South African Diamond & Precious Metal Regulator, Mintek, Council for Geoscience, Mine Health & Safety Council Strategic Plans

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Mineral Resources and Energy

06 May 2010
Chairperson: Mr F Gona (ANC)
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Meeting Summary

The Committee discussed the exorbitant quotations that had been given for the overseas study tour to Sweden, then to South America. Members were concerned that they were being overcharged. It was agreed that the Secretariat would investigate alternative quotations, economy class travel and travelling only to South America, although it was preferable also to visit Sweden was important because of its State owned mine, its participation in wealth distribution and its management of State and private industry interplay.

Members considered the Strategic Plans of four State Owned Enterprises. The State Diamond Trader was yet to present its Strategic Plan, although Members indicated that they would wish this entity to address the issue of funding, and the possibility of raising a levy on diamond production, and whether the entity should rely on secondments from de Beers and the Department of Mineral Resources. Members agreed to adopt this entity’s report on the interventions taken to address the concerns of the Auditor-General in respect of the 2008/09 audit.

Members had some reservations about the responses on interventions taken by the South African Diamond and Precious Metal Regulator (SADPRM) to address the audit report of 2008/09, and the adoption of the responses would stand over until further information was submitted. However, Members noted that the new management appeared to have taken positive steps in regard to the Strategic Plan and be leading the entity in the right direction. The Committee agreed to the adoption of the Strategic Plan.

The Committee then adopted the Strategic Plans of Mintek and the Council for Geoscience, noting that both shared problems of funding. Some Committee Members suggested a need to review the legislation to harness State Owned Enterprises’ ability to show a profit, and to increase the benefits of these entities to the people of South Africa. The Chairperson cautioned that this was a challenge since the quest for self-sufficiency could also lead to a focus entirely on making money to the detriment of all else. He suggested that the Committee must determine the quantity and distribution of mineral resources, and how this was used to counter poverty and ensure security of supply. Another issue to be addressed was the need to increase allocations to research.

The Committee would not adopt the Strategic Plans of the Mine, Health and Safety Council before it elaborated on human resources issues and skills development. The role of the Council and that of the mining houses was discussed in regard to health and safety promotion and accommodation. Members felt that the budget distribution of the entity must be explained, as the budget seemed skewed, and that it would need to satisfy the Committee about regulation and inspection to ensure compliance.

The Committee briefly discussed the meeting it would be holding with ex-mineworkers around compensation, for which the Chamber of Mines had apparently paid an amount of R54 million to the Eastern Cape government, despite the latter not being responsible to finalise matters. Members noted that Parliament’s Ad Hoc Committee on Ex-Mineworkers had compiled a full report on the issue, and that this Committee would assist the Portfolio Committee on Labour to resolve the matter.

Meeting report

Forthcoming study tour
The Chairperson said that Members had asked about the overseas study tour. It was discovered that the cheapest option would cost R96 000 a ticket; the problem apparently lay in the costs of the flight from Sweden to Chile. The Committee Secretariat had therefore been asked to provide a quotation for a trip to Chile and Venezuela instead. He said that these prices seemed exorbitant and his office would be looking into them.

Ms F Bikani (ANC) stated that Members should become involved in making travel arrangements, to ensure that money was not being wasted.

Mr E Marais (DA) asked if this quotation was for economy class. He assured the Chairperson that he could arrange the trip for under R35, 000.

The Chairperson replied that the quotation was for business class.

Mr Marais replied that he was prepared to travel economy class instead.

Ms L Moss (ANC) asked how many members would be going on the oversight visit and stated that preference should be given to the most zealous Members.

The Chairperson replied that the Secretariat would look at the options of changing countries, economy class options and new quotations. If the figure was still too high, the Committee could not be expected to simply pay as it must manage its budget properly. It seemed that there was a deliberate overcharge or over-inflation, which was wasteful.

Mr Marais asked, in the event that the Committee might only go to South America, which countries in South America it would visit, as he wanted to check the costs with his own travel agent.

