Department of Mineral Resources 2008/09 Annual Report

NCOP Economic and Business Development

26 October 2009
Chairperson: Mr F. Adams (ANC; Western Cape)
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Meeting Summary

The Deputy Director-General of the Department of Mineral Resources briefed the Committee on the 2008/09 Annual Report of the former Department of Minerals and Energy.  The Director-General’s statement on the Annual Report was read in his absence. The Department was in the process of being split into the Department of Minerals and the Department of Energy and a progress report on this aspect was included in the presentation.

Presentations were made by the Corporate Services, Finance, Mining Health and Safety, Mineral Policy and Promotion and Mineral Regulation branches of the Department.  The presentations included details of the key strategic objectives of each branch, a summary of the major achievements and the challenges faced.  The global economic downturn had a significant impact on the mining and energy sectors and the Mining Industry Growth Development and Employment Task Team were formed to minimise the effect of the downturn. The Mining Policy had been reviewed and would be presented at the end of October 2009. A policy on safeguarding strategic minerals such as coal and uranium was in the process of being developed. The implementation of the restructuring of the Department was expected to be challenging. The Department had achieved an unqualified audit report for the fourth consecutive year and reported an under-spending of less than 1% of the budget.

Members congratulated the Department on the rare achievement of an unqualified audit report for the fourth consecutive year.  Members requested explanations of a number of items included in the financial statements in the Annual Report.  Questions were asked about the opportunities for disabled persons and historically disadvantaged persons, the use made of external consultants, the results of the workshops held by the Department, the issuing of prospecting and mining licenses, the results of the task team appointed to investigate illegal mining activities and the measures taken by the Department to combat illegal mining, the review of the Mining Charter, the loss of the Mintek research findings to China, the involvement of small to medium-sized enterprises in the small-scale mining initiatives and details of mining houses that failed to carry out their environmental, social and labour responsibilities.

Due to time constraints, the Director-General undertook to provide written responses to Members’ questions within seven days.

Meeting report

Briefing on the 2008/09 Annual Report of the Department of Mineral Resources (DMR)
Ms Thandeka Zungu, Deputy Director-General: Corporate Services, DMR, apologised for the absence of the Director-General at the meeting.  She read out the Director-General’s statement on the Department’s Annual Report for the 2008/09 financial year (see attached documents).

In May 2009, the Department of Minerals and Energy (DME) was divided into the Department of Mineral Resources and the Department of Energy. The re-organisation was expected to be finalised by 1st April 2010. The Annual Report of the previous Department of Minerals and Energy was the subject of the presentations to the Committee.

Ms Zungu reported that the world economic downturn had had an impact on the mining sector. The Mining Industry Growth Development and Employment Task Team (MIGDETT) had been set up to address the challenges of the economic downturn.

The Department had 4 strategy objectives: to actively contribute to sustainable development and growth; to redress past imbalances; to regulate the minerals and energy sectors to be healthier, cleaner and safer and to create an enabling environment for effective and efficient service delivery.

MIGDETT brought Government, mining companies and labour to the table to mitigate the impact of the economic impact by the development of medium and long-term interventions.  Retrenchments were limited to below 25000. Other achievements included the Royalty Bill, the beneficiation strategy, the establishment of the Mining Development Agency and soliciting the commitment to comply with mining regulations.

During 2008/09, the Department initiated the process of the five-yearly review of the mining charter. The beneficiation strategy (to add value to strategic metals such as gold, platinum and other mining products) was launched at the end of March 2009. The promotion of small-scale mining enterprises was an attempt to redress past imbalances and to contribute to Black Economic Empowerment (BEE). The future focus would be on community development.

A 24% decrease in fatality levels in the industry was recorded. The Presidential Audit (a safety audit of the industry called for by the President) was conducted during the year after a series of mining fatalities had occurred. The audit had highlighted the need for mining operators to improve compliance with legal requirements, to develop enabling frameworks for the prosecution of negligent operators and to develop enforcement capacity.

The Mine Health and Safety Inspectorate had experienced capacity challenges and constraints. An agreement between the DME and the University of the Witwatersrand resulted in the development of a customised training package for inspectors and other units.

The Department of Minerals and Energy‘s financial performance was 0.98% within budget. The Department received an unqualified audit report for the 4th consecutive year.

Presentation by the Corporate Services Department
Ms Zungu advised that the Corporate Services Department provided strategic planning, security risk and human resource management, communication and administrative support to the DMR (see attached document).  Corporate Services was responsible for special projects and programs on the empowerment of women and the youth.

