Legal challenges faced by Department of Mineral Resources; DMR 2009/10 Annual Report: continued

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Mineral Resources and Energy

18 October 2010
Chairperson: Mr F Gona (ANC)
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Meeting Summary

The Director-General of the Department of Mineral Resources briefed the Committee on litigation in progress. The Italian granite investors had claimed that the Minerals and Petroleum Resources Development Act was a form of expropriation. They had withdrawn their case at the tribunal in the Hague and the South African government had been awarded damages. There was a pending case brought by Agriculture South Africa on the same basis. Although a relatively small amount was being claimed it might pave the way for more than a thousand cases if successful. Government would continue to defend the law as the Act was based on constitutional imperatives.

Members felt that cases as described by the Director-General were aimed at destabilising the government. South Africa had a model Constitution which sought to redress past imbalances. One of the aspects was in fact the right to challenge the law.

Programme 1 under the Department was Corporate Services. The main thrust of this during the year under review had been the split of the Department of Minerals and Energy into two separate Departments, namely the Department of Mineral Resources and the Department of Energy. The split had been completed by April 2010 although the Annual Report reflected the situation at the end of the previous financial year. Additional resources were needed to boost the capacity of the Department.

Members were concerned over the management of the Department. A particular example was leave policy. Staff owed a large amount of money for leave that had been granted irregularly. Members were assured that measures were in place to control leave according to Department of Public Service Administration policies.

The Inspectorate of the Department of Mineral Resources was pleased to report a continuing trend of a reduction in the number of fatalities and injures. Even so, the number was unacceptably high. A training programme had produced a number of learner inspectors to fill some of the vacancies. More attention was being paid to preventing mining activities in particularly dangerous areas. The Inspectorate was also focused on health issues, in particular tuberculosis and silicosis.

Members agreed that the number of fatal injuries was still too high. Overcrowded accommodation was a factor in the spread of disease.

One of the major successes of the mineral regulation programme was the number of historically disadvantaged South Africans who had been granted mineral rights. However, not many of the prospecting licences had graduated to mining licences. Many complaints had been received from the community. The Department had taken action to save thousands of jobs after the recession. A major challenge to be dealt with was the rehabilitation of derelict and ownerless mines.

Members discussed the state of transformation in the industry briefly. A dedicated meeting would be held at a later date.

The Department had received a qualified Auditor-General report. This was ascribed to a change in accounting requirements. There had also been some delayed payments. Members of the Department admitted that there might be some financial problems in the regional offices.

Meeting report

The Chairperson said that the meeting would continue its discussion on the Annual Report of the Department of Mineral Resources (DMR). He invited the Director-General (DG) of the DMR to brief the Committee on the legal challenges being faced by the Department.

Briefing by the Director-General on legal challenges being faced by the Department
Adv Sandile Nogxina, DG, DMR, said that the DMR was operating in a very contested terrain where there was a lot of resistance to change. People felt that that they had no rights to redress their problems. The DMR did not see the situation as being negative. There was cogent evidence that freedom prevailed in South Africa. Those who felt aggrieved had recourse to the courts. The Mineral and Petroleum Resources Development Act (MPRDA) had become law in 2004 and had brought a new dimension to the mining industry.

Adv Nogxina said that one of the provisions of the MPRDA was that the old order mining rights had to be converted. Most rights owners had done so already. Some investors in granite mining from Italy had taken legal action. They were relying on bilateral treaties between South Africa and Italy, and between South Africa and Luxembourg. The Italians had the perception that theior rights were being expropriated. They went to court to seek compensation of R2 billion. There had been voluminous pleadings. The claimants could not file the required documents by the deadline of 2 November 2009 and had told the court that they wished to withdraw their claim although there were many pleas to delay the process.

The DG said that the South African government had replied with a comprehensive counter-memorandum. The contention was that the Italian investors had got what they wanted. They had until April 2010 to convert their rights to new order rights. The Italian group had then started to lodge requests for conversion of their rights while still claiming that government was expropriating their rights. They were making their claims in terms of the same MPRDA that they were contesting. It was clear that there would be security of tenure for the Italians. There was no prejudice to the claimants. The Italian group had withdrawn their claims. In terms of the rules of the tribunal, the case could be discontinued on the consent of the parties.

Adv Nogxina said that he had gone to the Hague and applied for the dismissal of the case. The tribunal had then issued an award to dismiss the claim. The South African government had claimed costs and been awarded R3.8 million. As the claimants had withdrawn their case, the merits of their argument were not considered. The conversion process enabled the claimant to continue with operations while the process ran its course. The adversarial process was now over. The government welcomed all responsible mining companies, both local and foreign. At the same time it was the responsibility of government to defend its decisions.

The DG said that the current case facing the DMR revolved around the same issue. Agriculture South Africa (Agri-SA) had brought a test case against the Minister of Mineral Resources. The application of the MPRDA was also considered to be a form of expropriation in the view of Agri-SA. They made the same allegations as the Italians. A rights claim regarding a coal mine had been dismissed by the DG of, what was then, the Department of Minerals and Energy (DME). The DG denied that the MPRDA was a form of expropriation. The DMR maintained this position.

