Alexkor Administrator on outcomes of forensic investigation and turnaround plan; with Deputy Minister

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Public Enterprises

27 May 2020
Chairperson: Mr K Magaxa (ANC) and Mr T Matibe (ANC; Limpopo)
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Meeting Summary

Video: JM: PC on Public Enterprises and SC on Public Enterprises and Communication,27 May 2020
Audio: Alexkor Administrator on outcomes of forensic investigation and turnaround plan 

Joint Committee Media Statement

The Portfolio Committee on Public Enterprises and the Select Committee on Public Enterprises and Communication were briefed by the Alexkor Administrator on the outcomes of the forensic investigation and the turnaround plan. The Deputy Minister of the Department of Public Enterprises was in attendance.

The presentation highlighted the specific terms of reference by the Department which included, amongst others, an extensive review of and proposed solutions for the mining contract and revenue sharing models between the Alexkor Richtersveld Mining Company PSJV and the contractors. Future contracts should be determined on a scientific basis and be performance based. The Johannesburg office should be closed and the Chief Executive Officer, who is a mining engineer, should be relocated to the mine in Alexander Bay. The sales and marketing contract awarded to Scarlett Sky Investments was found to be irregular and in order to overcome this, an application for a diamond-trading license was made so that the contract can be cancelled. It’s anticipated that the license will be issued in mid-June of this year. The Department fell short in providing the Administrator with all available information and data and in rendering assistance without unreasonable delay. It was highlighted that the town of Alexander Bay must be handed over to the Alexander Bay Municipality, the property portfolio in Port Nolloth and Alexander Bay must be sold and a task team must be established to deal with the issue of illegal mining.

Members were also briefed by the Department of Public Enterprises on the state of Alexkor and the proposed future options. The presentation highlighted the inconsistent carat production over the past 5 years due to worsening weather conditions, declining quality of land diamonds resources and no production from deep sea operations. Alexkor is currently not a going concern and is expected to run out of cash by the end of June of this year. The current cash position is insufficient to cover the operating expenses. Government has not supported the request for additional equity primarily because the business model is not sustainable and the Public Finance Management Act doesn’t apply which makes it difficult to put public funds into a structure where the funds can’t be properly accounted for. The Department’s preferred option must still be discussed by the cluster and Cabinet. The preferred option includes the transfer of the remaining Deed of Settlement obligations to the Department, the transfer of municipal functions which are currently being executed by Alexkor, the winding up of Alexkor’s head office operations and consultations with the Richtersveld community.

Members raised concern on the issue of heavily armed illegal miners, the trend of mismanagement and theft across state-owned enterprises and that the presentations barely touched upon the role of management and the state in the situation. Members raised concern that the Department failed to provide its information to the Administrator in order for him to perform his work. Members asked whether there are prosecutions against the executive members of Scarlett Sky Investments and how far the process is on handing over responsibility of Alexander Bay to the municipality. Members raised concern that the exploration and mining plan should be done by the company rather than outsourced contractors. It was also asked why the irregular appointment of Scarlett Sky Investments was not referred to the Public Protector, how far the application process is for a trading license, feedback on the disciplinary action case against the Chief Executive Officer and how the Department provides support and socio-economic activity for the community.  

 

Members asked to be provided with the full forensic report, more details and timeframes concerning the Johannesburg office, more information on the usage of fuel cards, more information on the investigation into the relationship between Alexkor and the PSJV and for a clear report on the duties of the Administrator, what he was able to execute and how the R17 million is accounted for. Members also raised concern on the capacity of the Department, whether it consulted with the relevant stakeholders when retrenching its employees and whether there are any pending court cases lodged by the Department against those implicated in the investigation. Members raised concern that the issues facing Alexander Bay are as old as 10 years and are yet to be resolved. It was asked whether the factory in Alexander Bay was still using old and outdated equipment, why the local populace do not benefit from the business and to what extent the Gupta family is involved in Alexkor.

Meeting report

Opening remarks
Co-Chairperson Magaxa welcomed Members, the Deputy Minister of the Department of Public Enterprises (DPE) and officials of the Department to the meeting. He asked the Deputy Minister to provide a political overview before the Department begins its presentation.

