Officials of the Department of Public Enterprises briefed parliament on the outcomes of a forensic investigation into Alexkor.
- A forensic report has revealed a number of issues at a joint venture with Alexkor, which has implicated former CEO Mervyn Carstens.
- The report shows procurement processes were flouted and the joint venture contracted poorly qualified diamond evaluators which resulted in diamonds being marketed below their value.
- According to the department of public enterprises, the forensic report has been shared with the Zondo Commission of Inquiry into State Capture for further investigation.
A forensic report has revealed a number issues at a joint venture with Alexkor, such as the flouting of procurement processes and diamond evaluators lacking required skills which resulted in diamonds being undervalued.
Officials of the department of public enterprises on Wednesday briefed the parliamentary oversight committee on the outcomes of a forensic investigation into the state diamond mining company.
The investigation, conducted by Gobodo Forensic and Investigative Accounting was launched in 2019, this following numerous complaints to the department in late 2017 and early in 2018. Marine mining contractors had complained that they were unfairly excluded from a 2018 marine mining procurement cycle at operations of a Pooling and Sharing Joint Venture (PSJV). The PSJV is between Richtersveld Mining Company and Alexkor, it was established in 2011.
Before appointing Gobodo, the department had conducted a site visit in Alexander Bay. Engagements were held with the PSJV board and management as well as contractors. “The contractors raised allegations of intimidations, unfair exclusion from the mining procurement cycle, unauthorised mining activity, dishonest reporting of diamond revenues and unlawful appointment of the marketing and sales service provider, Scarlet Skye Investment (SSI),” said Morongwa Mothengu, the department’s director of mining.
“The investigation by Gobodo uncovered that there were irregular actions committed by the executive and board of the PSJV in the management of the diamond operations,” Mothengu said.
Among the key findings and recommendations are:
- A decision taken by CEO Mervyn Carstens and the then board of the PSJV to exclude certain contractors from the marine mining services procurement cycle was not valid. Gobodo recommended that disciplinary actions be taken against Carstens.
- The procurement and appointment of SSI, a diamond marketing and sales company, in 2014 was not above board. The bid evaluation process was “manipulated” to favour SSI. Gobodo subsequently recommended that the contract with SSI be terminated.
- Gobodo also found flaws in the valuation of rough diamonds – among these that the evaluator did not “possess the skill” to value diamonds; the evaluator was sent for intermediary training. Gobodo however noted the lack of experienced personnel in the valuation of diamonds at the mine site exposed the PSJV to a risk of the diamonds being undervalued at the mine. Gobodo recommended an independent evaluator be appointed to conduct valuations of rough diamonds before being delivered for marketing and selling.
- Gobodo also picked up that the SSI’s selling prices for diamonds was substantially lower than average market prices.
- Gobodo looked into allegations of the PSJV withholding information relating to the sales and marketing of diamonds. It recommended that disciplinary action be taken against Carstens for “disregarding contract agreement” in refusing to share information to the contractors.
- As for the legality of coffer dam operations – which allegedly result in environmental damage – Gobodo found that the mine was constructed without proper permission in terms of environmental management plans. Carstens was implicated in this decision and Gobodo recommended disciplinary action against him.
In terms of progress on recommendations Mothengu explained that Carstens’ was suspended and his employment was terminated in August this year. The case has been brought before the Commission for Conciliation, Mediation and Arbitration. The department expects the matter to wrap up in December.
The PSJV also terminated the contract with SSI and now uses the services of the Diamond Exchange and Export Centre, for marketing and sales activities.
Mothengu added that the forensic report had been shared with the Zondo Commision of Inquiry into State Capture for further investigation.
