Department of Mineral Resources on the Strategic Plan for the period 2010/11 to 2012/13;briefing

Meeting report

Briefing by the Department of Mineral Resources (DMR)
The Director-General, Department of Mineral Resources (DMR), opened the presentation to the Committee with his discussion notes on the Department’s strategic plan. After the President had announced the split of the Department of Minerals and Energy, management had examined all facets of the newly announced DMR and how it would respond to the split. This strategic plan therefore marked the first formal objectives that the DMR would follow.

The mandate of the Department had been amended to reflect the importance of transformation and economic growth within the mining sector. Visions had been developed for both the medium term (2014) and long- term (2025), based on the premise that sectoral impacts in the medium-term would translate into greater societal outcomes in the long term.

Service to the citizenry was identified as the main reason for the existence of the DMR. For this reason the culture and strategic outlook of the DMR needed to be based on a strong value system of honesty, integrity and professional conduct. Accountability was therefore assumed from the highest office to the lowest function.

The Department outlined eight strategic objectives which would contribute to achieving Government’s priorities. Amongst others, these included the sustainable development of both resources and skills and transformation of the Minerals Sector through increased Black Economic Empowerment (BEE) and Small, Medium and Micro Enterprise (SMME) participation.

Members were reminded that this Strategic Plan was formulated at a time when the country, and specifically the mining industry, was experiencing the effects of the global economic downturn. During this time the mining industry had decreased by 8%. Nonetheless, the Department was firmly committed to ensuring that the mining industry remained the “cornerstone of the South African economy”. 

As part of its short term response to the economic crisis, the Mining Industry Growth Development and Employment Task Team (MIGDETT) was established. While initially only intended to address short term interventions, MIGDETT’s mandate was now extended to creating long term strategic approaches for sustainable growth and transformation. This extended mandate was meant to presage a growth trajectory for the Mining Industry.

The Department had completed its assessment of the Mining Charter to “inter alia determine the extent of transformation in the industry”. The outcomes of this assessment had been shared with key stakeholders, all of whom had agreed on the necessity of developing a strategy for sustainable growth and transformation.

A draft Small Scale Mining strategy had been developed, intended for implementation in the 2010/11 financial year. It was conceded that the implementation of Small Scale Mining had experienced challenges in the past, but it was still considered a prospective tool to uplift the lives and economies of poor communities. The focus of this strategy therefore was to increase the impact of Small Scale Mining on poverty.

The Department had forged ahead with the development of a beneficiation strategy. The main objective of this strategy was to ensure that the mining industry supported and added value to the manufacturing sector. Sector-specific consultations were underway for the development of an implementation plan.

The Mine Health and Safety Inspectorate (MHSI) was committed to continuously reduce incidents of occupational diseases, injuries and fatalities in mines. As part of the strategy the MHSI would continue to address the findings raised in the Presidential Audit. Furthermore, the Inspectorate was in the process of developing small scale mining guidelines and was participating in a task team formed to address illegal mining.

The exercise of identifying ownerless or derelict mines was an ongoing component of the strategy. Restoration projects would be undertaken in conjunction with service providers who would supplement the Department’s capacity constraints. Environmental liability funding practices were also being reviewed in order to limit the State’s exposure to funding mine rehabilitation.

In terms of the Department’s organisational environment, a number of factors needed to be considered. Since the final split of the DME would take effect on 1 April 2010, the DMR would retain only those employees who had been matched and placed within the Department. A Human Resource (HR) Department would now operate within the Department to review and adopt systems relevant to the new organisation.  The new structure of the DMR emphasised monitoring, evaluating and reporting as well as the independence of the audit function. An outcomes-based approach had been adopted in the Department’s planning, so as to align strategic objectives with Government priority outcomes.

It was acknowledged that “people are the DMR’s most important resource”. For this reason human capital programmes would be linked to the Department’s mission, strategies and goals. The Department undertook to “move with fortitude and speed” in recruiting, developing and retaining a qualified, diverse workforce to fill all vacancies after the split.

Lastly, after completing a national visit to all regional offices in February 2010, the Department was to implement procedures that would enhance service delivery and turnaround times. The newly appointed Mineral Regulation Branch would assist in the evaluation of the economic impact of the mining sector. Efficiency would be increased in the Department’s processes of issuing prospecting rights and mining permits, thereby drastically reducing current timelines. A thorough review had been conducted of the Department’s workings to reduce the risk of actual, or perceived, corruption.

In conclusion the Director-General stated that the 2010/11 fiscal year would be underpinned by action, with the Department proactively preparing the mining sector to fully utilise all opportunities.

