Chairman’s Newsletter July 2018

 

CHAIRMAN’S NEWSLETTER

 

1. This is the fourth newsletter that I have issued since being voted into office in December 2016. It also marks the end of my extended chairmanship.

2. I assumed the chairmanship of the club on the basis of a mandate to constitute a crisis committee made up of members who were willing to roll up their sleeves and implement a turn-around strategy to address a history of mal-administration, a failure to pay SARS, V.A.T/PAYE and UIF for five years, a failure to pay for municipal services, a failure to pay trade creditors, month on month unsustainable losses through trading activities, (especially the kitchen) and contractual commitments for goods and services, which the club did not need and could not afford.

 

3. Both I, and my committee, agreed to tackle these problems for a year. We hoped to implement necessary changes, put the club on a path to sustainability and then step aside after handing its management, direction and control to a committee constituted by younger members who subscribed to the principles of good governance, appropriate ‘hands on’ management and control with the focus on expanding membership to include all of the Port Alfred community.

 

4. It is perhaps appropriate that I take this opportunity to re-emphasise and affirm the principles underlying the re-structuring which is to an extent incomplete.

 

• Firstly, there had to be a change to the model of governance from occasional meetings of the committee, who issued instructions to a manager for implementation, to a model which involved the entire committee in policy, direction and the execution of the clubs management. In short, no more managers:  the committee would do the work.  This we achieved and by so doing effected very significant savings.

 

• Secondly, the kitchen had to go. Financial analysis of available information proved conclusively that it operated at a significant loss, month on month.  A decision was taken to separate the facilities and move towards identifying a suitable tenant to operate a restaurant and function venue against payment of market related rentals.  This we achieved.

 

 

 

• Thirdly, the club’s debts and inappropriate contractual obligations had to be addressed. Here there has been progress but much still needs to be done.

 

• Fourthly, the club’s workforce had to be rationalised and reduced and made secure in their employment. Of primary importance, was the identification and employment of a bar manager able to manage and control support staff, accept responsibility and be accountable for bar takings, security, cleaning, maintenance and most importantly, opening and closing on a daily basis. Written contracts were negotiated with each employee.  Salaries have been increased and will have to be further increased.  This we achieved.

 

• Fifthly, the committee adopted a financial model for sustainability. None previously existed.  The club was to break even or show small net profits through trade.  Benefits were passed to members by keeping profits at close to break even.  Additional funds were generated through fundraising, donations and subscriptions.  This we have achieved as explained below.

 

• Sixthly, the implementation and continual and close monitoring of finances, the liquidation of debt to trade creditors, the liquidation of the bank overdraft, (which was at maximum) and a transition to cash for goods and services. This we achieved.

 

• Seventhly, the replacement of the club’s Constitution, to put in place safeguards against a recurrence of mal-administration, an ability to exercise financial control and provide a framework for conducting the management of the club into the future. This was achieved.

 

• Eighthly, the committee set about increasing the membership. After resignations and natural attrition the membership increased by 14 during the period December 2016 to June 2018.

 

• Ninthly, the committee tackled and resolved the problem of non-payment of contributions to the employees provident fund. This entailed the liquidation of the fund, the registration of our employees as tax payers, the distribution of the fund to members, the distribution of R39 000.00 of club funds to the employees (payment of contributions not paid by the club from inception) and the negotiation of full and final settlement agreements against an increase in salaries.

 

 

• Lastly, and in order to balance the strictures imposed by the need to restructure and placate members resistant to change, the committee resolved to improve the facilities by undertaking maintenance and renovations. This we achieved.

 

5. The achievements of the committee have been considerable. I reported on these during the Chairman’s address at the AGM of December 2017.  (Published on the website and posted on the club notice board).  They need not be repeated other than to update for the period December 2017 to June 2018.  In the main there is little to report because the turnaround has been implemented and proper management is in place.

 

• In terms of the Constitution, the setting of policy and direction and the execution of the club’s management vests in the elected committee who are volunteers who give of their time without remuneration and are deserving of support. They gather to take decisions by resolutions recorded in written minutes.

 

• A committee, chosen and elected to office at an annual general meeting of the membership, who underperform, should be voted out of office. The Constitution makes provision for this.  Concerned members have the right to demand a special general meeting for this purpose.  If they can achieve a majority in general meeting, the committee must step aside and be replaced.  If not, then by convention those who called the special general meeting resign their membership.

 

• What the Constitution does not recognise and, which is totally unacceptable, is that members manage the club from the bar and second guess the committee.

