Department of Mineral Resources Annual Report 2008/09

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Mineral Resources and Energy

13 October 2009
Chairperson: Mr F Gona (ANC)
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Meeting Summary

The Committee was given an overview of the Annual Report by the Director-General and received presentations from the branches of the Department: the Mine Health and Safety Inspectorate, Mineral Policy and Promotion, Corporate Services and a presentation by the Chief Financial Officer on the financial results for the 2008/9 financial year.

Budget performance remained on target with underspending maintained at a level under 4%. The Department had received a fourth consecutive unqualified audit report. As of April 2010, the Department of Minerals and Energy would cease to exist and be replaced by the Department of Mineral Resources and the Department of Energy.

The Committee complained that the Department had not sent the documents to the Committee beforehand.  The Department was asked to identify their challenges when reporting to the Committee.

The members queried the progress and results of the Mining Charter Review and whether BEE deals that were "underwater" would be bailed out. Strategic thinking around the African Minerals and Energy Forum (AMEF), the state owned mining company, was queried.

Small-scale mining and illegal mining were highlighted by the Committee. The Department was asked about the status of and the difficulties with the split of the Department of Minerals and Energy. Job creation in the mineral beneficiation industry and the criteria for retention of people trained within the Department were raised for discussion. Health and safety in mines were queried in light of the prevalence of Pulmonary Tuberculosis (PTB) in densely populated mine hostels and heat disease.

Follow-up visits to regional offices and the Chamber of Mines to see the impact of the Social and Labour Plan in real terms was suggested. The Department was asked which mining companies had lost their mining rights and if they were now mining illegally and what was happening with the South African Women in Mining Association (SAWIMA).

Due to time constraints, the session was cut short and some of the responses were not completed. The Committee intended to revisit the Annual Report of the Department of Mineral Resources at a later date.

Meeting report

Statement by the Director-General
Adv Sandile Nogxina, Director General: Department of Mineral Resources, noted that the global economic crisis and the resulting recession in South Africa had radically slowed down the world economy and mining companies were experiencing difficulties. The Mining Industry Growth, Development and Employment Task Team (MIGDETT) had been set up to mitigate the severity of the crisis, with interventions planned for the medium term and long term. The Department continued its assessment of the Mining Charter and its Beneficiation Strategy was launched on 31 March 2009. The DG commented on the role of small-scale mining and the importance of mine health and safety. Regarding financial performance of he pointed out that the figures were still inclusive of the programmes of the Department of Energy. Budget performance remained on target with underspending maintained at a level under 4%. The Department had received their fourth consecutive unqualified audit report.

A brief update of the progress made with the split in the Department of Minerals and Energy was presented.  It explained the interim arrangements, the 9 departmental work streams, an analysis of functions that would be split, strategic planning, design of departmental structures, provision and timing of funding, determining job levels and remuneration, matching and placing of existing staff and attending to vacancies. As of April 2010, the Department of Minerals and Energy would cease to exist and be replaced by the Department of Mineral Resources and the Department of Energy.

Mine Health and Safety Inspectorate: presentation
Mr Thabo Gazi, Chief Inspector of Mines: Department of Mineral Resources, commented on the Mine Health and Safety Inspectorate’s purpose and measurable objectives. The Committee was briefed on the achievements and challenges in regulating the mineral resources and energy sector to be healthier, safer and cleaner. The statistics for occupational health were presented, specifically causes of deaths (2003-2007), fatality rates, reportable injury rates and actual fatalities. On the last point, Mpumalanga had experienced regression in actual fatalities but there had been a general improvement in actual fatality numbers. A downward trend could be observed on injuries. The Inspectorate will work on the improvement of these figures by implementing the Presidential Audit Report recommendations and training Health and Safety representative over the next five years (see document).

Mineral Policy and Promotion (1): presentation
Ms Faith Nzimande, Chief Director: Mineral Policy: Department of Mineral Resources, spoke about the performance and the current status of work in beneficiation, the mine closure strategy, the mining charter review, small-scale mining and MIGDETT (see document).

