Department of Mineral Resources Budget and Strategic Plan 2010 to 2013

NCOP Economic and Business Development

11 May 2010
Chairperson: Mr F Adams (ANC)
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Meeting Summary

The Department of Mineral Resources presented its 2010/11 Budget and Strategic Plan. The budget totalled R1.03 billion, of which R302 million represented transfers to the Council for Geoscience and the Council for Mineral Technology. The budget for the various programmes, and their priorities, were outlined. It was noted that R145 million would be spent on health and safety programmes, and the Mine Health and Safety Amendment Bill would be tabled in the course of the financial year. The Department would seek to develop a comprehensive strategy on vibrations, blasting, and dust control. It would implement a national seismic network system. There would be work on reducing the State’s environmental liability. The Department would also work to identify and prioritise unsafe, un-rehabilitated, ownerless and derelict mines, and an amount of R52 million was budgeted for this.

Members raised a number of concerns arising out of the presentation and the situation with mining in the country. They asked if money allocated for research and rehabilitation in certain areas could not be put rather to assisting social difficulties, or for promoting industry. Questions were asked as to what would happen if the mines were to be nationalised, and what the impact would be on the industry, what strategies the Department had in terms of transformation, and what strategies were in place for addressing safety issues. A Member was concerned about whether the State Diamond Trader would be relocated back to Kimberley, believing that this might transform the area, although the Department was not convinced that this would be a good idea at this stage. Members were also interested what actions would be taken to enforce compliance with mining licence conditions, and Social and Labour Plans, as well as what could be done about alleged problems in Richards Bay, including problems with housing and labour. They further questioned the situation with water, what was done about closure of mines in Welkom, whether the National Empowerment Fund was funding transactions, and more details of the performance agreement with the President. They also asked how the Department would be contributing to the priorities of government and what greater efficiency would be needed, whether the Department would be able to grant the mining rights and how it had reached its targets. A Member was particularly concerned how the empowerment provisions would be handled and what training and positions were offered to previously disadvantaged people. They urged that the situation with illegal miners should also be considered. They criticised the situation where many mining companies were using their own revenue to assist local government in putting in pumps, roads and urged a greater partnership between all role players.

Meeting report

Department of Mineral Resources (DMR) Strategic Plan and budget 2010 to 2013 briefing
Mr Thabo Gazi, Acting Deputy Director-General, Department of Mineral Resources, presented the 2010 to 2013 budget and strategic plans. He noted that the split of Mineral Resources away from the former Department of Minerals and Energy (DME) was now finalised, and there was now a separate Department of Energy (DOE) and a Department of Mineral Resources (DMR). The budget for the DMR was split into four programmes:  namely, Administration, Promotion of Mine Safety and Health, Mineral Regulation, and Mineral Policy and Promotion. The budget total was R1,03 billion.

Mr Edson Ragimana, Chief Financial Officer, Department of Mineral Resources, presented on Programme 1. The budget was divided into current, capital and transfers. A total of R607 263 million was spent by the Department itself.

He said that one of the main budget costs was the implementation of the accommodation plan. Other money was spent on implementation of ICT infrastructure maintenance plan, the development and implementation of the disaster recovery plan, reviewing and implementing the Master Systems Plan, the acquisition of office supplies (furniture, equipment, consumables); and the drawing of the annual financial statements.

Ms Linda Nkhumishe, Acting Chief Director: Management Services, Department of Mineral Resources,  presented on the second part of Programme 1. She stated the DMR had developed a integrated Human Resources (HR) and retention strategy. Through that talent management plan the DMR would establish governance structures. The critical activities were to develop a HR Development strategy, conduct core values and a code of conduct awareness workshop, implement enterprise risk management and fraud prevention strategies, monitor State owned enterprises and develop and implement a communication strategy.

