Mineral Resources: Minister's Budget Speech
21 Apr 2010
Mineral Resources Minister Susan Shabangu's 2010/11 Budget Vote Speech
Honourable Chairperson and Members of Parliament;
The Director-General and management of the Department of Mineral Resources;
Chairpersons and CEOs of mining companies;
The leadership of trade unions;
Chairpersons and CEOs of State-Owned Entities
Representatives of other stakeholders;
Comrades and friends;
Ladies and Gentlemen
It gives me great pleasure to introduce to this House the debate on the Budget Vote of the Department of Mineral Resources for the 2010/11 financial year.
As you will recall, President Jacob Zuma announced on 10 May last year the re-organization of cabinet and national government departments. Amongst others, the DME was split into two, namely the Departments of Mineral Resources and Energy respectively, to ensure a realigned organizational structure reflective of the new functions as informed by the new mandates. I am happy to report that the transitional arrangements in terms of which DMR provided support services to the Department of Energy has now come to an end. The DMR is now fully established and employees have been matched and placed into the two newly created Departments. In view of the global recession and the State’s limited financial resources, the DMR will be implementing the approved organizational structure in phases.
The process of splitting the DME budget was successfully finalized in January 2010. This process culminated in the final allocation of R1,030-billion for the DMR.
In response to shrinking financial resources, the department introduced a number of cost-containment measures and stringent controls to achieve more with less. These included scaling down the number of delegates on overseas trips, suspension of international conferences and seminars, hosting of meetings in close proximity to the department or in free venues, using public service circular or free advertising for positions below director etc. We will continue on this path.
The revenue collected for 2009/10 was R149,118-million against the projection of R165,357-million. The implementation of the Royalty Bills will result in a further reduction of our revenue collection as this function has since been moved to SARS effective 1 March 2010.
My department remains committed to sound financial management and discipline. We will continue the legacy of obtaining an unqualified audit opinion as we did in the last five years. The DMR will continue to implement our fraud prevention and anti-corruption strategy and plan. In addition, the Department will continue to educate our employees on the Code of Conduct.
We have also finalized our Disaster Recovery Plan (DRP) which will be implemented this year. We are also reviewing all our information systems with the aim of ensuring integration.
With regard to procurement, my department has managed to channel 45.4% of its procurement spend towards Historically Disadvantaged South Africans (HDSAs) in 2009/10. Going forward we are planning to develop a supplier development strategy in consultation with the Department of Trade and Industry. This strategy will assist in ensuring the participation of HDSAs in the procurement of specialized goods and services.
In line with our spending priorities for 2010/11, an amount of R67-million has been allocated for Mineral Policy and Promotion activities. I recently convened a mining summit with all stakeholders under the auspices of the Mining Industry Growth and Development Task Team (MIGDETT) with the aim of developing a “strategy for sustainable growth and meaningful transformation”, seeking to position the country’s mining industry along a growth path whilst simultaneously transforming it.
I must at this point emphasise the mutually reinforcing nature of both growth and transformation, i.e. the one cannot be successful without the other. The development of a ‘2030 Vision’ for growth and transformation is consistent with the second mandate of MIGDETT of recommending interventions sought to position South Africa’s mining industry for optimal growth when the global economic climate improves Our deliberations took place in a constructive spirit of tripartite collaboration and we are positive that we have agreed on a significant number of issues which will enhance growth, the sector’s global competitiveness, create decent jobs and transform the industry in a manner that meets the expectations of the industry’s stakeholders, investors and our country’s citizens. Equally, it’s encouraging that all parties are committed to conclude work on the remaining consensus-seeking issues by the end of June 2010. As of February this year, mining production grew at 6%, while mining revenue correspondingly increased by 8%, confirming that the recession is quickly becoming a thing of the past.
