PRESENTATION TO SELECT COMMITTEE ON COMMUNICATIONS AND DPE Progress Report on Aventura 31 July 2019

Background In 2001, Cabinet took a decision to dispose of all the Aventura resorts. Aventura had 14 resorts, 6 were loss making and were the first to be sold to different purchasers. The remaining 8 were all sold to Forever Siyonwaba Consortium for R200m. The transfer of those resorts to the Consortium encountered serious challenges i.e incorrect property descriptions, land claims, etc. The transfer was protracted resulting in the Minister deciding to dispose Aventura by way of liquidation. Liquidation completed in 2018. To complete the winding up, Aventura Founding legislation (Overvaal Resorts Act 197 of 1993), needed to be repealed.

Background continues Department embarked on the parliamentary process in April 2018 to repeal the Act. Portfolio Committee and Select Committee approved the repeal in 2018 and March 2019 respectively. Even though the repeal was approved by both committees, there were concerns raised during public hearings by a group of former disgruntled Aventura employees. The concerns relate to: 30% shareholding from Siyonwaba that Forever Resorts is holding; Employee share Ownership scheme; perceived failure by Government to protect the interest of employees;

Background continues Complaint that a company owned by a managing Director of Aventura is providing service to the Company; and Allegations that employees are/were persuaded/encouraged to take voluntary and early retirement by Aventura Management. Parliament processed the repeal of the Bill as concerns raised do not have a direct bearing on the repeal of the Bill. The Department undertook to look into those concerns and report back to Parliament. The Department advised Parliament that the key concerns that should be addressed are the employee share ownership schemes and the 30% shareholding.

Delay in the transfer of the 30% Shareholdingcontinues. With regard to other concerns raised, the Department does not have authority as Aventura is sold and is currently under control of a private company. The 30 % shareholding was previously held by Siyonwaba but is currently purchased by Forever Resorts. Several letters have been exchanged between the Department and Forever resorts regarding this shareholding. Dept reminded Forever Resorts that Government's objective with the sale of Aventura was amongst others the empowerment of Previously Disadvantaged Individuals.

Delay in the transfer of the 30% shareholding In this regard, Forever Resorts was referred to the Information Memorandum issued at the time of the sale of Aventura. Forever Resorts referred also to its statement on Black Empowerment status of Forever in February 2009 in which Forever Resorts stated that it believed in the upliftment of previously disadvantaged communities and community involvement, that it supported BEE program and that the 30% shareholding will once again be transferred to a BEE company. Furthermore, in response to an enquiry by DTI in 2010, Forever Resorts advised that efforts were underway to put in place a new BEE structure and that plans were afoot to transfer the 30% shareholding to a trust on whose beneficiaries will be employees of Forever Resorts.

Delay in the transfer of 30% shareholdingcontinues The Dept reminded Forever Resorts that Forever stated that the new BEE company was going to be in place by the middle of November of 2009 . Dept sought to establish why Forever Resorts was not keeping these undertakings. Forever replied that : the Department was misconstruing the sale transaction, insisting that the transaction was regulated by Sale and Purchase Agreement (SPA); the issues raised by the Department in relation to empowerment of communities is not provided for in the SPA; Forever Resorts is cognizant of policies of Government such as empowerment and that it subscribes to such policies;

Delay in the transfer of the 30% shareholdingcontinues Forever Resorts plans to introduce a BEE company are constrained by things such as unresolved land claims and the uncertainty as the final make up of the asset basket of Forever Resorts; Forever Resorts continues to evaluate its position and will make a decision regarding the introduction of a new BEE company at the appropriate time; and that the Department is urged to allow Forever Resorts space to manage the process on its own. The delay (i.e since 2009) in the transfer of the 30% shareholding to another BEE/Aventura employees prompted the Department to seek a legal opinion in this matter.

Legal Opinion The preliminary view is that there is merit to Forever Resort’s contention that it cant finalise the identification of another BEE company until the land claims are resolved and its asset base finalised. The Dept is advised to first obtain the Shareholder Agreement (“SA”) either voluntarily or through PAIA, To obtain also the agreement pertaining to the sale of Siyonwaba’s 30% shareholding to Forever Resorts. The Dept advised to consider triggering the dispute resolution provisions of the agreement(i.e arbitration ) / alternatively to bring an application in court to compel Forever Resorts to procure another BEE company. This is dependent though on giving consideration to the matter as a whole( including having had sight of the SA).

CONCLUSION QUESTIONS ?