Mr Phumulo Masualle, Deputy Minister of Public Enterprises, said the Alexkor Administrator should present his report before the Department does. The Department will provide an input on the state of affairs beyond the life of the Administrator. The Administrator was appointed on a fixed term contract with a duration of 6 months. This duration has been exhausted. Where his work was not completed within the fixed term, the Department had to see to the completion of such work.

Co-Chairperson Magaxa asked the Administrator to begin his presentation.

Briefing by the Alexkor Administrator
Mr Lloyd McPatie, Alexkor Administrator, said he wasn’t hired to do a forensic report. He was given specific terms of reference by the Department and the presentation will highlight this. He had to fulfil the following 3 roles: Executive Chairperson of Alexkor, Chairperson of the Pooling and Sharing Joint Venture (PSJV) and the Chairperson of the Rehabilitation Trust. All of these positions came with their own challenges. In the first role, Alexkor is not a going concern and has serious financial challenges. In the second role, the Deed of Settlement indicates that the PSJV Board should contain 3 members from Alexkor and 3 members from PSJV. The Administrator was the only one from Alexkor and this created challenges during Board meetings. The 3 court-appointed PSJV Board members were appointed in December 2019. In the third role, Alexkor approached the National Treasury (NT) to do the rehabilitation but this proposal was rejected. The Department was going to renegotiate with the NT on this issue.

Mr McPatie said his terms of reference included an extensive review of and proposed solutions for the mining contract and revenue sharing models between the Alexkor Richtersveld Mining Company (RMC) PSJV and the contractors. The mine uses contract miners and the revenue splits tend to favour the contractors. Future contracts should be determined on a scientific basis, by looking at past geological data, so that it can be more equitable towards the PSJV. The contracts will also be performance based. This will help in separating the poor performing contractors from the good ones. At the moment, there are more than 100 contractors at the mine which makes it extremely difficult to manage. There was a negligence of the usage of fuel cards and the Acting Chief Financial Officer (CFO) was instructed to monitor this on a monthly basis. In reviewing duplicated functions at Alexkor head office and at Alexkor RMC PSJV, it was proposed that the Johannesburg office should be closed and the Chief Executive Officer (CEO), as a mining engineer, should be relocated to the mine in Alexander Bay. The current rent is still being paid because the Department hasn’t discussed a reduction in the penalty yet.

Mr McPatie said the Sales and Marketing contract awarded to Scarlett Sky Investments (SSI) was found to be irregular. The difficulty with cancelling the contract immediately is because of the financial situation. SSI is selling diamonds on a monthly basis and if the PSJV doesn’t sell diamonds, it will have no money to pay its contractors or to pay for water and electricity. It provides electricity for the entire town. The community is poverty-stricken and there will no money to pay salaries if the contract is cancelled immediately. An application for a diamond-trading license has been made and it’s anticipated by the CEO that the license will be issued by mid-June of this year. Once issued, the contract can be cancelled and diamonds can be sold on any platform. The Department fell short in providing the Administrator with all available information and data and in rendering assistance without unreasonable delay. A significant portion of Alexkor’s monthly operational costs is related to the management of Alexander Bay. This should not be Alexkor’s responsibility and the town must be handed over to the Alexander Bay Municipality. During winter its extremely difficult for the PSJV to operate so it is suggested that a winter period shutdown is implemented. There is a whole host of issues concerning the property portfolio in Port Nolloth and Alexander Bay and therefore the properties should be sold. Illegal miners are armed and aggressive so a task team needs to be established in order to deal with this issue.   

Briefing by the Department of Public Enterprises
Ms Makgola Makololo, Acting Deputy Director-General: Energy, DPE, said the PSJV carat production has been inconsistent over the last 5 years. The reasons for poor performance include worsening weather conditions, declining quality of land diamonds resources and no production from deep sea operations. Other mining companies have exited the Richtersveld operations due to the decline in the quality of diamonds. Alexkor is currently not a going concern and is expected to run out of cash by the end of June of this year. The current cash position is not sufficient to cover the operating expenses. Government has not supported the request for additional equity primarily because the business model is not sustainable. Even though the Deed of Settlement propels government to put money into the PSJV, the PSJV is not subjected to the Public Finance Management Act (PFMA) and this makes it difficult to put public funds into a structure where the funds can’t be properly accounted for. The decreasing revenue trend is likely to continue because there is no clear mine plan, high operating costs and the fact that deep-sea mining is not operational. The Department’s preferred option is still being discussed in government and discussions must still occur with the cluster and Cabinet. The preferred option includes the transfer of the remaining Deed of Settlement obligations to the Department, the transfer of municipal functions which are currently being executed by Alexkor, the winding up of Alexkor’s head office operations and consultations with the Richtersveld community.