Adv Nogxina said that a judge had been appointed to hear the case. However, the judge had recused himself when he saw a letter from a case that he had heard in 2006. The judge was concerned that the fact that he had expressed an opinion in the earlier case might prejudice the current one. The recusal led to the current case being stalled. The DG was constrained from commenting on this case as it was still before the courts.

The DG said that the implications of the case were that Agri-SA was seeking damages from the state. It was arguing that the MPRDA was a form of institutionalised expropriation. They were saying that there was no longer a concept of rights. At first glance the case appeared insignificant as the claim was only R750 000. However, this was the first of thousands of other claims against the state with a combined value of several billion Rand. The value of unused old order rights was approximately R44 billion.

Adv Nogxina said that if the Agri-SA claim was successful government could be exposed to claims totalling R99 billion from old order rights related matters. The outcome of this case would inform what would happen in the other 1 100 claims that had been filed. The DMR was saying that the MPRDA was not a form of expropriation. An award to the claimants would place an unnecessary burden on the state and would stop the work of the DMR. Government had only one kitty to fund its activities. If it had to pay compensation to the claimants, government would have to use funds that could have been employed for service delivery in the fields of health and education, amongst others. Whatever the verdict might be in the case, the DG did not expect that the high court ruling would be the final word as the verdict would surely be appealed. The DMR would continue to defend. The objectives of the MPRDA were in line with constitutional imperatives.

Ms N Mathibela (ANC) said that the Agri-SA claim was based on unused old order rights and allegations of expropriation. Agri-SA had not come back on the question of the ownership of derelict mines. She asked what would happen if some of the claimants were the owners of such mines. She asked if the DMR was able to find the owners and force them to service the old mines.

Adv Nogxina replied that Members must distinguish between old order rights and derelict mines. Land owners had automatically held mineral rights on their property. Most of such land was owned by farmers who did not engage in mining activities. There was an issue of sterilisation and hoarding. These mischievous acts had to be prevented. People who had not mined in the past could not be held responsible for derelict mines. In the case of abandoned mines, the owners might no longer be alive. The DMR would continue to look for those who were responsible for abandoning mines.

Mr C Gololo (ANC) said that these were old cases that dated back prior to 1994. They had been raised before the inception of the MPRDA. He asked if this government could not nullify the cases.

Adv Nogxina replied that this could not be done. The answer lay in the history of the country. The actions of government were informed by the contents of the Constitution. Government could not ride roughshod over its citizens. Government was instructed to mediate in disputes. There would be no difference between this government and the apartheid regime if the state used a fiat. It would be like invoking a state of emergency. Government could begin to engage in discourse. This is why the DMR was going to court and why it wanted to convince the courts that the legislation was in the best interests of the nation. Government would continue to engage in court in terms of the law and the Constitution. He reminded Mr Gololo that the claims did not originate from before the MPRDA. The claims were the result of the implementation of the Act. Change was a way of life.

Mr M Sonto (ANC) asked what steps had been taken by Agri-SA. Their actions were tantamount to being an attempt by a foreign country to bring the South African government down. It was a political move to render the state useless or bankrupt. He was inclined to align himself with the comments made by Mr Gololo. If the government was challenged, he asked what legal and constitutional recourses were available. He asked if the approach taken by Agri-SA was similar to that of the Italians. He asked what loopholes in the MPRDA had been cited in the Hague.

Adv Nogxina said that the government prided themselves as being a country with one of the best constitutions. The Constitution protected the rights of all. The best course of action was to defend itself by using the Constitution. The MPRDA was constitutional when it was enacted. The Constitution enjoined Parliament to redress past imbalances. The MPRDA was one of the instruments in government's hands. It protected the holders of rights and was an instrument for change. Government would continue to act in accordance with the Constitution.

The DG said that the tribunal in the Hague had indicated that they did not believe that the Act had the effect of expropriating rights. It was the right of the Italians to use South African law to protect their rights. It was also the constitutional right of the state to enforce the law. The loophole that the Italians had tried to use was the claim that the previous dispensation had granted them the rights. The rights were being changed by the MPRDA and so they were entitled to compensation. He would not be drawn into going into the merits of the current case.

The Chairperson asked if there was any relationship between the current case and that involving the Italians. He wanted to know if there were any similarities. Were there was any similarities regarding the defence teams? He asked if there was any suggestion that the MPRDA was unconstitutional. He asked what the implications would be if the final court decision favoured the plaintiff. Was there any link to the transformation process? The mining industry was the first to have a meaningful transformation charter. If government lost the case it would reverse the transformation process.

The Chairperson said that South Africa had a beautiful Constitution, but no other country had copied it. The court decision would impact on ordinary people. There was a danger that people would lose their faith in the democratic dispensation. The rich continued to get richer while the poor got poorer. This impression had been confirmed by international bodies. South Africa was considered to be the country with the most unequal society. The country still faced serious socio-economic challenges. Government needed to go deeper. The Committee would watch the process carefully. Government must guard the processes that had been introduced since 1994. The situation could degenerate into a civil war over resources. A tiny minority was still benefiting from the country's riches.

