requested that the original retrenchment process be resuscitated, to enable employees to claim their Unemployment Insurance Fund money and tax reprieve. The aim was to try to run the consultation process alongside with Voluntary Severance packages and Voluntary Separation packages. The process was aimed for completion at end of June. 

The principles governing the package, and the formula, were set out. The current approach was that the same package would be offered to both farms and mines employees. The restructuring, meanwhile, was being conducted in two stages: the first involving immediate transfer or exit of farm employees, and the employees affected by downscaling of the mines, and the second involving the exit of employees prior to the PSJV taking over operations.

It was noted that Alexkor must develop a social and labour plan, encompassing development programmes, processes to manage downscaling, promotion of economic development and minimizing impact on individuals, the region and the local economy. The political obligations, social challenges and employee impact were set out, together with the plans for easing employee impact. The proposed training and development initiatives were described. The social and labour plan was also described, and it was noted that challenges included the fact that the region and local economies were weak, that provincial opportunities were poor and there were limited social support providers. Stakeholder engagement would be critical to overall sustainability. The attached presentation set out full details under each of these points.

The financial overview of Alexkor for the years 2006 to 2008 was given, noting that in the previous years there was a nett loss of R19 million, and in 2007/08 a nett loss of R4.7 million. 
Discussion
The Chairperson asked about the different joint ventures that Alexkor was implementing, including the township development. She questioned how far along the processes were, and if any were already up and running. The Chairperson also asked how Alexkor was involved in the PSJV, as there was a lack of concrete information on this in the presentation.

Ms McClain answered that, with regard to the agricultural companies, the transfer of movable assets had already been made from Alexkor to the community. The companies were therefore no longer on Alexkor’s books. However, Alexkor did offer support during the transition period.

Ms McClain noted that in terms of the PSJV, 51% was held by Alexkor, and 49% by the community. The Board of the PSJV was a sub-committee of Alexkor’s board. However, there were no Alexkor board members on the PSJV board, and in the deed of settlement it was unanimously decided that the PSJV should operate independently, without interference from Alexkor.

The Chairperson then requested more information on what has already been established; and how the appointment of officials took place.

Ms McClain answered that a drawing board had been established, and that Alexkor was in the process of setting up certain plans. The PSJV had not yet been appointed, but this process was currently under way. She also mentioned that the Department of Public Enterprises (DPE) was the driving force behind the township development; along with some local and municipal government members.

The State and Alexkor had the cooperation of the Development Bank of South Africa in order to undertake projects under their Sustainable Communities Programme. The Development Bank had already established programmes around the Western Cape, and the DPE had used these as a model. The Sustainable Communities Programme provided for a steering committee of all the stakeholders, including the DPE and the Department of Public Service and Administration, Alexkor, and local municipalities. Once this was formed, the township development would be transferred to the Richtersveld Municipality. The Department of Public Service and Administration had a different approach to sustainable development, which involved coming up with infrastructure in line with the local environment, climate and economy. Full construction of the township, including building and upgrading of all the sewerage and water pipes, was expected to take 18 months. 

The Chairperson requested a further briefing, including information on the phases of the programme, the main aims and objectives, timelines, the roles of the different stakeholders, and the framework of the municipal regulations.

Mr L Gololo (ANC) asked whether the exiting employees involved in the six month post-care programme would be paid a salary during these six months.

Ms McClain responded that, with regard to the post-care programme, six months was considered a worse-case scenario, as many people would find alternate employment in a much shorter time. However, training needed to begin as soon as possible, otherwise the programme would go well beyond its own cut-off dates for restructuring. Because it was not economically viable to send service providers into an area to provide training to a single person, the process was instead taking place on the mines. People therefore remained on the mines for the duration of the training. However, because of this, Alexkor needed to provide some form of monetary incentive to people to remain on the mines, and did so, although this was not a salary as such. Follow-up visits were carried out for those who did leave the mines. 

