Presentation to

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Presentation to The Select Committee on Labour
and Public Enterprise (NCOP)on Alexkor
Restructuring
16h September 2009
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Introduction

• The purpose of this presentation is to provide
  the Select Committee with a progress report on
  the Alexkor restructuring
• The presentation will include
• Background and details of the mine restructuring
• Structure of the financial separation packages
  offered to employees affected by the
  restructuring
• Progress with social and labour plan obligations
• Progress with stakeholder engagement obligations

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Current situation

• Land mining operations were restructured in
  2007-2008 financial year with the closure of
  Alexkors own land-mining teams
• Administration, processing and plant maintenance
  have continued as an interim measure until the
  PSJV is established and running
• All non-core mining activities were transferred
  in terms of the Deed of Settlement (farming,
  dairy and mariculture)
• After extensive consultation and engagement with
  labour, the restructuring process was completed
  in June-July 2008 (in accordance with Section 197
  and 189 of the Labour Relations Act)
• Workforce was reduced from 276 to 111 in July
  2008
• Current mine production is sourced from
  contracted mining companies
• 3 on land and 27 operating in shallow-water

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Background to the restructuring
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Context of restructuring

• The successful land claim by the Richtersveld
  Community culminated in a complex Deed of
  Settlement for the restitution to the community.
• As a consequence of the Deed of Settlement,
  Alexkor is obliged to
• Transfer its agricultural maricultural assets
  to the Community, and
• Transfer the Mining operations to the PSJV.
• The transfer of agricultural maricultural
  assets to the Community took place at the end of
  Jan 08
• During the restructuring process the focus was on
  the people affected by the restructuring
  initiatives
• Ensuring that employees were treated with
  fairness and dignity
• Providing an financial package to ease the impact
  on employees
• Providing support initiatives such as training to
  improve employability and transition support
  (assistance with seeking alternative jobs)
• Engagement with key stakeholders (internally and
  externally)
• Ensuring legal compliance at every stage of the
  restructuring

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Deed of settlement

• The Deed of Settlement entails, inter alia
• Alexkor's land mining rights will be transferred
  to theRichtersveld Mining Company (RMC).
• Alexkor will retain its marine mining rights and
  remaining mining assets
• Alexkor and RMC will 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 the marine and land diamond resources
• Alexkor will furthermore pledge its land and
  marine mining rights to the PSJV
• Alexkor's movable assets relating to its
  agricultural and maricultural businesses to be
  transferred to the RVC

As a consequence of Deed of Settlement, Alexkor
was obliged to- transfer the mining operations
to the PSJV- transfer the agricultural and
maricultural assets to the community
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Financial consequences of restructuring

• Alexkor mining operations were not profitable and
  funds were limited
• Alexkor Management wanted to act as an exemplary
  employee in the Mining sector and ensure that
• The restructuring approach was integrated and
  holistic and that stakeholder engagement was
  viewed as a critical success factor

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Employee numbers
Farm and Mine Workers
Farm Workers
TOTAL 276 ABM (mine) 198 (72) ABT (farm)
78 (28)
TOTAL 78 ABT sectoral 49 (61) ABT
non-sectoral 29 (39)
Approximately 100 ABM positions were ring-fenced
for Care and Maintenance operations until PSJV
takes over
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Interim Organisational Structure
ALEXKOR
Marine mining
Land mining
Support services
Township
Rehabilitation
Alexkor mining rights
RMC mining rights
Assets and operations to be pledged to the
Alexkor/RMC PSJV
Assets and operations to be transferred to the
Richtersveld Municipality
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Integrated approach
L A N D C L A I M
SUSTAINABLE ECONOMIC DEVELOPMENT
T R A N S F O R M A T I O N
R E D R E S S
C O N S U L T A T I O N
C O M M U N I C A T I O N
Alexkor
VSP
Farming
Mining
S L Plan
Ex-emp
New Co
PSJV
New Job
TD needs
TD needs
TD needs
Change and leadership network
COMMUNITY AND SOCIAL DEVELOPMENT
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Alexkor restructuring
Original approach versus final approach
Engagement time-lines 03/07-01/08
Farms
Mine
Transfer ito section 197 of LRA
Retrenchment ito section 189 of LRA