Adv Nogxina did not know why the South African Constitution had not been copied. He said that the Constitution was being deployed in the service of the people. The Constitution had been informed by the specific history of the country. It must respect the spirit of society. He saw no reason why the Constitution could not be changed. The ball was in the court of the people and their representatives. Parliament had a mandate to change the Constitution if so required. If there was a law that was thwarting efforts to achieve a better society there was no reason why it should remain on the statute books. The Italian claimants had cited the Bill of Rights, especially the property clause. There were many other provisions in the Bill of Rights. Government had cited the same provisions in its defence. There was no commonality in the cases except that the lawyer who had represented the DMR in the Hague was now representing Agri-SA. There was nothing wrong with that. There were rules to govern such matters. This had led the judge to recuse himself.

Mr P Dexter (COPE) had two concerns. The Committee should not pre-empt the court ruling. Parliament had a powerful voice and must therefore withhold its opinions until the case was settled. Members were open to debate the validity of the Constitution but opinions must be based on facts. It was the duty of government to provide services. His party was pleased to hear of the stance of the DMR.

Mr Dexter asked if the DMR could give some clarity. Many controversial issues had arisen. Not all of the cases saw government as one of the litigants. In some cases there were disputes between two private parties. He welcomed the new system to manage rights but asked if the mechanisms were in place to take speedy decisions. Investors wanted surety.

Mr Sonto said that some people did not want the South African Constitution. It was a man-made document and was not self-made. The DG's response on how the Constitution covered the state was satisfactory. Every “Jack and Jill” was using the Constitution against the country. He asked if the Constitution could assist those people who had drafted it. The Constitution could protect the state against looters.

The Chairperson said that the Committee would watch events closely. The MPRDA had been passed by Parliament. Parliament was confident in the judiciary. This was the second such case. He asked what factors were at play. A response was needed. Parliament represented the majority of the people and could not keep quiet. His party represented the poorest of the poor and the working class.

Adv Nogxina said that a favourable outcome to the case would be in the interests of the majority of the people. When the MPRDA had been promulgated it had spelled out the future for the downtrodden. It was transformational in its thrust. If there was a positive outcome in the courts, it would advance the agenda of transformation. The majority would smile again. It would represent a fundamental change to the economy. The progress of change was not as fast as what had been expected. Mining was the only sector where there was some movement. Government must not dismantle what had been done.

The DG said that in terms of targets the DMR would validate that it had taken the correct path. The aspirations of the people had to be maintained. A positive outcome would be a manifestation of the deepening of democracy. When the people exercised their rights, fingers were pointed at government. A perception was created that government was corrupt and incompetent. Observers did not see this as merely the exercise of rights. In the Sishen matter, there was a difference in the interpretation of the law. This was normal. As yet there was no jurisprudence regarding the MPRDA. It was touching on vested interests and was therefore contested.

Adv Nogxina said that the Act meant a lot to the holders of interests. Some were using illegal means to protect their interests. People were asking why there were so many cases being brought. People felt that government was incompetent. People were thinking that conditions were not good for investment. This was because of the new freedom in the country. The Lonmin case was based on the sale of associated minerals. An impression was being created that the business was being run like a zama-zama shop.

The Chairperson expected that the Committee would continue to monitor developments. He excused the DG as he had other commitments.

Annual Report of the Department of Mineral Resources
The Chairperson invited the DMR delegation to continue with the presentation on the Annual Report.

Mr Nthupheni Ragimana, Chief Financial Officer, noted that all the financial aspects had been dealt with at the meeting held the previous week.

Programme 1: Corporate Services
Ms Linda
Nkhumishe, Acting Chief Director: Management Services, DMR, said that Programme 1 was Corporate Services. The purpose of this programme was to enable the DMR to deliver on its mandate. The major success during the year under review was the split of the former DME into the DMR and the Department of Energy (DOE). There had been a service level agreement in place during the previous financial year (FY). The DMR acted as a host department and provided corporate services to the DOE. Memorandums of Understanding with prioritised countries had been evaluated. A compliance framework had been developed. Policies had been approved with organised labour. A balance scorecard had been implemented during the FY. An executive leadership development programme had been developed through the University of the Witwatersrand. Security measures had been improved. The DMR had moved to a new building with better security. Transformation issues were being addressed with a focus on youth, women and people with disabilities.

Ms Nkhumishe said that that challenges facing the DMR were change management issues to the split of the DME. There was inadequate funding for the new approved structure. There were capacity issues. The communication strategy was still to be implemented as it was still being developed.

Ms Nkhumishe said that the corrective measures put in place started with a reprioritisation of priorities to ensure a successful split of the Department. In terms of change management, a survey would be done to assess the attitude of staff on the new issues. Requests had been prepared for additional funding over the Medium Term Expenditure Framework (MTEF) to cater for new positions in the organisation. Approval was to be obtained for the DMR communication strategy.

The Chairperson asked about capacity building. The DMR did not have enough staff to enforce compliance with the MPRDA. Licences had been granted without inspections being undertaken.

Mr Edson Ragimana,
Chief Financial Officer, DMR, replied that the DMR had locked on to its new structure. There was a need to build capacity, especially in the regional offices. For this they were dependent on the appropriation of additional funds.

Mr Joel Raphela, Acting Deputy DG: Mineral Resources, DMR, said that the DMR had been able to redirect capacity during the moratorium period,. This would end in February 2011. Members had been seconded internally. There was capacity to assist the DMR. An overall review of the entire structure was needed, especially in the busier regions. The DMR was now seeing positive signs. The impacts of the current actions would become clear.