We have completed the first phase of the mining transformation policy journey, which has provided us with the benefit of hindsight. As we review progress in terms of performance of the mining industry and the extent to which the transformation objectives have been attained, we find that we have seemingly made great strides towards replacement of the original mistrust among key stakeholders with a growing spirit of collaboration. However, we also find that the cumulative performance of the mining industry in
I am also aware of the recently published Fraser Institute Survey of Mining Companies, which indicates that
Despite considerable diversification of the country’s economy in the recent past, the mining sector remains a key variable in our economic growth equation. For instance, in 2009, the industry contributed 9.5% to gross value added, 9% to total fixed capital formation, more than 30% to the country’s total export revenue and employed 2.9% of the country’s economically active population, currently at just below half a million direct jobs and a further half a million indirect jobs. In addition, the sector contributes 18% to the country’s corporate tax receipts. The listed mining companies represent over 30% of the market capitalisation of the Johannesburg Stock Exchange. While mining activities consume 15% of national electricity, the mining industry directly contributes more than 95% towards the country’s electricity generation.
On the transformation of the mining industry, there’s consensus among stakeholders on the limited progress attained to date. The rising tensions between mining companies and host communities, typically in rural areas, are symptomatic of serious challenges that face our intent to grow this industry in a sustainable manner. The impact assessment of the Mining Charter further illuminates lack of meaningful ownership vesting in the hands of its intended beneficiaries, due to, inter alia, the complexity of funding models underpinning transformation transactions. These models are typically designed to benefit principal partners, financiers, legal advisors and other management firms at the disadvantage of the intended beneficiaries, who remain not only indebted but also in the absolute minority. This practice is contrary to the objectives of the transformation agenda, undermines the aspirations of the populace. This has also created an environment for fronting, at which targeted beneficiaries are not actively involved in mining project development, but more focused on making quick money. Fronting is a disgrace and a scourge towards the realisation of effective transformation of the mining sector in
Skills development is the cornerstone of competitiveness of the industry. Earlier this week I spoke at a ceremony at which Gold Fields handed over R28-million worth of sponsorships to the University of Johannesburg and the University of the Witwatersrand in support of their engineering faculties, specifically aimed at supporting mining engineering. I want to applaud Gold Fields for this important initiative and challenge other companies to follow – and indeed better – this example.
I am introducing a more frequent monitoring and evaluation mechanism, which will constantly gauge the extent of compliance and transformation to the regulatory regime. In this regard, my department is enhancing its scope with continuous Regulatory Impact Assessment (RIA) on legislation and policies developed and implemented in the mining industry. This will ensure constant evaluation of the impact of the policy and will enable the department to assess the socio-economic impact of the legislation governed by the department. I will release quarterly reports to this effect.
Chairperson, Cabinet has directed my department to undertake a detailed audit of the State’s exposure to mining and to propose modalities of consolidating such interests in a single entity. To this extent, I am finalizing the creation of the State-Owned Mining Company to be considered by Cabinet during May. I am particularly encouraged by the overwhelming support of stakeholders during the Mining Summit for the finalisation of the State mining company, and I assure you that the work is being assiduously finalised.
I am delighted to announce that the Council for Geoscience has completed and published the 1- in 2-million-scale geological map for the entire Southern African Development Community (SADC) region. This map is a benchmark product because it is the first integrated geological map for the region that will provide a common understanding of the geology between all the SADC countries. The map is already proving useful in the search for groundwater and minerals in the region. As
Honourable Members, beneficiation of our minerals is a priority for my department and, to this end, I have completed the necessary consultations and am ready to table the strategy before Cabinet within the next two months.
The importance of research and development aimed at supporting and expediting the country’s expanded mineral beneficiation program cannot be over-emphasised. To this end, R165-million has been allocated to Mintek for 2010/11. Although the results seemingly take long, they are generally worth the patience and the continued support of our science councils.
Chairperson, the Geoscience Amendment Bill was endorsed by Cabinet in December last year and gazetted earlier this year. I intend to introduce this Bill to Parliament shortly. The main focus of the Bill is to effectively manage infrastructure development in dolomitic terrains as well as to empower the Council for Geoscience to be an advisory authority in respect of geohazards and also to enable the CGS to become the custodian of all geotechnical data and technical information relating to exploration and mining. The department has allocated R136-million in support of the activities of the Council for Geoscience during 2010/11.
