Minister of Mineral Resources 2013 Budget Speech & Responses by ANC,DA and IFP
Briefing
28 May 2013
Minister of Mineral Resources, Ms Susan Shabangu, gave her Budget Vote Speech on the 28 May 2013
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Mr Speaker,
Honourable Members.
May I convey my sincere condolences to all mineworkers who passed on during the past year. We are honoured to table our budget allocation of one billion three hundred and ninety four million rands (R1, 394 Billion) for 2013/ 2014 financial year which represents an increase of two hundred and eighteen million and three hundred and sixteen thousand Rands (R218, 316 million) at the most testing time in the post-apartheid history of the mining industry.
We are mindful of the fact that we are tabling this budget one year short of the two decades of freedom whose 20thanniversary we will celebrate next year. This, in fact, is the last budget of the current administration.
Our budget vote also coincides with the 50th anniversary of the formation of the Organisation of African Unity (OAU), now called the African Union (AU), which played a key role in the decolonisation and liberation of the peoples of Africa. This is also the time when we are celebrating “Workers’ Month.”
Through the budget we are tabling today, we are outlining the actions that we are taking to respond to the challenges currently bedevilling the mining industry. We are confident that, despite the current cyclical downturn and labour relations challenges, the medium to long term outlook for the South African mining industry looks extremely attractive.
Last week, our President, Jacob Zuma, quite correctly called for leaders of this industry to restore calm and confidence in the sector. Following this, the Minister of Finance and I met with the leadership of the mining industry on Friday last week in a bid to address the challenges faced by this important sector of our economy.
In this regard, we drew inspiration from our longstanding and well entrenched culture of partnerships in mining, which has consistently served us well during difficult times. In this all-important meeting, we agreed on a specific program of action. We agreed that the government side will be led by the National Treasury, Department of Labour and Department of Mineral Resources, while participation from the mining companies will be led by Chairpersons of the Boards and will also engage the leadership of trade unions.
This was a bold and decisive action taken with a view to dealing head on with the challenges faced by our economy. This has arisen as a result of a crisis of perception, of both our country and the mining industry which invariably has an effect on, among others, the fluctuation of our exchange rate, the result of which we can ill afford as a country.
This process that was established at the Friday meeting is scheduled to conclude its initial tasks and provide progress report within a month. Whilst we respect workers inalienable right to strike, and the right to the freedom of association as enshrined in our Constitution, we will not tolerate anarchy, violence, intimidation and illegal strikes, which threaten, not just our democratic freedoms, but also the sustainable growth and employment in a sector with so much to offer not only in terms of retaining employment but also in creating new jobs on a larger scale than ordinarily would be the case.
We are accordingly calling on all signatories to honour the letter and spirit of the law and the recently signed “Peace and Stability Framework” of the mining industry. We need urgently to join hands and deal a cruel blow to those who are wilfully undermining the well-established system of collective bargaining that has been a critical component of the mining industry.
It is the truth that South Africa has the world’s largest mineral endowment, with an estimated value of US $3.8 trillion dollars. These endowments, if properly exploited using the combination of appropriate policies and regulatory framework such as we have, we are more than capable of breaking the back of the triple evils of poverty, unemployment and inequality.
There is a confluence of factors which gives us good reason to be optimistic. Both the 2013 World Bank Doing Business and the World Economic Forum’s World Competitive Reports place South Africa in the top quartile. These reports show a set of enabling factors, including among others, the ease of doing business, investor protection, access to loans, starting a business and ease of dealing with construction permits, which if properly harnessed could significantly create a broad based and robust economy, which our country desperately requires.
In the same vein, I am encouraged by the voices of the young people in the leadership of the African National Congress Youth League (ANCYL) who are saying boldly: ‘it is cool to get educated and get a degree’. After all, it was the late ANC President, Oliver Tambo, who said a country that does not take care of its youth does not deserve its’ future.
This is the kind of spirit that we need to re-ignite among workers in the Rustenburg Platinum belt and in the mining executives.
Honourable Members,
As you know, we are currently in the cycle of wage negotiations in the mining sector which we have done for decades. This year should be no different. However, there has never been a more opportune time to call on the protagonists in these negotiations to be more responsible and take decisions that will retain jobs, bring about stability of this sector and ultimately help our economy as it emerges from the ravages of the recent economic downturn.
We should all take responsibility and accountability for the success of these negotiations. For, if we do not grasp the nettle, we run the risk of losing jobs and further fuelling negative perceptions that are being used to run our country down at the most inopportune time.
Accordingly, we believe that, if we can work together and forgo our narrow interests and act in the interests of all our people, we will indeed be able to rise to the challenge of regrouping and consolidating the existing building blocks for the long term success of our mining industry.
This time last year, some observers were in a state of frenzy which they attributed to, among others, the calls from some siren voices, for nationalisation. The African National Congress (ANC) Mangaung conference unequivocally rejected this option and further called for the intensification of beneficiation and industrialisation, which have been part of ANC policy since we adopted the ready to govern document, declaration of strategic minerals, as well as promoting of the state owned mining company among others.
These decisions demonstrate that South Africa’s premier liberation movement, the ANC, is keen to ensure that we balance the imperatives of transformation with those of competitiveness of this crucial sector of our economy.
Regulatory framework
We believe that we have created a predictable regulatory framework which is in sync with the dynamic socio-economic and political landscape of our country. These have resulted in the following milestones:
- Gross fixed capital formation has increased significantly under the MPRDA from R18 billion in 2004 to R75 billion in 2012 (Data source: South African Reserve Bank).
- Foreign Direct Investment grew exponentially from R112 billion to R389 billion from 2004 to 2012 (Data source: South African Reserve Bank).