The heads of the DMR’s five programmes presented the focus areas for the forthcoming year.

Programme 1: Corporate Services
A revised structure for Corporate Services within the newly formed DMR was presented.  Two branches now existed within the programme. A Corporate Services branch which would deal with HR, legal services and International Relations; and a branch run by the Chief Operating Officer (COO) dealt with strategy, risk management, fraud prevention and monitoring functions.

The split of the DME would create two independent Departments, which would form “opposite sides of the same coin”. Energy and Mineral Resources would share similar processes, even as independent Departments. Corporate Services was ready for the split, however it was acknowledged that this would not be without challenges.

It was stressed that care had been taken to consider all employee requests as to which Department they would prefer to work in after the split. However, a pragmatic approach was adopted and not all requests were granted: employees’ skills had to match the Departments’ needs. For this reason, a period of instability was envisaged in which some employees inevitably requested relocations or promotions between the two new Departments. Assurance was given that management was equipped to face such a challenge with an integrated HR plan, and that stability would return to the DMR after three to six months. Furthermore, core values and code of conduct workshops would be run to facilitate a smooth transition period. The importance of communication was recognised in successfully establishing the new Department. 

An important function of the COO branch of the programme was the monitoring of State Owned Enterprises (SOE). This was in line with the DMR’s strategy of increased accountability and evaluation processes. The DMR would especially consider ways in which to help SOEs balance their commercial duties, such as making a profit and keeping afloat, with their Governmental responsibility of serving the people.

It was undertaken that Risk Management and Fraud Prevention structures would be implemented within the first quarter of the year.

Programme 2: The Chief Financial Office (CFO)
A summary of expenditure estimates was presented to the Committee. It was emphasised that the Department faced serious challenges as resources that had been allocated to the DME now had to be divided between two new Departments. For example, while the budget made an allocation of R239 million to the DMR Administration Programme, R62 million of this needed to be reallocated to the Department of Energy.

In total, the DMR was granted a budget of R1 billion. This meant that the Department was to be severely under-funded as the budget had been vastly reduced by the split and was further strained by the recent increase in the salaries of public servants. This challenge was seen as especially pressing when viewed in light of Corporate Service’s aim of stabilising the Department through an integrated HR approach.

Priority areas were identified. It was undertaken that all systems were to be refined and resources aligned with the needs of the newly established Department. Costs were also to be managed with increased efficacy, especially in light of the decreased budget and the lingering economic recession. Specifically, an asset loss management strategy was to be implemented to ensure a reduction in the number of assets disposed of prior to the end of their life span. In order to improve the efficiency of service delivery, Service Level Agreements (SLA) would be implemented with all strategic service providers.

In line with the overall strategy of the DMR, special attention would be given to the transformation policies of the programme. Transformation of the CFO was currently at 30% and this would be increased to 40% in the coming year. In order to do so, policies had been developed and put in place with the necessary auditing measures. Furthermore in an effort to communicate with and educate stakeholders, the number of historically disadvantaged South Africans participating in departmental procurement was to be increased.

The priority area of aligning the Department’s budget to strategy was identified as a challenge. This was due to Government timelines for budgets occurring at different periods to the timelines for strategy formulation. For this reason the strategy had been delayed to coincide with the financial year end and budget votes.

Programme 3: Mineral Regulation
In order to achieve the DMR’s objectives, the Mineral Regulation Programme undertook to increase its focus on monitoring – especially in terms of facilitating transformation and sustainable development.

In order to contextualise the targets set for 2010/11, what had been achieved the previous year was presented to the Committee. Overall, almost all targets for 2008/09 had been well exceeded. Far more rights had been granted to historically disadvantaged South Africans and women than targeted, and a greater number of workshops were held than originally aimed for. Thirty-one infrastructure projects (including clinics, libraries, schools and training centres) had been completed by the programme through social and labour plans in conjunction with mines. More than 1700 jobs had been created through mining projects and enterprise development, and all were subjected to a number of BEE inspections carried out by the programme throughout the year.

In order to actively contribute to sustainable development and growth the programme undertook to facilitate skills development by providing scholarships, learnerships, adult education classes and a variety of courses.

Internal business processes would also be improved. Firstly, by monitoring and enforcing 100% compliance with all regulatory requirements. Secondly, by implementing measures to improve turnaround times: all mining and prospecting rights would be finalised within six and three months respectively. Lastly, by reducing the state’s environmental liability – all mining operations would have to provide proof of adequate funding for rehabilitation processes. 