The Chairperson stated that the Committee would have wished to visit Sweden, Chile and Venezuela; Members would visit the capital city of each country to liaise with finance and mining ministries within the relevant governments, and then visit actual mines. In Sweden the mine chosen was located in the northern region of the country. The aim of the trip was to look at State participation in mining and the disbursement of funds collected from such activities. The trip would be during the next constituency period.

Mr E Mtshale (ANC) asked if it was necessary to go to Sweden as it appeared more prudent to go to countries at the same level of development as South Africa.

Ms N Mathibela (ANC) interjected that the point of going to Sweden was because this country had a State-owned mine.

The Chairperson agreed. Despite Sweden being more developed than South Africa and South America, it was a model for State-owned mining, having started in the same position as had South Africa, and having learned a number of lessons along the way that it could pass on to South Africa. It was also important to note that Sweden had been at the forefront of wealth distribution, especially to Africa. Sweden had heavy levels of private industry and it was necessary to see how this country managed to manage State and private industry interplay. However the cost imperative was forcing the Committee to reconsider going to Sweden, and he suggested that the Committee should review the situation when the new quotations were received.

Ms Mathibela said that Parliament needed to stand firm and refuse to be charged such high prices.

The Chairperson replied that he agreed. The Committee would need to look at this issue.

State Owned Enterprises: Consideration and adoption of Strategic Plans
The Chairperson noted that the Committee had received presentations on the Strategic Plans of four State Owned-Enterprises (SOEs), excluding the State Diamond Trader.

State Diamond Trader (SDT)
The Chairperson reminded the Committee that the State Diamond Trader’s (SDT) Strategic Plan was not included, as this entity would send a reworked version at the end of May.

He stated that the STD was well-placed to start beneficiation processes, and he outlined a recent event to the Committee, saying that this was precisely the type of matter in which the SDT needed to become involved. Ms Mona Fortune had been granted a prospecting permit, based on information given to her by her father, who had requested that she develop the mine and share 20% of the proceeds with the local community, as he had tried to do in the past with other projects. Ms Fortune wished to carry out her father’s legacy of community beneficiation. She was granted the permit, but not yet been given the mineral rights. Apparently, those assisting her with the funding had intentionally allowed her permit to lapse, meanwhile promising her that they would sort the issue out as they had government connections. In the meantime, someone else applied for a permit for the same area. The Minister of Mineral Resources, having discovered this, intervened on her behalf and reinstated the permit. However, she had then approached a second funder, who had treated her in the same way, with the reinstated permit expiring on 13 May 2010. It was discovered that the problems lay with the regional manager of the Department of Mineral Resources (DMR) in the Northern Cape. The Chairperson had intervened on Ms Fortune’s behalf and asked the DMR to assist her to put her plans together and draw in the community. The DMR needed to incubate people like Ms Fortune. Access to government should be easy. He noted that there was also the point that the Northern Cape needed to be prioritised.

The Chairperson noted that the Strategic Plan would be presented in May. However, the Committee would need to discuss the responses given by the SDT on the Auditor-General’s report for 2008/09.

Mr Marais stated that the SDT had indicated that it needed R10 million to operate and noted that employees were seconded to the SDT from the DMR and De Beers. Information on the length of these secondments was needed, as it was a potential flaw in the SDT’s ability to continue operating.

The Chairperson replied that while SDT had indicated that it needed R10 million for overheads, it had also mentioned that most of its functioning costs were funded by a R50 million revolving credit loan with the Industrial Development Corporation (IDC). He acknowledged that the SDT was not able to purchase the intended 10% of diamonds produced, but the DMR needed to state how it would manage to finance this. SDT and DMR needed to look at the funding model.

The Chairperson noted that Mr H Schmidt (DA) had raised the option of the SDT raising a levy on diamond production. When the SDT came back to the Committee, this was one of the options that it would need to discuss, in light of the Auditor-General’s concerns about the future of the SDT as a going entity. Funding was one of the issues to be addressed when the SDT returned to the Committee with the finalised Strategic Plan.

