PRESENTATIONON THE NDFT’S FOUNDING, CORPORATE

GOVERNANCE, OPERATIONS AND FINANCIAL STRUCTURE TO THE

PORTFOLIO COMMITTEE ON MINING3 NOVEMBER 2010

Table of Contents

Elaboration on objectives

Rationale for appointing new auditors

Cash grants

Audit report not signed

Explanation of qualification of audit reports

Property investments

Municipal functions & focus on welfare

Reporting

Trustee compensation

Municipalities

Job Creation

Education & training stats

Partnerships / alliances

Election of trustees

Amendments to Deed of Trust

Concerns

Cooperation by other stakeholders

Closing statement

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The overall purpose of existence of the NDFT is to improve the quality of life of the inhabitants in its beneficiary areas, by enhancing social, cultural,

economic well-being

This purpose is served via two fund structures –

• Application of the Education Fund• Acting as a ‘charitable institution’

Elaboration on objectives

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Bursaries Secondary Education Tertiary Education Skills training

Programmes Intervention programmes for Grade 12’s Inclusive programmes for primary schools Programmes for people with special needs

Support to Namakwaland FET College

Special programmes (e.g. internships and learnerships)

Financial Assistance to schools (e.g. for equipment and programmes)

Additional support for scarce professions (e.g. Mathematics & Computer Science, Medical staff)

Elaboration on objectives: Application of the Educational Fund

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Infrastructure Clinics, schools, libraries, community halls, mortuaries, dams Tarring of Pella Road Electrification of Richtersveld and Kamiesberg Areas Kuboes water provision (pipe line) Building of houses (to the value of R2.1 million in 2006/07) Installation of satellite towers for TV reception

Elaboration on objectives: To act as a charitable institution

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Social Welfare

HIV Aids programmes & home based care consumables Food parcels and blankets KANSAOld age homes and institutions for people with special needs (upgrading and funding of operational costs) Primary Health Care e.g. Eye care Financial support for funeralsCoordination and support for rehabilitation (substance abuse) Support of restitution of relationships among inmates and families

Elaboration on objectives: To act as a charitable institution

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Sport, arts and culture

Assistance to sporting activities (local, regional, provincial and national) Sponsorships (e.g. main sponsor of Daisy Marathon) Upgrading of sports groundsAnnual budget for 2010/11 is R250000-00 which covers a total of 56 Primary Schools and 12 Secondary Schools for participation in district, provincial and national sporting codes

Elaboration on objectives: To act as a charitable institution

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Elaboration on objectives: To act as a charitable institution

CHARITY CONTRIBUTIONS 2004 - 2010

ITEMS NO OF BENEFICIARIES TOT CONTRIBUTIONContribution to Transport Cost to enable visitation of Prisoners

625 R 125 147.30Assistance with diapers for patients

540 R 162 076.93Contributions to crime prevention

374 R 207 046.16Provision of rations to AIDS sufferers

427 R 213 872.85Support of children

713 R 356 586.59Treatment of rare diseases

799 R 399 668.01Assistance with rehabilitation

427 R 427 645.56Support for the aged

918 R 459 672.66Assistance with costs for operations and medication

769 R 462 253.40Part Funding of Spectacles and special eye care

2072 R 621 491.54Assistance with hospitalisation cost

1575 R 630 034.93Assistance to physically disabled (purchase of wheel-chairs, etc)

1295 R 647 293.79Contributions to funeral expenses

1365 R 1 365 048.36

11899 R 6 077 838.08

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Rationale for appointing new auditors

What was the rationale for changing from one auditing company (PricewaterhouseCoopers) to another (LDP)?

In December 2009, the then Minister of finance, Trevor Manuel, instituted a ministerial panel to investigate and make recommendations about improving the integrity of financial markets by more efficiently regulating auditors and accountants. One of the recommendations made by the panel, was that accountants responsible for the auditing of a company's financial statements, should ideally be replaced every five years.

Although the previous firm of auditors -- Price Waterhouse Coopers -- had served the Trust well over the years (from 1994 to 2008), it was felt to be in the interest of good corporate governance to appoint a new auditing firm. The NDFT followed a due process for the engagement of new auditors in accordance with particular criteria. This was also done in the interest of cost effectiveness and the centralised grouping of specialist service providers

Why did the trust make cash grants in view of the obvious risks involved?

Most of the NDFT's beneficiaries do not have bank accounts and in many of the rural areas there are no banking facilities.

In the past, cash grants were paid out to trustees, but are now deposited directly into bank accounts as everybody had been requested to open such accounts.