Corporate Services: presentation
Ms Thandeka Zungu, Deputy Director-General: Department of Mineral Resources, briefed the Committee on the branch’s composition and its customer perspective. The implementation of the Human Resources plan was focused on addressing the challenges of the Department of Mineral Resources (see document). Ms Zungu updated the Committee on the progress of the split of the Department of Mineral and Energy into the Department of Mineral Resources and the Department of Energy from the Corporate Services perspective. She noted that the biggest challenge would be in splitting the support services. Resources had to be shared and were currently inadequate to support the split. They proposed that the Director General of the Department of Mineral Resources would be the hosting DG of the joint budget and that support services would liaise with the Minister of Energy. The process had to adhere to the National Macro-Organisation of the State (NMOS) timeframes. This was not an easy process and would take a long time to complete.

Ms J Ngele (ANC) pointed out that the Department had not sent the presentations and Annual Report to the Committee beforehand. They had not been able to peruse the documents before the meeting. Additionally some of the presenters had moved through the presentations very quickly and this had made it difficult for members to follow. She felt this was confusing and unfair to members.
The Director General, Adv Sandile Nogxina, responded that, with all due respect, the Department was required to make a presentation on an Annual Report on the understanding that the Annual Report was already in the members’ possession. This was not a sign of disrespect for the Committee. The DG apologised and stated that the Department would do this next time. To be fair this presentation was supposed to be on their strategic plan. This had to be changed to a presentation on their Annual Report and this had also been a constraint.

Mr H Schmidt (DA) remarked that the language used the presentations was vague. Some of the statements were so wide that he could read anything into them. There were no concrete, tangible facts. The concepts and issues were too broad. He suggested that more detail should be contained in the strategic plan and asked if this was the case.

The DG responded that this was also a function of presenting an Annual Report. They had been told that they should use the language in the Annual Report. Outside of practical business plans, the Annual Report also contained aspirations. These aspirations were usually cast in broader terms, rather than specifics.

Mr Schmidt noted that there were indications that some BEE deals were "underwater" or in trouble. He got the impression that either there had been some form of bailout or bailouts would have to take place from banks or government or from the Industrial Development Corporation (IDC). He asked what the strategic thinking was on the possibility of bailouts.

The DG responded that this was true. Some of the companies had reported this to the Department and the Department was able to grant a Section 11 cession to the strategic partner. In cases where the majority shareholder had trouble paying their creditors, the Department was able to allow the strategic partner to cede shares to a minority shareholder in order to liberate funds with which to pay the creditors. The BEE therefore diluted their holdings in order to service debt. This was a creative way of dealing with the situation. Regarding bailouts, he said that the Department did not provide bailouts.

Mr Schmidt queried the strategic thinking around the African Minerals and Energy Forum (AMEF) - the stated owned mining company. It seemed that there was a view that the AMEF would compete with other mining concerns on an equal footing. He asked what the current thinking was on the matter, specifically on what kinds of mining rights it would be afforded.

The DG responded that the AMEF was established in 1944 to secure energy supply. Eskom had run out of feedstock (coal) because mining companies had long-term agreements abroad and the question was raised as to whether the Department could allow the availability of feedstock to be dependent on the private sector. The AMEF was supposed to fulfill the function of securing energy supply and therefore government had to extend AMEF's operation into other strategic feedstock such as uranium. Regarding rights exemptions, there were certain things that government companies did not have to go through by law while still being subject to all the critical requirements. Despite being exempt in certain instances, AMEF had complied with all the requirements of legislation and would continue being treated like any other mining concern. The other question they would have to address was would AMEF have to comply with all these requirements if it was to play this strategic role. Until the necessary changes were made to the law to accommodate this question, AMEF will continue to function as it currently did.

Mr E Lucas (IFP) commented that one could generally say the Department had managed their finances well. However, small-scale miners remained an important issue and he did not see an end to their suffering. He wondered if the Department would come up with a concrete plan for the people who had been given rights to mine but still did not have the support to do so successfully. Though there had been progress, he thought the enrichment of people could be much better.