Deputy Minister Masualle said the forensic investigation report has been provided to members. It includes a summarized table with each of the recommendations and the action steps taken.

Co-Chairperson Matibe asked members to raise questions.  

Discussion
Mr S Gumede (ANC) asked for reports to be sent to members earlier. Members are now flooded with reports and it gets confusing as to which reports have been received and which haven’t. Some of the reports are thick. This tendency of not submitting reports timeously must be addressed. Is it legally competent, if not ethically correct, to have both financial persons resigning at the very same time and with immediate effect? It’s suspicious if they both leave without any prior notification. On the issue of heavily armed illegal miners, what is the Department doing in such an instance? What is the kind of relationship between the Department, Alexkor and the PSJV? Option 6 indicates a rebirth or reincarnation where the entity is seen as a new person that may even be given a new name. Won’t the community be troublesome in this process of rebirthing an organisation? Out of all of the options he would have preferred option 5 because it leaves the community with work. The PSJV is technically insolvent, the Administrator states it’s not resourced and there is no capacity to run the company. This challenge brings into question whether option 6 is appropriate in this kind of situation.

Mr G Cachalia (DA) said Alexkor’s stated intent is to support the national development goals, optimize national resources, promote beneficiation and increase participation in the local and international diamond industry. On all of these parameters, it has failed spectacularly over many years. It’s a case study in mismanagement and theft. Every villain in the industry and every player in state capture have been complicit in this demise. The report of the Administrator bears some testament to this sad state of affairs. The Administrator’s recommendations concerning the Johannesburg head office, the PSJV and the SSI are sound but other areas such as the role of the Board, management and the state in this debacle is barely touched upon. Places like Botswana, Namibia, Tanzania, Canada and Australia show the viability of either private ownership or an appropriately governed and equal relationship between a private investor and government with proper governance in place enabling the accountability and scrutiny during investments. None of this has been in place in Alexkor. Regardless of whether it was under the stewardship of the previous or current administration, it represents a significant market failure in the hands of state ownership.

Mr Cachalia said the Department’s preferred option is to cede mining rights to a SOC reporting to the Department of Mineral Resources and Energy (DMRE) with a new community shareholder. This represents the same situation which has led to a bleeding fiscus, a community sold down the river, gross impropriety and a failure by government. In view of the ongoing debacle, the only credible solution appears to be liquidation or sale to the private sector in the face of insolvency and reckless trading. Purchasers can be found if the price, terms and underlying assets merit it. What are the costs of administration? Is there a schedule of activities, time and associated costs? Are there prosecutions in the pipeline for SSI executives and other complicit entities including management and the Board? Have there been expressions of interest from other players in the industry? In looking at the options and wishes of government departments, what are the obligations under the Companies Act given the insolvency and reckless trading which the Administrator has uncovered?

Mr Cachalia said miners are not mining in the dark north of the river. How do you count the success of profitable trading north of the river? Does this not point to management’s deficiency over many years? How far is the process of the municipality taking control of Alexander Bay? Should any geological exploration and mining plan rather be done by the company? If it is outsourced to a contractor then the company has no control over it. It will be irregular if it’s in the hands of the contractor. In terms of the recapitalization option, who is expected to foot the bill? Is it the tax payer again? Any prospective purchaser of mining rights will do their own due diligence. In terms of a sale option, it is common practice for the purchaser to determine what lies there, what the value is and what they are buying. To put this as an impediment to the sale option is nonsensical. If you can’t deliver on your core business then surely you have no business embarking on non-core businesses such as agriculture?

Ms O Maotwe (EFF) said there seems to be a bit of confusion between the Deputy Minister and what he expected the Administrator to present. His opening remark indicated that the Administrator would present the forensic report but this was not part of the mandate. In future, the forensic report should be given to members because it will be very helpful. The Johannesburg office must be closed down because it’s not serving any purpose. How far is the Department in negotiating with the estate agent? What has it done so far? If it doesn’t agree with the estate agent, why doesn’t it take him to court to nullify the contract? On the irregular appointment of the SSI company, is the application for a trading license the only option to nullify the irregular contract? Why doesn’t the Department refer the irregular appointment to law enforcement agencies such as the Public Protector? The license is expected in June. How far is the application? Since the Administrator is no longer in place, who is keeping track of the application? Money needs to be set aside to save the mine. The full project life cycle, including feasibility studies, must be done. When are you going to do the feasibility study? What is preventing the Department from starting that process?

