Presentation to The Select Committee on Labour and Public Enterprise (NCOP)on Alexkor Restructuring 16h September 2009
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
Current situation • Land mining operations were restructured in 2007-2008 financial year with the closure of Alexkor’s 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
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 it’s 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
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
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
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
Interim Organisational Structure ALEXKOR Marine mining Land mining Support services Rehabilitation Township 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
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 Ex-emp Farming Mining S & L Plan New Job New Co PSJV T&D needs T&D needs T&D needs Change and leadership network COMMUNITY AND SOCIAL DEVELOPMENT
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 Mine’s 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)
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 changed…Voluntary 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
Organised labour’s 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
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 VSP’s 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
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)
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
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 Context of Restructuring 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
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 CV’s 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
Employee Destination 3 5 6 50 5 5 1 10 Kabus/Sanddrift : 15
ABT Exiting Employees Offered T&D programmes to ensure improved employability and self sufficiency Post care for at least 3 months Transferring employees T&D to upskill and ensure sustainability of the farms Management T&D on core management skills Coaching & Mentorship Enable access to regional agricultural initiatives for the growth and sustainability of the business ABM Exiting employees Offered T&D 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 T&D to upskill and improve employability in JV operations Facilitate and enable transition of ex-employees into JV Training & development interventions
Employee Impact and Legal Compliance S&L 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
Legal Compliance: Social and Labour Plan (SLP) Alexkor’s 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
Social Challenges Alexkor’s 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.
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 SLP’s • The SLP’s 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
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 S&L Plan is in progress • Integration with Richtersveld IDP was ensured • Creation of Municipality and local government links and alignment to development plans was undertaken
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)
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).
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.
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.