Mineral Resources response to State of Nation Address, Committee Programme and 2010 Annual Report

Meeting report

Impact of the State of the Nation Address by Department of Mineral Resources
Mr Sandile Nogxina (Director-General of Mineral Resources) presented the analysis stating that due to the time constraints, having only heard the address a week ago, they could not provide an in-depth assessment but he would delve specifically on those points that had the biggest impact on them. Three points of discussion were outlined, those being the Department’s Mining Sector Strategy, the State Owned Mining Company and the Beneficiation Strategy.

He began with the Department’s growth strategy of the Mining Industry Growth, Development and Employment Task Team (MIDGETT), linking it with the job creation goals outlined in the State of the Nation Address (SONA). MIGDETT had a two pronged mandate of which one was to mitigate job losses in the sector during the global financial downturn, while also positioning the industry along a sustainable growth path when the economy returned to its upswing phase. This strategy had also been put up for consideration by the Ministerial Cluster on Economic Sectors and Employment and was hoped to be presented to Cabinet for adoption. He noted the co-operation of the mining sector in terms of this strategy and hoped the success of this strategy would benefit all.

His second point concerned the government’s endorsement of the African Exploration, Mining and Finance Corporation (AMEFC), presented by the Department to government, to form the nucleus of the State Owned Mining Company. The DMR had been encouraged to work alongside the Department of Energy in finding a way to make AMEFC, which currently was a subsidiary of CEF, a standalone entity.

The third issue he highlighted from the President’s speech had to do with the Beneficiation Strategy that was up for finalisation and adoption by government which would become official policy. The Committee would be briefed in due time once the strategy had been approved.

His last point spoke to the SONA’s mention of government vacancies, in which the Department had set itself a target of filling these positions by the end of June. He cited the vacancy rate sitting at 16% across all portfolios in the Department.

Discussion
Mr Gololo expressed his appreciation for the successful operation of MIGDETT and the Department’s challenge of filling job vacancies even recommending a student that he knew of. He inquired as to how the DMR’s expected growth strategies would involve the private sector and advised that they should also make skills development an element of focus, specifically development of youth in mining towns. He also wanted to know who the directors would be of the anticipated State Owned Mining Company (SOMCO).

Mr Schmidt inquired what the status of the strategies would be once adopted. Would they become policy, regulations or law? He also asked whether the DMR had followed best international practice in terms of adopting their beneficiation strategy.

Mr Nogxina responded that one of the key challenges in filling the vacancies, especially in his department, had to do with attracting and retaining those with the skills for the jobs being advertised and this challenge would need to be overcome. The DMR had been enlisting the private sector’s participation within MIGDETT and while the Department’s role should be to facilitate an environment where jobs can be created, much of the burden to create jobs still fell on the private sector. He mentioned that their growth strategy had a very strong element of skills development especially on skills that needed to be retained. The current directors for AMEFC, as a subsidiary of CEF, had been appointed by CEF and the existing board members serving on this board may not be the same once SOMCO was up and running. As to the status of the strategies, the growth strategy was hoped to result in some law changing if passed and the beneficiation strategy would have parts of it migrate to regulation status and other parts to policy. This could only be verified once feedback from Cabinet was attained. He confirmed that while keeping in tune with best international practice, DMR also held in mind the specificity of the South African case as to how best to shape the beneficiation strategy here.

Mr Sonto was pleased about the decision taken by the Committee to support the DMR’s efforts to create a SOMCO, despite the cries from Democratic Alliance members about nationalisation. The Presidents’ SONA had vindicated and agreed to the establishment of SOMCO. The strategy in place from DMR was welcomed but he cautioned against its snail pace. Citing the experience of the Committee on the Chile and Bolivia study tour, he emphasised the readiness of the Committee to establish a SOMCO based on the lessons learned from these countries.

Mr Schmidt raised his concern that SOMCO, unlike all the other state owned enterprises in South Africa that operated in a monopoly environment, would need to operate in a competitive industry. Hence it would have to be profit driven for it to survive. There existed the risk for SOMCO to become another Alexkor which had gone bust.

Mr Nogxina assured members that the mistakes of Alexkor would be avoided by the endeavours of SOMCO. However he warned that it was premature to discuss the failure or success of this company before the business plan had been presented to the Committee. Only after real interrogation into the workings of the company, could this be useful. As to the success rate of other state owned enterprises, Mr Schmidt had forgotten to mention Petro-SA which had become a successful commercial entity that operated in a competitive industry. He used this as proof that SOMCO could be successful, but again that would be dependent on its business case and how well its leadership guided it.

The Chairperson reminded the Committee that SOMCO was still work in progress and the DMR would appraise them on this issue as time went on. The Committee had yet received neither its action plan nor its business case and hence advised such commentary and interrogation should wait until they were presented to them. As for the issue of mineral resource wealth being a countering instrument to alleviate poverty, he cautioned that due to the political volatility of the country, it was imperative that the Committee ensure the success of such endeavours.

Apology from Committee Section about Study Tour
The Chairperson thanked members who had travelled to Chile and Bolivia on the study tours at the beginning of the year and apologised to members who had taken ill from the trip. This had been due to the unknown climate and inadequate information given to the Committee Section by the travel agency. A follow up meeting would be held with the agency to ascertain why the Committee had not been warned of the serious health hazards of such a trip - so as to prevent such an incident occurring again. He then reassured the Committee that everyone had made a good recovery.

Committee Programme for First Term: adoption
The Chairperson guided the Committee through the programme document noting two important points. The first being the dates of scheduled meetings. He reminded members that Fridays were now days on which meetings could be scheduled, unlike before. The second issue dealt with the expected public hearings whose dates were expected to shift to the end of the month and the venues moved. One would be held in Gauteng in a small mining town in Carltonville and the other in the North West in Klerksdorp. The reason for these changes was due to the Committee exhausting its budget from the study tours. Following its request to parliamentary leadership, the loan could only be fulfilled if the hearings were shifted. To date, the Committee was still financially overstretched and was awaiting its budget allocation.

Mr H Schmidt (DA) inquired from the Director-General with regards to the Annual Committee Report whether the Petroleum Agency of South Africa (PASA) or the Mining Qualifications Authority (MQA) still reported to the Mineral Resources Committee.

Mr Sandile Nogxina (Director-General of Mineral Resources) replied that until the law had been amended, the MQA would continue to report to the Department of Labour and PASA to the DMR.

The programme received no further challenges and was adopted

Mineral Resources Portfolio Committee 2010 Annual Report: adoption
The Chairperson noted that the document contained not only the guiding objectives of the Committee but also the actual work that had been done. Any issues outstanding would be dealt with in those particular annual reports, such as the affairs of the State Diamond Trader that was receiving ministerial oversight.

Mr Schmidt raised a concern about the lack of follow up for the members as to what conclusions had been reached regarding certain matters. For instance, what had been the final decision by the Department of the Limpopo province in the Limpopo Economic Development Enterprise (LIMDEV) affair? He suggested that in future there should be an effort to clarify and inform the Committee about conclusions made on matters presented to it.

The Chairperson replied that the Ministry had reported to LIMDEV as well as the Committee that no changes could be made to the leadership structure of the entity until ministerial approval had been granted but an update was still being awaited. These were decisions that were taken off the agenda as they had been resolved.

Mr M Sonto (ANC) expanded Mr Schmidt’s concern suggesting that perhaps an extra column should be included to show the finality of the decisions come to by relevant parties.

Noting that a quorum had been established, the Committee moved to adopt the Annual Report of the Portfolio Committee on Mineral Resources.

Meeting was adjourned.