SECOND DRAFT
PROPOSAL TO THE INTER MINISTERIAL CO-ORDINATING COMMITTEE
1998-11-12
Purpose of document
1. This document has been prepared by the Legal Resources Centre and Surplus Peoples Project, with the assistance of attorney, Michelle O'Sullivan, acting on behalf of Namaqualand and Richtersveld communities and after extensive consultation with community representatives, in response to the request of the Minister of Public Enterprises that the communities take the initiative in developing proposals regarding their future equity and beneficial interest in the company known as Alexkor Limited, in anticipation of its intended privatisation.

2. Accordingly, the proposals represent a basic outline intended to provide a point of departure for future negotiations which would seek to achieve a consensual settlement of litigation instituted in the High Court on behalf of the Richtersveld people based upon aboriginal rights and a constitutional right to restitution. In addition, these proposals would be intended to novate and supercede the existing de facto arrangement which involves the transfer of a 30% share in net annual profits to the Alexkor Foundation.

Historical Background
3. Alexkor Limited("Alexkor") is a public company incorporated in terms of the Alexkor Limited Act, 116 of 1992("the Act"), which is the successor to a Corporation originally known as the Alexander Bay Development Corporation, established in terms of the Alexander Bay Development Corporation Act 46 of 1989. Alexkor owns and operates a diamond 'nine at Alexander Bay, which was formerly a State Alluvial Diggings.

4. The land on which the mine is situated had been occupied and used by the Richtersveld people since time immemorial. The Richtersveld people are a community of approximately 3000 people who live in the Richtersveld reserve, which is adjacent to the land on which the mine is situated. The Richtersveld is one of the local government areas in the Namaqualand region. The Namaqualand region is part of the Northern Cape Province. The Namaqualand people consist of a broader community of approximately 40 000 people which include the Richtersveld people.

5. Until as recently as 1962 Richtersveld communities lived on the land currently mined by Alexkor. The mine implemented a white labour preference policy in the 1930's. The cumulative effect of the mine's policies and practices were to disadvantage the local Namaqualand and Richtersveld communities, who were thereby dispossessed of both their land and any economic benefit from the mine. On the other hand, the State profited greatly from the mine. In the first 25 years of its existence profits of over 28 million pounds were generated.

6. As a means to redress this imbalance, a development institution known as the Alexkor Foundation was established during 1993. The trust deed stipulates that:

"Aangesien Alexkor se Aandeelhouer goedkeuring verleen het dat ALEXKOR in samewerking met die gemeenskappe van Nani~a1and 'n ontwikkelingstigting op die been mag bring welke stigting jaarliks uit 'n gedeelte van die na-belaste winste van Alexkor befonds mag word".

7. In implementation of this commitment, 30% of Alexkor's net profits accrues to the Foundation, the objects of which have been summarised in the annual report of the Foundation as follows:
a) To act to the advantage of the people of Namaqualand at all times;
b) To promote socio-economic development, especially with regard to the disadvantaged sections of the population;
c) To facilitate the establishment of an infrastructure by co-operating with governmental and other bodies, rather than single-handedly carrying the full burden of new infrastructural development;
d) To provide educational opportunities and resources;
e) To create job opportunities, especially in terms of small business development;
f) To promote the empowerment of women in the region; and
g) To focus maximally on the development of people within the region, thereby ensuring sustainable economic development

The restructuring of Alexkor Limited
8. During 1995 Alexkor was identified as a state-owned enterprise("SOE") which was intended to be privatised. Privatisation structures were established in terms of the National Framework Agreement ("NFA"), including a Restructuring and Transformation Committee ("RTC"). All members of the RTC, including the Government representatives agreed that the communities of Namaqualand were important stakeholders in the restructuring process. As a result, Namaqualand communities have been represented on the RTC since 1997. The RTC made certain proposals to the Inter Ministerial Coordinating Committee in 1996 and 1997 concerning the future of Alexkor. These proposals included a recommendation that Namaqualand communities should receive equity in a restructured Alexkor.