 

• In the interests of the future of our club, this practise should stop. Amazingly, when members are invited to be co-opted onto the committee as full participants, they refuse. Indeed, the best example of this are the facts around the chairmanship which need to be explained.

 

5.1.3.1     I undertook to head up the crisis committee to implement the turn-around strategy for a year only. This was made plain from the outset. The demands of my professional practise were such that I could not remain chairman for longer than a year.

5.1.3.2     Succession planning for the chairmanship commenced during 2017 when attempts were made to identify members willing to stand for office.  Many members were approached.  No-one stepped forward.  In the result, I was prevailed upon to extend  my chairmanship and Mike Beaumont was prevailed upon to extend also the Financial portfolio.

• I announced at the 2017 AGM my firm intention to step aside by June 2018 at the latest and called on all members to apply their minds to the identification of suitable candidates for the chairmanship.

 

• At its monthly meetings, during the period January to June 2018, there has not been a single meeting where succession planning has not been the priority of the agenda. No-one stepped forward.  No-one could be identified.

 

5.1.4   What did happen however, was the collection of signatures of members, non-members and visitors to the club on what purported to be petitions against a resolution of the committee concerning trading hours and a resolution of the committee regarding renovations ‘for obvious reasons’. Both were handed to the secretary a day or two before the scheduled meeting and came as a surprise.  The concerns of members were not conveyed to the committee.  Not by word, telephone or letter.

5.1.5   The abovementioned state of affairs must be taken to be a failure on the part of the committee.  Somehow it has failed to carry with it the support of a portion of the membership.  I ascribe this failure to the need to focus on the implementation of the turn-around strategy, (which entailed countless hours of behind the scenes work by all members of the committee) when more attention should have been given to communicating with the membership.  The solution lies in better communication on the one hand and an adjustment of the behaviour of certain members who appear to subscribe to the notion that the volunteers who serve on the committee are required to manage the club in accordance with their uncommunicated wishes.

 

• Let me turn now to the ‘petitions’, which were given close consideration by the committee at its meeting during June on the basis that they constituted evidence of dissatisfaction amongst members in relation to trading hours and the project to renovate the outside area so as to incorporate it into the building and make it user friendly, especially for members with young families. While both were the subject of unanimous resolutions of the committee and expert advice, the issues were reconsidered within the constraints of the Constitution which prohibits the alteration or amendment or resolutions within six months except by way of a motion of rescission. This is a stock standard Constitutional provision designed to create certainty in the administration of a club or institution.

 

• Firstly, as regards trading hours, the committee had within the previous six months, and at the request of a member who wrote a letter, considered whether trading hours should be extended. Following extensive debate and an examination of all issues, the committee resolved that trading hours would remain as they were vis that the bar manager could not be expected to keep the club open every night for extended hours against the event that a few members might wish to use its facilities, that additional staff would not solve this problem and could not, in any event, be afforded, that the bar manager was owed (and continues to be owed) a substantial amount of leave and that his current hours of employment are in contravention of the Basic Conditions of Employment Act and that the overhead associated with extended hours far exceeded even the gross profit, which would accrue.

 

• This notwithstanding the issue was again considered. This time in the light of financial calculations pertaining to the cost of employing an additional barman.  (of between R3 500.00 and R5 000.00 per month) and of entrusting control of cash to anyone other than the manager, if he were not to be responsible for locking up at night.  The committee has reaffirmed its existing resolution.  The bar trading hours will remain as they are.  This entails that the bar manager will himself lock up the club when all  members have left.  The club will not remain open when no members are present against the hope that some may arrive in due course.  In practise, according to the Bar Manager, the club is open Monday to Saturday, until at least 19h30.

 

 

 

• As regards the resolution of the committee to renovate the outside area, the committee resolved to delay the execution of its resolution until a new chairman has been elected following my resignation. The new chairman must be elected by a special general meeting together with a committee member responsible for finance by reason of the resignation from the committee of Mike Beaumont (see below).

 

5.1.10 Between the date of my resignation and the election of a new chairman, the club will, in accordance with the Constitution, be under the chairmanship of Jennifer Nelson, who is currently the vice-chairman.  Since the chairman carries both a deliberative and casting vote, should there be a motion of rescission of the resolution in question, the new chairman’s views will carry considerable weight.  I did not believe it appropriate to implement the resolution on the eve of my resignation and have full confidence in the incoming chairman’s decision, whatever it may be.  My view is that there is a serious need to improve the outside entertainment area.  It is non-functional and a waste of space.  The decision vests in the committee after taking into account the concerns of the membership which it has always done and no doubt will continue to do.