Programme 4: Mineral Policy and Promotion
This programme had specifically focussed on skills development in educating individuals on environmental affairs and by contributing to the United Nations Commission on Sustainable Development. In this way both the skills and sustainable development initiatives of communities were improved.

An area crucial to sustainable resource management was that of Mineral Intelligence. Projects which fell into this area would specifically be aimed at pre-empting trends within the industry in order to find solutions to any challenges or opportunities that could arise.

The programme had also looked at developing a small scale mining strategy In accordance with the Department’s aims. Two challenges had been identified in this regard. The first was that many compliance issues arose around small scale mining operations. While the projects were of a small scale and community geared, it was nonetheless necessary for all such endeavours to comply with regulations. It was conceded that this issue had arisen because most of the individuals involved had no formal business training, the Department would rectify this through its skill development projects. Secondly, many small scale mining initiatives floundered because of a lack of access to funding. In this regard the Department was working on finding ways to assist such operations.

An important policy in promoting and transforming the mineral sector was the endorsement of Mineral Beneficiation projects. Stakeholders had been engaged and five industry ‘base-lines’ where beneficiation should start were identified. In this manner then, 35 DMR beneficiation projects would be carried out, all with the focus of ensuring sustainability of the mining sector.

The issue of mine environmental management was raised. In order to sufficiently meet objectives in this area best environmental practices had to be employed. In this regard an example was given of the water levels in certain basins in Mpumalanga province. Detailed scientific studies had been carried out in order to establish critical water levels and the rate at which water was rising. The situation was also under constant monitoring. The Committee was assured that such environmental impacts were under control and that the media reports covering such issues had been “sensationalised”.

Lastly, the efficiency of service delivery would be improved within the programme. It was acknowledged that all statistics regarding mining were provided by the Mineral Policy and Promotion branch to Statistics South Africa. For this reason quality work and improved turnaround times would become the norm.

Programme 5: Mine Health and Safety
As with all other DMR programmes Mine Health and Safety undertook to actively contribute to sustainable development and growth. One way in which the branch would achieve this was through skills development programmes. Engineers and mine managers were being issued with Health and Safety certificates after undergoing training. Furthermore, learnerships, bursaries and training were taking place and in this manner 12,136 persons were to benefit from the branch’s skills programme.

Secondly, the need to promote health and safety was identified. Compliance from those in the industry had been at 66% throughout 2008/09. This was to be constantly monitored and improved by 10% per annum. In doing so it was hoped that the risk of injury and the number of fatalities would be reduced. The Health and Safety branch also undertook to further disseminate information on safety practices, from which mines could develop their own strategies in coping with such issues.

The Minister of Health had been engaged to chair a committee on HIV/Aids in the Mining Sector. An Aids Conference was also to be hosted by the MHSI in October 2010.

Lastly, the internal processes of the branch were to be improved in all nine provinces. Regional inspectors in all regional offices had been subject to reviews. Improved management systems and turnaround times were to be implemented by June 2010.

Discussion
Mr E Marais (DA) asked the Director-General to provide members of the Committee with an organogram detailing the contact numbers of all Department members and their positions once the split had been finalised. He also enquired about the fact that Mining Rights and Prospecting Rights were to be finalised in six and three months. He asked how this would be monitored, if it would be linked to the performance assessment of managers and how often such assessments would take place.

Mr V Magagula (ANC) enquired as to the nature of the split. He asked if regional offices of the Department of Mineral Resources would be established. Secondly, transformation was not really occurring. Companies were simply employing white women to office positions while black women were deployed underground, even if they were pregnant. Salaries in the mining sector were also a problem. Mine workers earned more in overtime work than what they earned in basic salaries, which indicated an issue with HR strategies. Lastly, problems with the competency certificates issued by the Department had been identified. Those with no formal schooling but who had significant practical knowledge were passed over in favour of those with an education and little experience.

Mr H Schmidt (DA) asked the Director-General what the envisaged final number of employees in the DMR would be. He asked how the implementation of SLAs would ensure that the Department received value for money from service providers. He asked where the funding to facilitate a programme of providing 12,000 learnerships as outlined by the Mine Health and Safety branch would be sourced. An important issue that needed to be explored further was that of environmental applications. It seemed that no consequences were enforced upon those who flouted environmental regulations. This was apparent in the lack of water control around mining projects. In an example on the West Rand, water had washed down into the Cradle of Human Kind. Nothing was being done to rectify such situations. 

