Mining Health and Safety Council 2009/10 Annual Report, Namaqua Diamond Fund Trust , Alexkor legal opinion, State-Owned Mining Company discussion

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Mineral Resources and Energy

28 February 2011
Chairperson: Mr F Gona (ANC)
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Meeting Summary

The Mining Health and Safety Council (MHSC) stated they had received an unqualified audit form the Auditor-General, despite their being issue with Supply Chain Management and Procurement processes.  There had been a reduction in mine fatalities by 24% since the previous year. The MHSC had revised its strategic priorities on a three-year rolling plan. It had developed a Balanced Scorecard (BSC) to monitor performance against the strategic objectives.

During the 2009/10 financial year, four advice reports were submitted to the Minister. These were based on outcomes of research work, implementation of research outcomes and issues raised by stakeholders. At a summit in September 2008, the stakeholders had identified a need to develop a culture transformation framework and the “Changing Minds, Changing Mines” initiative was conceptualised. The aim of this project was to develop a health and safety culture transformation framework that would allow the South African mining industry to significantly improve its health and safety culture. In terms of
Internal Business Process and Managing Occupational Health and Safety (OHS) Research, the manner in which the OHS research was determined and managed was fundamentally changed during the 2009/2010 reporting period. The MHSC had undertook four key focus areas to monitor performance: Improving Efficiency, Embedding Processes, Automating Processes and Reviewing Business Processes & Procedures.

With regards to the financial perspective the summary of performance indicates that the MHSC had no audit queries raised by the Auditor-General on Performance Information. In terms of good governance and the internal audit, the Audit Committee was of the opinion that the internal accounting controls were operating satisfactorily. With regards to the R23 million under-expenditure, this was primarily related to Research. The research projects had been approved and contract agreements signed to utilise the research budget. Thus the surplus did not imply “uncommitted” funds. The issues with regard to irregular expenditure were structural and the MHSC had now put into place processes and capacity to eliminate these issues of non-compliance. They were already seeing an improvement in reporting of finances, which was now done monthly.

The Chairperson requested that as the MHSC was a tripartite structure, their delegation should have labour and employer representatives present. Members raised concern about the Irregular Expenditure and Fruitless and Wasteful Expenditure. They were assured by the MHSC that there had been no material losses except for a figure of R104, 000 relating to a cancelled launch and that the other issues were figments of the incorrect processed being followed in procurement which had been retrospectively ratified by the MHSC Council.  Members were concerned by the R23 million under-expenditure, but were told by MHSC that this related to dedicated research projects that were committed and would be paid in the future. Members were concerned about HIV/AIDS and TB and felt that the priority was being given to safety issues rather. They were told by the MHSC that they acknowledged this historic bias and were consciously striving to change this bias by the implementation of a dedicated leg that would be looking at these diseases. MHSC was asked how their objectives talked to the target of job-creation and specifically Government’s target to fill all vacancies budgeted for. The Committee asked for a detailed presentation on 16 March on the
Auditor-General’s matters of emphasis raised in the Annual Report.

The Committee decided to study thoroughly the Committee Reports on Northern Cape Oversight Report, Public Hearings on the State-Owned Mining Company and Study Tour to Chile and Bolivia after which they would reconvene to discuss the contents. It was decided that the Committee needed to clarify their position on the matter of the State Owned Mining Company (SOMC) before they engaged with the relevant departments.

Meeting report

Mining Health and Safety Council (MHSC) Annual Report 2009/10
Mr David Msiza, Acting Chairperson: MHSC, said health and safety were at the forefront of the MHSC’s role and that there had been an improvement in the reduction of fatalities. However, fatalities were still of grave concern to the MHSC. The Minister of Mineral Resources had commented that despite fatalities being at their lowest levels since 1985, they still needed to be concerned. Health and safety were included in the reviewed Mining Charter and a resolution was taken to form a task-team under the MHSC after meeting with private companies. There had been reduction of vacancies from 30% to 15%. There were also actions to fill all vacancies by June. The Minister had also had the MHSC review the Mining Health and Safety Act.