Ms Pillay added that the first aim of post-care was on-mine up-skilling of employees. This was combined with after-care services to facilitate the skilling, either on the mine, or in the towns where employees later settled. A support structure had also been established through the municipalities, including a help-desk, and a transition office would help people to find alternate employment. Ideally, it would be run from the mine, but hopefully the municipality would be able to provide assistance at a later stage.

Mr Gololo also asked about the current and future role of a specific group of female contractors in the re-structuring process.

Ms McClain noted that the contract for the specific women’s group had been renewed, and that Alexkor would focus on such groups in the future, by providing support, and trying to ensure that they were successful. However, contracts could not be renewed for long periods of time, as they could well be affected under the PSJV.

Mr Davies added that the women’s group received support in the form of advice and capacity-building.

Mr Gololo asked, since Alexkor had until recently provided municipal services in the area, whether municipal workers would also be affected by voluntary separation or severance packages.

Ms McClain said that nineteen of the municipality workers had been ring-fenced to remain employed during the transition process, and they would take care of municipal services during the township establishment. However, this number had been reduced over the years.

Mr Z Kotwal (ANC) asked about future operations and about the PSJV Board, including how it was constituted and chaired, and how the community was represented.

Ms McClain answered that three members were nominated by Alexkor, and three members were community members, nominated and approved by the community. The PSJV board was a sub-committee of the Alexkor board, and therefore reported to Alexkor. 

The Chairperson noted that the Committee would need a briefing from the Department on the PSJV, as Alexkor had not had extensive involvement in the process. She also enquired what was the relationship between Alexkor and the PSJV.

Ms McClain answered that Alexkor needed to oversee the process to ensure it ran smoothly, because the mining rights conversion was critical. However, the Board was still busy exploring other options around Alexkor’s future role in this process, and would be able to report back to the Committee on this in the near future.

The Chairperson asked for more information on the number of people affected by the process. She asked why Alexkor had chosen to provide post-care support, as it may have been more cost-effective to simply provide retrenchment packages, and ring-fence money for further training and development. The Chairperson also requested a breakdown of the costs of the transition process, and more details on the infrastructure upgrade, including timelines, what was to be upgraded, the costs, and a list of the infrastructure projects.

Ms McClain answered that some of the information could be provided now, but anything relating to the conversion would only be available later. The process involved a small number of employees, especially in comparison to other mining companies completing restructuring in the area. There were only 83 mine-workers, and 76 farm-workers involved. Alexkor was required by law to go through a social and labour plan process, rather than just providing retrenchment packages. This process needed to involve training and skills. The process of training could be started within the next few weeks, and would continue for up to six months. This was because it would make sense for employees to receive training before they left the company. Around R17 million had been set aside for re-structuring for employees.

Ms Pillay added that the process was worked out with an average of R15 000 to R17 000 being allocated per person for further skills. However, not everyone would opt for a full learnership. Some would simply be doing skills conversion, or get certification of a skill they already had. A variety of possibilities were available. However, there were no year-long programmes, as employees could not sustain themselves for this long. 

Mr R Nogumla (ANC) then asked why Alexkor had chosen to adjust its programme, instead of just retrenching the employees.

The Chairperson noted that this could be related to Unemployment Insurance Fund (UIF) and tax issues. Retrenchment packages had certain tax implications. 

Ms McClain added that the process must be changed so that it did not penalise employees. The new programme was intended to assist employees in lower income brackets. The current process was an improvement on the initial plan.

The Chairperson asked for a cost projection of the various transition activities from Alexkor, in order to see what was still outstanding. The Committee also wanted details of the mining conversion process.

The Chairperson thanked the Alexkor delegation but noted that because not sufficient members were present, the Committee could not pass the draft Report today, but would attend to this in the following week.

Second Draft of Committee’s Oversight Report on Pebble Bed Modular Reactor (PBMR)
The Committee discussed the second draft of its Oversight report on the Pebble Bed Molecular Reactor (PBMR Ltd). A number of minor changes were made. However, since there was no quorum, the Report stood over for approval at a future meeting.

The meeting was adjourned.