She set out the various allocations to the aspects that the DMR governed. She noted that Promotion of Mine Safety and Health was allocated R145 865 000. Key activities of the latter programme would include an Audit of Health and Safety Management system of mines, conducting investigations and enquiries, implementing amendments to the Mine Health and Safety Act. It would also handle community issues. It would develop a comprehensive strategy on vibrations, blasting, and dust control. This programme would also deal with research and development, implementing a national seismic network system, and a focussed annual research programme.

Mineral Regulation would receive R215 925 000. Key activities of this programme would include monitoring and enforcing compliance, inspections of social and labour plans, mining and prospecting work programmes, and environmental management plans. It would also include Mining Charter inspections, reducing the State’s environmental liability, identifying and prioritising unsafe and un-rehabilitated ownerless and derelict mines, and implementation of policies for identified ownerless and derelict mine projects. It must also ensure adequacy of current provisions for rehabilitation.

Mineral Policy and Promotion would receive R429 184 000. The bulk of this would be transfers to State Owned Entities (SOEs), amounting to R361 625 000. Research and development conducted by the Council for Geoscience (CGS) and the Council for Mineral Technology (Mintek) would account for R302 million of these transfers. Key activities of this programme would include contributing to the United Nations Commission on Sustainable Development (UNCDS) proceedings to enhance the image of the mining industry through “Greening the mining industry”. Measures to promote investment in the minerals sector would include facilitating access for Black Economic Empowerment (BEE) coal miners to the Richards Bay Coal Terminal (RBCT) for export grade quality. Measures to transform the mining industry would include finalising the review of the Mining Charter, amending the Geoscience Act, reviewing the Diamond Amendment Act, a review of the Mineral and Petroleum Resources Development Act (MPRDA), No 28 of 2002, and conducting frequent regulatory impact assessments.

Under Departmental Spending Priorities Areas, the Department budgeted R52 million toward the rehabilitation of ownerless and derelict mines, R145 million to health and safety programmes and R174 million to the implementation of the Mineral and Petroleum Resources Development Act. The Mine Health and Safety Amendment Bill would be tabled in the course of the financial year.

Ms M Dikgale (ANC, Limpopo) asked if the money that was allocated for research in the Northern Cape could be used instead for the people in that area, because they were suffering without houses, water and electricity.

Advocate Sandile Nogxina, Director General, Department of Mineral Resources, noted that research was a problematic area. Most mining had taken place in rural areas, which were underdeveloped by nature. Building housing, roads, water and toilets was the job of government as a whole. The private sector made a contribution to the fiscus through the taxes and royalties, which were given for the purpose of social infrastructure and service delivery. Provincial, local and municipal government held the responsibility for social infrastructure development. The responsibility could not be shifted from the municipality to the private sector, because that would make the mining industry unattractive to investors since the cost of business would become too high. It was necessary not to compromise the competitiveness of South Africa as an investor destination at any cost. He noted that a community in Themba Balfour had protested at the mines, instead of going to the government, when it had problems, and this could become a problem.

Ms Dikgale said that help was needed with the housing, work and electricity.

Advocate Nogxina said DMR was already working on assisting communities around Limpopo. The councillors needed to identify the social needs of the people there. Then the critical issues could be addressed. He suggested the Members should perhaps visit the community, find out the problems, and then bring the mining companies, DMR and local governments together to find a solution. The mining sector could change their Mining and Labour plans to focus on what was needed.

Mr B Mnguni (ANC, Free State ) asked whether, in the event that the mines were nationalised, there would be losses in terms of job creation, revenue and social facilities, and asked who would benefit from it.

Mr K Sinclair (COPE, Northern Cape) asked what the impact would be on the industry as a whole, if the mines were nationalised.

Advocate D Nogxina, said that the budget was informed by the strategy plan, which in turn flowed directly from the policy of government. There was no policy on nationalisation therefore no programmes or activity plans had been designed or made. This budget was about policy implementation. The Department had not done an assessment on the cost benefit of nationalisation, so had no information on the benefits.