Mr Thabo Gazi, CEO: MHSC, said the MHSC was an advisory council which operated like a board and they did research to support national initiatives in mining health and safety. He noted that in the last meeting with the Committee, there had been questions about the R23 million surplus, which they would address today. He proceeded through the presentation document.
MHSC had revised its strategic priorities on a three-year rolling plan taking into account: opportunities and challenges facing the broader mining industry; past performance of the MHSC and related progress; relevance and efficacy of existing strategic objectives; the mandate of the MHSC; strengths, weaknesses and threats (SWOT) analysis of the MHSC and current and future opportunities and challenges.

The MHSC had developed a Balanced Scorecard (BSC) to monitor performance against the strategic objectives. Core features of the BSC included: Financial strategy for growth, sustainability, and risk viewed from the perspective of the stakeholder; Customer: strategy for creating value and differentiation from the perspective of the customer; Internal Business Processes: strategic priorities for various business processes that create customer and stakeholder satisfaction; Learning and Growth: priorities to create a climate that supported organisational change, innovation and growth. The graphical representation of the performance against the planned initiatives was tracked using a colour coding system and progress was reported to MHSC members and to the Minister on a quarterly basis

During the 2009/10 financial year, four advice reports were submitted to the Minister. The advice reports were on based on outcomes of research work, implementation of research outcomes and issues raised by stakeholders. Since1996, approximately 66 submissions on amendments to the MHSA and regulations dealing with various aspects of health and safety had been submitted to the DMR.  During the 2009/10 financial year, three regulations were submitted against a target of 6.

At a summit in September 2008, stakeholders identified a need to develop a culture transformation framework and the “Changing Minds, Changing Mines” initiative was conceptualised. The aim of the this  project was to develop a health and safety culture transformation framework that would allow the South African mining industry to significantly improve its health and safety culture.

In terms of
Internal Business Process and Managing Occupational Health and Safety (OHS) Research, the manner in which the OHS research was determined and managed was fundamentally changed during 2009/10. A significant change was the replacement of tripartite technical advisory committees and the use of technical experts to provide guidance and direction to the research providers. Further to this, the identification of research focus areas was improved by in-depth analysis of the mining sector statistics on OHS performance.

When considering the objective of maintaining effective operations of the MHSC,
they undertook four key focus areas to monitor performance: Improving Efficiency, Embedding Processes, Automating Processes and Reviewing Business Processes & Procedures.

In support of the initiatives to support and monitor OHS in the sector, the MHSC adopted the Management Information System that was developed by the Department of Mineral Resources. In terms of performance in Learning and Growth, job profiles were completed in the past year as the basis for the competence framework. Each employee signed a performance agreement and Council members and committees completed an induction course.

With regards to the financial perspective, the summary of performance indicated that the
MHSC had no audit queries raised by the Auditor-General on Performance Information. There was a significant focus on the Stakeholder Perspective in order to provide information on OHS issues to Ministry, employers and employees. Efficacy of MHSC operations by introduction of new systems and processes was completed. Financial management and risk reduction were continual and resulted in significant improvement through the year.

In terms of good governance and the internal audit, t
he Audit Committee was of the opinion, based on the information and explanations given management and the internal auditors on the results of their audits, and the status in addressing the matters raised, that the internal accounting controls were operating satisfactorily. This ensured that the financial records may be relied upon for preparing the annual financial statements, and accountability for assets and liabilities was maintained. Nothing significant had come to the attention of the Audit Committee to indicate that any material breakdown in the functioning of these controls, procedures and systems had occurred during the year under review. The Audit Committee was satisfied that the internal audit function was operating effectively and that it continued to provide assurance in relation to the risks pertinent to the MHSC in its audit. With regards to the financial statements, under-expenditure primarily related to Research. The research projects were approved in line with programmes and contractual agreements were signed to utilise the research budget. With this in mind, the surplus did not imply “uncommitted” funds, rather that the budgeted expense had not been incurred as of yet and that the monies were contractually committed. Expenditure due to project progress was not a fair reflection of performance.