Mr E Lucas (IFP) brought up issues regarding small scale mining. The practice of small scale mining needed to be looked at in depth by the DMR. The Department was also cautioned not to be over-ambitious in what it set out to achieve, as its budget was not large enough to cover all necessary areas. Rather, a focussed approach should be taken in which more could be achieved albeit in a smaller area. Beneficiation Projects needed to be taken further in order to create jobs and opportunities for economic growth. The Department needed to get to grips with the issues surrounding beneficiation. The problem of ownerless and derelict mines was a serious one and he suggested that the budget was reviewed to be in line with the major issues.  While procurement was an excellent manner in which to empower previously disadvantaged individuals within the industry, the danger was “window dressing” and he wanted to know how the Department planned to address this issue. Lastly, in terms of skills development, learnerships posed a problem as the training provided was not as in-depth or long-term as apprenticeships. The possibility of reintroducing apprenticeships needed to be considered by the Department.

Mr C Gololo (ANC) raised the issue of the social responsibility mines had towards the communities in which they operated. In many mining areas very little had been done by the mines to improve the standard of living. Dilapidated schools, buildings and the compounds in which miners lived abounded in such areas. He wondered if the Department do something to address this issue.  A breakdown of the mining licences awarded in each province was requested. While a lot had been said about the Department’s transformation policies regarding historically disadvantaged individuals, disabled people did not seem to be included. The DMR should remember that disabled individuals also needed to play a part within the industry.

The Director-General replied that an organogram would be forwarded to the Committee once the split had been finalised on 1 April 2010. A direct communication channel between the Department and the public was encouraged in order to facilitate clear lines of communication. He confirmed that the time frames regarding licences would be linked to performance agreements. Performance agreements would start at the very top of the organisational structure and cascade downwards. Performance evaluations would take place on a quarterly basis.  The split of the DME was to occur at regional, as well as national, levels. Fortunately, most regional offices had historically been run as two separate entities, making for an easier regional transition.

The Director-General agreed that the transformation process was flawed, and that in fact Departmental assessments had confirmed this. A process had been agreed upon by all stakeholders in how to deal with this issue, and all stakeholders were working together to rectify this imbalance. The category of historically disadvantaged South Africans included all women, regardless of race. In this matter the Department was simply applying the law. If the Members were displeased by the number of “white women in office positions” then the law would have to be amended.

Similarly, the competency certificate was also a legal measure that the Department was applying. However, the Department had identified the problem that Mr Magagula spoke of and was investigating ways in which to mitigate it. It was explained that the competency certificate did not require a qualification, but rather significant exposure and experience within the mining industry. The problem lay in trying to identify the employees who met these requirements, but this issue was being addressed.  Any issues regarding salaries fell outside of the mandate of the DMR and were overseen by the Department of Labour.

DMR had envisaged a full staff complement of 1,517 posts. However, not all of these posts were currently funded.  

In the past there had been a tendency by Government Departments to procure services from service providers on the basis of engagement and not through the implementation of a Service Level Agreement (SLA). Within the framework of the Department’s new strategy, all service providers had to enter into SLAs which contained punitive clauses if the terms of service were not met. This would ensure that if the Department was not receiving value for its money, it could easily resign from a contract. Monitoring and evaluating of these programmes in terms of value for money was also continuous.

The Director- General stated that he had not been aware of the situation with Rand Water and the Cradle of Human Kind and undertook to follow up the matter. Processes were now in place to deal with such situations and these would be implemented.

The problems surrounding small scale mining were conceded. The issues related to the funding and the capacity of the mines themselves. By definition, those engaging in small scale mining activities were previously disadvantaged and lacked the skills for trade. The Department’s skills development programme would ensure this problem was dealt with. However, the DMR’s function was limited to that of a regulatory body and therefore the issue of funding did not rest with them. It was the responsibility of players in the small scale mining sector to raise the necessary capital themselves. This had led to situations where the funding models of BEE mining operations were eroding the effectiveness of the Mining Charter. These operations would receive funding from banks, but would only be able to operate in the short term. Banks were therefore left holding mining licences and the operations were rendered unsustainable. Within its new strategy the Department hoped to look at ways of preventing such situations.

A detailed plan of action regarding derelict and ownerless mines would be presented to the Committee in April 2010. The Department had however learnt that in order to achieve any success in endeavours such as this, the “buy in” of all players and stakeholders in the industry would be necessary.

It was agreed that the issue of ‘window dressing’ in procurement was a very serious problem and could even be labelled as fraud. Within its new strategy the Department would now examine the impact of policies, including that of procurement. To what extent the granting of procurement tenders translated into value for black South Africans would be studied closely. In applying risk management and fraud prevention strategies and working with the Committee, the Department hoped to rectify this situation.