- Employment grew from approximately 448 909 in 2004 to 518 240 in 2012.
- Gross sales of primary minerals have appreciated from R98.5 billion in 2000 to R371.7 billion in 2012, whilst the number of operating mines has increased from 993 in 2004 to 1579 in 2012.
This is over and above the fact that during the 2012\13 financial year, 56 new mining rights were granted and have the potential to create an additional eleven thousand and fifty two (11052) decent and sustainable jobs and attract capital expenditure of about R7.3 billion.
More than a decade of implementation has provided us with sufficient jurisprudence to further review and amend the Act. We sought to effect holistic review and amendments of the Principal Act that will cater of the dynamic changes and sufficiently incorporate the notion of subsequent events.
Following Cabinet approval in December 2012, we are satisfied with the quality of extensive stakeholder consultations and their substantive input. The issues raised by stakeholders centred among others, the definitions, the repeal of the first-come first-served principle, trading in shares and transfer of rights, the environmental provisions, the dissolution of the designated agency, Ministerial discretion on mineral beneficiation and State free carried interest, the revised sanctions and the concept of associated minerals.
All these quality submissions have been duly considered in the process of finalizing the Bill.
The Bill further enhances provisions relating to the regulation and implementation of Social and Labour Plans (SLPs) and also includes integration of SLP into the Integrated Development Plans of District municipalities in order to streamline and optimise the development impact of the mining contribution; Introduces provisions for classification of mineral resources as strategic, taking into account strategic national developmental imperatives; Realigns functions in order to consolidate the regulation of petroleum resources under the auspices of the DMR, while the promotional geo-scientific research functions are incorporated into the Council for Geoscience (CGS).
The draft Bill is currently at final stages of Cabinet processes and we are intending to submit to Parliament soon. There has been further improvement on health and safety of workers in the mining industry since implementation of the Mine Health and Safety Act. I directed my department to embark on a process to review the MHSA and align it with the MPRDA to ensure consistency and ensure that we employ regulatory best practice regarding the impacts that mining activities will have on the health and safety of mine employees and affected communities.
The review of the Mine Health and Safety Act seeks to. Amongst others, strengthen enforcement provisions, streamline the administrative processes, reinforce offences and penalties, remove ambiguities in certain definitions and expressions and to harmonize the Act with other laws, in particular the MPRDA.
Implementation of SAMRAD
Honourable Members,
May I report that we have made sterling progress in the implementation of the South African Mineral Resources Administration System (SAMRAD) online, since it was launched. Prospective applicants are now able to apply for rights using computes online without having to travel to the regional offices to lodge an application.
The system contains information regarding land availability, requirements for various types of applications to be lodged, and payment arrangements for fees payable. As a benefit of that, contestation as a result of the documents getting lost, is a thing of the past.
To assist applicants, guidelines and templates were then supplied to improve the quality of applications as well as ensuring consistency in the adjudication process. We are continuously making sure that we improve this system in order to deliver an application system that is seamless and efficient.
In this regard application for Prospecting, Mining Rights, Permit as well as Ancillary applications such as Sections 11, 102, etc. can be lodged online. These include, among others, a module which provides for the auto parking of applications which addresses one of the key concerns that have been raised by the prospective applicants.
This is being carried with the additional allocation of R 3 million from National Treasury, for the current financial year for the development of a number of reporting modules, including a transformation monitoring system, appeals as well as the acquisition of hardware infrastructure.
Mining charter
We introduced the “broad based socio-economic empowerment charter for the South African mining and minerals industry“, commonly known as the Mining Charter to effect the meaningful transformation of the mining industry, consistent with our democratic landscape. This was a consensus document by mining stakeholders that introduced a transitional transformation window of ten years, with specific targets to be attained by 2014.
We subjected the efficacy of this transformation tool to a rigorous test in 2009 in respect of its progress, the findings of which were less than desirable. During this time, every other stakeholder suffered from a case of parochial amnesia in terms of their responsibility for the implementation of this transformation agenda. As a result, we ended up with widely varied accounts on the extent or otherwise of the progress that has been made in this regard.
In order to obviate against the recurrence of this misrepresentation and distortion, my department has initiated a comprehensive evaluation of transformation against the scorecard of the amended mining charter as a precursor to the 2014 transformational milestone.
Let me emphasise that we have no intention of shifting the goal-posts with regard to our targets, but we wish to reiterate that we remain unequivocal and resolute in our commitment to transformation, which remains a vital component of normalising our society and creating a genuinely non-racial and democratic country, without which we do not have a prosperous future.
The societal problem that was accentuated by the unfortunate developments at Marikana in 2012 as well as several other related occurrences reflects that there has been glaring lapses in the implementation of our transformation tool.
I cannot over-emphasise the urgent need to modernise the mining industry entirely, including recruitment patterns that remain trapped in the archaic model of migrant labour systems that entrenched apartheid. This system results in mineworkers leading multiple families, which they struggle to sustain.
In this regard, I call upon the entire mining industry to develop a ten year company specific strategy that will transition this industry from the obsolete model to be part of modern society within which it operates, without creating abrupt discontinuities that result in unnecessary instability.
This will enable us to enhance our global competitiveness, improve working and living conditions of mineworkers and ultimately reduce the dependence of workers on the mining industry. Further, such strategies will assist us in preparing for the transition well in advance, anticipate potential effect and plan accordingly to manage the transition to an appropriately modernised mining industry.
In this regard, we recognise the work of the Farlam Commission of Inquiry and we are confident that it will be able to emerge with recommendations, which will strengthen our resolve to improve the lives of mineworkers and immediate communities.