Mr David Nolapo, CFO: MHSC, said that if one looked at the Annual Report there were issues with regard to irregular expenditure. These issues were just structural and the MHSC had now put into place processes and capacity to eliminate these issues of non-compliance. They were already seeing an improvement in reporting of finances, which was now done monthly.

Mr Gazi said, with regard to
Mining Sector OHS performance in the South African Mining Industry, there had been significant improvement since 1985 and there were many initiatives by all stakeholders. However fatalities and injuries were still higher than what was demanded. There had been a combined collaborative approach by all stakeholders to improve performance in this sphere. There was an improvement in the fall of fatalities by 24% and a lot of work and investment prioritisation was put into tackling gravity and seismically induced fall of ground. The MHSC had entered into an agreement with the Council for Geosciences to integrate all seismic networks. Six of the provinces had registered improvements in the eradication of silicosis, but three were tending in the opposite direction including the Free State, Mpumalanga and Limpopo. On the whole there was good improvement in eradicating silicosis, the MHSC wanted to put the focus on reducing silicosis-carrying dust in order to prevent future occupational health problems. 

With regard to noise exposure, it was evident that noise exposure was highest in the North-West; it was due to the fact that almost 50% of mine employees were based in that province. There was a problem with data reporting in terms of OHS in this sphere.  Going into the future, zero harm
was still the paramount consideration, not just fatalities, but the elimination of all injuries. In order to achieve this, the MHSC had a new Strategic Plan for 2011-2014. New internal processes had been implemented as part of internal continual improvement and the roll-out of the Cultural Transformation Framework had begun. Research Dissemination was prioritised as paramount and the finalisation of the Centre of Excellence had been initiated as well as the integration of the seismic network project with the CGS.

The Chairperson said that the MHSC had said that it was a tripartite structure, but that their delegation did not reflect that. He asked if there were any reasons why labour and employer representatives were not present.

Mr Gazi replied that in the past they had composed their delegations like the one present today, but that last year they had departed from tradition and invited labour and employer representatives. They had found that last year, these representatives had addressed stakeholder positions on issues and not Council issues. However if the committee wished them to do so, they would include labour and employer representatives in future delegations as they had last year.

The Chairperson replied that with the current Committee, the tradition was to have labour and employer representative present as that was what the MHSC had initially introduced them to. The manner in which this delegation was constituted talked to the ‘glossy’ report without any voices of contradiction. Taking this into consideration, the Committee would prefer all stakeholders to be present.

Mr C Gololo (ANC) said that the Changing Minds, Changing Mines (CMCM) initiative was good. He asked how the MHSC would be dealing with OHS for the State-Owned Mining Company (SOMC). He asked whether reasons for some targets not being met were related to non-availability of funds.

Mr Msiza replied that in terms of the modalities of the SOMC, Cabinet had taken the decision that the DMR and the Department of Energy (DoE) needed to return to Cabinet with a plan on how they would deal with the modalities.

Ms F Bikani (ANC) said that their mandate talked specifically to promoting health and safety. They seemed to be running away from prevention and using the term promotion instead. They should look at both promotion and prevention, not simply promotion. In terms of the Council composition, they had mentioned that they were adding an extra section to deal with HIV/AIDS and TB. She asked how this leg would relate to the
Mining Occupational Health Advisory Committee (MOHAC). She also asked for a model of the BSC. What were the challenges that the MHSC was facing in terms of influencing legislation?  She requested that the MHSC bring the Committee further details on the CMCM initiative as they moved forward with it.

Mr Msiza replied that he took note of the comments made around prevention and that their concept of promotion was to enhance prevention. However they would work on this.  In terms of influencing legislation, the challenges were that tripartism made internal agreement over certain areas difficult. However they had introduced a process document in order to mitigate against these problems. He stressed that the work being done was on existing legislation.  He added that they would come back to the Committee with details on the CMCM initiative.

