Minister of Mineral Resources Budget Speech
15 May 2018
Minister of Mineral Resources, Mr Samson Gwede Mantashe , gave his Budget Vote Speech on the 15 may 2018.
Deputy Minister of Mineral Resources, Cde Godfrey Oliphant
Chairperson and Members of the Portfolio Committee on Mineral Resources. We take this moment, once more, to send condolences to Cde Zet Luzipho and his family, who buried their father this past weekend.
As Nelson Mandela intimated, we have always known that our freedom would be incomplete until the people of Palestine are also free. These words are even more true today, having witnessed the carnage meted out by the Israeli forces in Gaza yesterday.
We send our sympathies and solidarity to the people of Palestine. We commend the Department of International Relations for its response by withdrawing our country’s Ambassador to Israel. Such is our commitment to our solidarity, as the ANC.
It is indeed an honour to table the Budget for Vote 29 before this House today, my 78th day in office.
I have used this time to reacquaint myself with critical issues facing the industry, and to understand some of the challenges facing the Department.
As stated publicly; policy and legislation, health and safety, mining rights and application for mining licences, and illegal mining along with its related criminal activities; are amongst my immediate priorities and receive urgent attention.
The Departmental Strategic Plan for 2014 to 2019, with its relevant vision, is the framework we work within. Both the vision and mission statements focus us in our work as the regulator and enforcer of compliance in the sector.
Vision 2019 states that we want to build “a globally competitive, sustainable and meaningfully transformed mining and mineral sector”, and Vision 2030 sets the task of being “a leader in the transformation of South Africa through economic growth and sustainable development by 2030”.
The Mission set out in the Strategic Plan is that of “promoting and regulating the mineral and mining sector for transformation, growth and development, and ensuring that all South Africans derive sustainable benefits from the country’s mineral wealth.”
It is important, therefore, to reflect on what we have achieved, and look at how we can accelerate the pace of transformation, to realise our overarching socio-economic objectives.
The Department is allocated R1,9 billion for the 2018/19 financial year. A considerable portion of this funding - 51% - goes to entities reporting to the Department, with Mintek and the Council for Geoscience receiving 83% of the transfers, for critical work being undertaken in research and development (R&D).
The funding allocated to the Department and its portfolio of entities remains inadequate if we are to effectively carry out our mandate. Addressing this anomaly is important, so that as part of the Economic Sectors, Employment and Infrastructure Development (ESEID) cluster of government, we are better able to be a catalyst for the growth and development of the economy. An insufficient allocation of resources curtails our efforts to create more economic opportunities. We are mindful of the fiscal constraints the country faces in the same breath as we will strive to deliver with the limited resources at our disposal, in line with the Public Finance Management Act (PFMA).
Macroeconomic context and role of mining in the economy
South Africa's economy, including its financial sector amongst others, is built on the back of our enormous mineral resources, which have made massive contributions over the years. Mining plays a strategic role in economic growth and development.
Recent data supported by Stats SA shows that mining production increased by 3,1% year-on-year in February 2018, indicating a recovery from previous periods. However, the positive growth was reversed by the 8,4 percent plunge in mining production in March, which was a result of the serious downturn of -18 percent in gold; -8,9 percent in iron ore and -6,1 percent in PGMs.
An urgent message is that we must work hard to instil and maintain stability in the industry. We must ensure policy and regulatory certainty.
The high number of mines and shafts under care and maintenance contribute heavily to the massive decline in both production and employment. In this regard, we will meet with companies that are culprits of these practices. We intend to discuss honestly and robustly on the use it or lose it principle, found in our law. Our mineral wealth must be exploited, not left unused, if we are to generate economic growth and impact on the development of society.
The relative stability seen in the sector in recent times, bodes well for the sustainability of mining and creation of a conducive environment for investment.
South Africa accounts for 94 percent of known global reserves of the platinum group metals (PGMs), 73.7 percent of chrome, 29 percent of manganese, 18.4 percent of vanadium and 10.5 percent of gold reserves. As a leading producer and supplier of a range of minerals, the country offers a highly competitive investment location, enabling us to meet specific trade and investment requirements of prospective investors and business people, as we meet the development needs of our people. The country has the potential to supply a large share of the global demand for many commodities. This rich endowment of natural resources and high mineral potential can only be developed and extended through a vibrant exploration sector.
