Johannesburg - South Africa’s troubled state-owned diamond company, Alexkor, turned a profit in the 2013 financial year but acknowledged that this was largely due to a state injection of R350 million.
At the firm’s annual general meeting in Pretoria on Friday, Deputy Public Enterprises Minister Bulelani Magwanishe acknowledged that in its current form Alexkor was not sustainable. “Proceeds… are not sufficient,” he reported.
The board, chaired by Rafique Bagus, had responded to the challenges “with a game-changing strategy”. This would be focused on the coal mining industry with Eskom indicating that it would need new sources within five years.
It failed to present results for the 2012/13 financial year at the annual general meeting but it was explained by the communications company, Litha Communications, that these would be put to Parliament next week.
Instead, Magwanishe, who represented his minister, Malusi Gigaba, reported that Alexkor had achieved 93 percent of its contracted key performance targets. “The board has tabled the best governance and management structures… and is in the process of building the requisite human capacity for driving results.”
In preparatory notes sent out by Litha, the deputy minister reported that there had been a R29.7m profit for the year against loss of R16.4m in 2011/12. This apparently had been achieved by managing the joint venture with the Richtersveld community in the Northern Cape, where the mining is centred, but was “mostly as a result of the net income received from the surplus” of medium-term expenditure framework funds, which refers to the state’s annual injection.
It reported Alexkor received R350m funding from the state, paid on December 31, 2012.
Magwanishe said Percy Khoza, who became chief executive in April, had “extensive experience in mining”. Management at the joint venture had stabilised, he said.
He said Gigaba had sought the intervention of the master of the Northern Cape High Court, as custodian of trusts, to investigate the allegations of financial mismanagement at the Alexkor Development Foundation. “The master has appointed one of the leading auditing firms, PwC, to lead an investigation. If any wrongdoing is uncovered, it will be referred to the relevant law enforcement agencies for further action.”
Magwanishe said the government had considered its options. “It is either we opted for business as usual with limited and localised impact and wind down the company, or we frame a new future with a significant and strategic national impact. Due to the strategic nature of our interests in the mining sector, the latter was our only option.”
In a separate submission to the portfolio committee on mineral resources meeting on Friday, Eskom’s Kannan Lakmeeharan proposed that the state-owned African Exploration Mining and Finance Corporation and Alexkor could contribute to the long-term security of low-cost coal supplies.
“Our analysis shows that Eskom will start experiencing coal supply shortages by 2018. The state has to move fast to avert an energy crisis. Electing to enter coal mining, will fundamentally change the value proposition of Alexkor to the people of south Africa.”
In the last annual report for 2012, the then acting chief executive, Berno Lategan, said Alexkor’s only option was to ensure profitability and sustainability by acquiring “other means of generating income”, such as new diamond mining opportunities.
He said Alexkor’s 51 percent investment in the Richtersveld joint venture would be “relatively passive in the next three to five years due to the exploration activities planned on the land mining concessions”.
It would focus on assessing new opportunities in the Northern Cape and North West, he said at the time. - Business Report