Honourable Members, the diamond industry was the hardest hit by the global economic and financial crisis, resulting in prices contracting by more than 40% during the year of recession as well as job losses in the same magnitude. Accordingly, the industry has not responded adequately to a number of initiatives being put in place, all of which suggest abundant vulnerabilities within the sector. For instance, the business model of the State Diamond Trader (SDT), including the financing model, structure, operational model and the inhibitive legislative provisions are the basis of the low performance of the SDT. Consequently, I have instituted an urgent development of a comprehensive strategy for the diamond industry, which seeks to identify structural weaknesses in the structure of the diamond industry and recommend remedial action.
I have established a Rehabilitation Oversight Committee within my department to drive the implementation of a rehabilitation programme for all mines which were licensed prior to the Minerals Act of 1991 and the MPRDA of 2002. I have also signed off the rehabilitation strategy for these mines and I am now finalising the implementation plan and costs for the rehabilitation program. An amount of R52-million has been set aside for the implementation of this programme for 2010/11.
My department, through the Council for Geoscience, has been confirmed to host the 2016 International Geological Congress, which will attract a few thousand leading earth-scientists from all over the world. This is just as historic as the 2010 World Cup as it is the first time in the African history that this conference is hosted in the continent. It is my intent to attract as many young people as possible to not only participate in the lead up to 2016, but also in the actual conference itself so that they can begin to appreciate that “science is truly cool” and to get them excited about building careers in such fields, which are much needed in the industry. The Council for Geoscience, in partnership with a few geo-institutions, has earnestly begun the preparatory process for the conference and is seeking to attain a long-lasting legacy in the geosciences for the country and the continent.
The Department embarked on an initiative to review administrative processes and the current timeframes as prescribed in the MPRDA with a view to reduce turnaround times and to be more transparent. During this review process, proper engagement and consultation will take place with other government stakeholders such as the Department of Water Affairs.
The turnaround times for processing applications for mining rights will be reduced from 12 to 6 months, whilst the turnaround time of applications for prospecting rights will be reduced from 6 to 3 months.
With regard to the conversion of old order mining rights into new order mining rights, a number of such applications have been submitted and we are currently processing these. The deadline for such applications expired on 30th April 2009 and those who missed the deadline have forfeited their rights. As we process these applications, it is becoming clear that most applicants are not meeting the requirements. The most prominent non-compliance issue is the reluctance and even refusal by companies to embrace transformation. Most applications have not addressed the BEE requirements and this is of great concern to my department. The other area of concern is the quality of the Social and Labour Plans (SLPs) which are not in line with the needs of the communities. The failure of companies to address these critical issues, inevitably results in delays in the finalisation of their conversion applications.
In the last budget vote, we committed ourselves to ensure that companies deliver on their Social and Labour Plan commitments. Some companies have come on board and contributed significantly to uplifting both their host communities and labour sending areas through their Local Economic Development Projects and providing Scholarships and Bursaries. I commend companies that have implemented infrastructural development and local economic development projects successfully and for particularly bringing their host communities on board.
While I applaud the contributions of those companies, I implore those who have not done so to come on board in the implementation of their Social and Labour Plans.
My Department will focus on conducting more rigorous compliance inspections. In cases where companies fail to comply or default, we will enforce the law. R174-million has been allocated for the implementation and enforcement of the MPRDA.
Honourable Members, our health and safety track record in the mining industry continues to be a matter of great concern. The industry has in the last year managed to record a year on year slight reduction in fatalities due to mine accidents. A total of 165 mine employees died in 2009 when compared to 171 in 2008. I am still very much concerned about the high number of fatalities in the mining sector - one death is one too many. Consequently, many families lose their sole breadwinners. Fall-of-ground accidents still remain the largest accident category and the predominant cause of fatalities followed by transportation and machinery category.
Occupational health impacts are not immediate and hence difficult to quantify. Silicosis remains a major cause of premature retirement and death at South African mines due to excessive dust exposure. On the other hand, Tuberculosis continues to be a serious challenge for the mining industry and this is exacerbated by HIV and Aids. Lastly, Noise Induced Hearing Loss is also a significant health hazards due to exposures to high levels of noise in working places.