9. In response to the RTC proposals, certain decisions about Alexkor's future were made by the IMCC.

10. As recently as 19 September 1998, the IMCC decision about Alexkor's future was reported to the Portfolio Committee on Mineral and Energy Affairs in the National Assembly by Mr Nchakha Moloi of the Department of Mineral and Energy Affairs, and may be summarised as follows:

11. Government will retain 100% equity in Alexkor in the short term;

a) A management contractor will be appointed to manage Alexkor;
b) Provision will be made to transfer equity to communities;
c) A vehicle must be set up to hold community equity
d) The quantum and appropriate community share will be negotiated with the State.
e) The current 30% profit share, which the Alexkor Foundation receives, will be converted into community equity.

12. The report to the Portfolio Committee echoes the Minister of Public Enterprises' message to the representatives of Namaqualand communities when she visited Alexander Bay on 13 March 1998. She indicated that the IMCC had decided not to privatise Alexkor in the short term but that equity would be transferred to communities. She requested that communities develop proposals concerning the amount of equity and an appropriate vehicle to hold equity.

13. In response to the Minister's request, community representatives were elected to take forward the development of proposals to the IMCC at meetings held in Alexander Bay on 13 March 1998 and in Springbok on 14 February 1998 and 26 July 1998. Regular community meetings were held in the Richtersveld and in Namaqualand to discuss the proposals and a mandate was given to community representatives to finalise the proposals contained in this document. The community representatives also participated in Alexander Bay Trading Implementation Team ("ABT team"), where the proposals were presented and discussed.

Land Claims
14. On 9 December 1997, the Richtersveld Community instituted litigation in the Cape High Court for land currently held by Alexkor. This aboriginal title claim is for
land that has been traditionally occupied and used by the Richtersveld Community. The Richtersveld community requested a declaration of their rights in the land
claimed. The Richtersveld community will institute a restitution claim in the Land Claims Court as an alternative to the aboriginal title claim in the course of this
month.

15. The Namaqualand communities, which include the Richtersveld communities, hope to achieve a consensual settlement of litigation instituted in the High Court on behalf of the Richtersveld people based upon aboriginal rights and a constitutional right to restitution. In addition, these proposals would be intended to novate and supercede the existing de facto arrangement, which involves the transfer of a 30% share in net annual profits to the Alexkor Foundation. Consideration must be given to ensuring that any settlement agreement is binding upon all potential claimants and will be in full settlement.

Proposal
16. This proposal has been developed within the framework of the Act and the National Framework Agreement. The NFA provides that "the capacity of the historically disadvantaged communities to participate and benefit fully in the restructuring programmes should be ascertained and enhanced. "1

17. The proposal aims to deal with both issues, the share in the proceeds and the land claims. It is proposed that an agreement dealing with these issues is entered into by the duly authorised representatives of the Namaqualand communities, the State and Alexkor, the terms of which will be incorporated into the agreement with the company, which is awarded a management contract to manage Alexkor. The settlement agreement should incorporate the terms of this proposal and bind all parties to implement these terms. The rights and interests of the Namaqualand communities will have to be legally recognised and protected within any present or future corporate structure or management contract. In order to achieve this, the Act and Alexkor's articles of association will require amendments.

18. This proposal is a first step in the negotiation process. The proposal deals with four aspects,

(i) establishment of appropriate entities to hold equity;
(ii) the nature and proportion of equity;
(iii) the identification of the community who will benefit; and
(iv) employment opportunities for local communities at Alexkor.

ESTABLISHMENT OF APPROPRIATE ENTITIES TO HOLD LAND AND CO~~IUNITY EQUITY
19. In preparation of this proposal, we considered existing entities in Namaqualand, which conduct charitable, and development activities. We have sought to avoid any duplication between the existing entities and those proposed below. The proposals are made in the light of resource constraints in Namaqualand. It is intended that in view of limited resources, it may be appropriate to establish a process for rationalising existing entities in Namaqualand.