• Employees had to transfer to the new business ,
  with same or similar conditions of service
• Alternatively accept a generous voluntary
  separation package
• All employees but for 3, accepted the VSP
• Terms and conditions for the remaining 3
  employees were co-determined with new company
  management and in consultation with unions

• Employees and unions were notified of the Mines
  intention to restructure and downscale operations
  to a Care and Maintenance model, until PSJV
  operative
• Section 189 consultation commenced in 03/07
• A generous voluntary separation package was
  offered
• However, due to the impact of the voluntary exit
  versus forced exit. It was jointly agreed to with
  unions that the VSP would be offered as an
  alternative to retrenchment (tax, UIF benefits)

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Financial packages offered
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What was on offer?

• Original offer 2 weeks for every completed year
  of service
• Farms to transfer in terms of s 197 and
• Mine to undergo retrenchment in terms of s 189
• Offer changedVoluntary Separation Package (VSP)
  offer to Farms only
• Mandate changed to include Mine in the VSP
• Retrenchment process placed on hold, with
  principle that retrenchment process would be
  resuscitated if there was insufficient interest
  in the VSP
• Organised labour requested an improved offer of 3
  weeks R10 000 relocation allowance
• DPE mandated an integrated and holistic approach
  to the restructuring and for the financial
  package to be re-evaluated
• Aim was to develop a seamless transition plan,
  post the conversion of the Mining Rights and the
  cession of the rights to the PSJV
• Research was conducted on similar restructuring
  initiatives in the Mining industry in the region
• Mining Charter and the Social and Labour Plan
  guidelines were used as the benchmark

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Organised labours expectations

• The uniform VSP was offered to all employees, as
  the original intention of retrenchment, had the
  unintended consequence of denying affected
  employees access to the legitimate benefits of
• UIF
• Tax reprieve
• A distinction was drawn between
• Farm workers, who had the safety of a job, if
  they did not take up the offer
• Mine workers, who did not have job security
• Organised labour requested that the retrenchment
  process ito of section 189 was to be resuscitated
  and completed, to enable Mine employees to claim
  their legitimate benefits to UIF and the tax
  reprieve
• Aim was to run the s 189 consultation with
  Voluntary Severance Packages (alternative to
  retrenchment) for ABM alongside the Voluntary
  Separation Packages for ABT employees

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Principles that governed employee financial
packages

• The package was socially conscious
• To ensure that the poorest, affected by the
  change, were not compromised and were provided
  with an appropriate financial parachute
• The value of the payment had to have meaning
  any form of discrimination had to be meaningful,
  logical and consistent
• Consideration of the profile of the affected
  individuals (Age, length of service and skill
  levels)
• Re-employment prospects of the affected employee
• Consideration of the VSPs against other redress
  mechanisms
• Consideration of whether the package was legally
  defensible

• FINANCIAL PACKAGE FORMULA
• Benefits (accrued leave and accumulated bonus
  contribution)
• VSP (2 weeks for every completed year of service)
  
• 80 of VSP value as an Ex Gratia payment
• Total payout (minimum threshold of R 20 000)
• TOTAL COST VSP benefits Ex Gratia
• R16 918 221.33 R10 928 271.87 R28 073
  796.92

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Phased restructuring approach

• The restructuring process was conducted in
  two-stages
• Phase 1
• Immediate transfer and/or exit of farm employees
• Employees affected by the downscaling of the
  mining operations
• Mine moving to a Care and Maintenance Model
  (while still generating revenues to sustain
  operations and keep plants functioning) pending
  the PSJV becoming operative
• Phase 2
• Exit of employees prior to the PSJV taking over
  operations