 

• During the course of this year, it became apparent that both Mike Beaumont and Keith Reid (Finance and Secretary respectively) were undertaking tasks in addition to those that could reasonably be expected of them as members of the committee. From inception, they have been hands-on on an almost day-to-day basis.  It was therefore proposed, and the committee unanimously agreed, that they be remunerated.  Their total salary bill amounts to R5 000.00 per month.    This is clearly not market related and constitutes a disbursement in the nature of a stipend as compared to the previous dispensation, which entailed a salary bill in excess of R20 000.00 per month for two managers, and two bookkeepers. In the interests of good governance  both Mike Beaumont and Keith Reid have resigned from the committee but remain employed as before.  In this way the club will retain their valuable services.

 

• The offer of compromise to SARS to settle the historic debt remains outstanding and is not finalised. The debt will continue to attract interest until settled.  The issue is however in hand and the committee have planned for all eventualities, including the worst case scenario of a final refusal.  In that event, the funds of R210 000.00, invested in the trust account of attorneys Changfoot van Breda, will be returned to members together with interest for which the club has made provision.

 

 

The club will then face legal proceedings to recover the historic debt and interest.  Essentially this will boil down to an assessment by the legal representatives of SARS as to whether the club has movable assets for sale in execution to satisfy the debt.  The club does not have movable assets anywhere near sufficient nor is its lease of commercial value.  Accordingly, at the stage of litigation, the club has every prospect of achieving a de facto compromise.  The offer of compromise has not been finally refused and the club continues to engage with SARS in an effort to comply with its requirements so as to allow the offer of compromise to be considered on its merits.

 

5.4         The debt to Ndlambe for municipal services has been reduced by more than 50% and currently stands at some R72 000.00.  This too, is the subject of an offer of compromise on the basis that the outstanding amount be written off by reason of over-charging for electricity consumption which was demonstrated after the installation of pre-paid meters.  A decision from NdIambe on the offer is outstanding at the time of writing.

5.5         Rental contracts in respect of computer hardware and software have been successfully renegotiated. Importantly both the hardware and software will be upgraded, the bar staff will be trained and up-skilled and the equipment will become the property of the club after 36 months at an all inclusive rental of R3 100.00 per month, without escalation.

 

• Historic debt owed to SAB is the subject of negotiations between SAB’s attorneys and the club. A settlement remains outstanding.

 

• Crystal Carelse has been our tenant since the beginning of the year. She has had to come to terms with the fact that we are, and will remain, a small seaside village that does not attract hordes of holiday makers and where residents have limited disposable income.  We have watched with interest the improvements which she has effected and her innovative ideas around promoting the facilities which she rents.  The club has reduced and adjusted rentals to cater for a reduction in trade during the off season.  Rental is on a scale which peaks during December/January.  The committee is confident that Crystal Carelse will succeed in her endeavours and have renewed her lease for a period of two years with an option to renew for a further period of two years.

 

 

5.8         Mike Beaumont, who guards our funds and prevents expenditure beyond our means, reported that for the period October 2017 to May 2018 the club made a net profit of R143 000.00.  Gross trading profit amounted to R220 000.00 which translates to R27 000.00 per month.  Other income including subscriptions and rent amounted to R281 000.00.  Against this overheads totalled R358 000.00.  An amount of R220 000.00 is invested to secure an overdraft (which we do not use) and make provision for repayment of debentures and loans from members.  All in all we have much to be proud of.

 

5.9         The manifestation of a small portion of the work of the committee, can be seen in the renovations and maintenance.  Of this, the committee is especially proud.  Substantial donations were received.  Members participated and some rendered services at cost.  The club itself was able to spend R155 000.00 thanks to proper management.  The club premises have never been in better shape since I became a member some seven years ago.

 

• All in all, I congratulate my committee on their achievements. I am proud to have been the chairperson of the committee who have given of their time and effort to save the club and put it on a sustainable footing for the future.  I urge the committee that I leave behind and those who are to come, to apply themselves diligently and to take the hard decisions after careful consideration.  Membership of a committee of a club has got nothing to do with a popularity contest.  In the nature of things, there will always be those who have much to say but make no actual contribution and expend no effort.  The secret seems to lie in rejuvenating the membership through attracting young persons and their families who have an interest in fishing and related activities, who are willing to transform the club into a welcoming and accommodating environment and to work towards including all sections of our community.

 

• In conjunction with the committee, I will time my resignation as chairman to accommodate tight time limits of application to convening a special general meeting. I have for some time focused on achieving a transition and remain available to advise the committee, especially on legal matters, should I be requested to do so.

 

_________________

Richard Quinn

Chairman

 

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