Mr Gazi said that the legislation off-the-target issue had been touched on by his colleague and that it really related to the nature of how they developed regulations, which was more technical than legislation. Tripartite disagreements had a tendency to halt progress due to differing viewpoints. However, they had now developed a new process document stemming from a governance workshop. He thought that they would be able to overcome this issue.  With regards to the HIV/AIDS Committee, MOHAC dealt with OHS and therefore HIV/AIDS was not covered per se. BSC model details could be provided, it was essentially a balanced way of looking at the business from all angles.

Mr E Mtshale (ANC) did not understand why the Auditor-General (AG) had given the MHSC a clean bill of health if there was a shortfall.

Mr Gazi replied that with regards to the AG, they had an external contractor perform their internal audit function and that recently they had extended the scope of the Internal Audit Committee (IAC) to include broader functions. The IAC reported to the Audit Committee (AC) which reported to Council. The previous AC was weak, but they had brought in external members who were competent in audit functions and came from financial institutions.  Internally as management, they were looking at all units and core processes. He thought that these mitigations minimised the problems raised in the AG’s Report. These new processes were based on principles of the Council. There were lots of issues raised about procurement processes. Now they had centralised procurement processes and were confident that the issues raised would be addressed as they now focused on Risk Management. The AG had given them a clean bill of health despite the issues raised. 

Ms Bikani referred to page 49 of the Annual Report and said that it would be nice to have direct engagement on the AG’s Report in terms of irregular expenditure and fruitless and wasteful expenditure, possibly in another meeting.

The Chairperson interjected that the time was “now and here” to deal with these issues.

Mr M Sonto (ANC) said that currently, the ‘war-cry’ from Government’s side was one of job creation and skills capacitation. He said that they needed to look at substantive issues that affected the lives of citizens. He understood the MHSC organogram and they now needed to check whether their composition, BSC and CMCM concept talked to ‘war-cry’ of Government.  He asked how all the objectives implementation would talk to the target of job-creation and specifically Government’s target to fill all vacancies budgeted for.

Mr Msiza replied that he was positive that his DMR colleagues would come and present to the Committee on the issue of job creation. The MHSC position was that they were looking at creating 140, 000 jobs through the Mining Qualifications Authority (MQA). The MQA would be coming before the Committee on 16 March and would then be able to flesh out these issues.

Ms Bikani asked that on 16 March they also get confirmation and a detailed presentation on the AG’s issues raised in the Annual Report.

The Chairperson asked Ms Bikani whether she wanted to absolve the MHSC of the responsibility to respond to these issues now.

Ms Bikani replied that she had looked at the figures and thought that they needed a full briefing on the details regarding the R23 million figure.

The Chairperson asked Members to cast their eyes on page 80 of the Annual Report, as the notes contained there clearly explained things. He asked the MHSC to take them through the matters of emphasis.

Mr Msiza replied that the Audit and Risk Committee looked at issues raised by the AG to use as a sounding board to fit within a matrix which clearly indicated where problems were.

Mr Gazi said that with reference to the R23 million figure, it was a business model question which they had raised with the AC and Council. Although the MHSC had budgeted 100% for this year in terms of research expenditure it was impossible to disburse all the funds as the Council needed to accept the report first. They had reviewed the processes on reports and research contracts. They had cleared the impediment and would implement a new improved programme. However, due to the nature of the work that they did, the R23 million was not money unspent, but committed to pay for research that would be processed and accepted at a later date.

The Chairperson asked whether the difficulty here was that this money would be forfeited and questioned whether it could be recovered. The second issue was that in the DMR’s budget there was a budget for the MHSC and that when they looked at this, they would need to look at whether the MHSC had the capacity to spend their allocated budget. He added that State Owned Enterprises (SOEs) were meant to be developmental and that this would not happen if there were rollovers. If recurring rollovers of funds occurred, the question would be raised as to whether they could meet their developmental role. Taking this into consideration, the MHSC needed to give the Committee an assessment of whether they could recover this money and if they could spend it.