Ms J Mkhwanazi (ANC) asked if members can be provided with details and timelines on the current position of the Johannesburg office. Can the Department take members through its capacity to process the Administrator’s report? Is the Department able to perform its duties and handle option 6? What is the capacity of the Department itself?

Mr A Arnolds (EFF; Western Cape) said it’s concerning that the Administrator struggled to get information from the Department in order to do his work. Can the Department provide reasons for this? Can members receive more information on the investigation into the relationship between Alexkor and the PSJV? The summary provided to members is very short. The disciplinary action case against the CEO is ongoing. The irregular exclusion of appointing miners is a serious matter. Can members receive feedback on the case? The Commission for Conciliation, Mediation and Arbitration (CCMA) case concerning the irregular exclusion of appointments of contractors and tenders is another matter. The investigation report contains an allegation that there was only 1 member on the Department’s Tender Committee to conduct oversight over the entity. What is the reason for the irregularity not being detected and adhered to? On the usage of fuel cards, can the Administrator provide more information so that members can see what was actually spent, how it was spent and how it was corrected?

Ms W Ngwenya (ANC; Gauteng) said that President Ramaphosa stated in his State of the Nation Address (SONA) in February 2020 that there is a move from establishing state-owned enterprises (SOE’s) to repurposing these strategic companies to support growth and development. This sentiment is relevant to Alexkor because members are looking forward to a lasting turnaround plan. Alexkor is planning to retrench about 2 employees. Did the Department consult with the relevant stakeholders such as organised labour, civic society and other relevant structures? If yes, how did the consultation process go with these structures? If no, why not? Are there any pending court or litigation cases lodged by the Department against those implicated by the investigation, apart from the ones already mentioned in the presentation? If yes, what is the nature of the findings against those implicated? Why has the mismanagement of Alexkor proven to be such a difficult challenge to overcome?

Ms Ngwenya said the Select Committee on Public Enterprises and Communication had a meeting the previous day with Minister Gwede Mantashe and the DMRE where members were informed of a decline in the demand of diamonds that may impact the exporting of diamonds. How will Alexkor sustain its own business of producing diamonds if there is decline in the demand of diamonds globally? The Johannesburg office must be moved to Alexander Bay to ensure compliance and work as the oversight office. Staff contracts seem to be a part of the challenge. Staff retention creates the possibility to attract sustainable, qualified and permanent persons in order to avoid CCMA and settlement cases.

Ms C Phiri (ANC) said one of the duties of the Department is to monitor, evaluate and give support to SOE’s. It seems like the Department is doing its work and people are assigned to specific SOE’s but there is a clear trend of the situation becoming messy. What is the Department doing before things get messy? The Department submits monthly reports. When it immediately finds out there is a challenge, what kind of support is given to the SOE? If such an enterprise is not abiding to the terms and references it’s given, what are the steps taken by the Department to ensure the situation changes and a messy situation is avoided? All of the SOE’s are in a similar state. Why is the Department even there to give oversight and support? A direction was given by President Ramaphosa at SONA but members don’t really see these things happening.

Ms T Modise (ANC; North West) asked whether the representative from the Richtersveld community was engaged on option 6. If there was an engagement, what was the community response?

Ms J Tshabalala (ANC) noted the mandate of the Administrator was to restore governance. What would he say he has managed to do to assist and restore some order in the entity? Was there any value for money in the work that he executed? Is he confident with himself? Was there an exchange between himself and the executive where he raised fundamental concerns? What lessons can the Department learn in this? What is being planned for the Department so that it has financial muscles for the Alexkor issue not to fall through the cracks? Can members be provided with a progress update on the future role of Alexkor and the socio-economic outcomes on the Richtersveld and Alexander Bay communities? Members are concerned about those communities. There is opportunity for socio-economic activity. How will the Department provide support to those communities?  