Mr Mnguni asked what strategy the Department had to transform the mining sector in terms of the historically disadvantaged people, apart from the Mining Charter. He felt that the mine workers should have a share in the mines. The 26% ownership target set aside for previously disadvantaged people by 2014 was well enough, but he also questioned how the Department intended to reach that target. This was particularly since mining was a capital intensive industry where few people were technically qualified.

Advocate Nogxina said transformation was a broad policy concept which the DMR brought to specifics through the Mining Charter. The Mining Charter was the tool used for transformation and that tool was being reviewed and assessed. There was no other tool used for transformation.

Mr Mnguni was concerned about mine working safety. He pointed out that even the early detection devices could only predict danger up to a few minutes before an accident happened. He asked how such a programme could assist in improving safety resulting from blasting, earthquakes, tremors, and other seismic activity, and in general, how the Department could improve safety on the mines.

Mr Mthokozisi Zondi, Acting Chief Inspector of Mines, DMR, said every mining company had a responsibility to make sure it was not negatively effecting communities. Currently there was no scientific system to predict the time or location of seismic events. The DMR was currently re-evaluating what actions companies had taken after seismic activity was detected, and it wanted to ensure that it had the ability to withdraw people from areas that had active seismic activity..

Mr A Lees (DA, KwaZulu Natal) referred to the R52 million put aside for rehabilitation of ownerless and derelict mines. He asked if there were any guidelines as to whether there was a real need for rehabilitation, saying that on the West Coast it was being done at a huge expense for little benefit, whilst on other “real issues” there was a massive need for funding. He asked if there was any assessment done on value for money and the continuing effect on the environment.

Advocate Nogxina said there were guidelines to determine the need for rehabilitation. In December the Minister approved the Rehabilitation Strategy. There were a multitude of derelict mines which could not be dealt with in ten years. That was why priority areas were pointed out and rehabilitated first.

Mr Sinclair referred to a decision by former President T Mbeki to relocate the State Diamond Trader (SDT) back to Kimberley. He asked what the rationale was for not implementing that decision. The current developmental pattern was not helping and was inefficient in the turn around strategy.

Advocate Nogxina said there were challenges that bedevilled the STD, therefore it was unwise for it to relocate. It did not have personnel of its own, and was staffed by people who were seconded from De Beers. Once the SDT was on its feet the situation would be reassessed. It was unknown if it would be moved. The situation depended on the practical realities after assessment.

Mr Sinclair asked what the Department was doing about the specifics in the Social and Labour plan. He maintained that the mines were not adhering to the prescriptions of that Plan. Mr Sinclair asked how the Department would follow up on the adherence to the Plan, once the mining licences were approved and said the DMR should be more stringent.

Advocate Nogxina said that mines had taken advantage of government’s concern for socio economic issues. If a licence holder failed to comply with Section 47 of the MPRDA, then the licence would be revoked and the mine would be closed. However, using Section 47 was a last resort because of the social economic consequences. The DMR rather tried to assist the company to comply, before implementing that section. It would not enforce compliance immediately through such stringent measures, without due regard to the consequences but would first assist the offending company to comply with the law, to resist situations like Welkom, where there was unemployment as a result of closing the mines. Closing mines always had unintended social economic consequences.

Mr Sinclair stated that water was a crisis because pipelines no longer had capacity, which was causing problems.

Advocate Nogxina said the water issue boiled down to inspection issues. As the Department rigorously inspected the provinces these problems would be dealt with.

Mr Sinclair asked for clarity as to whether the National Empowerment Fund was funding mining transactions. He also wanted to know which government institutions were funding BEE deals.

Adv Nogxina commented, in respect of funding, that the National Empowerment Fund did not report to the DMR. The Department’s mandate was to regulate business only and funding was outside the realm of this mandate.

Mr D Gamede (ANC, KwaZulu Natal) asked if the Minister had already signed the performance agreement with the President and whether he could receive a copy.