Ms Bikani said that when one looked at the request for money for derelict mines, they did not get the full figure requested. She also noted that the surplus was not money unspent.

Mr Gazi replied that the MHSC got R5 million from the DMR and that money was purely allocated to administration. This meant that the grant from the DMR was fully utilised. Under-expenditure related to research money which was committed to projects. These projects got extended which meant the money could not be disbursed in one year. He had requested the research people to look at a way to budget for expenditure per year, not project and they were working on improving the nuances of accounting for research budgeting.  He assured the Committee that the Department grant was fully spent.

Mr Nolapo said that the AG had said that as much as the spending of the MHSC was not done in vain and did benefit the organisation, the process followed was a violation of preferential procurement procedures. The AG reported that as much as the quotations for procurement were secured, they were not secured in writing in the correct manner. The AG took issue with the motivation for a sole supplier not being put in writing. Another issue raised by the AG was that a supplier did not have their tax clearance certificate in good order. There was no loss, but rather legislative non-compliance, the only loss was the Fruitless and Wasteful Expenditure figure of R104, 000. The MHSC accepted full responsibility for this. The R755, 000 figure was an impairment though losses due to depreciation, which was simply an accounting function.  The AG had said that there were no material losses.

The Chairperson asked who approved the process of condonation for Irregular Expenditure and asked how far along they were in this process.

Mr Nolapo replied that the Council approved the budget, meaning that the Council approved spending. Therefore the condonation should be presented to the Council for approval. In the same note on page 80 of the Annual Report, it said that the amount was included as Fruitless and Wasteful Expenditure, which effectively meant that when the Annual Report was presented, it was already represented as an expense. The fact that the AG recognised that it was a capacity issue, led to the Council accepting and condoning the figure.

The Chairperson said that this meant that Fruitless and Wasteful Expenditure was more than R104, 000.

Mr Nolapo said that this was not exactly the case as the condonation in the form of ratification did not mean that the expenditure was in vain. The only issue was that someone had to sign a document and the Council ratified this expenditure in retrospect.

The Chairperson said that the statement that the amount was awaiting ratification was after the books were closed and that the matter had already been dispensed with.

Mr Nolapo replied that this was correct.

The Chairperson asked whether they held anyone responsible for the R104, 000 Fruitless and Wasteful expenditure, as it seemed as if they did not.

Mr Gazi replied that financial commitments had been made for a stake-holder driven launch, but when the time came for the launch, the stake-holders were not available, which meant that the launch had to be cancelled.

Mr Sonto referred to page 49 of the Annual Report and said that Fruitless and Wasteful Expenditure was put at R104, 000, but that on page 80 there were penalties and interest amounts added to the R104, 000 figure, which he did not understand. The cancellation cost R102, 000 and South African Revenue Service (SARS) penalties were R2000, thus the R4000 amount added did not make sense.

Mr Nolapo replied that the cancellation cost of R102, 000 was added to the R2000 SARS penalties. It also said that there was interest of R2000 form the previous financial year, (which did not mean that it was added to the R102, 0000 plus R2000 figure, therefore the figure was at R104,0000.)

Ms Bikani said that there seemed to be grey areas around the adequacy of their policy on procurement. She thought that tax clearance was supposed to be a priority and added that cancellation of a launch event reflected poor planning, which needed to be acknowledged.

Mr Gazi replied that in terms of the procurement issue, the challenge for a small entity was that they did not have specific units. The problem was that there had been no individuals overseeing procurement. Now they had a dedicated Supply Chain Management (SCM) individual and were confident that these issues would not re-occur. In their perspective, when dealing with stake-holders, they were dealing with externalities which they could not control. Stake-holder involvement was on a voluntary basis and these individuals had many other obligations to their host employer, which sometimes meant that they could not attend to MHSC business immediately as it was their secondary function.

The Chairperson said the presentation made mention of legislative challenges. He asked how far they had proceeded, as last year they had said that they would be bringing forth amendments in 2011. He added that despite the warning from the MHSC that it was long process, he wanted an update of how likely it would be that they would come out this year.