Cash grants

The question arose why a particular audit report had not been signed

• The process for final signing of audited Financial Statements involves the presentation of a draft copy of the Statements which is amended, if needed, and signed off by the Chairperson of the Trust – where after the final copy is tabled for signature•The above process was duly followed and, as per a letter received from PWC, the then auditors, dated 27 October 2010, the books of account of the NDFT had been audited and signed off over the period 1995 - 2008

Audit report not signed

The nature of donations made to the NDFT renders it impossible to document such donations until such time as the income has been received in exact terms -- e.g. royalty income varies from year to year.

As per an explanation received from LDP on 27 October 2010, pertaining to the qualification of audited statements, the report was qualified in view of the nature of cash grants and donations and the inherent problem of confirming the comprehensiveness of such grants.

In general, the view of auditors over the years has been that the financial statements have been a reasonable representation of the cash flow and operations of the NDFT in accordance with the South African Standards of Accounting Practice.

Explanation of qualification of audit reports

Question about why the NDFT invests in properties in other provinces, and not the Northern Cape

• According to the selection criteria, property investment opportunities in the Northern Cape Province are preferable to other opportunities

• Thus, investment opportunities in the Northern Cape province were indeed considered

• However, none of the opportunities met the investment objectives and the selection criteria

• It was then decided to widen the scope of opportunities to other regions and there is merit in sourcing investment return from outside of the region and adding it to the region through the PBA of the Trust (thereby increasing economic value and not reallocating it)

• Other investment opportunities in the Northern Cape district are still being investigated -- e.g.

The STC property portfolio in Springbok Possible development in conjunction with Upington municipality Development of an office park in Springbok Development of a regional shopping centre in Springbok

• To date, none of these yet met the selection criteria and investment limits• Ongoing consideration is given to exposure limits, asset allocation, risks,

available surplus funds and future anticipated PBA spending

• It is a residential property, purchased with the main objective of housing trustees from the NDFT when they visit Cape Town for business

• This strategy has the dual advantage of investing in oneself and not paying other parties as well as the preservation of capital

• As a means for the further generation of funds, the house has been set up as a self-catering unit, which is being advertised to the NDFT’s service providers and ‘business partners’

The rationale for purchasing number 5 Greenway Drive, Bellville

• Projects for particular communities are determined and prioritised by communities themselves at the annual compulsory visits of the communities by the full Board of Trustees

• Therefore, communities’ are needs determined and prioritised at their budget meetings and these are tabled at Board meetings by their local trustee representatives, for discussion and approval

• The selection of projects is therefore not determined or prescribed by municipalities, but indeed by the communities themselves.

Contextualising the ‘taking on’ of municipal functions and retaining a focus on welfare/charity

•As determined by the Deed of Trust, annual meetings are held with all beneficiary communities for the purpose of needs identification and report back

•The Trust accommodates 4 Provincial Representatives on the Board -- amongst others to ensure open channels of communication with all tiers of government

•Annual Reports and Financial Statements are provided to the Province and the Auditor General

•Individual trustees conduct meetings with their local beneficiary communities for the purposes of report back, determination of priorities and budgeting

How and when reporting is done to the communities as well is to Trans Hex and the founder (the government of the RSA)

• As is standard practice, trustees receive an attendance fee for attending constituted Board meetings

• Travel expenses related to the business of the Trust, are reimbursed at a fixed amount per kilometre which is based upon and aligned with the varying price of fuel

• At the most recent Board meeting, it was decided to use published AA tariffs as the guideline for determining the reimbursement rate for travel expenses of trustees

• It needs to be noted that the trustees’ role in the beneficiary areas is one of active consultation, liaison and counselling with individual beneficiaries on a continuous basis -- something which is undertaken by trustees without any measure of tangible compensation

Question about whether trustees receive a salary as compensation

Question about the scheduling of meetings and related compensation

Board of Trustees Executive Committee Finance Projects and Investments Committee

Education and Training Committee

Administration, Sport and Marketing

CommitteeDate Day Date Day Date Day Date Day Date Day

JanFeb 25, 26 Thursday

Friday17 Wednesda

y19 Friday 4 Thursday 16 Tuesday

(Admin)March 31 Wednesda

y (Sport)April 8 Thursday 14 Wednesda

y21 Wednesda

y (Admin and Marketing)

May 26, 27 Wednesday Thursday

12 Wednesday

June 9 Wednesday (Sport)

July 29 Thursday 7 Wednesday

14 Wednesday

21 Wednesday (Admin)

Aug 18, 19 Wednesday Thursday

4 Wednesday (Marketing)

SeptOct 28 Thursday 13 Wednesda

y6 Wednesda

y20 Wednesda

y (Admin)Nov 17, 18 Wednesda

y Thursday3 Wednesda

y (Marketing)

