Alexkor expansion into coal was part of state capture project - inquiry hears

The judicial commission of inquiry heard that Alexkor's decision to go into coal mining was a "misguided strategy". Photo: iStock
The judicial commission of inquiry heard that Alexkor's decision to go into coal mining was a "misguided strategy". Photo: iStock
  • The judicial commission of inquiry into state capture on Friday heard evidence from long-term contractor to Alexkor and to its joint venture with the Richtersveld community, Gavin Craythorne.
  • According to Craythorne the proceeds from work contractors did not go back into the Richtersveld community but instead were used in investments to diversify Alexkor's expansion into coal.
  • He told the commission that this change of focus from diamond mining to coal was meant to benefit Gupta-linked companies.

State diamond mining company Alexkor was a casualty of "classic state capture", with its expansion into coal mining an attempt to benefit Gupta-linked companies, the judicial commission of inquiry into state capture heard.

The commission, led by deputy chief justice Raymond Zondo held its first sitting for the year on Friday, where it heard evidence related to the mining industry.

Evidence leader advocate Carol Sibiya explained that capture took place at Alexkor in two ways – by getting hold of the produce of the diamond mines and secondly directing the purposes of Alexkor and its mining towards coal mining, to benefit Gupta-linked entities.

Appearing before the commission, a long-term contractor to Alexkor and its pooling and sharing joint venture with the Richtersveld community unpacked how Gupta-linked entities ha benefited from contracts, while he and other marine contractors were pushed out.

The joint venture was established back in 2011, when the Richtersveld community won a land claim. It was agreed Alexkor would hold a 51% sake in the venture and the community would hold the remaining stake – the community would access land mining rights and Alexkor would have marine mining rights. They would pool these resources together resulting in a pooling and sharing joint venture, Sibiya relayed to the commission.

While the venture was to benefit the community- it has not been the case.

The board had decided to made a decision for Alexkor to go into coal mining, mainly in Mpumalanga, nowhere near Alexander Bay in the Northern Cape where Alexkor's existing operations were located.

Craythorne said that the groundwork for this had been done by former Public Enterprises Minister Malusi Gigaba, his department is the shareholder of Alexkor.

During Gigaba's term between 2010 and 2014, the decision was taken to repurpose Alexkor. "Taking it out of diamond mining to coal mining was a strategic blunder of epic proportions," said Craythorne. He said he had written to the parliamentary oversight committee to "raise alarm bells" on the "misguided strategy" to go into coal, just after the community had resolved the "gordian knot" that was the land claim and was finally ready to rebuild itself.

Craythorne said that Alexkor should have focused on marine mining which had a promising future for the west coast, as was seen in Namibian marine industry which was flourishing.

While Caythorne said there was nothing wrong with Alexkor looking to diversify its revenue stream, the problem was that it had no budget to do so. Alexkor had to appoint consultants to evaluate the coal strategy- as a result yields of the work of marine miners like himself was not sown back into the pooling and sharing joint venture and the Alexander Bay communities- instead it was invested into the coal strategy in Mpumalanga, which would have benefited Gupta linked entities.

He said the town of Alexander Bay as deteriorating as were the operations of the marine miners, a result of the decision to go into coal.

Craythorne added that he did not think Alexkor had the expertise at the time to go into coal.

Capturing diamonds

Craythorne also provided evidence on how the diamond mining chain at Alexkor was captured. He echoed the findings of a Gobodo Forensics investigation. Former executive director of Gobodo Forensics, Albert Torres had appeared before the commission earlier on Friday. He explained how a firm - Scarlet Sky Investments - was irregularly appointed to market and sell diamonds for the joint venture.

According to Gobodo's findings, a Gupta associate– Kubentheran Moodley had been a board member of Scarlet Sky Investments- which was a mere shelf company when it took part in the tender process.

Craythorne similarly suggested that Moodley and another director Daniel Nathan were only officially appointed after the tender was awarded to Scarlet Sky, which meant there was a misrepresentation during the tender process.

Craythorne pointed out that Scarlet Sky operated without its own licence and was using that of another company Daniel Nathan Trading CC. This information was provided by Alexkor to the parliamentary oversight committee, which had asked questions relating to the Scarlet Sky appointment. Craythorne said through the responses provided by Alexkor provided to parliament, it was established that at the time of the tender the company neither had a track record or expertise in selling and marketing diamonds- it relied on the 20-year experience Daniel Nathan had in diamond mining. Zondo made the point that these expertise cannot be claimed by the company, they are purely Nathan's.

Another issue Craythorne highlighted is that while Alexkor in the past struggled to have its diamond prices match international benchmarks, they continued to deteriorate under Scarlet Sky. He had reached out to former CEO of the joint venture Mervyn Carstens to cancel the contract with Scarlet Sky when he learnt Moodley, linked to the Gupta family and implicated in the public protector's state capture report, was a director at the company. "The appointment of a Gupta-linked firm to market and sell diamonds for an Alexkor joint venture - I made of that, that it is classic state capture," said Craythorne.

These concerns were not attended to, while there was growing anger among contractors over the poor selling prices of diamonds.

Having conducted his own analysis of diamond mining prices, he pasted these finding at the entrance of the mine. Craythorne said he was  subsequently banned from accessing the mine and legal suit was lodged against him. Carstens had put up his own notice at the entrance eof the mine disputing the data findings.

Craythorne said his ban from the mine led to the "decimation of his financial wellbeing" and that it had been a "tough journey" to get to the commission.

Craythorne will continue his testimony on Monday.

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