Deputy Minister Masualle replied there was no confusion on his side. An impression might have been created that the Administrator would present the forensic report but this report was submitted by the Department. There is no problem in making the entire and full report available to members. The presentation is concise and user-friendly by focusing on key findings and actions on those findings.

Mr Kgathatso Tlhakudi, Acting Director-General, DPE, replied that the resignation of the financial persons raises a red flag. Where funds are running out fast, it creates a risk for these professionals. The funds are expected to run out by June so there is a clear mandate on what the deliverables should be. The issue of diamond theft at Alexkor is an old issue. It was estimated at some point that 25% of diamonds get stolen from Alexkor. A security company was brought in to assist with this. On the question of whether option 5 is preferable, the state of affairs with the community structures make it very hard to engage with them. When option 6 is implemented, a way will be found to make sure the communities are properly empowered. The communities have seen diamonds being taken out of their land since 1988 and have not seen any proceeds from it. Even after the new government has come in to ensure the deeds settlement is implemented, communities have still not seen proceeds coming their way. There is fighting within the community. Those who could get their hands on the resources sowed division within the community. The appointment of people who have sector specific knowledge is very important in the turnaround plan. Some of the capability can come from public-private partnerships. The average salary that mining companies pay their executives is extremely high compared to what is paid to their miners. It’s a clear message that the capital system needs to be relooked at. A model is needed that is tailored specifically to the context of South Africa and that empowers communities.

Mr Tlhakudi explained that matters of state capture are referred to the Zondo Commission. In the past, the Administrator provided very concerning responses when asked why irregular contracts were not terminated. The power to affect such a decision lies with the Administrator as the accounting officer. Miners raised concerns that diamonds were getting sold through SSI and an analysis showed they were getting paid 40% below index. The contract was found to be irregular. The Department will step in to make sure diamonds are sold through the proper channels. On the obligations under the Companies Act given the reckless trading, the Department has developed options to ensure the situation is addressed. The Administrator was brought in as a temporary measure. On the difference in performance between the south and north side of the river, the criticism is linked to the quality of management. It was apparent that the suspended CEO of Alexkor was not suited to this particular task. The Board that was overlooking the business decided to proceed with him even though he had Human Relations (HR) qualifications and not mining qualifications. The diamonds tend to drift north as a result of the currents in the ocean. The resources have not been fully exploited in the past and this will be addressed going forward. The municipality needs to start taking responsibility over Alexander Bay town. On the issue of using the company instead of outsourcing mining contractors, this is something that needs to be looked at but it essentially boils down to management. If there is a proper team in place, this ideal can be realised.

Mr Tlhakudi informed Members that the buyer will normally conduct due diligence and determine the price instead of the seller. On conducting non-core businesses, Alexkor used to produce agricultural products due to the availability of water from the Orange River. This fed communities and created activities such as breeding shellfish as well as having a dairy farm. These are sustainable businesses that supply communities up the West Coast. On the contract with the landlord, the power to re-negotiate lies with the Board and management of Alexkor. All the Department can do is nudge growth in the right direction. Ultimately the contractual relationship does not involve the Department. On the exploration programme at the mine, exploration requires a lot of money that the Department and Alexkor do not have. It’s in the hands of the professional team to come up with an innovative exploration solution because the Department is not in a position to undertake such a task. The Department is properly capacitated and resourced. Alexkor is a small business and the Department has a small team that works very closely with the Administrator. On conducting oversight over entities, the country has just emerged from an era where there has been a systemic breaking down and looting of SOE’s. The Department has a very small team that spends long hours engaging in these issues. The damage that has already been done to these entities is quite horrendous and members need to really appreciate that.

Mr Tlhakudi replied that the Department has sorted out the governance issue, public funds have been mobilized to sort out the balance sheets and there is a focus on the operational performance of entities to ensure, with the support of the Board, that competent people are appointed at entities. It will take time to get there. These skills might have to be resourced from private entities. Option 6 is beyond the Department because it needs to be approved by government before it can be implemented. Alexkor has 51% of the shares in the PSJV group. The Administrator would vote on those shares. The Department has addressed the issue of using the Administrator’s vote to represent the government’s interest. On the decline in the demand of diamonds, it’s a difficult economic period to be seeking partners and new markets but Alexkor diamonds are some of the most sought after in the world. There will be a post-Covid-19 period where markets will recover. On lessons learnt, the Department has learnt the significance of having the right team in place. The issue of consolidation in the sector is also important. On Alexkor, the government could have done more in delivering socio-economic projects by working closely with the municipality. The region is unique, has a lot of value and has opportunity to improve the lives of people. The Department has been to the region with the head of the mining sector and conducted community engagements with contract miners. This has been very fruitful because the engagements prompted investigations. Members can assist the Department by getting other departments who have oversight over these areas to produce a joint solution.