Learnerships did in fact cover apprenticeships, as the subject matter studied was of a broader nature. The funding of the 12,000 learnerships mentioned fell under the Department of Education, as the DMR did not have a large enough budget.

In terms of the social upliftment of mining communities, the Director-General stated that the responsibilities of the State could not be “shifted onto the shoulders of mining companies”. To do so would mean that mining companies could no longer afford to operate. Social and labour plans were in place in all mines, but the mining companies could only be responsible for what fell within the ambit of these plans. The DMR was however constantly monitoring the status of such social programmes.

A breakdown of the licences which had been issued would be presented at the next Committee meeting.

Disabled people were certainly included in the transformation policies of the DMR. The Department had simply omitted to formally state this within its presentation.

The Chairperson asked the Director-General to readdress the issue of white women in positions of influence. The media had highlighted that the mining industry favoured white women in an attempt to comply with transformation policies. He asked if there had been unintended consequences.  The Beneficiation Programme also raised concerns. Only five focus areas had been identified. He asked if all minerals should be included in the programme if the South African industry was to be truly developed.

The Director-General admitted that the influx of white women into the mining industry was indeed an unintended consequence of transformation policies. This would now be addressed through the monitoring processes the DMR was to implement.

This was the first time that a Beneficiation Strategy had been implemented in South Africa. For that reason the Department had decided to start out with a more focussed approach, so as not to over-extend itself and inadvertently fail. The strategy was however a ‘living document’ and more areas of focus would be added as the programme expanded.

Mr R Sonto (ANC) asked about the need for asset loss management. He wanted to know what caused the malpractice of disposing of assets before the end of their life span. He asked how the Department planned to reduce the State’s liability in terms of ownerless and derelict mines. He asked what measures would be taken against operations that were known to be non-compliant.

Ms J Ngele (ANC) raised issues of health and safety, especially those regarding women within the mining industry. There was a recent example in which a seven-month pregnant woman was sent down into the mines and experienced major complications. If sufficient monitoring was carried out, such a situation would not have arisen. Furthermore, the issue of water control was a serious one. In the East Rand water had flooded the ground beneath a settlement. The residents of this area now lived in constant fear of being relocated. The Department needed to act in such circumstances.

Mr Schmidt commented that Beneficiation was not simply a Departmental issue but should rather be an issue viewed within an Industrial Participation Framework. Recent media reports had stated that Transnet wished to increase its coal exports. Beneficiation would never work unless a coordinated approach was undertaken. Consultation with regard to prospecting was non-existent. A serious revisit of these practices needed to be carried out. It was pointed out that the budget for ownerless and derelict mines was only R50 million.  He felt that this issue was too low on the list of priorities and would not make the difference needed. He asked why employment participation schemes had not been implemented within the mining sector. In this way BEE policies could easily be met and the community would see a real difference.

Mr P Poho (COPE) asked for clarification on the streamlining and shortening of the licence period. He wanted to know what determined whether an application for a mining licence was accepted or rejected.

The Director-General responded to Mr Poho’s questions first. The application for mining licences was subject to stringent requirements and criteria that needed to be met. If the application did not meet all requirements it would be rejected. In the past, however, discretion had been used and licences were often granted if it was shown that criteria could be easily met in the near future. This had lead to claims of corruption within the Department and the practice was stopped. All regional offices in the nine provinces had been audited at every level of the licensing application. This had enabled the reduction of the number of hands that dealt with the application (thereby also reducing the opportunity for corruption and fraud) as well as the reduction of the time taken to issue licences.

Employee participation was mentioned and encouraged by the Mining Charter. However, the Charter was specifically formulated so as not to constrain the economic activities of mining companies. The choice of BEE compliance was therefore up to the companies themselves. Challenges had arisen with employee participation schemes in the past, as workers came and went. The Department was however using its experience to formulate a more balanced plan.

It was conceded that consultations at the moment were very vague and undefined and as a result companies hid behind them. Prescribed requirements and the depth of the consultation would be stipulated in future.

It was agreed that the Beneficiation Strategy was more than simply the responsibility of the DMR. All industries and Departments needed to cooperate together to ensure its success.

An asset loss management strategy was required as changes in technology and standards occurred so frequently that assets needed to be upgraded before the end of their life span. However, the DMR was ensuring that all assets disposed of were either moved into other Departments or passed on to NGOs and other such organisations.

The Chairperson called for the end of the meeting as it had already run over time. All unanswered questions were noted and would be dealt with at the next Committee meeting.

The meeting was adjourned.