In 2007/08, the Department was requested to apply a balanced scorecard approach to its strategic planning process. Preciously, strategic planning was based on results rather than on desired outcomes. In 2008/09, the Department attempted to implement the balanced scorecard approach as much as possible. The balanced scorecard included four perspectives.  The first perspective was an understanding of the customer, customer expectations and how these expectations could be met.  The second perspective identified the internal processes required to meet customer expectations. The third perspective was the training and development of employees to enable them to satisfy customer expectations.  The fourth perspective was the financial aspect, i.e. how to utilise the limited financial resources available to implement the perspectives.

The gender statistics of the Department indicated that 620 females and 574 males were employed. At the senior management level there were 34 females and 64 males.  Development initiatives concerning vulnerable groups included Youth in Emerging Mining (YEM), South African Women in Mining (SAWIMA), Women in Energy (WOESA), Women in Nuclear (WINSA) and South African Young Nuclear Professionals Society (SAYNPS). Focus weeks were held, targeting learners in grades 11 and 12.

In an attempt to develop the capacity of employees and to meet the challenge of retaining staff, the Department implemented various training and development opportunities.  613 officials attended training and development courses, costing R2 564 975 out of a total budget of R3 549 317. Bursaries awarded amounted to R1 050 255, out of a budget of R1 234 686.  Since 1999, the Malaysian Government had sponsored ten students per annum to study at a Malaysian university for four years.  The students were selected on the basis of gender and were drawn from rural areas. 666 employees were promoted, of which 337 (55%) were male, 329 were female and 45 were at the managerial level. The staff turnover rate was 17.5% - a rate of 2.1% at senior management level and a rate of 15.4% at the junior levels.  The Department competed with other Government Departments and the private sector (that paid better salaries) for skills.

Progress report on the restructuring of the former Department of Minerals and Energy
The Department of Minerals and Energy was divided into the Department of Minerals and the Department of Energy as part of the National Macro Organisation of the State (NMOS) initiative, which had developed the requisite structures and timeframes.

A scoping exercise was conducted by the DME to analyse the functions that would be transferred to the new Departments and the capacity that would be required.  A business plan had to be developed and presented to the Director-General of the DME and the two new Ministers. As a result, an interim phase from the beginning of August 2009 to the end of March 2010 would see the support services reporting to Advocate Nogxina, the Director-General of the DME, who was responsible for the budget of the Department of Mineral Resources. The line functions of the branches of the DME were re-assigned to the new Departments of Mineral Resources and Energy respectively.  Support services and finance would remain under the Department of Mineral Resources until the end of the 2009/10 financial year, but would provide services to the Department of Energy in terms of a service level agreement signed by the Director-General and the two Ministers concerned.

The split into two Departments had been a serious challenge as the same employees were required to carry out their normal duties in addition to effecting the changes. Both new Departments had to clarify their vision and mission statements. The DOE and DMR had held strategic planning sessions to develop mission statements and departmental structure. The structure of the DOE had been finalised and the structure of the DMR was expected to be finalised by Friday 30th October 2009. The restructuring did not result in any job losses and existing employees would be transferred or re-assigned to new positions.  Any outstanding posts would be advertised. The anticipated staff changes were expected to be a challenge for the Department.

Presentation by the Chief Financial Officer
The presentation covered the composition and functions, the key achievements and challenges and financial performance for the 2008/09 period (see attached document). The branch was responsible for supply chain management, information technology, systems development and maintenance, financial planning and management accounting, expenditure management and the management of transport, facilities and records.

Key achievements included performance to budget (the Department was approximately 1% under budget) and achieving a clean audit report for the fourth consecutive year. Every manager’s performance agreement had a clause related to his or her contribution to the audit report and this aspect had contributed to the consistent achievement of clean audit reports. The Department maintained timeous and accurate financial reporting. An ageing computer infrastructure and growing business demands had necessitated the implementation of an information technology infrastructure.  

Office accommodation was a challenge as the Department had outgrown the current office space and the design of the buildings did not facilitate the maximum use of the space available. A project to move to more suitable accommodation had been initiated.

The most significant challenge faced by the Department was a lack of financial resources. The Department needed to utilise the funds allocated more efficiently and could not expect an increase in the amount allocated under the current economic conditions.  A number of financial goals would have to be re-prioritised as a result.

Presentation by the Mines Health and Safety Inspectorate
The purpose of the Inspectorate was the safeguarding of the health and safety of mine employees and to reduce the number of deaths, injuries and ill health (see attached document)..  The key focus areas were the creation of an enabling environment to provide effective and efficient service delivery and to regulate the minerals and energy sectors to provide a cleaner, healthier and safer working environment. The presentation included details of the strategic outcomes and achievements during the 2008/09 period.