Honourable Members, to deal with these pressing occupational health and safety challenges facing the industry, my department has recently embarked on a number of interventions which include:
- Implementation of the amendments to the Mine Health and Safety Act to improve enforcement and prosecutions;
- Work is being done to improve seismic network coverage and seismic systems integration to assess actions taken by mines in dealing with high risk areas which are prone to seismic events;
- The health capacity of the Inspectorate has been improved by establishing a new Chief Directorate for occupational health and the appointment of additional health inspectors in our regional offices.
An amount of R145-million has been allocated toward these Health and Safety Programmes.
We are currently experiencing problems between mines and surrounding communities due to blasting operations that causes damage to houses, nuisance dust and noise. In addressing these challenges, we are developing a comprehensive strategy with an emphasis on blasting, vibration, noise and dust control, and where necessary we will regulate.
The current legislation on compensation matters in the mining industry needs an urgent overhaul that will address issues relating to access to services and information, turn-around time on payments and compensation amounts. There are collaborative efforts between my Department and the Departments of Labour and Health to review the compensation legislation and develop an integrated compensation system.
Although illegal gold mining is still a matter of concern, there has been significant progress in ensuring that appropriate measures are taken to eliminate illicit mining operations. My Department has elevated this issue to the Inter-Ministerial Security Cluster (IMSC) as this is a criminal matter. Subsequently, the Cluster has established a Task Team made up of my department and other relevant departments to ensure that there is national coordination in the fight against illegal mining.
The Mine Health and Safety Council has budgeted R29.5-million to support the achievement of zero harm to mine workers through a comprehensive research programme. The Council continues to drive the implementation of outcomes of the Tripartite Leadership Summit and the recommendations of the Presidential Audit.
The Mining Qualifications Authority (MQA) has allocated almost R280m to support the Mining and Minerals Industry with Skills Development. There is great need to partner with FET colleges in areas where there is significant growth in mining.
Work experience is important for graduates in area Mining Engineering, Geology, and Metallurgy. The MQA is supporting this initiative through allocation of bursaries to about 500 learners who are studying mining-related qualifications at the different Universities.
I must emphasise that we will be revisiting our strategy to address challenges whereby internship and learnership programmes are sometimes abused by replacing experienced mine workers with interns. This is an unacceptable practice on the part of mining companies and we will be dealing with this issue decisively.
In conclusion Honourable Members, there seems to be consensus amongst economists that we have passed the stormy seas and the global economy is on the mend. I would therefore like to emphasise that for my department to realize its vision and goal of a transformed minerals sector, our collective efforts, commitment and partnership will be paramount. The mammoth task that lies ahead of us cannot be achieved by any one individual or organization, but through our meaningful yet distinctive contribution, collaboration and partnerships we will create value for our fellow South Africans and investors through sustainable exploitation of our mineral resources. It is therefore critical for us, as stakeholders and partners, to continue with robust debates, engagements and action, with the aim of growing and transforming the minerals sector.
I thank you.
Speech by the
Minister of Mineral Resources
Ms Susan Shabangu, MP,
on the occasion of the
National Council of Provinces
Budget Vote Debate
21 May 2010
Honourable Chairperson, Mr Freddy Adams;
Honourable Members of the NCOP and the Select Committee on Economic Development;
Officials of the Department of Mineral Resources
Ladies and Gentlemen:
It gives me great pleasure to introduce to the National Council of Provinces the debate on the Budget Vote of the Department of Mineral Resources for the 2010/11 financial year.
On the 10th of May 2009, President Jacob Zuma announced the re-organization of his cabinet and government departments. Amongst others the Department of Minerals and Energy was split into two, namely the Departments of Mineral Resources (DMR) and Energy (DOE) respectively.
Although the split was announced in May, it could only take effect administratively from 1 April 2010 since the two departments shared one budget. During the transitional period, my department entered into a shared support services agreement with the Department of Energy in terms of which the DMR provided support services to the DOE until the end of March this year.
I am happy to report that the transitional arrangements have now come to an end. We have restructured in line with our new mandate but, due to limited financial resources, the DMR will be implementing the approved organizational structure in phases. We intend to address our human resource challenges through a review of our integrated Human Resources Plan.
The process of splitting the DME budget was successfully finalized in January 2010. This process culminated in final allocations of 1-point-03-billion-rands (R1.030bn) for the Department of Mineral Resources.