The Chairperson agreed that the unofficial position of the SDT was that the secondments would be renewed by De Beers and the DMR, but it was more prudent to discount the secondments and focus on how the SDT could be set up without secondments.

Ms Bikani agreed that the SDT needed to come back as soon as possible and provide the Committee with more detail on what interventions management had taken. She proposed that the Committee should approve and adopt the SDT’s responses on the Auditor-General’s report in the interim, on the understanding that more information would be forthcoming.

The Chairperson stated that when the Committee examined the SDT’s new Strategic Plan, it would be able to assess whether there was now clarity on the Auditor-General’s report.

The Committee formally proposed, seconded and approved the adoption of the SDT’s responses to the Auditor-General’s Report

South African Diamond and Precious Metal Regulator (SADPRM)
The Chairperson stated that he had serious misgivings about the responses given by the South African Diamond and Precious Metal Regulator (SADPRM) on the initiatives taken in response to the Auditor-General’s 2008/09 report, but the Strategic Plan indicated that the new management of SADPRM appeared to have done some good work. The Committee had agreed, at its last meeting, that the SADPRM would revert to the Committee within 60 days on three outstanding issues. The Chief Executive Officer had only taken office in February, but in the short time since his appointment he seemed to be steering the SADPMR in the right direction. He had indicated the shortcomings in the Strategic Plan adopted before he had joined the entity, what changes he proposed and incorporated in another document and how to resolve the issues that he had picked up.

Ms Bikani said that the Committee had gone through the document and that the SADPMR had corrected most of the issues that the Committee had deliberated on.

The Committee proposed, seconded and approved the adoption of the SADPMR Strategic Plan.

The adoption of the response to the Auditor-General would stand over pending the submission of further information.

Mintek Strategic Plan
The Chairperson thought that Mintek had more mileage than any other SOE and that the Committee had good insight into its Strategic Plan, due to the workshop that was held with this organisation.

The Committee proposed, seconded and approved the adoption of the Mintek Strategic Plan.

Ms Bikani added a rider. Whilst she supported the Mintek Strategic Plan, she felt that the Committee should probe further into its statements about doing things differently. Mintek had indicated that although it was in fact making some profit, it was not, as a State Owned Entity, primarily concerned with doing so. However, she thought that perhaps there was a need to review the legislation. State Owned Enterprises’ ability to turn a profit could be harnessed usefully to aid development, job creation and benefit people.

Ms Moss was concerned about the general lack of skill in the DMR, despite the fact that there were some successful entities, such as Mintek. She added that she had never seen ‘the people’ benefit and that these entities were supposed to enrich the people of South Africa.

The Chairperson replied that this was a serious challenge. Any review of the legislation must consider the role of SOEs within South Africa as a developmental state. The quest for self-sufficiency had been subverted in Eskom’s case, and led this organisation to become completely focused on making money, to the detriment of everything else. Thus the change of a developmental entity into a profit-making one needed to be carefully considered.

The Chairperson said that there was also a need to determine the quantity of mineral resources within South Africa and who owned them. Mining economists had put the mineral wealth of the country at $3 trillion. There was a need to see how this wealth was used to counter poverty. Mintek’s remarks had opened the eyes of the Committee. He cited the example that China was stockpiling commodities, deliberately looking 20 years into to the future, to create security of supply for itself. South Africa needed to look at a similar approach, especially with regard to uranium, a key South African commodity that would be crucial to energy generation in the future.

Council for Geoscience (CGS)
The Chairperson turned to the Strategic Plan of the Council for Geoscience (CGS) and noted that a key ability of this institution was its ability to conduct research. On its visit to Mintek, the Members had seen clear collaboration between the two entities and the CGS was improving its research methods constantly. The CGS had received R20 million to undertake research into serious technology to prevent fall of ground and monitor seismic events.

Mr Dexter suggested that Members should indicate whether they had any problems with the Strategic Plans, to expedite the meeting.

Ms Mathibela said that the CGS and Mintek had the same issues of not being granted enough funding or being allowed to make their own money.

Mr Dexter added that the strategic view should be taken that more budget should be allocated to the research area, where both CGS and Mintek needed more money. However this should not result in other areas of the mineral resources portfolio suffering.