Dec 1, 2 Thursday Friday

Note: The schedule may change from time to time in response to changed circumstances and supplementary meetings may be scheduled where matters need to be dealt with as a matter of urgency

NDFTTRUSTEE REMUNERATION

Year Remuneration per trustee before tax

Remuneration per trustee after-tax

Tariff per kilometre travelling

allowance before tax

Tariff per kilometre travelling

allowance after tax

1994 R300.00 R300.00 R1.26 R1.261995 R300.00 R300.00 R1.80 R1.801996 R500.00 R300.00 R1.80 R1.801997 R500.00 R437.50 R1.80 R1.801998 R700.00 R612.50 R1.80 R1.801999 R700.00 R612.50 R2.11 R1.842000 R1000.00 R750.00 R2.28 R1.992001 R1000.00 R750.00 R2.28 R1.992002 R1000.00 R750.00 R2.28 R1.992003 R1000.00 R750.00 R2.28 R2.342004 R1000.00 R750.00 R2.68 R2.342005 R1000.00 R750.00 R3.20 R2.802006 R1333.00 R1000.00 R3.20 R2.802007 R1333.00 R1000.00 R4.40 R3.852008 R3334.00 R2500.00 R6.80 R5.782009 R3334.00 R2500.00 R6.80 R5.782010 R3334.00 R2500.00 R7.20 R6.12

Question about the scheduling of meetings and related compensation

Excerpt from Deed of Trust (Clause 17)

All costs and expenses which are expended by the Trustees in the course of administering the Trust Fund including their remuneration, (being such reasonable remuneration as they may decide upon), as well as any income tax which they may have to pay in their representative capacity related to the income of the Trust, have to be paid by the Trustees from the Trust Fund

Number of trustees

• 11 Trustees (representing beneficiary areas)• 4 Provincial Representatives• 1 Trans Hex Representative

Question about the scheduling of meetings and related compensation

• Nama Khoi Municipality

• Richtersveld Municipality

• Khai-Ma Municipality

• Kamiesberg Municipality

• Namakwa District Municipality

Question about municipalities in the NDFT's beneficiary areas

• With the undertaking of projects, local labour is procured as far as is practicable

• Local contractors are given preference (obviously upon the satisfaction of the NDFT's procurement criteria)

• SMME’s supply the material required

Question about how the NDFT goes about job creation in order to bring about poverty relief

Job creation and procurement

2000Project budget Deliverables Partnership

R2.7 million Concordia Community Hall Nama Khoi MunicipalityR1.7 million Electricity supply:

Eksteenfontein/LekkersingRichters municipality veld

2002R1.3 million Electricity supply:

LeliefonteinKamiesberg Municipality

R1 million Tar road: Pella Department of roads and public works

In summary, the following projects were undertaken in partnership with respective municipalities and particular requirements regarding procurement and empowerment as per their policies were adhered to –

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Job creation and procurement

During 2004, projects to the value of more than 3 million Rand saw the empowerment of 4 local subcontractors as well as an SMME’s through procurement; in addition, a total of 80 jobs were created.

2006 saw the creation of 145 jobs through projects totalling just more than 4.9 million Rand.

During 2007, projects to the value of 3.223 million Rand yielded the empowerment of eight local subcontractors, a total of 16 SMME’s through procurement and 57 jobs.

During 2008, a total of 11 projects to the value of 7.2 million Rand empowered 7 local subcontractors, 15 SMME’s and led to the creation of 100 new jobs.

Despite the economic downturn in 2009, the Kuboes pipeline project to the value of 4.2 million Rand still created 62 jobs.

Question about the number of students which have been supported at secondary and tertiary level and the costs involved

YEAR TERTIARY SECONDARY SCHOOLS AND PRIMARY SCHOOLS

TOTAL AMOUNT (IN RAND)

NUMBER AMOUNT(IN RAND)

NUMBER AMOUNT(IN RAND)

1995 233 542,500-00 746 280,572-00 832,072-00

1996 213 499,585.90 758 346,481.00 846,066-90

1997 281 886,373-38 1304 556,580-00 1,442,953-38

1998 533 1,616.380-00 1006 1,210.769-00 2,827.149-00

1999 475 924,720.60 1156 1,079,810.00 2,004.530-60

2000 248 753,780-00 460 776,881-90 1,530,661-90

2001 520 1,452,360-00 1270 1,346,899-00 2,799,259-00

2002 623 1,816,450-00 1216 1,256,829-00 3,073.279-00

2003 720 1,956,897-00 1564 1,825,696-00 3,782,593-00

2004 790 2,950,890-00 1020 1,733,365-00 4,684.255-00

2005 743 2,568,435-00 932 2,642,388-00 5,210,823-00

2006 532 2,369,789-00 1076 2,888,613-00 5,258.402-00

2007 648 2,989,697-00 889 2,916,460-00 5,906,157-00

2008 712 3,027,584-00 1276 2,948,500-00 5,976.084-00

2010 648 2,140,680-00 1578 3,279,320-00 5,420,000-00

7919 24,879,741.88 16251 24,532,583.90 51,594,285.78

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Summary of spend on Educational Projects : 1995 - 2009