Hence the importance of the integrated and multi-disciplinary mapping programme by the Council for Geoscience (CGS), at a scale of 1:50 000, which is underway, as part of creating capable institutions in line with the aspirations of the NDP. Although some funding has been allocated over the medium term, a total investment of R20 billion is required over the next 10 years.
The programme will help identify new mineralising systems, adding to our flagship Wits basin for gold, the Bushveld Igneous Complex for Platinum Group Metals (PGMs) and the manganese fields in the Northern Cape. This will, in turn, assist to secure new resources for development, employment creation, economic growth and accelerate transformation.
In this current year, we will process the request for the Presidential Proclamation to give effect to the provisions of the Geoscience Act that were held in abeyance when the Geoscience Amendment Bill was promulgated. In part, this will bring South Africa in line with the world in respect of submission of all historical and current geological information to the CGS.
Rebuilding the levels of trust and confidence in the sector is paramount to return us to the business of mining. We are investing time and effort to rebuild relationships and trust with our primary clients: business, labour and communities. Frank and open discussions with our stakeholders will enable us to serve them better. We also encourage all stakeholders to talk among themselves so that even in cases of disagreements, it must be on substantive issues, not because of a trust deficit.
In line with the call by President Cyril Ramaphosa, we have intensified our engagements on the Mining Charter. The Mining Charter, which is a tool for transformation, is a powerful pact between all stakeholders to contribute towards the achievement of an equal, non-racial and non-sexist society envisioned in our Constitution. We aim to finalise and gazette the Mining Charter in June, having taken on board inputs and concerns from stakeholders across the country. Thus far we have held consultations in five provinces where mining and labour-sending areas are situated. We have also established a task team, comprising all social partners, to develop a coherent vision for a competitive and sustainable industry. The mining sector must increase its contribution to the GDP of the country. It must operate optimally for the benefit of society. If production is consistently disrupted capacity to deliver is also disrupted. Hence the importance of the Department and the individual mines engaging mining communities and workers so that all stakeholders are part of and appreciate developments in the sector.
Transformation and competitive growth will best serve the country when they happen in an environment of mining communities that feel and see the benefits of mining. Our participative democracy, which is at the heart of broad-based socio-economic transformation, intends to move mining communities from the periphery to join the centre of South African life.
According to the Fraser Institute, an international rating agency that rates 91 mining economies, South Africa could potentially be rated at 21 overall. Currently, on investor attractiveness, we are rated number 47; and are placed number 80 in policy and regulatory framework. It is evident that the conflict in the industry around the mining charter and, therefore, failure to have the sector coalesce contributed to uncertainty and fear among investors. This has further been exacerbated by delays in finalising the Mineral and Petroleum Resources Development Act (MPRDA).
Since South Africa is part of the global economic village it is necessary to heed surveys from rating agencies. We should aim to be competitive and use our competitive advantages to attract investment. This will give us the necessary capacity to transform and meet our Social Labour Plan commitments for community development and the improvement of the living conditions of mineworkers.
The Department is in the process of reviewing the Housing and Living Conditions Standards, which are developed in terms of Section 100 of the MPRDA. The review seeks to address the historic and systematic policies of discrimination and marginalisation of mineworkers in terms of their working, housing and living conditions, and to provide for the progressive realisation and protection of their basic constitutional right to human dignity through provision of adequate access to housing, better living conditions and related amenities.
The Mineral and Petroleum Resources Development Amendment Bill, 2013 (MPRDA Bill) is before the National Council of Provinces. Eight of the nine Provincial Legislatures supported the Bill in the negotiating mandates process. The Department has provided responses to the provincial legislatures’ negotiating mandates and the Committee is currently negotiating and voting on the mandates. Once the Select Committee on Land and Mineral Resources has finalised the mandates, it will compile its report and recommend to the National Assembly for further processing of the Bill. We urge Parliament to proceed faster towards finalisation of this Bill, because it is key in entrenching regulatory and policy certainty necessary for investment, thereby attainment of sustainable growth, development and transformation in the sector.
