A wrangle has erupted between De Beers and the workers in Koffiefontein mine in the Free State over the company’s decision to award lucrative shares to nominated employees only when it was delisted in June last year.
This week the workers set a substation on fire causing an explosion; power was cut for 14 hours and production was severely affected, fuelling a crisis in one of South Africa’s biggest mining companies. Next week the National Union of Mineworkers (NUM) plans to meet De Beers to find out why only middle and senior management received shares and, subsequently, money, while the workers received neither.
The delisting stemmed from a deal where a consortium of Anglo American (45%), Central Holdings Limited (45%) and Debswana (10%) formed a new company, DB Investments, which now owns De Beers. A majority of shareholders voted in favour of the buy-out.
De Beers’s explanation of the share scheme raises new questions. Describing aspects of the selection process for the shares, a De Beers spokesperson says the board of directors announced in the 1997 company annual report that it intended to introduce a scheme to provide an incentive to nominated employees “to enable them to more closely identify with fortunes of the group and promote its continued growth and profitability” and “to promote the retention of such employees”. What De Beers also says is that “in the 1999 annual report it was further stated that the share incentive scheme had been extended to include qualifying employees at middle and senior management level”.
De Beers also says “the criteria that were developed included tertiary qualification, specialist skills, mobility and skills”.
The criteria were “considered appropriate to protect the company’s investment in the employees concerned in the increasingly competitive South African labour market”.
When the company was delisted, shareholders were paid out, as were those employees included in the share incentive scheme, says the spokesperson.
But some workers have professed deep concern about the choice of employees to participate in the scheme and the handling of the shares when De Beers was delisted. In particular, they have objected that shares were given to some employees while the rest were excluded.
A NUM representative, Joseph Bhotile, says the union wants shares “which were extended to other people to be extended to others as well. What De Beers did is unfair and unacceptable.” He says NUM “will try to engage De Beers next week and decide which steps to take”.
But some workers did not wait for their union to take up the issue. A written note next to the burnt-out substation read “We want shares”.
When approached for comment, the representative of De Beers based in Koffiefontein confirmed this week that a substation had been set on fire at the weekend, but said the police have launched an investigation and expect to make arrests soon.
The representative was unable to disclose further details. “It is believed that [the explosion at the substation] was an act of sabotage and we are planning to have discussions with the unions.”
A diamond industry analyst said this week that when a company is delisted it is under no obligation to give its shares to anyone.