Mr Marais stated that the CGS needed more funds to upgrade its instruments and that it should also be allowed to make more income from the private sector.

The Committee moved, seconded and approved the adoption of the CGS Strategic Plan.

Mine Health and Safety Council
The Chairperson asked whether there were any comments on the Mine Health and Safety Council (MHSC) Strategic Plan.

Ms Bikani said that the Committee had exhaustively discussed the MHSC issues, but that there was a need to go deeper into human resource management, as this had only been mentioned almost in passing. The MHSC was not addressing the improvement of training around the development of hospitals and clinics. Whilst its research work was acceptable, its development of skills was not. She felt that the MHSC should elaborate on human resources and skills development before the Strategic Plan was adopted.

Mr Marais agreed with Ms Bikani. He stated that he was not convinced that the MHSC was focusing in sufficient depth on the health of workers at mines.

Mr Dexter stated that the bulk of the MHSC’s finances went to research, and asked why that was so.

Ms Mathibela stated that 2% of the budget allocated for health and safety promotion was not enough, and that there was nothing that said that the MHSC was dealing with accommodation issues. If the issue of accommodation was a responsibility of the mining houses, then the MHSC needed to enforce compliance.

Ms Bikani felt that MHSC’s medium term budget should not be approved. She requested that the MHSC come back and explain its budget distribution, which she did not think was correct.

The Chairperson noted that the MHSC would be required to come back. He said it was necessary to explain that certain matters such as health promotion were the financial responsibility of the mining houses. The MHSC’s job was to enforce compliance. However, he agreed that the budget did indeed seem skewed. The MHSC needed to identify exposure to diseases and ensure that mining houses paid for the medical treatment of those affected. Its main task was regulation, and it needed to satisfy the Committee on this issue. There needed to be a focus on inspection in order to ensure compliance. He agreed that it was not an issue of work in progress and that the MHSC needed to be recalled before the Committee.

Mr Marais supported the Chairperson.

Ms Bikani also supported the Chairperson, and added that the MHSC had allocated money to do research on silicosis. She asked why this was necessary, saying that silicosis was already well understood and the expenditure seemed to be wasteful.

The Chairperson suggested that the Committee submit a letter to the MHSC stating precisely what it would need to address, and that the Chief Executive Officer and Chief Financial Officer should be recalled. The MHSC Strategic Plan would not be adopted until answers on issues raised were received.

Compensation for ex-mineworkers
The Chairperson stated that the Committee was now faced with an issue of ex-mineworkers who had approached Parliament, in regard to issues of compensation. It had been agreed that the Committee would meet with them in the Eastern Cape to try to find a permanent solution to the problem. He outlined that the Chamber of Mines (CoM) was to blame for the problem, as it had given R54 million to the Eastern Cape government, thus attempting to shift the responsibility to government, which should not have accepted this money in the first place. The Chamber of Mines, and not government, was the former employer. Teba was the recruitment agency for the Chamber of Mines. It had engaged in deliberate recruiting. CoM could not shift the responsibility for what had been done. The R54 million paid to the Eastern Cape Government was probably not even anywhere near enough the true figure that would be appropriate for compensation. The ex-mineworkers had acknowledged that their fight was not with government, but with the mining companies. Government would assist them in their endeavours. This Committee would assist the Portfolio Committee on Labour to deal with the issues, as it had a detailed understanding of the industry.

Ms Moss stated that the reports of the Ad Hoc Committee on Ex-mineworkers should be examined.

Ms Mathibela interjected that when Teba paid the R54 million this was allegedly done because Teba could not find the details or addresses of the people who were to be paid out. That was where the problem lay. She indicated that Teba and the CoM had come before Parliament to give evidence. The report on this was with Parliament. 

The Chairperson stated that that was why it was resolved that Parliament would monitor the situation. There was progress in respect of legitimate cases, but the Committee would support the Portfolio Committee on Labour in driving back the issue to the CoM to take its responsibility.

The meeting was adjourned.


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