Issuing of mining rights and the proper processing of applications for mining licences is among our key priorities. This aspect of our work is fraught with greater challenges and laced with corruption; from declined prospecting rights, unprocessed applications and unexplained red-tape.
The preliminary investigation has found that the backlog on new mineral right applications stretches as far back as 2012 in some Regional Offices. It has further been found that the applications for renewal of Prospecting right applications go to as far back as 2010. The implication of unprocessed renewal applications is that it blocks any other party from applying for mineral right in that area. No satisfactory reasons were advanced as to why we have these backlogs. The word in the corridors is that applications from ‘known’ or ‘paying’ applicants are prioritized. Internal systems to detect delays in the processing of mineral right application is non-existent. Renewal applications are normally dealt with on applicant’s request otherwise it is hardly attended to.
To unleash our economy, we must overcome this hurdle to ensure that prospectors can prospect and those with the legal permits and the means to mine can mine. Among various considerations before us is an audit of all applications, permits and mining rights. In addition, various measures to deal heavily with corruption.
Application should be dealt with in chronological order, with frequent report back by Chief Directors, and their respective Regional Managers, to the Director General on their status. The Licensing Committee has started meeting more frequently to process the applications.
Shale gas development
The southern Main Karoo Basin is considered the most prospective area for shale gas, with a possible estimation of 205 Trillion cubic feet of gas technically recoverable, as reported by Petroleum Agency SA. The successful development of this resource has the potential to transform the national energy economy of South Africa. To that end, we intend to move with speed to fast-track the finalisation of Exploration Rights applications so that South Africa can maximise its chances of reaping the benefits from shale gas exploration and exploitation.
In due course I will publish a notice in terms of the Promotion of Administrative Justice Act, to invite comments from persons who may be materially and adversely affected by our decision on the three shale gas applications with us.
Compliance with the MPRDA and the Mine Health and Safety Act (MHSA) is imperative for the sustainability of mining. The Department has embarked on compliance audits on Social and Labour Plans (SLPs) and procurement, which will continue in the current financial year. The aim is to ensure that SLP projects are aligned with Integrated Development Plans (IDPs) of municipalities, to ensure community development is undertaken in an integrated manner. Companies have continued to implement the commitments made regarding community development. In the last financial year, 108 local economic development projects were implemented, largely aimed at addressing health, education and housing needs.
Section 52 Processes of the MPRDA
The purpose of the Section 52 process is to prevent mining downscaling, ameliorate job losses and prevent retrenchments in the mining industry, thus saving jobs in the process. In addition to complying with the requirements of the MPRDA, the interventions proposed are also informed by the Stakeholder Declaration adopted by the mining industry in August 2015.
During the past financial year ending 31 March 2018, a total of 26 (twenty-six) Section 52 Notices, affecting approximately 32 000 workers/employees, were received. The mining companies mostly affected are those mining gold, platinum and coal commodities. The Minerals and Petroleum Board, supported by the Department, has successfully processed eighteen (18) Section 52 Notices and the outstanding eight (8) notices are envisaged to be finalised in the current financial year.
Notwithstanding possible amendments to the MPRDA, the Department is in the process of developing Regulations for prescribing how mining companies should submit Section 52 Notices. There is also a need to synchronise the implementation of section 189 of the Labour Relations Act and Section 52 of MPRDA.
The Board and the Department will continue to exert effort to halt the decline and sustainability of the industry.
Health and safety
Health and safety remains a key area of concern, and one which requires consistent priority attention by the social partners. The 2017 calendar year was the first time in ten years where a regression in the number of fatalities was reported, with the gold sector being the leading contributor. An estimated 30% of the fatalities were from fall of ground and seismic related accidents.
Since the beginning of 2018 a total of 33 fatalities have been reported. The recent disaster at Sibanye-Stillwater’s Driefontein operation, where seven workers died after a seismic event, should compel the Regulator, business and organised labour to step up efforts on promoting health and safety. The long-term sustainability of mining is dependant not only on its growth, competitiveness and transformation, but also on how well its workforce is cared for and safe.