The DG responded that the existing policy and the existing legal framework was not very effective. As such, the Department was developing a new strategy for small-scale mining. Unfortunately the Department could not provide funding, not even for the small-scale entities as such funding did not fall within their legal mandate.

Mr Lucas recalled the Committee's visits to illegal mining sites, specifically Barberton. He felt the Committee and Department needed to look at the issue of illegal mining more closely.

The DG responded that the Department agreed that it was a serious threat. There was a meeting underway among the law enforcement agencies. It was not possible for the Department to deal with the issue because their mandate was to deal with legal mining. Illegal mining was a crime and therefore fell outside the scope of the Department's legal mandate. Accordingly, they initiated an inter-departmental process with law enforcement agencies. The details of plan were not yet finalised.

Mr Lucas referred to the resistance to the review of the Mining Charter. He felt that a conclusion needed to be reached on that issue.

Ms F Bikani (ANC) asked what the practical results were of the Mining Charter Review, especially relating to ensuring proper housing for people living around the mines, to allow the Committee to evaluate the progress madeand establish what issues needed attention.

Ms Ngele asked when the Committee could expect a report on the Mining Charter Review.

The DG responded that he could not respond to the question. The answers would be yielded as the outcome of the process. He asked for the members' patience until the report was completed and studied by the Department. He would be able to present the outcome by the end of October. Members had to appreciate the constraints placed on the DG by the fact that these kinds of reports had to be presented to Cabinet before it was brought to Parliament.

Mr Lucas asked how the debates on budget votes would work in 2010. Would there be two debates for the newly split departments of Mineral Resources and Energy or would the budget vote still apply to the Department of Minerals and Energy.
Mr V Magagula (ANC) asked the DG to clarify if he was the Director-General of the Department of Mineral Resources or the Director-General of the Department of Energy, or both.

Ms Bikani wanted more detail and explanation of the progress and what the status of the split of the Department of Minerals and Energy by March 2010 would be. This was needed for the Committee to start evaluating the challenges and the shortfalls in their functioning as the Department of Mineral Resources.

The DG responded that the difficulty was caused by splitting the Department in the middle of the financial year. The budget was a legal entity and the DG would remain responsible for the budgets as the responsible accounting officer. When appointed, the Director-General of the Department of Energy would assume responsibility for the budget at the beginning of that financial year. In terms of management, he was the DG of the Department of Mineral Resources. For accounting and budgeting purposes, he was Director-General of both.

Mr Lucas complimented the Department on the ten students they had sent to Malaysia. He felt this was necessary for education, upliftment and for people to be skilled.

Ms Bikani asked the Department to use simpler vocabulary and minimise the use of acronyms.

The DG responded that the point was taken on acronyms. The Department would correct that.

Ms Bikani referred to the small-scale mining projects they had mentioned. There was an indication there were 33 projects in the 2008/9 Annual Report. She asked if the 15 projects were included in the 33 or if they were additional to the 33. She asked how monitoring of the projects was done to establish whether they were sustainable and how they were accommodated in the new legislation attached to the Department of Mineral Resources.

The DG responded that small-scale mining was a function of the new legislation under the Mineral and Petroleum Resources' Development Act (MPRDA). It was a response to illegal mining. Since they could not prevent people from eking out a living, they brought this under the ambit of the law. The current policy of small-scale mining was being revisited.

Ms Bikani wondered whether financial support was provided to Small, Medium and Micro Enterprises (SMMEs) or companies related to youth and women. Was financial support planned for in the future budget. She also asked what the accountability arrangements were for past projects.

The Chairperson asked what the strategic direction of the Department was in using South Africa's mineral resources to push back the frontiers of poverty. He asked for the DG's practical thoughts on whether South Africa would achieve the constitutional requirement of transformation of the economy to be inclusive of all citizens in South Africa. He asked if there was a way to address the "sea of poverty" in mining areas, specifically the lack of infrastructure. In these areas the only buildings were the mine offices while the workers and their families still lived in shacks and did not have access to infrastructure such as roads, schools and clinics. He asked how the Social and Labour Plan and Codes of Good Practice could be used to address this.