20. At this stage we propose that four separate entities be established with distinct roles and purposes:

(i) a communal property association (CPA) for the Namaqualand people to hold land currently held by Alexkor discussed at par 21 to 28 below;
(ii) a charitable trust discussed at par 29 to 32 below;
(iii) a development trust discussed at par 33 to 37 below;
(iv) an entity to hold grazing land currently held by Alexkor on behalf of the Richtersveld people discussed at par 55 to 61 below.

A. NAMAQUALAND ENTITIES
(I) A Communal Property Association for Namaqualand

21. We propose that a CPA will be established as a holding entity to hold certain land currently held by Alexkor on behalf of the Namaqualand people.

22. This proposal is based on the following assumptions:

a) The land currently held by Alexkor will be a valuable asset to the Namaqualand community in the post mining economy.
b) The CPA established to hold the land will ensure that the land is protected from the risks associated with the trading activities of the company, particularly when Alexkor is privatised.
c) The CPA will preserve the land for the use of future generations.
d) The transfer of the land to a holding entity will also assist in the resolution of land claims.

23. In the short term, the CPA will require limited institutional capacity, as it will function solely as a holding entity. In the medium term, the downscaling of mining will increase the land use options. The CPA will require greater institutional capacity in order to develop and implement principles to govern land use and development, to manage natural resources and allocate user rights.

24. It is proposed that the land to be held by the CPA will include all land currently used for agricultural purposes and mining purposes. The land on which the Alexander Bay township is situated and land suitable for grazing, which is not suitable for mining or other agricultural purposes will be excluded.

25. The township land is excluded, as this land will be transferred to the appropriate provincial or local government structures, with the institutional competence to manage the town. The land suitable for grazing is identified as the land adjacent to the Korridor Wes farms in the southern part of the mine. It is proposed that this land will be transferred to the entity established for the Richtersveld community, which is discussed below at par....

26. It is suggested that the existing rights of Alexkor to surface rights in the land are secured in an agreement of lease entered into between the company and the CPA.

27. The CPA and Alexkor will have to negotiate an agreement concerning the rehabilitation of the land and ensure that Alexkor complies with environmental policy and legislation prior to transfer of the land.

28. Where a sale or mortgage of the land is considered, this will require special procedures, which protect the interests of the community and prevent them from being exploited. This may require the registration of a servitude over the land.

(II) A CHARITABLE TRUST

29. We propose that a charitable trust will be established which complies with section 10(1)(f) of the Income Tax Act. The charitable trust will have tax exempt status. The charitable trust will seek to benefit the poor and disadvantaged communities of Namaqualand, in particular rural communities, women and children. The Namaqualand people have identified the need for charitable activities in their communities.

30. The objectives of the charitable trust will be:

a) To provide welfare services for disadvantaged and poor communities in Namaqualand
b) To identify and provide welfare services which are not currently available in Namaqualand.
c) To provide welfare organisations with additional capital, when available.

31. We propose that the Charitable Trust receive a royalty from Alexkor which is equivalent to 5 % of sales of stones. We have identified the following factors, which suggest that a royalty payment is appropriate:

a) A royalty is an operating expense before tax based on gross sales of stones. It therefore amounts to a guaranteed payment;
b) Alexkor has not made a net profit since 1995. It is unlikely that this situation will change in the short term, which means that communities will not benefit from a profit share arrangement; and
c) A royalty is advantageous to both Alexkor and to the beneficiary community, because of the tax implications.

32. It is proposed that the royalty will be payable as between the Charitable Trust and Development Trust in such a proportion as they may themselves determine on condition that at least one third thereof accrues to the Charitable Trust.

(III) A DEVELOPMENT TRUST

33. We propose that a development trust is established to promote local development activities and self-sufficiency in Namaqualand. The objectives of the trust shall be:

a) training for local economic development
b) job creation
c) providing small business loans
d) retraining (e.g. from mining to another field)

34. Namaqualand communities have identified economic development as a priority for the region.

35. The Development Trust shall be a taxable entity.

36. We propose that it shall hold a special non-dilutable "A" share in Alexkor on behalf of the Namaqualand community. This special share shall entitle the Development Trust to 20% equity in Alexkor including a proportionate right to dividends. It shall also entitle the Trust to nominate a representative to the Board.