Together with the Mine Health and Safety Council, CGS, CSIR, organised labour, employers as well as industry experts in rock engineering and seismology, the Department is paying special attention into the issue of seismicity.
There are also improvements worth noting in health and safety, which include the 11% decrease in the number of injuries in 2017, as well as a 29% reduction in the number of occupational diseases reported.
In November 2018, we will host the Mine Health and Safety Summit to assess progress made in attaining our objective of “zero harm”, and to chart a way forward.
Illegal mining is a serious challenge and a danger to society. It places the health and safety of communities at risks, particularly where public infrastructure is threatened by its activities. It causes a leakage and costs both the industry and our economy greatly, thereby robbing Government and the people of South Africa of the benefits that should accrue to mining.
Coupled with the challenge of illegal mining is the matter of synthetics that is threatening the diamond sector. Calls have been made at the Pan African level for countries in the continent to propose and implement means to curb this threat. We will meet with the industry to solicit its views on this matter.
Further, there is progress made through work with provincial and local government, as well as law enforcement agencies. Collaboration with law enforcement agencies in Sekhukhune has led to successful arrests.
In the Northern Cape, the Department has been engaging with artisanal miners to legalise their operations, and on 30 April 2018 they received their mining permits. The artisanal miners will now be able to sell their diamonds in the open market, without exploitation by unscrupulous diamond buyers.
As we explore ways to regulate artisanal mining as means to enable ordinary South Africans participate in mining, we intend having discussions with the Minister of Police on strengthening approaches to dealing with the scourge of illegal mining.
We have witnessed a slow progress in implementing beneficiation, which was adopted as a policy of government in 2011.
Mintek is developing innovations to lead in niche markets in the areas of iron ore and steel, as well as the platinum group of metals (PGMs) value chains. In the next twelve-months, focus will be on underground processing, gold tailings treatment and the beneficiation of the PGMs.
The hydrogen fuel cell programme is also gaining traction and serves as an excellent case of the beneficiation of platinum. In the next financial year, Mintek will be focusing on scaling up catalyst production batch sizes and producing membrane electrodes for direct methanol fuel cells. We also aim to explore the development of platinum-based fuel cells for use in automotive applications. In addition, Mintek continues to assess additional commercial uses of platinum, in the pharmaceutical and chemical sectors for example.
We will continue to provide value-added training on beneficiation that is not only relevant to marginalized communities, but also enables them to operate small-scale jewellery manufacturing enterprises. In partnership with the Mining Qualifications Authority (MQA), Mintek will be training about 240 people over the next twelve months on small-scale mining and the manufacturing of jewellery, semi-precious gemstones, glass beads and pottery.
South Africa’s local beneficiation in the diamond and precious metals industries has significantly declined in the past decade. Of the 323 diamond beneficiation licences issued by the South African Diamond and Precious Metals Regulator (SADPMR), only 78 are active in the trade and beneficiation of diamonds.
In response to this challenge, the SADPMR has established projects that are intended to stimulate and increase local beneficiation, especially in communities that are located near mining areas. The SADPMR will support the Virginia Jewellery School (VJS) to establish a Jewellery Mass Production Factory in Virginia by 2019. The aim of this factory is to revitalise the local economy and increase employment in the distressed mining town of Virginia.
Initiatives by the State Diamond Trader (SDT) to increase participation and employment in beneficiation includes, raising the amount of suitable rough diamonds offered annually to ensure clients have security of supply. With only 15 percent of South Africa’s run of mine production being considered economic for local beneficiation, the SDT is exploring ways of making it economic to beneficiate an increased percentage of local run of mine production, thus increasing the amount of rough diamonds beneficiated locally.
The SDT continues to prioritise its HDSA clients, especially youth and women, when allocating diamonds. It will increase the amount of rough diamonds sold to its black clients, to accelerate their growth and ensure that they are sustainable. It is envisaged that by 2023, at least 30% by mass of the rough diamonds sold by the SDT will be to black clients. In addition, the entity will ensure that there is a constant stream of new black diamond entrepreneurs entering the sector through its Enterprise Development Programme.