Ms Morongwa Mothengu, Director: Mining, DPE, replied that in 2013/14 the Department gave the PSJV around R200 million to conduct exploration. That money has since depleted and the utilization of it was not properly managed. The Department believes that some of it was mismanaged and should have been used to ensure a better position for the PSJV. The Department has also assisted with a study where it paid half of the costs for a specialist in the diamond industry to conduct an overview of the land assets. That report is available to the PSJV. On illegal mining, the closing of operations in that area has resulted in the increase of Zama Zama’s. It’s a widespread issue because the goldmine is also experiencing it. The PSJV has established a monitoring security cluster in that area. There are weekly meetings and increased security has been established. In the Department, officials that are on the security cluster have been informed of the situation and have advised on how to assist the PSJV.

Mr Lemogang Pitsoe, CEO, Alexkor, replied that the trading license has been granted and all of the paper work will be received next week. There is a transitional agreement that indicates the handing over of the Alexander Bay town to the municipality with effect from 1 July 2020. Alexkor is currently spending almost R8 million per year on municipality activities.

Mr McPatie replied when he took on the position as Administrator, the PSJV had a debt of R126 million. R13 million of the debt was owed to SSI. In 2019, the Board ratified a loan agreement and backdated it. A focus repayment plan was put together for SSI, Eskom, medical aid and all of the creditors. This plan helped to lower the debt. He realised there was an abuse of garage cards, particularly the vehicle of the CEO. He lives in Cape Town and used the company vehicle on a weekly basis to attend meetings in Cape Town. The current Acting CFO has been instructed to monitor this abuse. He had received good support from management and saw a marked difference in the CEO. The CEO came up with good ideas because he felt like he was being listened to and engaged with. The role of the company secretary is underplayed because the support received from her was fantastic. At the mine, the current Acting CEO is a fantastic geologist. Between him and the CEO of Alexkor, they can create magic because they have fantastic ideas. On terminating the lease agreement, he engaged with the managing agent and it was made adamant that the lease must be paid until the end of the lease period. The Department said it would engage with the managing agent to see if a better deal can be reached. Even if he wanted to cancel the contract, the framework prevents him from doing so. On retrenching staff, there was only 10 staff members when he joined. He wrote to the Minister about the retrenchment and received no response.

Deputy Minister Masualle replied the Department is engaged in the process of consultations. This process will provide the decision on the proposed option to deal with the situation. The recommendations from the Administrator’s report have been consolidated into the options. Option 6 is a viable option going forward. The model itself includes the restoring of community dignity. The Department of Land Affairs is also on board with the community aspect. This aspect hasn’t worked well in the rest of the partnerships. Part of repurposing SOE’s is to relook at the standards and to make them sustainable. On the involvement of the private sector, it’s not the time to resell. Other stakeholders need to be drawn into the thinking process and action going forward.

Co-Chairperson Matibe asked members to raise any follow-up questions.

Mr Cachalia said that mining rights are extremely valuable. It’s clear that De Beer’s is the only company able to mine the deep waters profitably and responsibly. Once you mine the resource, you have to market and sell the product. You need to ensure that you bypass the middle men and secure the requisite permissions to do so internationally to bypass cozy cartels that are in place locally who have sold diamonds at 30% less value than the index. This can only be explained by underreporting, theft and extreme negligence. If you do it correctly, the valuable properties that communities hold kick in and communities begin to benefit. To do so you need competent management that requires oversight and governance. As soon as it’s feasible, members must do an oversight visit to the area and gain information from the horse’s mouth.

Ms Maotwe said she is not happy with Mr Tlhakudi’s responses. He is the Acting Director-General of all SOE’s under the Department. How can he say that some matters are for the management? What has he done? The Administrator has referred matters to the Department. What has the Department done? It should be in the best interest to save money through a simple thing like cancelling lease agreements or taking people to court to nullify contracts. This can’t be left unattended if it can save millions. Members must be taken seriously please.