The President also established an Inter-Ministerial Committee to address socio-economic developmental challenges arising out of the mining industry. Consequently, the aforesaid IMC has developed a responsive Presidential Package, whose results will be released soon, to optimise inclusive community development and improve the living and working conditions of mineworkers.
Coal sector
The coal sector is important for the economy of South Africa. The accelerated demand for coal, accompanied by an increase in international coal prices, has invariably changed the buying patterns and structure of the local coal export industry. The emergence of the export market for lower grade coal has presented the government with a challenge in that it has constrained the availability of coal that was historically sold to our utility, Eskom.
In our national energy plan, coal remains an important component of our future energy mix and requirements. It is therefore paramount that we work towards a common objective, in which South Africa Incorporated confronts the challenges facing the coal industry and turn them into net positive opportunities for all.
We have resolved that certain minerals such as coal should be declared strategic national resources, based on the balance of evidence. The coal resources and reserves report has been concluded by the Council for Geosciences and the findings will be released soon.
Shale gas
Honourable Members, last year Cabinet approved and accepted the release of a comprehensive report compiled by experts on hydraulic fracturing, which not only confirmed a shale gas resource of 485 trillion cubic feet, but also extensively considered optimal exploitation of the resource that appropriately balances economic interest with both environmental and social development considerations. The report was widely accepted by all interested and affected parties.
Cabinet directed further established an inter-departmental committee to develop regulations to presage further development of the shale gas resource. The committee will release the appropriate regulations during this financial year, which will prescribe a process and methodologies for exploitation of shale gas.
We are engaging legal processes to finalise the establishment of a State Owned Mining Company.
Platinum and gold sectors
The platinum and gold sectors, which are amongst the largest sectors of our mining industry in terms of employment, investment and revenue generation, are negatively affected by the persistent global economic market environment, which has an adverse bearing on their long term viability.
As such, I have directed my officials to urgently explore all available avenues and develop a rescue plan, which will enable us to find appropriate government-wide measures for appropriate sector-wide responses with particular focus on both supply and demand side interventions in order to position them along a recovery path and a trajectory of long term sustainability through the well-established tripartite structure of Mining Growth, Development, and Employment Task Team (MIGDETT).
Our recently concluded bilateral agreement with Russia during the BRICS Summit in Durban on cooperation in development of Platinum Group Metals is premised on an understanding that parties will make every effort to achieve, among others, sustainable expansion of the PGM market, create value-adding enterprises closer to production and, work towards realising the potential for developing other sectors of the economy.
It is our considered view that this bilateral cooperation will contribute significantly to the creation of a suite of interventions necessary to stabilize the platinum industry. I invite PGM companies to work with my department to leverage relations we have established with the Russian Republic.
Honourable Members,
In January this year, Anglo American Platinum announced its intention to restructure its business, following which President Zuma and the chairman of Anglo American plc, Sir Parker, met in Pretoria and agreed on finding sustainable interventions that will enable business continuity and sustainability, whilst preserving employment where possible.
It is our firm belief that working together we have found a sustainable, discerning solution, which we hope the labour movement will consider favourably. This demonstrates and emphasises the importance of taking different stakeholders into confidence and opening to them a long term window which enables them to appreciate the dynamics of inherently cyclical nature of the mining industry.
The chrome value chain participants have led the path to proactively find and explore mechanisms to implement and expand competitive mineral beneficiation. To this extent, the stakeholder task team that I initiated in August 2012 to address the plight of the sector has recommended substantive measures in line with the beneficiation strategy and its implementation.
Mineral beneficiation
As we have announced on previous occasions we have pioneered a mineral beneficiation strategy as national policy, we have developed a beneficiation strategy implementation plan framework.
The implementation plan further outlines modalities for implementation of the “game-changing” opportunity, which is conceptualised as a “win-win” value proposition for miners, beneficiators and the country at large.
It is important to reaffirm our position that mining right holders are not expected to undertake beneficiation, as it is not their core business, but rather to contribute meaningfully to national development through mechanisms outlined in the plan. The beneficiation implementation plan will be a subject of stakeholder consultation within the next month.
Since the introduction of the Precious Metals Act and Diamond Act, as amended, the benefit of jurisprudence has highlighted significant shortcomings during implementation of both Acts, both of which have experienced reversal of transformation and decline in beneficiation activities related to jewellery manufacturing. It is our intention to review both Acts in order to maximise the beneficiation of precious metals and diamonds, the developmental impact as well as transformation in general in the sub-sector.
We have partnered with the Provincial government of Gauteng to jointly develop, amongst others, the jewellery hub in the city of Johannesburg as well as collaborate with regard to the resuscitation of the steel industries.
I am finalising arrangements for the Jewellery Summit to be held in August this year, in partnership with relevant government institutions as well as mining and jewellery manufacturing associations. One of the critical components of the Summit relates to a program of creating appropriate skills and entrepreneurs in the jewellery manufacturing that will enable South Africa to become the global jewellery hub.
South Africa is not only a founding member State of the Kimberley Process Certification Scheme, aptly inaugurated at the “Tabernacle Church” in Kimberley”, but was the first chair of the scheme. This year, the international diamond community has reaffirmed its confidence in South Africa by bestowing the honour of chairing the scheme at its 10th anniversary since its establishment.
The Kimberley Process community has substantially reduced trading in conflict diamonds from approximately 4% of total annual sales value at its inception to well below one percent. The proceeds of conflict diamonds have previously been used to destabilise democratic governments, especially in Africa.
I am pleased to inform the house of our readiness to host important meetings of the KP, starting with inter-sessional meeting from 3rd to 7th of June to be convened in Kimberley, Northern Cape, and the plenary later in the year. We have coined a felicitous theme for the period of South Africa’s chairship of KP that is titled “10 years of stemming the flow of conflict diamonds”, which will inform and direct proceedings of the crucial engagements with KP participants.