In response to shrinking financial resources, the department introduced a number of cost containment measures and stringent controls for achievement of more with less. These included: scaling down the number of delegates on overseas trips; the suspension of international conferences and seminars; the hosting of meetings in close proximity to the department or in free venues; using public service circulars or free advertising for positions below director, and so on. We will continue on this path.
My department remains committed to sound financial management and discipline. We will continue the legacy of obtaining an unqualified audit opinion as we did in the last five years under the erstwhile DME.
During 2009/10, my department managed to channel 45 percent of procurement towards Historically Disadvantaged South Africans (HDSAs). We also conducted supplier information sessions in all nine provinces. In future we will be developing a supplier development strategy in consultation with the Department of Trade and Industry.
The mining industry continues to form the backbone of the South African economy, accounting for more than half of exports. The challenge, however, is that most minerals are exported as ores rather than high value intermediate or finished products.
In order to assist the country to leverage long-term benefits from its substantial mineral endowment, we have developed a mineral beneficiation strategy which seeks to facilitate further economic diversification, expedite progress towards a knowledge-based economy and create decent and sustainable jobs. We are now finalising our consultations on the strategy which will soon be submitted to Cabinet for approval.
Prior to 1991, mining houses in this country were not legally required to rehabilitate the environment after mining had taken place. This has resulted in a legacy of un-rehabilitated derelict and ownerless mines, which now pose significant health and safety risks to nearby communities as well as cumulative environmental impacts on the surrounding environment.
My department has prioritised the rehabilitation of derelict and ownerless mines in
In the past, infrastructure development occurred with minimal consideration for potential geohazards such as sinkholes in dolomitic topography. Examples of this include Khutsong township in Merafong and Katlehong on the
To address these challenges, we will be introducing the Geosciences Amendment Bill to Parliament shortly. The main focus of the Bill is to effectively manage infrastructure development in dolomitic terrains as well as to empower the Council for Geoscience to be an advisory authority in respect of geohazards and to enable the Council to become the custodian of all geotechnical data and technical information relating to exploration and mining.
In response to the harsh economic downturn that adversely affected the mining industry, my department established the Mining, Growth, Development and Employment Task Team (MIGDETT), a tripartite initiative consisting of various government departments, business and organised labour. The mandate of MIGDETT was to recommend short-term interventions to mitigate the effects of the global economic crisis on the mining industry and to develop interventions that will position
The Task Team has completed phase-one of it’s mandate, which has enabled the industry to contain job losses to less than fifty-thousand (50 000), representing half of the initial estimates. At the beginning of this year, the Task Team began working on the second part of its mandate. This has culminated in a Mining Summit that was organised on 30-31 March under the auspices of MIGDETT with the explicit aim of developing a “strategy for the sustainable growth and meaningful transformation of
We have made great strides in identifying issues that need to be addressed to enhance the growth, global competitiveness and transformation of
My Department has embarked on an integrated intervention approach in respect of conflicts between mining companies and communities and such interventions are indeed yielding positive results. We have started this process in Motlhotlo, Sekhukhune and Mokopane in
My department will work closely with municipalities to improve Integrated Development Plans and this will lead to a significant alignment in companies’ Social and Labour Plans. The biggest service delivery hurdle related to this area of our work is the time taken at municipal or community level to finalise agreements on SLPs.
From the regulatory perspective we will rigorously review SLPs before approval and increase the frequency of monitoring.
Improvement of cooperative governance is an issue that my Department will henceforth focus on. It is of paramount importance that other departments with whom we consult, e.g. Water Affairs, Rural Development and Traditional Affairs, interact with the Department in such a manner that synergy and common goals are achieved. Improved mine water management (through Environmental Management Programmes and Plans) is an issue that will receive more attention, specifically with regard to water issues in, e.g. Mpumalanga, Limpopo and the Witwatersrand Gold Basin.
