Deputy Minister Bulelani Magwanishe,
Acting Director-General Matsietsi Mokholo
Chairperson, CEO, Members of the Board,
Ladies and gentlemen

The year 2013 has been a significant year for Alexkor and I would like to thank the Board and Alexkor Management for the commitment shown in turning around the Alexander Bay diamond operation. I commend the Pooling and Sharing Joint Venture (PSJV) Board for reviving the land mining operations and demonstrating commitment to improving the socio economic status of the Richtersveld community. It is this kind of cooperation that will assist Government to reduce inequality, unemployment and poverty.

The difficulties that the mining industry is experiencing is having a negative impact on the economy of the country, mining output declined by 7.7% year on year in July 2014 mainly due to the 5 month strike in the platinum belt. The negative performance of the mining sector also translated into loss of jobs and missed growth opportunities. Despite Government’s intervention in the prevention of job losses, higher costs and lower commodity prices have forced companies to undertake job cuts in order to remain profitable and sustainable.

Notwithstanding the challenges faced by mining companies, companies need to rethink their participation and involvement in the development of the country as opposed to maximising profits for short term gratification.

The legacy of the under development, especially in mining towns, is a challenge all of us need to address. This includes private mining companies. It cannot be that our people are expected to foot the bill for the environmental degradation, disease management and social instability brought on by exploitative mining practices of the colonial and apartheid mining magnates.

Financial statement

The expression of an unqualified audit opinion with findings for non-compliance with legislation and internal controls by the auditors is worrying. I am concerned that the emphasis of matter refers to the non-compliance with legislation, internal control inadequacies and the financial management lack of preparedness for the audit. I urge you to put urgent measures in place to ensure compliance in the 2014/15 financial year.

The company remains liquid in its current form and may continue operating as a going concern. I am concerned about the cash constraints that Alexkor may experience in the near future and the company should explore other sources of income to mitigate against this risk.

Diamond industry outlook

The year 2013 brought noteworthy development in the diamond industry with De Beers migrating its London-based trading desk activities to Gaborone. The first sales were held in November 2013 and this translates to rough diamond buyers descending 10 times a year to Gaborone to trade in diamonds.

The global market came under pressure towards the end of 2013 with suppressed demand from the world’s biggest diamond polishers, India and China. The rough diamond prices have grown steadily by 5% during the first half of 2014 and this growth is expected to remain the norm towards the end of 2014. This provides an opportunity for Alexkor to improve operational efficiency to realise improved revenue in view of the positive growth anticipated in diamond prices going forward.

With limited development projects in the diamond industry due to the depletion of resources and lack of new diamond discoveries, diamond supply is expected to decrease from 2018 onwards. This forces global mining companies including Alexkor to evaluate their strategies and introduce smart processes and technologies to raise productivity and profitability.

Our continent is full of potential to grow in the next coming years with the emerging middle class. The continent has an opportunity to not only play a significant role in exporting rough diamonds but to become a significant buyer of polished diamonds.

The demand in polished diamonds from an emerging middle class also presents an opportunity for the country to promote downstream polishing and cutting initiatives. We need to find ways in which we become a competitive player in these global economic activities throughout the diamond value chain where possible.

Alexkor’s PSJV Performance

The R60million investment in a diamond plant has yielded commendable results with the creation of over 200 job opportunities and production improvement from 36 000 carats in 2012/13 to 46 000 carats in 2013/14. Positive growth in the land mining operations is expected going forward, considering that the operations were neglected for the past 12 years since the initiation of the land claims.

Overall, I commend Alexkor’s Board and management for achieving 94% of its contracted key performance targets for 2013/14. The department notes the significant improvements in both operational and financial performances of the Alexander Bay diamond operations.

The PSJV revenue increased by 33% in 2013/14 as a result of increased production supported by the rand/dollar exchange rate which was favourable compared to the budgeted exchange rate. I am however concerned with the budgeted exchange rate that you used for the year.

I believe that the PSJV management has commenced with putting in place stringent control systems to monitor and root out non-performing contractors and incentives for those contractors that perform well. Continued efforts in improving performance are expected and I am confident that the current management is properly capacitated to manage operational challenges.

I need to know how we are ensuring that local contractors, the Richtersveld and the Northern Cape’s marginalised communities are brought into this space.

The commissioning of the new plant will bring new hope to the Namaqualand people in particular the Richtersveld community who for a long time have had limited economic opportunities. It is important that Alexkor continues playing a key role in improving the lives of the Namaqualand community and create sustainable communities in the region. I challenge Alexkor and the PSJV management to turn the Richtersveld into a mining region of note.

Beneficiation

Given that the mineral resources are finite, we need to find practical ways to optimise what we currently have in the ground. I believe South Africa is well placed in undertaking mineral value-add initiatives and we have the mineral extraction experience spanning over a century.

We should be using the acquired knowledge to position ourselves as not only raw minerals exporters but leaders in developing new technologies to enhance the value of our minerals.

Given these challenges and the need to ensure that our people share in the mineral wealth of our land, Government has seen it fit to amplify its involvement in the industry, by setting up the African Exploration and Mining Finance Company (AEMFC). Now, it is incumbent upon us to ensure that another SOMCO in the form of Alexkor is known and its role is appreciated by all key stakeholders. The message must be clear that Alexkor’s existence complements that of AEMFC.

I therefore urge the Board to develop a strategy that will deploy both the political capital of my office and the entrepreneurial capital of the Board in attaining this objective.

Deed of Settlement

With the advent of democracy in 1994, one of the priorities of the democratic Government was to restore the dignity of our people after centuries of dispossession, in particular restoring land to its rightful owners. The Richtersveld community took steps to get back what was rightfully theirs. The Deed of Settlement agreement reached in 2008 between the State and the Richtersveld community remains the largest land claim settlement in our democratic era.

Not only did the State undertake to return land and its resources to its rightful owners but the State also committed itself to ensure that the land and its resources are developed further to support the people of Richtersveld.

Conclusion

I commend Alexkor’s commitment in fulfilling the Deed of Settlement obligations and I note that the Alexkor Board has worked hard and continues to work hard in strengthening the relationship with the Richtersveld community. It is evident that the Board’s efforts are effective, with the successful commissioning of the plant and reiteration by the Communal Property Association (CPA) committee members that the relationship with Alexkor has improved significantly in the past year.

Chairperson, Board Members and CEO, can you please convey my message to all employees of Alexkor especially those in the dry Richtersveld for their commitment to the company.

I thank you.

Issued by: Department of Public Enterprises