Mining Charter; Mineral Beneficiation Strategy: Department of Mineral Resources briefings

NCOP Economic and Business Development

12 October 2009
Chairperson: Mr F Adams (Western Cape, ANC)
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Meeting Summary

The briefing by the Department of Mineral Resources on the Mining Charter, included the background to the adoption of the Mining Charter, its purpose, progress made since its adoption in 2004, assessment and recommendations. The goal of the Charter was “to create an industry that would proudly reflect the promise of a non-racial South Africa.” The Mining Charter was a framework for increasing opportunities for historically disadvantaged individuals to participate in mining. Questions asked related mainly to the impact on and involvement of the communities around mines and the participation of historically disadvantaged individuals in mining.

Meeting report

Ms Ntokozo Nzimande, Chief Director of Mineral Policy in the Department of Mineral Resources (DMR) briefed the Committee on the Mining Charter, which was foreseen by Section 100(2)(a) of the Mineral and Petroleum Resources Development Act 28 of 2002 (MPRDA). The former Department of Mineral and Energy (DME) signed the Charter with stakeholders in 2002.

A list of legislation required to understand the conceptual underpinnings of the Mining Charter was cited, including the Broad-based Black Economic Empowerment Act 53 of 2003, Mineral and Petroleum Resources Development Act 20 of 2002, Precious Metals Act 37 of 2005 and the Skills Development Act 97 of 1998.

Ms Nzimande stated that the Mining Charter targets should be informed by the success stories and achievements as dictated by the six elements of Charter categories, namely, ownership, management, skills development, employment equity, procurement and rural development. She said that these objectives provided a clear lens of scope through which targets could be realised.

On progress made she said that the then DME had hired an independent consultant - Moloko Solutions - to conduct an assessment of compliance. They had finished data collection and were currently assessing the data. The DMR was currently conducting a similar study.

The Minister through international engagements would flight the Mining Charter through road shows so as to show that BBEE could be achieved within contact of free market forces, to ensure investor confidence.

Recommendations made included:
greater emphasis on mining company reporting in terms of Section 28(2)(c) and 29;
▪ the problem of fronting needed to be addressed;
▪ assess whether the initial terms of reference were still relevant today.

Mr B Mnguni (ANC, Free State) asked how many mining licences were issued and out of those, how many historically disadvantaged individuals (HDIs) were successful in running those mines.

Ms Nzimande responded that she could not give a figure and pointed out that the granting of rights was a continuous process and therefore the number was continually changing. Secondly, she was director of mineral policy within the DMR and that that question should properly be directed to the Chief Director of Mineral Regulations.

Mr Mnguni asked how far government should let free market forces determine government policy.

Ms Nzimande pointed out that the free market was not dictating policy, but that it was the environment in which they operated and could not be ignored.

Mr D Gamede (ANC, KZN) raised concerns about the employability of mine employees elsewhere. He also commented that rural development did not mean the same as “local economic development”.

Ms Nzimande responded that the department was of the view that people should be given portable skills that would enable them to work elsewhere. They were not just focused on skills development but also provided bursaries for staff and children of communities surrounding the mines. On the second issue, she replied that the two, rural development and local economic development, were interlinked. One could not talk of rural development without involving local economic development. She also pointed out that the Rural Development department was a new department and that the charters preceded it by approximately five years and therefore there would be a need for alignment.

Mr Gamede pointed out that hiring an independent consultant at the same time that the Department was doing its own research into the same issue appeared to be unnecessary duplication.

Mr J Gunda (Cope, NC) asked if outsourcing compliance could not lead to the possibility of the consultants colluding with the mining companies painting an inaccurate picture of the situation.

Ms S Chen (DA, Gauteng) commented that the comparison between the DME and the Moloko reports could paint a more representative picture, and that any contradictions would be particularly illuminating.

An ANC Member wanted to know if there was sufficient capacity
within the department to ensure compliance with the Charter and wanted to know what percentage of ownership was held by HDIs, commenting that a more detailed presentation would have been useful.

Ms Nzimande stated that that charter compliance inspections were regularly conducted.

In response to a question on the need for road shows, she said the strategy for road shows was not a necessary one, that it was simply a matter of selling policies. People were naturally fearful of and resistant of change and that investors would need to be reassured.

Mr Gunda related an incident with his constituency near the Vaal River where several mines were operating and where the communities claimed they had not been consulted

Ms Nzimande responded that it was difficult to provide an answer on specific areas, and without even the names of the mines she could not comment.

Mr B Mnguni raised a tax issue, questioning why multinationals that were currently prospecting could receive anything up to a 100% rebate on taxes.

Ms Nzimande pointed out that the government did not pour any cash into these companies and that they came here to sink mines into the ground and to provide technology that the country itself could not afford.

In response to a question on the time it took to issue a prospecting permit, Ms Nzimande said that it currently took six months. This was necessary, as the application had to be approved by other government entities, including Water Affairs, Environment and the local municipality and the process could be made shorter.

Mr Montsitsi inquired as to how mine ownership patterns had changed in the last 15 years and emphasised the relevancy of this in light of recent calls for nationalisation.

Ms Nzimande said that she could not respond on the past 15 years as the MPRDA had only been in operation since 2002.