South Africa appointed Ambassador Welile Nhlapo as chair of the KPCS during its tenure, given his vast multi-lateral experience and has the assurance of further progressing the global mandate of the KP towards conflict free trading of diamonds.
Mintek is involved in research on nano-technology for medical applications of gold as well as giving effect to the Hydrogen Strategy, in partnership with my department, the Department of Science and Technology and the Department of Trade and Industry. This work is intended to create future demand for both gold and platinum, in keeping with our national objective of achieving 20% global market share of platinum catalysis by 2020.
Honourable Chairperson,
Our implementation of the rehabilitation of derelict and ownerless mines continues unabated, culminating in the closure of 13 mine sites in the financial year 2012/13. Our science councils in the form of MINTEK and the Council for Geoscience play a critical role as delivery agents for the rehabilitation programme that seeks to mitigate the negative environmental legacy of mining and associated latent hazards to proximal communities.
We have received an additional allocation for this year for the rehabilitation of derelict and ownerless mines to expedite the rehabilitation program. We have accordingly prioritised the rehabilitation of the Osizweni site in partnership with the KwaZulu-Natal Provincial government. Mintek will lead the rehabilitation of the site and has already started with a scoping exercise for the project.
We have sought the services of actuaries to determine the contingent liability of derelict and ownerless mines in South Africa. The findings of the actuarial report give us better insights on the extent of the problem of derelict and ownerless mines and place us in an advantaged position to enhance appropriate interventions to accelerate the rehabilitation of these sites. The report will be released on the departmental website soon.
In conclusion, we have demonstrated both, as the ANC and the government led by this glorious movement of our people, that we are perfectly capable of rising above narrow shortemism and take decisions that are in the best interest of this country and our people.
I am sure, building on what we outlined today, we can indeed work together in partnership and demonstrate respect for basic and decent things like collective bargaining structures. If we succeed we will build on the Freedom Charter and the constitutional promise of handing over a country to the next generation that truly and genuinely belong to all those who live here, black and white.
I respectfully request this committee to support this budget and on our side we will continue to work towards a clean audit going forward.
I thank you!
2013/2014 Budget Vote Speech of the Deputy Minister of Mineral Resources of South Africa, Mr Godfrey Oliphant MP: National Assembly
28 May 2013
Honourable Chairperson,
Honourable Minister Shabangu,
Honourable Members of Parliament,
Director-General and senior officials of the Department,
Senior Executives of the state owned enterprises and the private sector,
Trade union leaders,
Religious and traditional leaders,
Ladies and gentlemen,
Comrades and friends
Let me start off by first and foremost wishing the Chairperson of the Portfolio Committee on Mineral Resources, Cde Fred Gona a speedy and full recovery.
I also wish to appreciate the privilege of this opportunity to address this chamber on the occasion of our Budget Vote for 2013/2014. I am particularly mindful of the month of May which is acknowledged for its historical significance like the incarceration of former President Nelson Mandela on Robben Island 50 years ago on 27 May; the formation of the Organisation of African Unity/African Union (OAU/AU) also 50 years ago to name but a few.
But most importantly, May is considered the workers’ month. On May Day, the world over, we are reminded that social development assumes meaning only when the economy consciously and actively promotes the wellbeing of the working classes and the poor. Focusing on poverty alleviation and the working class welfare does not necessarily mean neglecting the broader interests within society.
This is particularly pertinent for us in South Africa, and given the prevailing industrial relation disturbances within the economy, and in the mining sector in particular.
The current conditions remind us that despite considerable progress made since the dawn of democracy in 1994, we still have a long way to go to reach a point where the relative earnings within the economy are conducive to rising living standards. It is a fact that mine workers’ living conditions have not changed sufficiently, and by all accounts remain below all our expectations since 1994. This is not helpful for productivity enhancement and for stability of operations within the industry.
As such, I firmly believe that it remains our collective responsibility to deal with the remaining issues with haste and composure. It is particularly noteworthy that, ever since the 1920’s, the mining sector in South Africa has been the arena for highlighting excessive income disparities and earnings inequalities within our society. Clearly, history has shown beyond any doubt that such structural issues need resolution once and for all – the sooner they are resolved the sooner the mining industry will resume its stability and predictability that is so badly needed for growth and development of the sector.
The mining sector is far too important for our country and for our social welfare to be left saddled with unfinished structural difficulties. Importantly, the resolution of these issues requires multi-stakeholder commitment.
Honourable Chairperson,
Let me remind this chamber once more about a resolution taken by this Parliament, seven years ago, on the occasion of the 60th Anniversary of the 1946 Mineworkers Strike. The National Assembly resolved:
1) that the living and working conditions of mineworkers be investigated further and be improved
2) to support the initiative by the National Union of Mineworkers to build a workers’ museum
3) that Parliament gives consideration to naming some of its buildings after JB Marks, a leader of the African Mineworkers Union, and other heroes of the struggle.
Honourable Members,
South Africa is one of the oldest mining jurisdictions in the world, we have over 100 years of mining experience, expertise and knowledge and we are indeed respected for this throughout the world.
To date we are still the richest country in the world with more than 100 years of mining still ahead of us.
So, mining matters in South Africa
On 1 May 2014, Workers’ Day, we shall be celebrating the 10th anniversary of the MPRDA. This is a solid piece of legislation that has changed the minerals and mining landscape in South Africa. We wish to thank those who spent sleepless nights developing this revolutionary legislation. For many years, the prophets of doom had claimed that the MPRDA provisions amounted to expropriation of property without compensation.