Mr Marais had three questions on the Annual Report. In the disclosure notes to the financial statements it was reported that DMR staff owed the Department R566 000 for leave taken without the members having sufficient leave credit. He asked how senior officials sign a member's leave form without that person having enough credit. This was a normal line function. The CFO had explained the policy of leave entitlement earlier and under what circumstances members could be paid out for unused leave. He asked if there was any cap on leave allowances. If a member was entitled to 21 days, for example, he wanted to know how many days could be accumulated and if there was a minimum number of days which had to be taken. The trend was that people accumulated leave and then sold it back to their employer. This was wrong as people needed to take a rest from their daily work. He asked if performance awards were linked to members' performance contracts.

Mr Ragimana replied that performance awards were linked to performance contracts. The policy for leave was in line with Department of Public Service Administrative (DPSA) regulations.

Ms Nkhumishe said that members were entitled to 22 days leave per annum. They had to take at least ten consecutive days within the year and the remainder before the end of the following June. The policy precluded the accumulation of leave. It might happen that a staff member was unable to take leave due to work requirements. In this case the person's manager would have to disapprove the application with written reasons. The member's leave would then have to be rescheduled. In the rare event of a person not being able to take leave within the prescribed period, the responsible manager would have to explain to human resources (HR) management why leave had been denied. If acceptable reasons were put forward then the DG would decide whether that person's leave should be paid out or not. Staff were reminded of any outstanding leave before the start of June. Leave would lapse if there was no good reason for it not being taken.

Mr Marais accepted the explanation. The DMR should look at the managerial skills of its officials. If poor management was preventing staff from taking leave then there was a problem in the Department.

Ms Nkhumishe said that the DMR did analyse leave records and tracked requests. Poor leave management would become a norm if this was not done. The Auditor-General had said that there was a need for stricter control. The regional offices sometimes did not have access to the Persal system. It was in the regions that the irregularities were occurring. On 1 January each year staff members were credited with either 22 or 26 days, depending on their seniority. Days would be deducted from their leave credit if leave had been granted in excess of the annual allowance during the previous year. Updates on leave credit should be made available on a monthly basis. The DMR was looking to implement a system where members could apply for leave on line. The system would interface with Persal. If the member had credit then the days requested would be deducted automatically. The DMR was trying to eliminate the paperwork associated with leave applications.

Ms L Moss (ANC) wanted to see what the Department's structure was like after the split. It seemed that there were no proper line staff. The Committee needed to see what the organogram looked like. She asked what the budget constraints and capacity problems were. HR was the most important programme in the Department.

Ms M Phaliso (ANC) asked what functions of the DME had gone to the DMR and the DOE respectively. The Committee needed details and a time-frame. The Departments had been operating separately for more than a year. If the split was not concluded then the Departments could not service the needs of the community. Mining was a monopoly sector that needed to be transformed. She asked if the split would be delivered within the five year term of the current Parliament. She asked what was delaying the split. She felt that there was still some unfinished business.

Mr Ragimana said that the split had been completed by April 2010. The budget had been split and each of the new Departments had its own accounting officer. The Annual Report reflected the situation as at 31 March 2010. He acknowledge that this might lead to confusion. In terms of the structures, the approved structure had been sent to the Committee at some point. He would send it again with some additional information.

Programme 2: Mine Health and Safety Inspectorate
Mr David Msiza, Acting Chief Inspector of Mines, DMR, explained the purpose of the Mine Health and Safety Inspectorate. Achievements for the year included improved stakeholder relationships. Quarterly meetings were held with Unions, the Department of Labour (DoL), Department of health (DoH) and Directorate of Public Prosecutions (DPP). The Inspectorate encouraged the regional offices to form similar forums. Health and Safety risks had been identified. Inquiries and investigations had been completed as planned. 83% of the planned audits and 91% of planned inspections had been undertaken. Existing guidelines on matters such as underwater mining and emergency preparedness were reviewed on a continuous basis. A common approach was being adopted by the DMR and its regional offices on policies and procedures. One of the procedures was the inclusion or non-inclusion of fatal accidents in statistics. In terms of HR development, 99 officials had completed a course on risk management in mining, and 97 had completed health and safety training. This was also a continuous process. A second summit on hard rock management had been run during 2010.

Mr Msiza said that there was an improvement in safety performance. There had been a drop of 60% in fatalities and 44% in injuries. There had been a plateau of fatal and non-fatal accidents in 2006/07. Critical actions had been taken. An unsafe mine had been shut down and action had been taken on stoppages. As at the end of March 2010, there were approximately 0.15 fatalities for every million hours worked and 0.2 injuries.

Mr Msiza said that the number of fatalities in all mining sectors had decreased by 25% during the first nine months of 2010 compared to the same period in 2009. The rate of fatalities was the lowest ever in the history of South African mining and the figures compared well to countries such as Canada and Australia. Even so they were still too high for him. One of the challenges was capacity building. Many of the current inspectors were old. To do this, one of the corrective measures taken was the appointment of nineteen learner inspectors. They came from an electrical or mechanical background. They had been sent to the Goldfields Academy for their practical training. The learner inspectors had been placed in the regional offices. There were also eighteen bursary students. Training initiatives had been created in cooperation with various institutions. An electronic business management system had been implemented.