Mr Montsitsi asked about the issue of consultation with surrounding communities. He wondered if it was possible to bypass the community, especially the traditional leaders.

[This question appeared not to be answered]

In response to a question on illegal miners, she said that the fact of the matter was that they were criminals engaged in a criminal activity and no different from other criminals such as armed robbers.

Draft Mineral Beneficiation Strategy presentation
Mr Siyabonga Ndabezithe, Chief Director of Mineral Promotion in the DME, briefed the Committee on an overview of the Draft Mineral Beneficiation Strategy.

He started by noting that his colleague had given an indication of what has been achieved, and that what he was about to present was still in the making. He would preface presentation with a few remarks underpinning the beneficiation strategy, this was necessary to locate it within a broader context.

The first was that beneficiation represented an attempt to translate comparative advantage into a competitive advantage. He said that he would like to use beneficiation to transform the economic landscape. He accepted that the mandate was to regulate mineral industry but also realise

He explained the vision behind the beneficiation strategy emphasizing that it was not yet finalized and stated that: It would facilitate economic diversification; expedite progress towards a knowledge economy; attain incremental GDP growth in mineral value addition; and lastly create opportunities for entrepreneurial development.

He noted that most materials were still exported to the west, and that was a reflection of the old colonial division between labour and producer. If one beneficiated most minerals before export, this would increase GDP.

He outlined the strategy path, which began with an initial research study. The research done showed that it would be in the best interest of the country to undertake this process. He did acknowledge contrary findings by a Harvard-based academic who was of the view that this would not be in the best interest of the country. Comparative studies were done, and adapted for South African circumstances. He argued that beneficiation might not work in some countries but this did not mean that it would not work in South Africa. They had looked at international best practice and on that basis drafted the beneficiation strategy. There was a lot of debate still ongoing; they might beneficiate all minerals currently mined in South Africa, about 53 in total. The first draft was taken to Cabinet late last year. Cabinet provided comments and returned the draft with questions which the DME did their best to answer. The document returned to Cabinet and Cabinet approved it for publication as a discussion document and to be used as basis for further consolation. As a result it was consequently official launched on 30 March 2009.

Mr Ndabezithe said that people were not averse to the idea generally, but were much concerned about challenges likely to arise when implemented. A common concern was access to a ready energy supply, as the beneficiation process could be extremely energy intensive.

The basis for the beneficiation strategy was Section 26 of the MPRDVA, which provided for the Minister to promote beneficiation initiatives.

Mr Ndabezithe proceeded to list the various minerals that were examined for the study, as not all 53 were studied in any great detail. Those that were considered were gold, diamonds, vanadium, nickel, manganese, PGMs (platinum group metals), iron ore, heavy minerals, chromium and coal.
This did not mean that these particular minerals would be emphasised for beneficiation; they were merely chosen to see if beneficiation could be of benefit to the economy.

Five distinct value chains were identified:
▪ PGMs, which provided opportunities for beneficiation in auto catalysts and diesel particulate; filters, of which some activity was already occurring;
▪ Titanium, used in the platinum process;
▪ Gold, diamonds and PGMs, which were used in jewellery manufacturing, which was already ongoing, but they would like to see this occurring on a larger scale;
▪ Coal, vital for energy production;
▪ Uranium, also vital for energy production.
In conclusion he stated that beneficiation would mitigate the impact of commodity price fluctuation and that inter-departmental co-ordination would be required for implementation.

Mr B Mnguni asked to what extent South Africa would be able to beneficiate uranium.

Mr Ndabezithe responded that less than 1% was currently beneficiated.

Ms Nzimande elaborated saying that South Africa was not that advanced in comparison to other countries and this would require a lot more research. It was not considered an immediate need at the moment, unlike chrome.

Mr S Montsitsi said that he understood and was concerned that one of the countries to which raw materials were exported, was Israel. He wanted to know to which Western countries South Africa exported.

Mr Ndabezithe responded that he could not say to how many countries South Africa exported, only that it was extensive.

Mr Gamede raised a question about the consultation done.

Mr Ndabezithe replied that the draft strategy had been open for public comment for three months until 30 June and that several government departments had been consulted.

In response to a question on cutting and polishing producers, Mr Ndabezithe responded that most producers had been too small to provide a point of access for global markets. However, the Department had undertaken to ensure that small producers had access to 10% of minerals for beneficiation. He emphasized that this model still needed to be refined.

In response to a question on research and development, he noted that currently 1% of the Gross Domestic Product was spent on research and development across the sciences and that developed countries allocated 5% of their GDP for this purpose. Improvements had been made in this area, as four years ago, far less than 1% was spent on research and development.

In response to a question on environmental impact, he admitted that carbon emissions were a problem and a difficult one to resolve. On the one hand, they did pollute the environment, but on the other hand, it was the cheapest way of producing energy and there was a need to grow the economy. There were means to reduce carbon emissions but that they were quite costly.

In response to a question asked on the highly technical skills required, Mr Ndabezithe responded that there was not a problem with lack of skills, but rather one of limited skill. There was need for more undergraduates, Masters and PhD post-graduates to develop the skills needed and to conduct research to support beneficiation activities. The DME did have a partnership with several universities in this respect, including the University of Limpopo, Rhodes University and Stellenbosch University.

The Chairperson thanked the Department for their time and attendance.

The meeting was adjourned.

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