Mr M Nhanha (DA; Eastern Cape) said that some time last year members were briefed by Alexkor and he would like to repeat what he said in that meeting. It’s an indictment on government that issues as old as 10 years are yet to be resolved. The issue of who is responsible for service delivery in that township, revamping and dairy farms are the same old issues members heard about 10 years ago. The annual reports of Alexkor speak to this. The kind of community that lives in the Alexander Bay area don’t deserve this. They need government more than ever before. On the factory at Alexander Bay, the last time members went there was in 2012 and there was old and outdated equipment. Most of the equipment was broken. What is the state of the equipment that is currently being used in the factory? If there is still old equipment, how do you expect the business to operate optimally while competitors are using cutting edge technology? The diamonds are transported from Alexander Bay to Johannesburg for processing and polishing. How do you expect to develop the area without localising the value add for the local populace? On matters referred to the Zondo Commission, in the fourth and fifth administration, there were 3 ministers reporting to the Gupta family. To what extent has the Gupta family been involved in engaging in the Alexkor business and the diamonds in Alexander Bay?

Ms Tshabalala said members had 2 engagements with Alexkor last year and the issue of the Administrator was at the centre of the meetings. This should be the point of departure. The Administrator and Board of directors have duties to restore normality and stability in order to maximize successful outcomes. What exactly did the Administrator do? What type of corruption was he in a position to root out? Has a right sized model been proposed? R17 million was put into the Department to bring stability into Alexkor. What exactly was the Administrator able to execute? The impediments highlighted in the report don’t answer this. Can members be furnished with a clear report around the duties of the Administrator, an accounting of the R17 million that was given and what exactly was done besides stating that offices must be closed down?

Ms C Labuschagne (DA; Western Cape) said she has been part of the Select Committee on Public Enterprises and Communication dealing with the Alexkor issues since 2014. The previous Committee called for the appointment of an Administrator and an investigation into the supply chain management. For the first time in 7 years, members are receiving reports and getting an indication of what is going wrong in Alexkor. Since 2014, members have been very worried that the community is not benefitting from the land claim and the contracts being done. The community can only benefit if there are economic options and if the mining is going to be viable. There needs to be some kind of income for the community. The Department must look into all of the options. The reporting of the state capture and corruptive activities to the Zondo Commission can take years. The Administrator’s report contains a lot of information and the Department should follow through in laying criminal charges and doing the correct thing. She and the previous Chairperson of the Committee in the previous term received warnings to stay out of these issues. In the last meeting of the Fifth Parliament, the Committee called for the Department to refer these issues to the Zondo Commission. She said she’s very glad to hear today that it’s been done. The Department must take this further and do the right thing. That community is destroyed as it is and people are going to be further destroyed. She agreed with Mr Cachalia’s suggestion for members to do an oversight visit.

Deputy Minister Masualle replied that members are welcome to visit the area. He personally undertook to correct some of the challenges highlighted by the Administrator so that when a matter is being dealt with, it can be taken to its logical conclusion without any delays. It’s just a matter of improving communication. On the indictment on government, these are not easy challenges. Some are beyond the Department and involve the community who has not been stable over this period of time. From 1 July, the Department anticipates that all the municipal functions undertaken by Alexkor will be handed over to the local government. The Department is looking to put in place a market-sensitive and relevant mechanism that will see to the continued mining in the area with the necessary expertise. A detailed report will be provided to members relating to the breakdown of the expenses spent during the time of the appointed Administrator. On the issue of equipment, some of the investment decisions really left a lot of unanswered questions. The drawing of expertise to the area will be able to address this issue.

Co-Chairperson Magaxa said members will prioritise an oversight visit after the lockdown.

Mr Nhanha said the connection has been lost with Mr Tlhakudi and some questions were directed to him. The Deputy Minister may not be in a position to respond to those questions.

Co-Chairperson Magaxa said members will meet again, especially when finalising the budget, and be able to raise questions. Mr Tlhakudi can open the next meeting by responding to questions and members can raise follow-up issues. Do members agree with this?

Ms Maotwe agreed and asked whether there was an apology from the Minister.

Ms Ngwenya also agreed.

Co-Chairperson Magaxa said the Minister had to attend a Cabinet meeting.

The meeting was adjourned.

 

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