1995 R 305 673.001996 R 341 716.001997 R 160 302.001998 R 47 427.001999 R 289 844.002000 R 270 526.002001 R 310 433.002002 R 547 265.002003

R 737 915.0020042005

R 425 000.0020062007 R 946 600.002008

R 1 348 692.002009

R 5 731 393.00

Investments in projects covered the procurement of equipment, literacy programmes, pre-school establishment, skills training programmes, educational tours, HIV Aids awareness programmes, work experience programmes, upgrading of local FET College equipment, funding of school journalism, entrepreneurial development, establishment of computer centers at schools, computer literacy programmes, Rotary Exchange Programmes, advancement of community tourism, donations to orphanages, school sport & cultural programmes, intervention programmes & career orientation, enhancement of academic achievement

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Summary of spend on Skills Training: 1997 - 2008

A 3rd focus area of Education & Training involved Skills Training covering a broad spectrum of crafts and trades e.g. welding, motor vehicle mechanic, building trades, small stock farming, hair stylists, garment design & manufacturing etc

Over the period 1997 – 2001 an average of 3 courses were presented in each of 23 towns to a student complement totalling 3074

From 2005 to 2008 - in response to community needs – a total of 282 learners were accommodated on development programmes covering the following vocations: Artisans; Security; Ambulance drivers; Operators; Nursing Interns. These resulted in 249 placements yielding a total income of more than R30 million per annum.

Some examples are:

•Northern Cape Premier’s Education Trust Fund: Joint award of bursaries

•Namda: Recipient of an NDFT Grant for economic and SMME empowerment and development

•CPA: Recipient of an NDFT donation towards their land restitution litigation

•Hantam Municipality: Supported by the NDFT in the establishment of the Abraham Esau Trust for the Transfer of Skills

Question about the NDFT's relationship and partnerships/alliances with similar institutions

• Trustees are elected by their respective communities for a period of five years in accordance with a particular process

Question about the term of office of trustees and how they are elected

SUMMARY OF PROCESS

Publication of results

Acceptance of results by candidates

Question about the term of office of trustees and how they are elected

• The Deed of Trust makes provision for trustees to be re-elected (refer clause 10.11.1)

• Re-election depends on the choice of a respective community in the first instance (as democratic election by communities serves as the only avenue for gaining representation on the Board)

Changes to the Deed of Trust

In summary, the following changes were effected to the Deed of Trust:

•The description of the rural areas and the definition of ‘Namakwaland’•The ‘term of office’ of trustees•The requirement to submit annual tax returns and related documentation•No trust funds will be paid over directly to any one individual, save for instances where public welfare activities are effected•Finances available for investment, may be invested with registered financial institutions and or with any registered company on the proviso that investments may not be made with the aim of speculation•The NDFT may directly or indirectly invest surplus funds in fixed property, on the proviso that such investment may not be made with the aim of speculation

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• Should the NDFT find itself in the untenable situation of not being able to provide monetary support to its beneficiaries, 81000 people who all have various degrees of need in terms of quality of life will be affected detrimentally. Aspects to be most seriously affected include –

o Education and trainingo Inclusive education and equipment for schoolso Aid / support for life sustaining means/commoditieso HIV/AIDS counselling and support

Question about why the NDFT would be concerned about ‘current Legislation’

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• It needs to be noted that the NDFT receives requests regarding a wide array of needs from the broad spectrum of departments

• As the Trust wishes to participate efficiently and effectively and align its efforts with broad community based initiatives, it will be appreciated to be involved at

grass roots in terms of departments’ planning, priorities, overall project scoping and budgets. This will enable the Trust’s input to be utilised optimally

and assist with the seamless roll-out of contributing activities and funding

Question about whether the NDFT is enjoying sufficient cooperation from its so-called strategic partners/alliances

In closing

In keeping with the values of the NDFT, we will continue to live our vision of enhancing the quality of life of the people in our region

One must accept though that the on-going receipt of royalties constitutes the life blood of the Trust – without which it would be impossible to pursue the objectives for which the Trust was brought into being

We appreciate the opportunity of putting the current status of the NDFT into proper perspective and to highlight the challenges we are facing in

continuing to be the prime agent of change and empowerment in our region.

Thank you