Dineo Faku
PUBLIC Enterprises Minister Lynne Brown wants state-owned diamond producer Alexkor to find alternative sources of funding because the company’s cash constraints will be a major challenge in the near future.
“I am concerned about cash constraints that Alexkor may experience in the near future and the company should explore other sources of income to mitigate this risk, including exploring opportunities on the continent,” she said after the parastatal’s annual general meeting on Thursday.
Alexkor receives external funding mainly from its sole shareholder, the government, represented by the Department of Public Enterprises.
Brown said she was worried about “the expression of an unqualified audit opinion with findings for non-compliance with legislation and internal controls by the auditors”.
She went on to say: “I have urged the board and management to put urgent measures in place to ensure compliance in the 2014/15 financial year.”
Alexkor cancelled a press conference on Thursday about its annual results for the 2013/14 financial year. The results are now expected to be released next month when the company publishes its annual report.
Alexkor is often viewed as a reason why the government should not own mining companies because production and profitability have declined over the past few years.
It implemented a deep-sea mining agreement with International Mining and Dredging South Africa, one of two companies in the world with deep-sea diamond mining capability.
Alexkor’s strategy was reviewed in June last year and it was given a mandate by the Department of Public Enterprises to explore diversification into strategic commodities, including coal and limestone, which are crucial for power generation.
Last year Alexkor reported no income-generating operations of its own. Its operating loss widened to R20.7 million from R19.1m in 2012.
The Pooling and Sharing Joint Venture (PSJV) realised a small profit of R4.7m, down from R9.1m in 2012. Production of diamonds in the PSJV was down to 35 358 carats last year from 37 016 carats in 2012. It has previously said its goal was to increase output to 70 000 carats a year by the end of 2013/14.
Brown said production rose to 46 000 carats in 2013/14.
Alexkor said in its 2012/13 annual report that output would increase after the board decided to be firmer with poorly performing contractors and would reward achievers with more opportunities to unlock value.
The company’s new management team said a breakdown in management structures and procedures had compromised corporate governance. A significant decline in production and employment, and a hostile environment – driven by a significant loss of trust in community structures – were also challenges.
The company’s ultimate goal is to support the PSJV management team to improve profitability and reduce operational costs.
In 2003, the Constitutional Court ordered Alexkor to compensate the Richtersveld community for mining on their ancestral land in the Northern Cape.