Mr Msiza replied that the Minister had instructed them to review the Mining Health and Safety Act (MHSA) and the Mineral and Petroleum Resources Development Act (MPRDA) and that the plan was to finalise the matter by the end of the year.

The Chairperson replied that that was fine and added that he did not want to rush the process. On the issue of research and specifically Fall of Ground (FOG), he understood that the MHSC had a three year programme with the CGS. He asked if there was any indication of a breakthrough with the problem and asked for an appraisal.

Mr Naveen Singh, Chief Research and Operation Officer: MHSC, said that the project was in its infancy and that there was lots of groundwork to do. They were primarily looking at the gold sector in the North-West province at this stage. The good news was that Telkom and Neotel had allocated sites for their use.

The Chairperson said that the presentation did not give them figures on the exact number of fatalities.

Mr Msiza replied that there had been 128 provisional fatalities for the past year and that they were still investigating whether another four were a result of mining or due to natural causes. This was compared to 168 for the previous year and indicated a 24% improvement in the reduction of fatalities. Even though this was the lowest figure that they had ever had, they were still greatly concerned. They needed to take the good work that the Council had done literally to the coal-face.

Ms Bikani said that every time that the Committee had engaged with the MHSC they never got a clear picture as to their responsibility in terms of skills development. She asked what exactly their role around skills development was.

Mr Msiza replied that as they had indicated before, the mandate for skills development sat with the MQA. The CEOs of both the MQA and the MHSC sat on one another’s boards. As it was not the mandate of the MHSC, there was an agreement that the MQA would deal skills development and they would be in a position to expand on the matter.

Mr Gazi added that in line with national regulations, only one percent of their payroll was set aside for training.

The Chairperson said that the responses were sufficient as the MQA would be coming before the Committee on 16 March. With regard to OHS, he said that silicosis had not been covered to his satisfaction when they discussed engineering solutions. When one looked at asbestosis, there were different levels of exposure for different types of asbestos, however despite this people were still contracting diseases. He asked whether there was still any legacy of asbestosis.  The delegation had not given the Committee a clear answer on the role of the Department of Labour (DoL) on compensation. He asked whether workers who contracted silicosis got compensated and asked for the statistics and amounts on this issue.  

The Chairperson continued, saying while HIV/AIDS and TB was not the MHSC’s legislative responsibility, it was linked to mining OHS, especially TB. In this light he asked how they could not have spent time on this issue, HIV/AIDS was also caused by living conditions at mines.

Mr Msiza replied that they were not proud of the legacies they had around health and acknowledged that the previous focus was biased towards safety issues. The challenge with health issues was effective controls at the source. Although they could put levels in place, if measures were not put in places then the limiting levels would be useless. There still were cases of asbestosis, although they were declining. He agreed that HIV/AIDS did affect health and safety at mines. The Minister had requested that a summary be done on the rate of HIV/AIDS and TB infection in the industry. The study was being done by the National Institute of Occupational Health (NIOH) and the MHSC’s plan was to hold an HIV/AIDS and TB summit to look at what measures they could take to decrease the problem and find a common approach. He did not have DoL compensation figure for workers, but could provide them later.

Mr Singh said that eradicating silicosis had two parts, the engineering controls and human factors. However these two components should not be separated. The benefits of the Silicosis Roadshow had been good and engineering control programmes would be completed within this quarter.

The Chairperson said that the reasons that he had posed his questions was that it was natural that there would be an emphasis on safety, with health taking a backseat. However he wanted to know that they were working towards taking health issues equally seriously. He added that they would see the MHSC again on 16 March to look at the details that they needed. There was a marked improvement in the MHSC and it seemed like they had managed to deal with capacity issues. He recommended that they adopt the Annual Report with the understanding that the requested details would be covered on 16 March.

Members agreed to adopt the MHSC Annual Report.