Mr Msiza said that a second challenge was in compliance level monitoring tools. A common approach was being followed. An electronic business management system was still being developed. The third challenge was with fall of ground (FOG) accidents. These were most often caused by rockbursts. The DMR had stopped the practice of special areas being declared in mines as these were the dangerous areas. Old pillars were under enormous stress. Some mines were going back into such dangerous areas due to the high cost of gold at present.  The stricter policy had already led to a 77% drop in fatalities and a drop of 30% in all accidents. Some kind of tool was needed that could issue a warning of conditions likely to result in a FOG accident. SIMRAC was busy with a project on the integration of seismic networks with the Geosciences Council (GCS). A specialist task team had been created to look into FOG accidents. Quarterly review meetings were held between the Minister, Chief Executive Officers (CEOs) and labour organisations. The rock engineering capacity of the Inspectorate was being enhanced at head office and in the regions.

Mr Msiza said that the final challenge was occupational health. Many mines had gone a long way to improve health conditions. The tuberculosis (TB) guidelines had been reviewed. A Chief Directorate on Health had been established within the DMR. Silicosis road shows had been held. This was a significant disease which resulted from exposure to quartz. The Inspectorate had regular contact with the National Institute for Occupational Health on HIV/AIDS programmes and also for TB campaigns.

Ms Mathibela asked how many inspectors were employed by the DMR. She asked if there were safety inspections before applications for re-opening old mines were granted. TB was a highly contagious disease. She asked how the overcrowded nature of mine housing increased the spread of the disease.

Mr Msiza replied that the Inspectorate currently employed 275 people. The total complement was about 360. The learnership programme was assisting. The vacancy rate had been 33% at one stage but this had now been reduced to 16%. The Inspectorate was working with other branches of the DMR on the question of better housing. Mines had to move away from the hostel style of accommodation with up to sixteen men sharing a room. Such cramped conditions carried a high potential for the spread of disease. New studies into the HIV/AIDS status of miners would also look into accommodation conditions.

Mr Marais said that the shortage of inspectors had been noticeable when the Committee had conducted oversight visits. They had to cover large geographical areas. He welcomed the appointment of the learner inspectors. He asked when they would be sent into the field. He also welcomed the adoption of guidelines on TB. There were still no answers on silicosis. This was a most serious issue. Mining was the backbone of the economy and the country could not afford for the industry to be hampered by illness.

Mr Msiza replied that the learner inspectors had been absorbed into the Inspectorate. They were currently undergoing practical training on the mines and were learning the work of inspectors. They were still to be certified. He would find a copy of the TB guidelines. Silicosis was still a concern. The DMR had met with stakeholders in 2003 to address this area as well as the problem of hearing loss. Steps were in place to conduct research.

Mr Gololo asked if the DMR knew what the cause of the recent accident in Chile was. This programme could do more to improve safety. It seemed that corrective measures were only being taken in respect of TB. He asked what was being done about HIV. This disease contributed to fatalities.

Mr Msiza replied that the accident in Chile was an FOG incident but the details were still unknown. It was only the rescue aspect that had been publicised. The DMR would acquire a full report on the accident.

Ms J Ngele (ANC) was glad that activities in the special areas had been stopped. She asked if this meant that there would be no more accidents. People knew that these areas were dangerous but continued to work in them. Old pillars could collapse at any time. She asked if activities in the vicinity of pillars had also been stopped. Policies to stop mining in dangerous areas were only adopted after many miners were killed. She was happy that specialist teams were in place. The DMR was only thinking about establishing such teams now.

Mr Msiza replied that the DMR no longer accepted the declaration of special areas. These areas were to be avoided. Inspectors had to be thoroughly briefed on where the danger areas were by mine management before going underground as it was difficult to detect these conditions on site. If the inspectors were not satisfied then they had the power to stop all work at the mine. Increases in the price of gold and platinum were encouraging mining companies to go back into unsafe areas. More inspections were needed.

Mr Sonto said that the Inspectorate was claiming the achievement of internal policy and procedures as one of its successes. What was meant by the inclusion or non-inclusion of fatal accidents? He asked what the earlier practice was in this regard. He asked at what stage the electronic business management system would be introduced. The Annual Report quoted an amount of R174 000 had been under-spent. This was ascribed to the prevalence of vacancies. At what skills level was the DMR was looking at? He asked where the learner inspectors had been deployed after they had been trained in 2009.

Mr Ragimana replied that some of the funding had been redirected to cater for expenses under the Goods and Services programme. It was possible to transfer a limited amount of money in this way under the conditions of the Public Finance Management Act (PFMA). The figure quoted was not a true reflection of spending patterns.

Mr Msiza said that the reporting of deaths on the mines referred to deaths that were not the direct results of mining accidents, for example, should a miner suffer a heart attack underground. Some mines requested that such deaths should not be included as part of their safety statistics until the cause of death was confirmed by a post mortem. The health and safety compliance system should be in place by the end of the FY, hopefully.
IRCA Global, an international risk management solution provider, was developing the system. The fact that this was not yet ready did not meant that there was no interim system in place. The regions had their own systems in place. The DMR was striving to have an overview of all mining activities readily at hand. The Department had taken advice on how to deal with under-spending.