The DG agreed that mining was taking place in communities that were bedevilled by poverty. It was therefore important to consider this as they looked at transforming the mining industry. The current legislation had certain measures to address these problems such as the Social and Labour Plan. When people made applications to be part of the Social and Labour Plan, they made certain undertakings and when inspections were done, the Department found that they did not adhere to these obligations. He felt that the law must have effective teeth. Section 47 of the MPRDA provided for the Minister to revoke the licence if the licence conditions had been breached. The same applied to the practice of fronting among licence holders. The Department was also looking at the practical implementation of the MPRDA and whether the MPRDA, in its current form, would serve the purpose envisaged by its drafters. This would include looking at what could be done to improve communities.

The Chairperson referred to job creation in the mineral beneficiation industry, referringing to the example of India and China. He pointed to the irony that this industry thrived in countries like India and China, who had less natural mineral resources than South Africa. Could this be done in South Africa?

The DG responded that it was indeed ironic that a country that produced such large quantities of minerals, did not also beneficiate those minerals. He stated that there had been ideological opposition to fronting. As soon as Cabinet approved the mineral beneficiation strategy document, Parliament could then have public hearings to interact on that.

Mineral Policy and Promotion (2): presentation
Mr Jacinto Rocha, Deputy Director-General (Mineral Policy and Promotion): Department of Mineral Resources, briefed the Committee on small-scale mining (see document).

CFO's presentation
Mr Sakhile Simelane, Chief Financial Officer: Department of Minerals Resources, reported that the key challenges were: inability to attract and retain skilled staff, aging ICT infrastructure, inadequate office accommodation and limited financial resources. Performance against the budget and the utilisation of funds were presented. Key observations were: the figures were inclusive of the programmes of the Department of Energy. Budget performance remained on target with underspending maintained at a level under 4%. The Department had received their fourth consecutive unqualified audit report.

The Chairperson asked the Committee to study the Annual Report. The Committee staff would ensure the circulation of this report, as well as the Annual Reports of the relevant State Owned Enterprises (SOEs). The Committee would arrange for further engagement with the Department on their Annual Report 2008/9.

Mr Magagula asked when the draft mineral beneficiation strategy would be approved.

Ms Nzimande replied that as Cabinet had to approve it, it would be difficult to attach a timeframe to this.

Mr Magagula asked whether small-scale mining received assistance, specifically in terms of job creation.

Ms Nzimande replied that they did not have the figures with them. The figures would be submitted as to how many jobs had been created - as soon as they were back in the office.

Mr Magagula referred to Corporate Services bursaries and sponsorship and asked how the students were selected. He was particularly interested in representation according to provinces and whether rural areas were covered in the selection.

Mr Magagula asked what difficulties were experienced in the split in the Department of Minerals and Energy.

Mr Rocha replied that a split was always a challenge. There were psychological aspects at play. The biggest challenge had been in splitting Corporate Services, because Corporate Services worked as a unit on the functions that related to both Mineral Resources and Energy.

Mr Magagula noted that training had started long ago, referring to the programmes in Malaysia and France. He asked if there were criteria for retention of people trained within the Department.

Ms Zungu had indicated that this programme had been started 10 years ago. The programmes were advertised in the media. During the year the Department communicated with schools. The Department also visited schools in the rural areas in their learnership focussed programmes to talk about the scholarship. The Department stipulated that there should be at least one scholar per region. The interview panel consisted of Department officials, PetroSA (partial sponsors) and representatives from the Malaysian government. They used very wide advertising methods and there was a focus on rural areas.

Mr Magagula asked for more information on the 54 workshops mentioned in the presentation.

Mr Rocha replied that was the addition of the 9 and 29 on page 5 and the 16 on page 8. All these figures referred to the number of training workshops.