The mining health and safety legislation had been reviewed and the Mining Health and Safety Amendment Bill was published on 20th June 2009. The presentation included statistics and graphs of health and safety incidents at South African mines. The major cause of illness amongst mine workers was pulmonary tuberculosis with 4 639 cases recorded, of which 3 829 were at gold mines. The second most common occupational health hazard was excessive noise with 1 994 cases reported, of which 1 159 were at gold mines. Platinum mines recorded a significant reduction in noise-related illness, from 952 cases in 2007 to 318 cases in 2008. Respiratory illnesses accounted for approximately three times more deaths than mine accidents between 2003 and 2007. The challenge for the Department was the long time-lag between the exposure of mine workers and the actual diagnosis of the disease. The fatality rate had decreased by 28% since the previous year and was currently 0.15% per million hours worked. The reportable injury rate dropped by 11.6% and was currently 3.2%. The gold sector had the highest fatality rate per million hours worked per sector.

The challenges faced by the Inspectorate included the management of accurate cash flow statements. Other challenges were the lack of sufficient capacity and technical support.

Presentation by the Mineral Policy and Promotion Department
The Mineral Policy and Promotions branch of the Department was responsible for the formulation of mineral-related policy and the promotion of the South African mineral and mining sector (see attached document).  The key focus areas were beneficiation, the security of energy supply, the strategy for mine closures, a review of the mining charter and encouraging small-scale mining operations.

The beneficiation strategy was presented to the Committee at an earlier briefing. The challenge for the Department was the practical implementation of the strategy. The country faced a challenge concerning the security of energy generation and supply.  A strategy had been developed to ensure the supply of uranium for the nuclear power generation facilities and a strategy to ensure the supply of coal to coal-fired power generators was in the process of completion. The Department had identified the need to declare uranium and coal as strategic commodities. Mine closure strategies were developed to ensure that mine closures do not result in dire consequences for the surrounding environment and communities as was the case in the past. The closure strategy would be focussed on the Witwatersrand basin and the far West Rand area (i.e. Klerksdorp, Orkney, Stilfontein and Hartebeesfontein).  A review of the mining charter revealed that the mining sector had generally complied with the scorecard, with the exception of the aspect of employment equity. The report on the review and the recommendations were in the process of being finalised. Small-scale mining projects were promoted in line with Government policy on the promotion of sustainable small business development and job creation. In the past, financial support was provided but the Department planned to introduce different forms of support in future.

Presentation by the Mineral Regulation branch
The purpose of the Mineral Regulation branch of the Department was to regulate the mineral and mining sectors to achieve transformation and sustainable development through licensing, monitoring and enforcing compliance with the applicable legislative regulations (see attached document). The key focus areas were addressing past imbalances by promoting opportunities for historically disadvantaged South Africans (HDSA’s) and women, to increase the number of job opportunities created by sustainable growth and development and to govern the mineral and energy sectors to become cleaner, healthier and safer environments.

During the 2008/09 financial year, the branch granted mining rights to 152 HDSA’s and 34 licenses to companies headed by women. A number of workshops on the regulatory framework for the mining industry were held and attended by representatives from the industry, companies headed by women and HDSA’s. A total of 2 350 environmental management compliance inspections were carried out during the year under review.

Mr J Nyambi (ANC; Mpumalanga) congratulated the Department on achieving a clean audit report for the fourth consecutive year. He asked the Department to provide a breakdown of bursaries and scholarships granted per province. He requested a breakdown of the conditional grants paid to municipalities per province. He wanted to know what the Department’s policy was concerning donations. He felt that there was room for improvement in respect of the disabled. He referred to page 259 of the Annual Report and asked why the Department had been unable to implement the provisions of Part 6 of Chapter 9 of the Public Servants Regulation Act of 2001.

Mr D Gamede (ANC; KwaZulu-Natal) supported Mr Nyambi’s comments concerning the disabled. He believed that disabled persons did not consider themselves to be disabled but the environment that they lived in did not allow them to function properly. He remarked that something was wrong if 9 workshops were planned but 29 were actually held. He suggested that the Department’s next presentation included a briefing on the projects implemented which were aimed at redressing past imbalances. He was not convinced that mines should conduct their own investigations. He asked why the Annual Report stated that staff debts were irrecoverable. He asked for an explanation of the increase in bad debts that were written off. He asked for further information on an item included in page 209 of the Annual Report. He felt that R11 million was too much to spend on venues and facilities.  He noted a decrease in the amount spent on consultancy fees but felt that this should be reduced even further.  He asked what type of consultants were utilised by the Department. He requested clarity on the amount of R62 million in non-pensionable allowances referred to on page 208 of the Annual Report.