Today, we must also celebrate our recent victory in the Constitutional Court. For many the so-called mining law experts have claimed the MPRDA was unconstitutional and its provisions amounted to expropriation. These voices have been silenced forever. The Department has won the debate. In a landmark decision, the Constitutional Court said, “… the transitional arrangement … were so carefully designed to alleviate potential hardship and prevent expropriation.” This shows the genius of the public servants who drafted MPRDA. Let those who think that the Public Services only employs those who cannot find jobs in the private sector be silenced. The MPRDA was not drafted by lawyers in private practice, this piece of legislation was drafted by officials who were employed by the then Department of Minerals and Energy. We salute them.
Let me inform this august House what the Constitutional Court said, “The MPRDA constitutes a break through the barriers of exclusivity to equal opportunity and to the commanding heights of wealth generation, economic sector development and power.
It seeks to address the injustices of the past in the economic sector of our country in a more balanced way, the treating of individual property rights with care, fairness and sensitivity the deserve.”
If the Constitutional Courts labels the MPRDA as “… a break through the barriers of exclusivity to equal opportunity and the commanding heights of wealth generation …” let’s ensure that our people feel the warmth of this legislation. Our expectation in 2014 is full compliance with the MPRDA and the Transformation Charter.
As we set to deal with the structural issues, we should ever be mindful of the manner in which we resolve the issues and the way in which we communicate the rationale and the outcomes to the broader investment community. It is stating the obvious that our collective national interest is in our own hands. We need to take extreme care that we do not unnecessarily and inadvertently undermine our country’s brand and our collective ability to attract investment into this sector and its associated industries.
In addition to matters related to industrial relations, there are other structural issues that also need careful attention and conclusive resolution.
All over the world, the mining industry is synonymous with the destruction of the environment, land disposition and the use of land potentially useable for agriculture and food production.
Such dichotomies have to be managed carefully and responsibly via sound and concurrent environment rehabilitation management practices.
Globally, the extractive industries have come under the spotlight. As the honourable members are aware, the G8 leaders are focussing on this sector, not only due to the issues of tax evasion, but also because of the broader factors that have turned the blessings of the natural resources to what is now referred to as “the resource curse,” a term subsuming the multi-faceted damage that the mineral endowment imposes on the political stability, societies and communities that are rich in natural resources. How ironic, how very ironic, that the very resources that should and could be used to initiate and accelerate socio-economic development, turn out to be a curse of environmental and socio-political instability.
Surely, this is the time to break with the past and reverse the patterns of historic instability in this sector into a framework for a coherent and integrated developmental process. I would like to believe that our mining sector stakeholders in South Africa are well aware of their joint destiny and have had sufficient historic experience to be able to discharge their patriotic responsibilities towards our country and its people.
The turbulent state of the mining sector calls for urgent and meaningful commitment to our collective patriotic responsibilities with a view to set up our mining sector for success.
As it is well known, our natural resource endowment is considerable, and we have at least another century of mining ahead of us. It is surely incumbent upon us to govern it differently, structure it differently and manage it differently so as to unlock its maximum socio-economic benefits for our nation.
To this end, some basic building blocks of sustainable mining need effective attention. First and foremost it is about weaknesses in occupational health and safety performance in the industry. We cannot underestimate the misery brought to widows and orphans due to the failure to comply with health and safety standards. There is an urgent need to eliminate the fatalities and injuries that have characterised the mining industry for more than a century.
Next in line of priorities is the approach to environmental management, rehabilitation and more broadly the “greenification of mining operations.” This broader term pertains to a large number of factors such as energy efficiency, concurrent rehabilitation, prior planning for post-mining activities and the like. What is not acceptable, and indeed highly undesirable, is the neglect shown by many mining houses and companies with respect to the environmental management. In the recent past, we have had high profile cases of acid mine pollution and contamination and the social pain caused be asbestosis. We are still seized with the long outstanding matter between the Kgatelopele Asbestos Community in Kuruman and the Asbestos Relief Trust and hope to find some resolution as soon as possible.
These are indicative of the extent of care that needs to be taken by not only the regulators but also by the industry to avoid further damage to the socio-economic fabric of our society.
Honourable Chairperson,
Globally, it has also become clear that in all areas of economic activity, legislation and legislative pressures have their limitations. We have seen such limitations in the financial sector with colossal social consequences.
The mining sector is no exception. Whilst appropriate legislation and adequate administrative capacity are important requirements, the role of compliance with the spirit of the legislation, alignment with the broader national ideals, cannot be under-estimated. It is in this regard that we have reached a critical juncture in our mining sector, and I submit we have all that it takes to hammer out a sustainable growth path going forward.
What is moreover exciting and encouraging is that despite all the unfavourable developments and the negative publicity around the challenges facing our mining sector, there is a great deal of good will and investor appetite for investment in our industry. The reality is that if we see beyond the current cyclical downturn, the medium to long term demand for our mineral resources remain solid. Furthermore, there are many and major mining projects that are ready for implementation.
In our interactions with global and domestic mining houses, it is obvious that those who are long term investors are committed to work with us and see beyond our short term challenges.
Based on my recent interactions with the mining investment community in Canada, Australia and South Africa, I am convinced that we have major projects that are “shovel-ready” in commodities such as manganese, zinc and platinum to name but a few. Moreover, there is a growing realisation and willingness amongst the investor community for cross-border collaboration within our SADC region with a view to creating economies of scale and find practical means of overcoming logistical bottlenecks. Opportunities for value addition are enormous and plans are already in place to start serious pilots in the near future.
Ironically, if we entertain a collaborative framework, much of what we now face as logistical bottlenecks can be turned into investment opportunities. We need to acknowledge that the cost-base of our mining operations has risen sharply and in the prevailing globally competitive environment, our ability to remain a desired investment destination hinges on our creativity to manage costs and do so in a timely manner. Both cost containment and timely interventions are critical.