Stimulating local beneficiation of rough diamonds for non-jewellery applications will attract untapped markets for the diamond beneficiation sector, resulting in a demand for goods previously not desired by beneficiators. Furthermore, the SDT is collaborating with the Gauteng Industrial Development Zone (GIDZ) and SEDA Platinum Incubator to set up an equipment hub to help new entrants.
Rehabilitation and Sustainable Development
Sustainability of the environment remains a critical focus, with rehabilitation of derelict and ownerless mines a key part of this. A total of 188 sites have been rehabilitated over the past four years. As we put more focus on rehabilitation over the medium term, we have partnered with the Department of Public Works to ensure that the rehabilitation of sites provide work opportunities through the Expanded Public Works Programme (EPWP).
The Acid Mine Drainage water treatment project also continues. The largest opportunity we are envisaging is in the treatment of Acid Mine Drainage from the Wits basin. We are also testing a different method at a pilot plant in a coal mine in Mpumalanga. The overall aim is to provide water to build sustainable communities after the life of a mine. In addition, we are scaling up the development of an integrated filter for the removal of metals and bacteria in drinking water, through nanotechnology.
Acid Mine Drainage
The Department continues with implementation of recommendations by the Inter-Ministerial Committee on Acid Mine Drainage (AMD), including diverting surface water away from mine voids, especially in the Witwatersrand area. The Department will continue to engage the Department of Water and Sanitation and National Treasury to ensure sufficient funding to allow for an accelerated ingress control in the Witwatersrand, to mitigate against environmental harm.
Skills and capacity development
We invest in nurturing a critical mass of world class scientists. Among my guests, are four young people, from the CGS, who recently acquired their PhDs in geoscience. They are Dr. Thakane Ntholi, Dr. Taufeeg Dhansay, Dr. Nigel Hicks and Dr Emmauel Sakala. I have no doubt they will continue to make an immense contribution, to the betterment of this sector.
Through Mintek, we are increasing efforts to facilitate entry of small enterprises and junior miners, who would otherwise find the costs of sourcing specialist technical expertise or basic testing laboratories and facilities a barrier to entry in the industry. In this regard, Mintek operates as a one-stop shop for a wide range of services that enable miners to run solid mining operations.
To effectively address these challenges, respond to our clients and lead this important sector of the economy, the Department must be adequately capacitated.
We have begun the process of filling key vacant positions to stabilise critical areas in policy, regulation, health and safety as well as monitoring and enforcement of compliance. Team DMR is being knitted together as a team prepared to serve. Our emphasis on preparedness to serve was reinforced by the mistrust all stakeholders displayed towards the department in almost all the regions where it operates.
Addressing South Africa’s triple challenges of poverty, inequality and unemployment, as outlined in the National Development Plan, remains an overarching priority of Government.
This year, as we celebrate the centenaries of two of our Movement’s stalwarts, and distinguished leaders of our country, Cde Nelson Mandela – himself a former mineworker - and Cde Albertina Sisulu, let us strive that much harder, in their honour, for the attainment of this vision; this moment and today.
I thank my predecessors during this current term of Administration. Mine is to conclude the task they began in 2014, by driving us towards this vision of a globally competitive, sustainable and meaningfully transformed mining industry. That would be the greatest contribution in honour of Tata Mandela in his centenary year. As Chairman Mao said, “So many deeds cry out to be done, and always urgently. The world rolls on. Time passes. Ten thousand years are too long. Seize the day, seize the hour.”
Thanks to the Deputy Minister Godfrey Oliphant, the Director-General Adv Thabo Mokoena, and “Team DMR” for their hard work and dedication to the work at hand.
Thank you to community members who engage us voice their concerns about our work and share their opinions about the industry.
Thanks to labour organisations and the mining companies, including junior and small-scale miners, for their willingness to dialogue.
Thanks to the media for its scrutiny, expose and commending us where it is due.
My eternal gratitude to my wife and children, for their continued support and encouragement during the highs and lows of the responsibilities I am ever called to answer to.
Honourable Chairperson and Members,
I hereby table Budget Vote 29 before this House.
I thank you.