Mr A Mnguni (ANC; Free State) remarked that the Department was one of only five Government entities that had achieved an unqualified audit.  He asked if the workshops had produced the results desired. He wanted to know how many employees were appointed at the entry level and what the qualifications were for a 55% promotion rate. He commented that the Department had trained ex-miners to combat illegal mining in KwaZulu Natal and wanted to know what the training entailed and whether it had an impact on illegal mining activities. He asked what the Department was doing to combat illegal mining in areas such as Welkom, Barberton and the Limpopo province. He asked if the Department consulted with the Council of Geosciences (CGS) when issuing prospecting and mining rights so that data could be updated and duplicated prospecting rights could be eliminated. He asked how many of the 186 prospecting rights granted had been converted to mining rights and how many new mines were currently operating successfully. He asked what the Department was doing to reduce the number of deaths from mining-related causes of previous employees and what policy initiatives were in place to force the mines to take responsibility for such cases. He asked if the Department communicated with other Government Departments when complaints against mines were received. He had written letters to the Minister and the Deputy Minister of Environmental Affairs regarding a slimes dam and had received no response. He asked what measures were taken by the Department to ensure that at least 26% of the mining industry was owned by HDSA’s. He requested details of the Department’s strategy for the rehabilitation of areas that were polluted by mining operations. He wanted to know why the Department allowed China to utilise the research findings of Mintek for a period of ten years before South Africa could utilise the research because of a failure to make provision for funding of R80 million required by Mintek in order to complete the research programme.

Mr D Lee (DA) asked for a copy of the policy on uranium and coal. He noted that the Department had transferred an amount of R3.7 billion, which included transfers to the eThekwini municipality but there was a further item in the financial statements for transfers to municipalities. He asked why the eThekwini municipality had received two transfers.  He queried the reasons why two transfers were made to Eskom – one for R1.4 billion and another transfer of R78 million. He wanted to know what the purpose of the transfers to Eskom was. He requested details of the assessed loss of R593 000 reported and what action had been taken by the Department.  He noted that illegal coal mining was taking place at Osizweni and requested information about what was being done to counter this threat as mining formed an integral part of the economy in the area. He asked for details of the debt of R437 000 that was written off and reported on page 212 of the Annual Report. He wanted to know why the Department had to write off a debt that should have been written off by the Government Garage.

Ms S Chen (DA; Gauteng) enquired whether any data on the deaths in the mining industry for the year 2008 was available to add to the graph for the period 2003 – 2007 included in the presentation. She asked if the statistics included injuries and deaths occurring during illegal mining operations.

Ms E Van Lingen (DA; Eastern Cape) requested a copy of the report on the review of the Mining Charter. She asked for a list of the mines that failed to comply with the environmental regulations as well as mines that had closed and failed to carry out their responsibilities to the local communities. He asked for an explanation of the high staff turnover rate. She asked for a report on illegal mining activities.

The Chairperson asked where the small to medium-sized enterprises (SMME’s) involved in the small-scale mining projects were located and what their current capacity and potential was. He wanted to know if the task team appointed had reported back on illegal mining activities and what progress had been made on this issue. The Committee intended to carry out oversight visits to various provinces and wanted to investigate those mining houses that failed to comply with their social and labour responsibilities, particularly in the Sekukhune district in Limpopo province. He requested a briefing from the Department on the social and labour responsibilities of mining companies.

The Director-General thanked the Members of the Committee for their input. He advised that the report on the review of the Mining Charter and the policy on coal and uranium would be released by the Minister after it was submitted to the Cabinet. The problems with the electricity supply were caused by Eskom's lack of access to coal feedstock.  Even though the country was one of the largest producers of coal, the coal companies were exporting the coal produced. The uranium and coal strategy was developed in an attempt to control the country’s resources for use in South Africa. With regard to the achievement of the 26% BEE ownership of mines, the problem also lay with the BEE companies. Certain BEE companies were front companies that were formed for the purpose of entering into deals and were not genuine BEE companies. Instances had been found where persons who were granted mining licenses were attempting to sell the licenses directly to third parties. The transfer of a mining license had to be approved by the Department. He said that the report on the review of the Mining Charter made very interesting reading and warned that changes to existing legislation would be required to plug the gaps uncovered. He undertook to provide the Committee with a copy of the Presidential audit, which had not yet been published and gave Members the assurance that the Department would provide written responses to their questions within seven days.

The meeting was adjourned

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