Namaqua Diamond Fund Trust (NDFT)
 The Chairperson said that they needed to deal with Northern Cape Oversight Report first and that there was the issue of the letter from the Namaqua Diamond Fund Trust (NDFT). The letter was a follow-up from a meeting the Committee had with the Trust. In summary, the letter said the board of trustees had adopted resolutions based on the Committee’s requests. The board of trustees had approved the investigation and cost containment procedures. The NDFT requested the Committee provide guidance on the reinstatement of royalty payments to the NDFT. The Chairperson said that he thought that the Committee had requested that the NDFT reduce their conditions to writing, which they had done now.

Mr E Marais (DA) asked for clarity and said he thought that as of 1 April 2011, royalty payments would go the Receiver of Revenue.

The Chairperson replied that that was true and that the law did stipulate that. However, the Committee had said to the NDFT that as the royalties were their lifeline they would approach the DMR and make a joint delegation to National Treasury. The MPRDA did make allowance for the continuation of payments of royalties to communities.  The MPRDA did approve agreements concluded between companies and communities.  However, the new Act put this clause into question. Therefore the Committee had to engage with the DMR and Treasury due to the fact that the community in question was so reliant upon the royalty payments. Treasury may allow the company to continue paying the community directly. On this basis, the Committee had to arrange a meeting. With the Committee’s permission he would write to the Director-General of the Department. However they would also need a proper written motivation from the community outlining the fact that the application of the Act in question would be catastrophic for them.

Mr Marias replied that it was true that the royalty payment was the community’s lifeline, but he was disturbed by the NDFT’s investment portfolio. Their portfolio included property bought in Monte Vista solely so that members of the Trust could go and visit their accountants. This was frivolous, as every investment needed to go towards poverty alleviation. They needed to look closely at this. He was also not happy with government representatives on the board taking the day off and taking the R3000 board gratuity as private individuals when they were in fact supposed to be representing the DMR in their official capacity.

Mr Gololo asked where the royalties were currently going to.

The Chairperson replied that it would be to Treasury in terms of the Mineral Resources and Petroleum Development Royalties Act (MRPDRA), which was administered by Treasury. He said that they would get copies of the Act for members. In forward-thinking communities they had changed their royalty payment into stakes in the mining company on behalf of the people, such as Royal Bafokeng Holdings (RBH) had done. However in other communities they simply took the royalties.  He added that they had made the Committee’s intervention conditional on the NDFT doing certain things.

Mr Gololo asked whether the Committee had the mandate or power to redirect funds from Treasury to programmes such as poverty alleviation.

The Chairperson replied they could not impose on Treasury and that it was rather a matter of negotiation between the Committee, DMR, Treasury and the NDFT. Treasury might even provide a different solution to the problem. The issue was that if the NDFT stopped receiving royalties it would shut down. They needed to approach the DMR and Treasury, but they did not need to tell Treasury what to do.

Ms Bikani said that based on how the Bafokeng had run their trust, they could learn from them and apply the lessons they had learnt to the NDFT and then put forth recommendations, after they had gone through the MRPDRA.

The Chairperson replied that Ms Bikani was quite correct, but that the dilemma in putting forth the RBH route was that it was dependant on the mining company’s attitude. He said that once they had received the NDFT motivation, they could then talk to the DMR and look at the way forward.

Ms Bikani asked if the Chairperson had any legal advice in relation to the problem.

The Chairperson replied that they did not need any legal advice as the NDFT had co-operated with the Committee’s requests. It was as a straightforward matter.

Mr Marais said that he had spoken to the Transhex CEO and he had told him that Transhex had no problem paying either Treasury or the community, but that he could not see the value of the community getting the money without co-operation from provincial departments in supporting their financed institutions, such as clinics. RBH was a different case, they owned the land and had shares in the company in a public-private partnership.

The Chairperson asked for agreement that the NDFT needed to give the Committee further motivation and that Members needed to look at the law and then talk to the DMR. He asked Members to remember that RBH started off in a similar way. He requested that they follow the path outlined and request motivation, which would assist them in engaging with other departments.