• Financial package values were communicated and
  offered to all employees
• Farm workers
• 73 accepted the offer and 3 transferred to new
  co
• Many of the ex-employees were re-employed by the
  new farming company
• Mine Workers
• 40 employees accepted the voluntary separation
  as an alternative to retrenchment
• 83 employees volunteers required to avoid a
  forced retrenchment process
• An additional 43 employees had to be forcibly
  retrenched- using criteria that was agreed to and
  consulted on with unions (combination of LIFO,
  skills required for continued operations)

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Approach to an Integrated Social Transition Plan
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Legal compliance requirement

• In terms of the Mining Charter requirements,
  Alexkor was obligated to develop a Social and
  Labour plan that encompassed the following
  components
• Development programmes, in consultation with the
  local government structures
• Processes to manage downscaling or closure of the
  Mining operations
• Details of promoting and ensuring socio-economic
  development in the region
• Minimising closure or downscaling impact on
• Individuals,
• Region and/or
• Local economy

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Context of Restructuring

• POLITICAL OBLIGATIONS
• Government, as the employer, was obliged to
  engage with
• Provincial political structures
• District and regional political structures
• The region is economically weak and opportunities
  are limited
• High possibility of eventual poverty dependency
  on the state was identified

• SOCIAL CHALLENGES
• Needed to ensure that employees were treated
  fairly with
• Financial packages eased the burden
• Initiatives to assist and support employees
  during the transition
• Assistance in seeking alternate employment and/or
• Community outreach and development programmes
  that aimed to drive economic sustainability

• EMPLOYEE IMPACT
• Employees had the threat of restructuring for
  almost ten years
• Employees and community were fatigued and feeling
  dejected
• Skills level of existing staff was low and
  earning potential was weak

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Easing employee impact
Employees affected by the restructuring fell
into the following categories

• Immediate Employees who sought alternate
  employment post exit from Alexkor
• They were supported during the transition process
  through
• Training Development programmes
• Skills programmes and training courses (informed
  by employee preference)
• Learnership though a PROXY
• Placement assistance
• Preparation of CVs and skills to re enter the
  job market
• Establishment of an office that assisted
  employees to seek alternative employment
• Medium Term Employees, in the mining operations,
  who remained (interim phase)
• These employees are being upskilled in order to
  improve their employability in the new mining
  venture
• Long Term Employees who will need to be
  upskilled/reskilled in order to secure
  alternate employment and/or become
  self-sufficient once PSJV is in operation

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Employee Destination
3
5
6
50
5
5
1
10
Kabus/Sanddrift 15
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Training development interventions

• ABT
• Exiting Employees
• Offered TD programmes to ensure improved
  employability and self sufficiency
• Post care for at least 3 months
• Transferring employees
• TD to upskill and ensure sustainability of the
  farms
• Management
• TD on core management skills
• Coaching Mentorship
• Enable access to regional agricultural
  initiatives for the growth and sustainability of
  the business

• ABM
• Exiting employees
• Offered TD programmes to ensure improved
  employability and self sufficiency
• Post care for at least 3 months (housing post
  care support extended to Dec 08)
• Maintenance Care Operations
• TD to upskill and improve employability in JV
  operations
• Facilitate and enable transition of ex-employees
  into JV

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Employee Impact and Legal Compliance
SL Plans have been drafted and submitted
(together with the conversion requirements)

• Training plan considered
• Employee profile (unskilled, semi-skilled,
  skilled)
• Cost (regional accessibility to training
  institutions)
• Viability (timing)
• Leverages local and regional options and
  opportunities (agricultural and tourism
  strategies)
• Pre-training screening and assessment - critical
  for success
• The training plan looked at development in terms
  of
• Employment opportunities
• Regional and district development opportunities
• Social and economic development opportunities
• The interventions leverage existing skills
  programmes and learnerships that are available
  and affordable
• Costing averaged on a per capita basis and based
  on benchmarked research estimates

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Legal Compliance Social and Labour Plan (SLP)
Alexkors responsibility is to