Ms Bikani referred to blank columns in the presentation on Mineral Policy and Promotion. This created the impression that information was missing. She noted that it seemed that, as the strategic plan was not completed yet, the Committee would have to content itself with discussing the theory for now. Generally the presentation gave the impression that they would just be talking until the budget and strategic plan could be laid out. In addition, she asked the Department to lay out their challenges.

Mr Rocha replied that the structure of the presentation was a result of what was required of them by the Third Parliament. The content related to matters that happened before the elections. There were no additions to be made to the tables - the empty columns were just additional columns. Proof of this was they did not have headings. This had been the approved structure of the presentation. The Committee had the power to influence the structure of presentations in future.
The strategic plan was in the process of being completed but was not ready yet. In terms of the statutory process, it would not come before Parliament until March 2010.

Mr N Mathibela (ANC) referred to the fact that not all rights were registered within 30 days and that not all permits were recorded within 14 days. She asked what happened to people waiting for the prescribed periods, specifically what happened to small-scale miners.

Ms Mathibela asked of the Department Public Works did not assist with problems around office accommodation.

Ms Mathibela noted that the figures for Pulmonary Tuberculosis (PTB) were very high. She pointed that the disease spread very easily in densely populated areas. She asked if the Department could force the mining companies to have villages with single houses to stem the spread of PTB.

Mr Gazi replied that PTB was the most commonly occurring form of TB in Southern Africa. As to whether mines could be forced to convert hostels into single living units, he referred to Section 100 of the MPRDA. In this the Minister issued the housing and living conditions standards that guided mines in converting hostels into living units. Where there were no hostels, people should be given allowances to live in proper habitable environments. The Mining Inspectorate worked with the Department of Health who had engaged with the World Health Organisation to assess South Africa's TB programmes and the National Strategic Plan for TB and the guidance note on TB in the mining industry.

Mr Magagula noted that illegal mining posed major challenges and asked what the Department was doing about health and safety in these instances.

Mr Gazi responded that illegal mining did pose challenges to health and safety. Underground mining was an unnatural environment, deprived of oxygen. The fires started by illegal miners depleted the oxygen further and the relative increase in carbon monoxide led to the levels of death witnessed in the Free State. This could also affect legal operators but the issue was mainly highlighted in relation to illegal miners.

Ms Mathibela asked whether heat disease was a result of the heat inside mines if a mine did not comply with ventilation requirements.

Mr Gazi replied that this also related to the heat inside mines. Some mines had huge refrigeration plants to keep the environment habitable. People also had different levels of heat tolerance. This was the reason that health assessments were done before people could work underground to determine their sensitivity to heat. Broadly it occurred where the environment was not properly regulated.

Mr Schmidt referred to the workshop sessions the Committee had at the beginning of the Fourth Term of Parliament to acquaint themselves with the relevant government entities and legislation they would have to deal with and to appreciate what the Department did. He suggested that follow-up visits to regional offices, and the Chamber of Mines to see the impact (or lack of impact) of the Social and Labour Plan in real terms.

Mr Schmidt asked whether the legality of applications approved by the Department of Minerals and Energy from 10 May 2009 to end of June was in question. He asked if mining companies had lost their mining rights and were now mining illegally.
Ms Ngele asked what was happening with SAWIMA. She noted that there had been some problems and challenges and asked if something could be done about it and whether it could be prioritised.

Ms Zungu replied that the Department's role in SAWIMA was one of facilitation. SAWIMA's problems were mainly operational: the finalisation of their constitution, how they addressed membership and other such issues. The Department provided assistance where needed or referred SAWIMA to someone who could provide assistance.

The Chairperson stated that the Committee still needed to adopt the Committee Report on illegal mining for presentation to the National Assembly. The mining company, Extracta, had requested time to brief the Committee on the issue of the ferrochrome market versus the exports to China and transformation in their own company. The Committee would engage them on these matters, as they had been proactive.

The session was adjourned.


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