The Chairperson noted that some progress had been made, notably in addressing the challenges faced by the Inspectorate. The SIMRA project was an example. This Fourth Parliament was seized with the matter of mine safety. He was pleased to see that there was some progress. It was still a challenge to predict a seismic event. He felt that the DMR was evading this question. He asked how many inspectors were needed. He asked if it was possible for the DMR to benchmark itself against other countries in terms of the injury and fatality rates. He agreed that that there had been an improvement in the safety statistics. He liked the attitude of the DMR that even one fatality was one too many. This showed that they were not complacent. He was pleased to see that 99.9% of the money allocated to this programme had been spent. He found that it was irritating to have to roll over unspent funds.

Mr Msiza agreed that the South African mining industry could not be proud of its safety record. The recent events in Chile had put mining safety into the forefront. The number of inspectors required would be assessed as part of the restructuring exercise being undertaken. The North West was the busiest province with 200 000 persons employed in mining. The establishment of a second regional office in the province would alleviate the travel requirements. He would provide information about benchmarking at a later stage.

The Chairperson asked if there were any positive outcomes from the DMR's engagements with the Department of Labour and DPP. There was a backlog of cases. He asked if there was any movement. The DoL was not his area of competence. There were media reports that mines were flouting labour laws. Workers were not being paid salaries and other benefits. There was no insurance cover.

Mr Msiza said that engagement with the DPP and the National Prosecuting Authority (NPA) was producing positive results. The DMR was expressing reservations with the way some cases were handled. In some cases the only sanction against illegal miners was a R50 fine for trespass. The DMR was happy to see an improvement in the charges being brought recently. A dealer in minerals mined illegally had recently been fined R200 000. The DoL was striving to engage with unions and employers. The enforcement of the Labour Act was now part of the DMR's mandate. It would act on reports and engage with the relevant bodies. Joint inspections would be held.

Programme 3: Mineral Regulation
The Chairperson said that Programmes 3 and 4 were closely related. The Committee would listen to both presentations before discussing the issues raised.

Mr Raphela said that the purpose of Programme 3 was to regulate the minerals and mining sectors in order to achieve transformation and sustainable development. The DMR had exceeded its target in terms of granting mining rights to the historically disadvantaged South Africans (HDSA) community. It had exceeded various targets of conducting inspections into the Mining Charter and environment in order to monitor and enforce compliance. Relevant legislation was being effectively implemented. The target of conducting industry workshops had been exceeded. Awareness was being raised in all regions.

Mr Raphela said that there were still challenges. While many targets in granting rights to HDSA had been exceeded not many of the prospecting rights granted were actually converted into mining rights. Some of the rights granted could have been put up for auction without the consent of the Minister. There was an inadequate capacity to conduct compliance inspections. A limited number of Section 93 and Section 47 notices had been issued. An increasing number of complaints were being received from communities. These were mainly related to allegations that mining companies were not fulfilling their social level plan (SLP) commitments. One particular matter had been raised at the Committee. Funding was also a challenge. There had also been a challenge in the migration of the Department's offices to new premises.

Mr Raphela said that a moratorium had been placed on lodging new prospecting rights had been imposed pending a thorough audit of all rights granted since the implementation of the MPRDA. A new electronic system had been developed to process applications. This would allow for on-line applications. There was transparency. Time frames for the process of applications was being reduced. The capacity of regional offices were enhanced by the deployment of Chief Directors (CDs). Additional CD posts had been created and additional resources had been made available for monitoring and evaluation (M&E). There was a new focus on M&E. A new phase of the implementation of the MPRDA was being entered. Guidelines were being developed to address this work. The DMR was investing in the training and development of staff.

Programme 4: Mineral Policy and Promotion
Mr Tseko Nell, Acting Deputy DG: Mineral Policy and Promotion, DMR, said that the purpose of Programme 4 was to formulate mineral-related policies and promote the mining and minerals industry. It strove to make the industry attractive to investors. Success included the Mining Summit that had been held with all industry stakeholders. South Africa had only felt the impact of the global economic crisis of 2008 during the 2009/10 FY. MIGDETT intervention had mitigated against job losses. Some 600 000 jobs had been saved. Sections of the Labour Act and MPRDA had been used to achieve this. A strategy on sustainable growth and meaningful transformation  of the industry had been adopted. The strategy was in place by 31 March 2010 and would be implemented during the 2010/11 FY. An evaluation of the state's exposure to the mining industry had led to a moratorium on the disposal of state-owned mining assets. A complete report would be tabled at Cabinet during the current FY. A mining report had contributed to the country's report to the United Nations Commission for Sustainable Development. A mining charter assessment report had been completed. The Minister had approved a strategy for the rehabilitation of derelict and ownerless mines.

Mr Nell listed the challenges. The first was in the field of beneficiation strategy. This was an arduous path to follow. The DMR was consulting various stakeholders. A presentation had been made to the Economic Cluster and to Cabinet. The implementation plan for derelict and ownerless mines had to be finalised. This was in the pipeline for the current FY. The threat of Acid Mine Drainage (AMD) was a major concern. An inter-ministerial committee had directed the DMR, Department of Science and Technology (DST) and the Department of Water Affairs and the Environment (DWAE) to look at AMD. This was an authoritative message that government was prepared to take action. The team was doing well and would soon be reporting back to the inter-ministerial committee. The final challenge was the formulation of a small scale mining strategy. It was a challenge to introduce this level of mining into what was a robust industry. Efforts were being made to consult with stakeholders.