Honourable Members, the mining industry has suffered 45 fatalities in the year to date compared to 57 deaths for the corresponding period last year. Although this represents a 21 percent decline in mining fatalities year on year since the beginning of 2010, I am deeply concerned about the latest spate of fatalities in which six employees died due to falls of ground and a blasting accident within the first week of May. These fatalities occurred at Simmer and Jack in
The major causes of fatalities are falls-of-ground, transportation and machinery accidents. In dealing with these pressing occupational safety challenges, my department will continue with the following interventions:
- The sustained issuing of instructions for stopping either sections of a mine or even the entire mine where necessary, in terms of the provisions of Section 54 of the Mine Health and Safety Act;
- Improved enforcement and prosecutions in line with the recent amendments to the Mine Health and Safety Act;
- Continuing engagement with the CEOs of mining companies to highlight our concerns regarding the current fatality trends and demand tangible commitments to improve on health and safety.
Work is also being done to integrate seismic networks and systems to improve transparency and access to seismic information. This will ensure that appropriate actions are proactively taken by mines in dealing with high risk areas which are prone to seismic events. A pilot project will be carried out in
Occupational health impacts are not immediate and hence difficult to quantify. Silicosis remains a major cause of premature retirement and death at South African mines due to excessive silica dust exposure. On the other hand, Tuberculosis continues to be a serious challenge for the mining industry and this is exacerbated by HIV and Aids. Lastly, Noise Induced Hearing Loss is also a significant health hazard due to exposures to high levels of noise in working places.
In dealing with health related challenges, a new Chief Directorate for occupational health has been established and additional occupational health inspectors will be appointed in our regional offices. On TB, HIV and Aids there are ongoing projects to evaluate the policies and programmes of mines and to ensure alignment with the National Strategic Programmes of the Department of Health.
The current legislation on compensation matters in the mining industry needs an urgent overhaul that will address issues relating to access to services and information, turn-around time on payments and compensation amounts. There are collaborative efforts between my Department and the Departments of Labour and Health respectively to review the compensation legislation and to develop an integrated compensation system.
The health and safety problem goes beyond the mine boundaries. We have been receiving a series of complaints from communities located around mines relating to blasting operations which cause damage to houses, nuisance dust and noise. The major problem areas are in
We are continuously engaging the affected mines to ensure compliance and, where necessary, issue stoppage notices until such time that appropriate measures are put in place to eliminate the impact of mining activities on neighbouring communities. We are also developing a comprehensive strategy to deal with problems related to blasting, ground vibration, noise and dust control.
In ensuring further improvements on health and safety, the Mine Health and Safety Council has budgeted R30-million to support the achievement of zero harm to mine workers through a comprehensive research programme. The key research themes for the 2010/11 financial year include the prevention of rockfalls and rockbursts; eradication of tuberculosis and noise induced hearing loss in the mining industry.
The impact of illegal mining continues to be a concern in the mining industry. My department has referred this issue to the Inter-Ministerial Security Cluster (IMSC) as this is a criminal matter.
The Mining Qualifications Authority (MQA) has allocated R280m to support the Mining and Minerals Industry with Skills Development. In support of artisan development, the Mining Qualifications Authority has increased the grants for Artisan Development with effect from 1 April 2010. My Department will also discuss issues relating to training of artisans with the Minister of Higher Education, Honourable Nzimande. We may, for example, consider bringing back retired artisans to train and transfer skills to young, aspiring artisans. I would further encourage mining companies to play a proactive role in the broader skills development in the sector.
The MQA has further forged partnerships with public Further Education and Training (FET) colleges for various learning interventions required in the Mining and Minerals Sector. At least 23 Public FET Colleges were identified in all provinces as a support learning base for the training of artisans. There is a great need to partner with FET colleges in areas where there is significant growth in mining.
In conclusion, Honourable Members, I want to emphasise the important oversight role that the National Council of Provinces can potentially play with regard to the implementation of Social and Labour Plans as it relates to Integrated Development Plans at provincial and local government level. Related to this, I must also caution against the increasing tendency of communities to vent their frustrations with service delivery on mining companies who operate close by. I raise these issues here, Honourable Members, in the hope that you will assist us with your oversight duties to ensure that service delivery takes place as it should. For our part, the Department of Mineral Resources will ensure that the mining industry contributes to the socio-economic development of
I thank you all.
Issued by the Department of Mineral Resources of the
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Ministry and Department of Mineral Resources
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