• Ensure that the proposed initiatives addressed
  immediate restructuring needs and longer term
  restructuring requirements, including
• Minerals and Petroleum Resources Development Act
  requirements
• BEE Socio-Economic Empowerment Charter
  requirements
• Government will ensure compliance with the
  provisions of this Charter and will be exemplary
  in the way in which it deals with state assets
  (clause 4.10)
• Mining operations, until the PSJV takes over
  mining operations
• Conversion to New Order Mining Rights
• PSJV strategic imperatives will inform
• Mining Plan
• Human Resources Plan
• Social and Labour Plan
• Initiatives would support and enhance the Interim
  Mining operations and the business needs of the
  PSJV

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Social Challenges
Alexkors provided support post transfer to the
RAHC

• Ensured that employees who were transferred to
  the RAHC, were sufficiently skilled to meet the
  needs of the new business
• Provided training and development programmes to
  support the sustainability of the farming
  operations (farm specific training)
• Provided support to the management and HR team to
  ensure seamless transition and fairness during
  recruitment and selection process
• Initiatives included upskilling programmes for
  ex-employees who were seeking alternative
  employment
• HR and financial management support was provided,
  at Alexkor cost, for a 3-month transition period.

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SOCIAL LABOUR PLAN

• Social labour plans were put together and
  submitted to the Dept. of Mineral Resources (DMR)
  with the mining right applications
• Land and Marine SLPs
• The SLPs were done in consultation with the
  Interim Joint Board
• PSJV that will do the implementation
• Alexkor is in the process of appointing a
  compliance officer to ensure compliance with all
  DMR requirements (including the SLP)
• Stakeholder forums are being facilitated

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Stakeholder Engagement
The stakeholder engagement process was critical
to the overall sustainability of the initiatives
to ease the impact of the restructuring

• Critical Success factors
• Community consultation and union involvement was
  a critical success factor
• Skills transfer to members of the community, for
  improved sustainability was key to the approach
  adopted
• Consideration was taken of the short-term and
  medium term social and economic impact
• Long term sustainability is driven by
• Integration with the needs of the emerging JV and
  alignment with personnel and operational needs
• Mining license conversion application and
  integration with SL Plan is in progress
• Integration with Richtersveld IDP was ensured
• Creation of Municipality and local government
  links and alignment to development plans was
  undertaken

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Political Roles and Responsibilities

• Alexkor, with the support of DPE, engaged with
  the following stakeholders
• Provincial Government
• Local government
• Relevant National government departments -DME
• DPE and Alexkor intend to ensure ongoing access
  to opportunities
• Regional initiatives (e.g housing project, roads,
  agricultural initiatives)

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Human Resource Development

• An exercise was conducted to identify those
  portable skills which are in demand in the local
  and provincial economies.
• Service providers from the region were identified
  to provide such skills training
• In cases of surplus training capacity, the offer
  of training was extended to members of the local
  community.
• Training was provided to 144 persons in various
  programmes
• Mining-related training initiatives implemented
  during the year have focused on safety training,
  first-aid training, rigging training and
  hyperbaric chamber operator training.
• Alexkor have continued to support three bursars
  at tertiary institutions during 2009 (finance,
  mining and geological).

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Human Resource Development

• The impending implementation of the PSJV has
  prevented the development of extensive career
  path or mentorship programmes.
• Such initiatives are subject to clarity on the
  implementation of the PSJV. Short-term career
  path and mentorship initiatives are being
  implemented where feasible.

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Mine Community Development

• The major development initiative of the SLP is
  the upgrade of the Alexander Bay town
  infrastructure to that of municipal standards in
  preparation for the transfer of the town to the
  Richtersveld District Municipality.
• The major elements of the works programme are the
  upgrade of the water, sewer and electrical
  reticulation networks and relocation of the waste
  water treatment works.
• R80 million has been allocated to the project.
  Project expected to cost R116 million
• The two-year project is expected to commence
  early in January 2010
• All efforts will be made to support the
  participation of local HDSA companies, SMEs and
  labour-intensive construction methods in the
  development.
• Hostel accommodation for Alexkor employees was
  phased out during the year and all employees are
  currently housed in single-unit accommodation.
• Alexkor continues to ensure that the nutritional
  needs are being met.

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Thank youQuestions????