Mr Nell then went through the corrective measures. There was broadening consultation within the government system and with stakeholders on the beneficiation strategy. The implementation plan for derelict and ownerless mines was being finalised. A comprehensive forum was engaging on water resources and management to face the AMD threat. Apart from the government departments there was also involvement from the University of the Witwatersrand, Tshwane University of Technology and the University of the Free State. The role of the Independent Development Corporation of South Africa (IDC) was being enhanced in the development of small scale mining while reducing the influence of the Council for Geosciences.

Mr E Mtshale (ANC) said that transformation had been the buzzword for the duration of the meeting. There was no mention of what the concept meant.

Mr Raphela said that transformation was a policy angle.

Mr Nell said that the definition of transformation was different for civil servants. The DMR looked at the law and the Constitution and tried to uphold those values. All citizens had an equal opportunity to apply for mineral rights. The DMR was trying to find ways in which the historical injustices could be addressed. Members of Parliament gave the mandate and various interventions. The DMR would enforce the mandate given to it.

Ms Moss said that as a Member of Parliament she knew what her role was. Parliament was responsible for policy and legislation. She asked what monitoring systems were in place to see whether transformation was happening. The DMR must know what was contained in the applications. Social plans must be monitored.

The Chairperson said that a day had been set aside to review the Mining Charter. Members would be briefed on the new charter. There would be deeper engagement. He asked if the law was being implemented. Public hearings had been scheduled. He asked what the mining companies were doing.

Mr Mtshale was talking about transformation. He asked how the DMR was implementing the policy. The Department seemed unsure of what was happening. He needed to see what was transformation and what was not transformation.

The Chairperson said that this matter would be debated on the day set for that meeting. Certain sections of the Constitution, such as Section 24, dealt with transformation. Natural resources should be used for the benefit of all the people. Section 100 of the MPRDA also spoke to transformation.

Mr Sonto noted that Programme 3 had exceeded its target of granting rights to the HDSA communities, but this became a challenge in itself. He asked if those who were granted prospecting rights ever went into mining. He asked where the opportunities were being missed.

The Chairperson asked what the targets were. Rights had been auctioned without the consent of the Minister. The Committee would look at the Mining Charter at a later date. The DMR acknowledged that a limited no of notices had been issued in accordance with Sections 93 and 47. He asked if this was why the intended objectives had not been realised. Mineral rights were linked to social and labour plans. The Committee had been inundated with complaints from HDSA communities. The validity of the complaints would be confirmed when the Committee went on oversight visits. He appreciated the idea of workshops. People could find out what their rights were and express their expectations. It was a good step.

Mr Raphela said that the DMR also received a lot of complaints from the communities on a wide range of issues. Many related to companies not complying with their SLPs. The Department planned to accelerate the workshop programme. A programme of road shows was under way. The low number of Section 93 and 47 notices would have to be taken up in the regional visits. Negative reports were being made. A key issue was the provision of feedback from the audit to the applicant. The rights holder should know where he or she was going right or wrong. The target for HDSA rights grants was 27 while 300 had been received. What was a mystery was why the was such a slow pace of meaningful development given the number of rights being granted. Clearly the country would be a hive of activity with all the prospecting rights that had been granted, but this was not happening. This was why the DMR had instituted the audit. The Minister would make an announcement when the audit was completed. Very important lessons were being learned. There were transactions of rights without the consent of the Minister.

The Chairperson said that Members must still engage on the report of Auditor-General.

Ms Ngele said that it would be wise to include the community in the discussion on transformation. She noted that there was no mention of community leaders in the forums created by DMR.

Mr Gololo also remarked that the granting of mineral rights to HSDA was both a success and a challenge.

Mr Raphela replied that the audit had been done and would produce the answers. Rights had been granted to HSDA communities but the measure of the success of the process was wanting.  In some cases the holders of rights did not comply with the terms and conditions. The holders were not taking action on their rights. More monitoring was needed. Rights holders should be held to account. The new entrants to the industry since the passing of the MPRDA were changing the landscape.

Ms Mathibela said that job losses had increased by 10% due to the recession. She asked if there was still a high possibility of more job losses.

Mr Nell said that the DMR had anticipated that there would be a number of retrenchment. The mining industry had been asked to provide an estimate of how many people might be dismissed. The DMR had considered the position in terms of the MPRDA and labour legislation. This was how the figure of 60 000 jobs saved had been calculated. There had been no notices of intention to retrench workers since the start of the economic recovery. In fact some mines were now hiring new staff.

Mr Marais said that part of the planning of the DMR to address the issue of mineral rights during the moratorium period was the deployment of CDs to the regional offices. New posts had to be created. He felt that a Director was already a senior position. Job creation had happened on a senior level. He felt that if a Director was not fit enough to run a regional office then he or she did not deserve that position.

Mr Raphela described the organisational structure of the DMR. The nine regions were divided into three clusters. Each cluster reported to a CD. Deploying a CD to a regional office improved the hand-on management expected of that CD. The manager of each region was a Director. Not all of the regional offices were as busy as others. The North West was the busiest region. The DMR had found that a different approach was needed.

Mr Sonto said that the DMR was moving towards electronic systems that were more complicated.  What was really needed was better person to person contact. People in a province like the Northern Cape were not likely to have access to electronic systems and the internet. This corrective action was suspect for the stated purpose.