Adv Nogxina said he had not seen the agreement and therefore it was not presently available.

Mr Gamede asked where the DMR thought it would be able to contribute more, within the five major priorities of government.

Adv Nogxina said that the DMR contributed to the five priorities of government by the creation of decent jobs. It was an economic department, and belonged to the economic cluster, which focussed on job creation.

Mr Gamede asked what changes were anticipated after the meeting about efficiency, working faster and smarter, and similar sentiments, and where those changes would be seen.
Advocate Nogxina said the anticipated changes, after the meeting with the President, were that the turn around time should be reduced by half. That was the change in the administrative processes. There would be other changes, informed by the Monitoring and Performance Evaluation policy, on which there was also engagement with the President. In a new organisation there would be vacant posts, which must be filled that was why acting DG and acting DDG positions were there.

Mr Gamede noted that for several years there had been complaints about dust around mines. He cited a particular mine where people in surrounding areas were coughing badly and said that speedy intervention was needed there.

Mr Gamede asked where consultants fitted into the budget.

Advocate Nogxina replied consultants were under goods and services in the budget.

Mr Gamede said the DMR’s objectives set out that there should be 27 new mining rights within one year. He asked what specifically was planned in regard to those, whether they would be spread right through the country, and whether there was sufficient capacity to handle the 1 380 environmental compliances and 140 charter inspections in one year.

Advocate Nogxina said the DMR would be able to grant the mining rights. It had reached the figures for the year’s targets through a realistic assessment of the situation. DMR management firstly looked at the capacity of the Department, then at the already existing prospecting rights in the pipeline, which were likely to progress to mining rights, and at how much resources and money were available. Then a reasonable target was set for the year. 

Advocate Nogxina noted also that the Department did not ensure an even spread of Mining rights over South Africa. Mining rights were granted on the basis of applications, which in turn were informed by geology and mineralisation. If someone applied for a licence to mine coal in Waterburg he could not be told to apply in other areas. The cluster of applications was informed by the appetite for that commodity by investors.

Mr Gamede asked if there was a challenge with non compliant mines, and what would happen if they continued to not comply. He cited a gap in the Act which caused the government not to take action in cases of non compliance, and asked how the Department was intending to close that gap.

Advocate Nogxina said that inspections were the key activity utilised in solving the Social and Labour plan breaches, where companies were not adhering to prescripts. When a company applied for rights, it would generally set out good social and labour plans, but may not implement them properly after the licence was granted. He pointed out that Section 47 could be invoked if the companies violated terms and conditions of their licence.

Ms S Chen (ANC, Gauteng) brought up the promotion of investors in programme 4. She noted a complaint from investors who were not getting support from provincial and local government. She asked if there was a one stop service to give support to these investors.

Advocate Nogxina said there was no one-stop service for investors, but the regional offices of the DMR in the nine provinces offered those services. Electronically, information was available for investors. The NMPS was being improved so it would be the instrument for the promotion of the mining industry.

Mr Lees asked whether the private existing mines had obligations to rehabilitation. He wondered if there was any possibility of asking De Beers, for instance, to use the vast amounts of money that it had spent in rehabilitating 400 hectares of useless land on the West Coast, for instance for the development of new industry instead.

Advocate Nogxina said unfortunately that money was for rehabilitation only. Ideally it would be used to address other socio economic problems, but that would cause a fiscal confusion. He suggested that consideration could possibly be given to increase the mining tax to solve the problems.

Mr Mnguni asked how, if there were no technically trained people to occupy positions that were reserved for previously disadvantaged people, the DMR would be able to enforce transformation in the mining sector. He asked if the DMR was taking active steps to  recruit, graduate and train people for those positions. He also asked if there was any other stipulation, other than what was set out in the Mining Charter. He particularly questioned how people with no money would be able to acquire shares. He asked how the DMR intended to achieve the 26% transformation target.