Honourable Chairperson,
As we reflect on the challenges and opportunities within our mining sector, we cannot be blind to the vast opportunities that our region offers. Possibly, for the first time in our history, our economy and that of our neighbours have a real chance of sustainable integration and industrialization. To this end, the mining sector offers critical and exciting opportunities.
Getting the mining sector policy and operations right is not an academic goal or a theoretical nicety for us and our region. Rather it is a matter of “development” or “no development” for many of our regions, communities and our neighbouring countries.
It is therefore our collective obligation to ensure that this considerable wealth is utilized to generate socio-economic benefits and integrated development for our nation. To do this, we need to draw lessons form our past century of mining, to avoid the undesirable consequences, and to ensure a mining industry that is socially progressive, environmentally sustainable and economically competitive.
Honourable Chairperson,
Whilst I am concerned about the challenges prevailing in our mining sector, I am nonetheless convinced that in our typical South African way we will resolve our issues and carve a new path of our national prosperity. I am excited about the prospects of our mining industry and I look forward to serving the process of unlocking its potential.
I thank you.
Speech by Hon Joice Ngele during the Budget Vote Debate on Mineral Resources
The Chairperson
Hon Minister and Deputy Minister of Mineral Resources
The Acting Chairperson of the Portfolio Committee
Members of Parliament
Officials of the Department of Mineral Resources
All Guests
Good Morning
The health and safety of workers in the mining industry should continue to form an important part of the sustainability of the mining industry. The industry has for decades been the backbone of our economy and a major provider of employment in South Africa. Regrettably, the sector has also resulted in a significant loss of lives, injuries and ill health of mine workers.
You will recall that in the period before 1994, the occupational health and safety of mineworkers was sadly neglected. For instance, 706 workers regrettably lost their lives during 1990 as a result of accidents at the mines; however there has been a significant reduction since 1994. The 2012 figures indicate that mine fatalities continue to improve with 112 reported.
Chairperson, one of my greatest concerns has always been that, mineworkers historically lost their lives as a result of the same causes, mainly fall of ground accidents. Hence, it is encouraging to note that there has been a thirty five percent reduction of fall of ground fatalities between 2011 and 2012. Also, the coal sector went for the first time ever without a fall of ground fatality in more than twelve months. There has also been a significant reduction in the frequency of these accidents at the gold and platinum sectors.
The decline in fatalities over the past years is extremely encouraging and a step in the right direction. Hence I greatly compliment the DMR on implementing the necessary measures to ensure that there is a sustainable improvement on health and safety in the industry.
Hon members, whilst we recognize the improvement, we still experience loss of life, injuries and occupational diseases. So we urge the mining sector to back to the drawing board and constantly focus on both health and safety to ensure that there is zero harm on workers. In doing all of these steps the industry need to have more of platforms to share good experiences and develop programmes for the benefit of all the workers.
There are more deaths in the industry as a result of occupational diseases. Hence, the improvement measures should also include the general health issues such as noise induced hearing and silicosis diseases which further dispose miners to tuberculosis (TB), a condition related to HIV and AIDS.
There has been a welcomed increase of women participation in the mining sector since the promulgation of the Mineral and Petroleum Resources Development Act, 28 of 2002. However, it has been noted with great concern during our mine oversight visits that some women are employed in occupations without recognizing that women are physically and physiologically different from their male colleagues. The matter must be addressed to ensure that there is a fair representation and participation of women across all levels in the mining sector.
Also, I am deeply disturbed about the number of reported incidents of women experiencing sexual harassment and inhumane treatment by fellow workers in their underground workplaces. I would like to appeal to all the stakeholders, to ensure that there should be interventions implemented to prevent the intimidation of women miners. There should also be more attention given to the health and safety of women in the mining sector.
Accordingly, the mining sector should continue to take appropriate measures to ensure that women have safe and dignified working environment. The personal protective equipment available for use in the mines does not fit women workers as most PPE are designed based on the male body structure.
In this regard, we welcome the research conducted through the Mine Health and Safety Council and expect that the implementation of the recommendations should assist the sector to select, provide appropriate and suitable PPE for women in mining.
In conclusion, the ANC supports the Budget Vote 32 - Mineral Resources.
Thank you.
Hendrik Schmidt (DA)
Highlights:
· The Marikana tragedy in August last year undisputedly blemished South Africa’s mining industry;
· Failure of local governments to upgrade informal settlements, provide water, electricity, housing, sanitation and refuse removal has created immeasurable hardship for mine communities;
· Amendments to the Mineral and Petroleum Resources Development Act (MPRDA) will lead to less regulatory certainty, less compliance and less investment;
· Black Economic Empowerment (BEE) has failed workers and mining companies;
· Government should aim for responsible downstream and side stream beneficiation in an investment friendly climate rather than imposing more taxes.
The Marikana tragedy in August last year undisputedly blemished South Africa’s mining industry. The events at Marikana changed the lives of 34 families who lost a child, a father, a brother or a husband. Marikana also changed the lives of everyone involved in the mining industry. It illustrated the thoroughly weak state and the political-economic challenge of managing the most unequal country, 19 years after democracy. A well known supporter of the ANC remarked that: “It looked like the ANC turned its guns on its own people”.
These perceptions of the Marikana tragedy have contributed to threats by the Association of Mineworkers and Construction Union (AMCU), not ANC affiliated, to bring South Africa’s economy to a standstill. This in turn contributed to the rand sliding to a four year low against the dollar which could trigger another downgrade of South Africa’s ratings.