Mr Ragimana said that the motivation for the electronic systems was exactly the reason cited by Mr Sonto. People could apply for rights from anywhere in the country. Mining was a sophisticated operation and applicants needed to have access to the necessary expertise. Some applicants might need assistance in completing their applications. The DMR would be establishing a certain number of self-help centres.

The Chairperson said that the Auditor-General had reported under-expenditure of R7.4 million. The accounting officer had alluded to delays in the mine rehabilitation process and vacancies. Derelict and ownerless mines represented a serious challenge. The funds to implement the rehabilitation process would have impact on service delivery in other areas.

Mr Ragimana said that the under-spending was mainly related to the rehabilitation process. Much of the money was already committed by the end of the FY and the DMR had asked for a roll over. Initial work was being done by Mintek. The timing was a problem. A roll over of R5 million had been approved.

Mr Sonto had a general question. He was looking at the corrective measures to address the challenges. It seemed that most of these measures were still at a concept stage. He asked how implementation plans were being translated into action.

The Chairperson asked if there were any time lines attached to the beneficiation strategy. A lot of stakeholders had been involved. An amount of R38 million had been allocated to assist mines. The transfer of funds for derelict and ownerless mines was not automatic. The Committee would continue to watch developments in the small scale sector.

Mr Nell said that the beneficiation strategy was in the final round of adoption. It would soon be tabled at Cabinet. The small scale sector had been discussed at meetings held over the weekend. A draft strategy was in place but would be workshopped before it could be finalised. The DMR would make a presentation to the Committee when it was ready.

Mr Marais said that the budget made provision for about R53 million for rehabilitation of mines. This was too little, but it would be acceptable if roll over funds were added. The process of rehabilitation would become more intense during the current year and the whole allocation should be used.

The Chairperson asked what the basis was for the qualified report of the Auditor-General.

Ms Mpumi Gaven, Manager: Office of the DG, DMR, said that a plan for derelict and ownerless mines was being developed for implementation in the short to medium term. The DMR would revert to the Committee. The rehabilitation process would be in three phases and would cover a ten year period. The DMR would first review the methodology. Manuals would be developed as a result. Priorities would then be determined and the degree of risk would be assessed. Full scale rehabilitation should begin by 2016. She anticipated huge bills, and the plan would have to go beyond the fiscus as a source of funds.

Ms Gaven said that one of the reasons for under-spending was a pumping subsidy that had not been spent. The pumping subsidy was paid in accordance with the Assistance to Mines Act of 1958. The focus of the Act was on a particular gold mine for a specific reason. The DME had formed a committee with the then Department of Water Affairs and Forestry (DWAF) to determine which mines would qualify for assistance. Criteria had been formulated including socio-economic circumstances, safety, the Rand – Dollar exchange rate and the price of gold. The mine had to be operational to qualify.

Ms Gaven said that the reason for the under-spending was that a company had lodged claims for assistance between October and December 2009. The company had been under provisional liquidation at the time. The liquidator became the curator and handled all the business matters. The DMR had all the details. The application had been lodged in the name of the company, but the DMR could not process the payments. By law the invoice had to go to the liquidator. The DMR had met with the liquidator and had advised him to lodge the claim. Certain matters had to be verified by National Treasury (NT). Once all the necessary approvals had been done the claim had been processed. However, this meant that the payment was only made in the new FY.

Mr Ragimana said that the DMR was in a transit mode. It had operated its finances on a cash basis but was moving towards an accrual basis. They had followed Treasury guidelines by adopting a modified cash basis in the interim. There was a distinction between amounts committed and amounts expected. The qualification was based on this situation. The DMR collected revenue from royalties and prospecting fees. These were all accounted for. Projections had been made for the end of March. The Auditor-General had found gaps in this process. There had been a significant change in the attitude of the Auditor-General recently. The DMR was operating in more or less the same way for the past few years and had received unqualified reports. NT felt that the Auditor-General should accept the prevailing situation. The issue of the completeness of receivables would not normally lead to a qualification. There was an internal gap. The Department had engaged with the Auditor-General. The new approach to auditing was being followed.

Mr Ragimana said that the Auditor-General had reported on a discrepancy of R25.6 million and another amount of R10.4 million from 2009. The books should be re-audited in light of the new audit approach. New data systems were being developed. There were gaps in terms of the level of consistency at the regional offices. Monthly meetings were held with officials to address problems. There was a drive to recruit people with a financial background for the regional offices. It was an ongoing process. Financial statements would be prepared more frequently so that errors could be detected before the audit. He was confident that the issues would be resolved by the end of the FY.

The Chairperson said that the first draft of the Committee's report would be prepared for discussion. After some discussion Members agreed to meet on 21 October. There was a better opportunity to engage with the report when dealing only with the DMR. This was the last chapter in the split. It was important that quorum would be present.

Mr Marais would not be able to attend as he would be busy with party work. He would provide written comments.

Ms Moss said that Members had a responsibility to Parliament. The work of Parliament should take precedence over party work.

The Chairperson said that it was a difficult situation. Members could not interact with written comment.

Approval of Committee programme
The Chairperson asked Members to approve the Committee's programme for the current sitting of Parliament. Mr E Marais (DA) proposed that the programme be adopted. Ms Mathibela seconded the proposal. There were no objections.

The meeting w
as adjourned.


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