37. In addition, for income purposes, it is proposed that the Development Trust receive a percentage of the royalty described in relation to the Charitable Trust.

B. CRITERIA FOR IDENTIFYING BENEFICIARIES FOR THE NAMAQUALAND ENTITIES

38. Each of the entities described above requires principles for the identification of beneficiaries and members. These principles are described below.

39. The members of the communal property association and the beneficiaries of the charitable trust and the development trust shall be the Namaqualand community. The Namaqualand community is deemed to include:

people who are ordinarily resident within the geographical boundaries of the Namaqualand District Council who are historically and economically disadvantaged by virtue of their race and/or gender."

C. INSTITUTIONAL CAPACITY AND PROCESSES FOR NAMAQUALAND ENTITIES

40. In each of the three entities described above, to be established to benefit Namaqualand, democratic processes will be established for elections of trustees and committee members and decision making.

41. An election of trustees/committee members will take place every two years.

42. The electorate/electoral college will consist of the same people for elections for all three entities. Elections for all three entities will take place on the same day at the same place.

43. Elections will be overseen by an independent person.

44. Three representatives from each local government area in Namaqualand, two representatives from local government structures and one from the local development forum will be selected by each identified community within Namaqualand to form part of the electoral college.

45. Up to one third of the electorate/electoral college may be elected as trustees or committee representatives.

46. There will be 9 trustees on each trust and 9 committee representatives on the CPA.

47. The electoral college will elect 9 trustees to the Development Trust, 7 to the Charitable Trust and 7 to the CPA. The Development Trust will be required to nominate two of its trustees to sit on the charitable trust and two to act as committee representatives on the CPA.

48. To ensure continuity of leadership and skill transfer, one third of committee members and trustees appointed shall serve a second term.

49. It is preferred that the committee members/trustees are local persons, however where additional skills are required, it is possible to appoint/co-opt outsiders to the trusts or CPA.

50. A minimum of 30 % of trustees elected must be women. Within six years, 50% of the trustees must be women.

51. Trustees and committee members shall receive a nominal fee for attending meetings. It is envisaged that the amount paid now shall not exceed R 250 per meeting.

52. Provisions concerning decision making and accountability will be included. Mechanisms such as regular reporting and community meetings will be stipulated in each trust deed or CPA to ensure that representatives and trustees are accountable to communities.

53. Provisions relating to grounds and procedures for dismissal, eligibility requirements and conflicts of interests will be included.

54. A registered auditor will audit the accounts of the entities on an annual basis.

D. A RICHTERSVELD LAND HOLDING ENTITY

55. We propose that fourth entity be established to hold land on behalf of the Richtersveld people currently which is currently held by Alexkor. The land is identified as that land suitable for grazing and unsuitable for mining or other agricultural purposes. This land is situated adjacent to the Korridor Wes farms in the southern part of the mine.

56. This land will hold communally on behalf of the Richtersveld community.

57. The entity to be established should be consistent with the arrangements for holding communal land in the Richtersveld reserve and land transferred to the Richtersveld people by way of redistribution, such as the Korridor Wes farms.

58. The Transformation of Certain Rural Areas Act 96 of 1998 provides that land which is not township land will be transferred by the Minister to a municipality or a CPA or a similar body if the Minister is satisfied that it serves the interest of the community and individuals who are or will be using the land.

59. The entity established will have to be consistent with the provisions of Act 96 of 1998.

60. If a sale of the land is proposed, strict procedures and criteria will be used, such as those described above for the Namaqualand CPA.

61. The beneficiaries or members of the entity which holds grazing land on behalf of the Richtersveld people will include all individuals listed on the voters role for the Richtersveld.

E. EMPLOYMENT OPPORTUN~5 FOR LOCAL COMMUNITIES AT ALEXKOR

62. It is proposed that the agreement includes an employment policy setting a target for the employment of local people by the mine.

F. CONCLUSION

63. The above proposal to establish four new and separate entities is a first step in the negotiation process. It is appreciated that the proposals are required to be refined and developed. They are intended to provide the basis of an outline for negotiations for the parties concerned.