The government’s feeble response to the Marikana disaster was to delegate a ministerial task team and to appoint the Farlam Commission. The initial ministerial task team, which produced few results, was followed by a second and similar task team in response to renewed unrest at Marikana.
Not being welcome at Marikana, none of the problems leading to the Marikana disaster were addressed. An increased number of illegal strikes resulted which cost the country at least R15 billion in revenue. An acting minister in the President’s office recently stated: “We are confident we will be able to curb this problem and nip it in the bud” - a rather contemptuous remark considering the historical context. A recent newspaper headline stated the obvious: “Minsters misread mining crisis”.
The fact that the ANC government is allied to Cosatu to which the National Union of Mineworkers (NUM) is affiliated, is leading to allegations of clientelism and patronage. Government is perceived as not being able to act impartially between NUM and AMCU. The Secretary-General of the ANC has already indicated to NUM workers that “You are not being victims because of your membership of NUM but because you are a loyal member of the revolution” thereby creating more divisions. The honourable Minister last Friday indicated that NUM was not to blame for the Marikana tragedy. Honourable Chair, workers are losing faith in ANC affiliated unions.
Failure by local governments to upgrade informal settlements, provide water, electricity, housing, sanitation and refuse removal increased problems regarding the social wage of workers at Marikana. It is particularly this failure which has created immeasurable hardship for mine communities. The trade-offs of paying living allowances as compared to accommodation provided by government and mining companies should be considered. A co-ordinated structure between stakeholders needs to determine short, medium and long term goals to prevent a second Marikana tragedy. Migdett, which represents mining stakeholders, needs to step up on their responsibility.
A model community serving as a developmental model for the industry - as proposed by the SA Institute of Mining and Metallurgy - should include an integrated income generating community of mineworker families whilst taking note of the Bench Mark Foundation report which summaries most of the issues.
Finance Minister Pravin Gordhan is correct when he stated recently that something urgently needs to be done in the mining industry as the country would lose jobs and investor confidence, resulting in companies closing. This has unfortunately already started to happen. Mining output has contracted by 3.5% in March according to Statistics South Africa. South Africa’s foreign direct investment plunged from R45.4 billion in 2011 to R1.7 billion last year as compared to Zimbabwe’s FDI of R3.5 billion last year.
Whilst mining contributes approximately 19% to gross domestic product (GDP) directly and indirectly, and provides nearly 1.3 million people with mining related jobs, the proposed amendments to the Mineral and Petroleum Resources Development Act (MPRDA) will lead to less regulatory certainty, less compliance with international best practice and hence less investment, thereby creating more social tensions.
What South Africa does not need to prevent another Marikana tragedy, are:
· Threats of mine closures following the Marikana tragedy;
· Veiled threats of nationalisation by the ANC government;
· More state involvement, control and interference;
· Declaring certain minerals strategic minerals with the Minister setting prices and determining the quantity to be exported;
· Declaring an unspecified free carried interest in exploration activities to the benefit of the state;
· Creating a perception of controlling certain markets;
Black Economic Empowerment (BEE) has failed workers and mining companies. It has not been broad-based or economically viable in many instances. Mine employees should benefit from a responsible transformation of the mining industry such as the employee stock ownership plans (ESOPS) formulated by Kumba. The critiscm expressed by Africa’s richest man, Aliko Dangote, towards the manner in which South Africa implemented BEE, is well known.
Following the Marikana tragedy, South Africa needs a social compact that encourages transparency and accountability, better governance and a shared understanding of the role and value of business to society.
Marikana has led South Africans to re-examine the actions of the South African Police Services (SAPS) and that of an ill-equipped, unprepared and seemingly disinterested government to the plight of the mining industry.
We should address the problem of being the most unequal society, manifesting itself acutely in the mining industry, by inter alia the following considerations:
· Responsible downstream and side stream beneficiation in an investment friendly climate rather than imposing more taxes;
· A new labour dispensation model where mining is re-introduced as a continuous operation leading to more jobs and a higher frequency of leave;
· New clean energy initiatives providing incentives to mining companies to build self-sustaining energy systems and the development of infrastructure inclusive of private sector participation;
· Qualitative training to employees, including women engineering graduates;
· Developing platinum-based fuel cell technologies, incentivising Independent Power Producer agreements based on, for instance, coal gasification and methane gas technologies;
· Implementing well considered Special Economic Zones for certain commodities and poverty stricken areas;
· Concluding fair and representative union recognition agreements;
· Developing an independent regulator responsible for applications for mineral rights;
· Involvement by the state in the mining industry to provide an investor friendly climate.
The future of South Africa’s mining is on the brink of another crisis without definitive steps to resolve the underlying issues which contributed to the Marikana tragedy.
James Lorimer (DA)
Highlights:
· It is increasingly clear that the whole edifice of our Mineral Resources regulatory regime is primarily there to advance the interests of the crony class;
· The Mineral and Petroleum Resources Development Act (MPRDA) Amendment Bill will dry up low levels of mining investment, earning government less tax resulting in more job losses;
· I challenge the Minister to change the definition of Black Economic Empowerment (BEE) in the mining charter to only empower the workers on mines and people from the surrounding communities;
· A whole new industry in the oil and gas drilling sector may never happen because of the MPRDA Amendment Bill;
· ANC’s focus is to put its cronies in charge of the economy, in doing so, hampering the growth of the economy and keeping the people poor.
Mr Chairman,
Since we discussed the budget of this department a year ago, the mining industry has slid further away from the uplands of viability towards the trough of failure. The ANC government is shambling from one disastrous policy choice to the next.
Things are worse for mineworkers. Many of them have lost their jobs. They are worse for mining companies - as many as two thirds of our platinum mines are losing money. The platinum index has just hit a seven-year low. We see job cuts and reduced investment at Goldfields and AngloGold. Mining output was down 12.7% last year.