Adv Nogxina said DMR planned to grow previously disadvantaged people into management roles.

Mr Sinclair referred back to earlier comments on the STD. Kimberley not only had a history of diamonds but was diamonds. In Kimberley, there was a legacy of the wrong approach to mining. He asked how the DMR could position itself in terms of the developmental opportunity. If value was not added to the product of mining, then the community would lose out. If the government was sincere about transformation, then the developmental pattern of South Africa needed to be changed, and the State Diamond Trader needed to be brought back to Kimberley. Following this, motivation for an iron ore smelter in South Africa, closest to the source of that product, should begin.

Advocate Nogxina said the location of the State Diamond Trader would not address the problem of jobs. If the intention was to create jobs, then programmes were needed for creating cutting and polishing plants in Kimberly. He noted that many people were sent from the Northern Cape to China for training. There would be ten bureaucrats in the SDT. He reiterated that the location of the State Diamond Trade would not in itself create jobs, although he did agree that Kimberley would benefit from a developmental strategy designed around the diamonds, which were and are the history of the town.
Mr Sinclair said the question about the State Diamond Trader was not about creating jobs. It was about putting the instrument of industry in its correct financial position. The smelting issue would come after that. He asked for consideration to be given to the function and role of the State Diamond Trader.

Advocate Nogxina said the location of the smelter was a function of the economy. He noted that business had their own ideas on where they wanted to locate the smelters.

Mr Sinclair added that the situation of the illegal industry also must be considered.

Mr Sinclair noted that one of the roles of the municipalities was to lure investors to their area. This was not happening. This resulted in mines using their revenue to assist municipalities with roads and pumps. Municipalities should promote the mines rather than the mines using their revenue for promotion. He said that, in theory, the Department’s approach was right but in practice there must be a partnership between national, regional, provincial and local governments. There were complaints about the effectiveness, efficiency and turn around times of the Department in Kimberley. He asked what government as a whole was doing to promote effectiveness and efficiency.

Adv Nogxina agreed that there was a problem of complaints on a regional level. A systems audit took place this year, where DMR’s top management had gone to all nine provinces to identify the bottlenecks and remove them. A new system was developed to shorten the process of licence granting. In June that system would be evaluated to see its impact and effectiveness. The complaints had reduced and improvements were made since then.

The Chairperson said government was going to spend R35 million in assisting mines to pump water. Oversight was done on a few of the mining houses, and the mining companies had not fulfilled their social contracts. For example, in Richards Bay,  houses had cracked from blasting because they had been built too close to mining activities. He suggested a “Mining Scorpions” who could patrol and see that companies comply. He suggested companies should be heavily fined for non compliance, as was done in Australia.

The Chairperson called for clarity on Alexcor. This SOE reported to the Department of Public Enterprises. He asked whether the DMR had any influence over Alexcor and whether it could be called to order.

Adv Nogxina said that Alexcor no longer reported to the DMR; it was correct that it reported to the DPE because of its position as a State Owned Enterprise. The Chairperson had every right to call Anglo American to the meeting, and could ask Alexcor why it was not complying with an environmental management plan and the Social and Labour Plan, why there was not sufficient transformation and ask it about other operational matters over which government had oversight. However, issues of governance and shareholders were DPE matters.

Advocate Nogxina said that the standard of house building needed to be reassessed. Mining companies had a responsibility to repair the cracked houses because the damage was caused by them.

Advocate Nogxina stated that the Mineral Regulation Programme had a lot of money allocated to it. At first the focus was on converting licences to the new mining regime. Now the checks for implementation of contracts had started inspections and there would be consequences of this.

Advocate Nogxina said the Welkom situation had been handed over to the law enforcement agency and the latest was unknown.

Mr Lee and Ms Chen commented that this had been a useful engagement with an impressive presentation.

The Committee considered its Report on the Budget and Strategic Plan and resolved to adopt the report and the plans and budget.

The meeting was adjourned.


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