So what do you do if the industry is in trouble? If you’re the ANC, you lay plans that will make it worse. The new Mineral and Petroleum Resources Development Act (MPRDA) Amendment Bill is set to squeeze more out of the industry, while making operating conditions even more onerous. It will dry up our already low levels of mining investment. The government will earn less tax and more people will lose jobs.
One of the main criticisms of the MPRDA, since it was first passed, was that it left too much decision-making in the hands of the Minister and officials. That discretion meant the law could be unevenly applied, and worse, that it was impossible to predict the conditions under which mining investment would take place. Investment began to dry up and the industry began to shrink.
We were assured the new Amendment Bill would clear this up. The reverse has happened. In the old Act there are 26 instances where the Minister or officials had discretion. There are 34 such instances in the new Bill. This is not logical for anybody with the priority of encouraging new investment. There must be some other priority in the ANC’s thinking.
Some members on that side of the house are great followers of theories of class. What a pity they confine their theories to the ideas of two German men of 145 years ago and pass up on the fruitful opportunities to study a far more relevant class, one that explains much of what afflicts South Africans today and in particular, South Africans in mining.
This is the class of the insiders, those with connections in government, the tenderpreneurs, and the cronies - who are effectively our new ruling class.
It’s no coincidence that some of the more prominent scandals in mining over the past few years have involved companies who were connected to members of the families of ruling party royalty.
Look at Aurora, the now infamous granting of mining rights to a company linked to President Zuma and Mandela relatives. A deal that resulted in jobs being lost and workers being robbed by looting company owners.
Then there’s the case of Imperial Crown Trading. Despite being without visible assets, in either money or expertise but connected to representatives of the Zuma, Mandela and Motlanthe families, this company is being assisted by the Department of Mineral Resources all the way to the Constitutional Court (Assistance, incidentally which the department refuses to talk about in the Mineral Resources Portfolio Committee, a refusal endorsed by the ANC on the committee).
There has been a report that ANC members have been told to go easy on Ministers and officials in portfolio meetings. No need to send that memo to the Mineral Resources Portfolio Committee, it is already allergic to tough questions.
Former Goldfields Chair, Mamphela Ramphele, says the government shoved a list of empowerment beneficiaries down Goldfields’ throat. When Goldfields complied it won rights to mine at South Deep, its most profitable and only remaining South African gold mining operation.
And who was on that list of beneficiaries? It appears to have been assembled by convicted bank robber Gayton McKenzie. He was paid some R30 million for the hard work of handing out patronage. The list included just over 70 beneficiaries, from President Zuma’s lawyer to former Deputy President of South Africa, Baleka Mbete, Zindzi Mandela, as well as the daughter of a former member of the Mineral Resources Portfolio Committee, known for his softball questions.
It seems name-dropping doesn’t only afflict the Waterkloof Air Force Base.
These are some examples of who benefits from a subjective system of ministerial and official permissions. Decisions don’t have to be fair or legally testable. They can be capricious and illogical. Comrades can be given special favours and equally those who do not do exactly as the state says can be punished.
It’s becoming increasingly clear that the whole edifice of our Mineral Resources regulatory regime is there primarily to advance the interests of the crony class. Cash for comrades! The imperative to build the economy so that government revenues and employment can benefit is in a poor second place.
If there was truly an intention to put the needs of broad based empowerment first, then government is missing opportunities to show it.
But I am willing to be convinced it’s not all about cronies. Minister, here is a direct challenge to you. To help us believe that you truly believe in empowering all disadvantaged South Africans, change your definition of Black Economic Empowerment (BEE) in the new mining charter. Make it so that the only empowerment that counts, is the empowerment of workers for the mine concerned and people from the surrounding communities who have to put up with the consequences of having a mine of their doorstep. Do this, minister, and I will reconsider my opinion on your motives. But fail to do it and my opinion will be confirmed.
Here’s another example on how this government’s poor stewardship of our mineral resources is costing us opportunities:
A whole new industry awaits us in the oil and gas drilling sector. New theories about South Africa’s offshore seabed geology mean that some of the world’s major offshore drilling companies have taken up leases off our country’s coast, for the first time ever. It costs between 75 and 100 million dollars to drill one deep sea well. A number of companies stand ready to drill several test holes each off the West Coast, Cape Town, Mossel Bay and Durban. Those companies expect to find at least gas in large quantities and very possibly oil. This should be one of South Africa’s most optimistic economic stories.
And yet, it may never happen because of the MPRDA Amendment Bill.
Previously drillers were faced with having to hand over 9% of their operations to BEE partners, as they fell under the liquid fuels charter, they will now fall under the mining charter where the BEE requirement is 26%.
More worryingly there’s also a clause that gives the state a “free carried interest” of unknown percentage in any oil or gas operation. And there’s more, a provision for the state to acquire ‘a further interest’ through an organ of state or state-owned company. The size of this is not specified.
All of this comes on top of regular taxes and royalties.
This ownership grab is accompanied by vague but potentially devastating powers given to the minister to regulate what products are sold where and at what price, effectively nationalising all critical decision making.
These drilling companies are used to handing over a lot of tax and control to governments. But even for them this will be too much. None of this potential energy boom may ever happen if the MPRDA Amendment Bill as presented becomes law. Those major drilling companies will begin to drift away to find easier places to operate, in Africa, and across the world.
It seems the ANC’s focus is to put its cronies in charge of the economy, no matter that in doing so it will hamper the growth of the economy and keep people poor. The ANC would rather it be king of an anthill than have the whole of the country be lifted out of the mire of poverty.
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Budget Vote 32 - Minerals Resources |
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