Members agreed to this proposal.

Legal opinion on Alexkor Development
The Chairperson said that the next topic was the legal opinion on the troublesome Alexkor Development Fund (ADF). If Members went to page two of the legal opinion it ‘went to town’ in terms of the constitutionality of the action that the Committee wanted to take.  What concerned the Committee was paragraph 13 of the legal opinion, which said that summoning someone in front of the Committee should be a last resort. It said that the Committee could summon someone before it at Parliament’s expense in order for them to bring forth the required information. It stated that before the Committee summoned someone, they needed to give him a last chance. He suggested that they ask the drafter of the legal opinion to draft a letter for the Committee asking for the appearance of the person in question. A copy of this final invite would then also be sent to the Speaker.

Mr Marais said that he would second the proposal, but asked whether this was the same person who was a trustee on the NDFT who refused step down.

The Chairperson replied that it was the same person and that he was the person who was replaced by Mr Visser. He asked Members whether they agreed with his proposal to tackle the issue.

Members agreed to this proposal.

The Chairperson said eventually they would probably have to summon this individual and that it appeared that something unsavoury was going on.

Consideration of the Northern Cape Oversight Report,  Report on Public Hearings on the State-Owned Mining Company and Study Tour to Chile and Bolivia Reports
He asked Members how they wanted to handle the next topic which was the actual Northern Cape Oversight Report from 22 to 26 November 2010. He said that he felt they should table the Report, but that it was in Members hands as to whether they wanted to discuss it now. The alternative was to study it thoroughly and then go through it at the next meeting on 8 March. He added that there were two other reports, the Report on Public Hearings on the State-Owned Mining Company and Study Tour to Chile and Bolivia Report. If they read these reports it meant that in their next session they needed to look at matters for correction and then come up with recommendations based on the reports. On the 8 March, they could flesh out the possible recommendations that they wanted to work out and that they could process the recommendations in the next term.

He stressed that as the SOMC had policy and legislative implications, he did not want to deal with these reports as if they were ordinary. The dilemma around the SOMC was that the company belonged to both the DMR and the DoE. They needed to apply their minds as to whether the SOMC should be a SOE or remain with the DMR. They needed to think about what a SOMC should be after their visit to Chile and Bolivia. They also needed to look at the Citi Group Report which stated how much percentage of the global levels of minerals, South Africa possessed and be strategic. In relation to what they had seen in Bolivia and Chile they needed to decide what they did with the revenue collected from the SOMC. Treasury was not in favour of ring-fencing the revenue. But if socially directed spending on housing, health and education in Chile could be directly funded by the company, he could see no reason why it could not be done in South Africa. The issue of how the DMR would regulate something that it owned, also needed to be addressed. 

Mr Mtshale suggested that they call in the Minster or the DMR to brief the Committee on the SOMC and discuss these issues.

The Chairperson said that the intention was not to discuss the reports now and that he was only ‘fleecing out’ possible areas that they needed to look at before they called the Department in. These were things that the Committee needed to think about and be clear on before they called in anyone to brief them as they needed to decide upon and clarify their own standpoint.

Mr Sonto agreed entirely with the Chairperson, but also took what Mr Mtshale had said as equally valid. There was a tendency within the Ministry to ‘go it alone’ without discussing the modelling of the company with the Committee. After the experience that they had had with Alexkor, they needed to think about whether it was a success story. When they went to see Codelco in Chile and Comebol in Bolivia they had seen companies that were a completely different ‘kettle of fish’. The Committee needed to be very serious about familiarising themselves with the models of all these different companies, so that they could extrapolate what they wanted to see in the SOMC, which was definitely not what they saw in Alexkor.

Mr Mtshale insisted that they should invite the Department or Ministry to brief them on what was taking place and allow them make recommendations to the delegation.

Mr Gololo agreed with both Mr Mtshale and Mr Sonto and also registered his disappointment at the Committee not being invited to the SOMC launch over the previous weekend.

Mr Marius said that they did not have a spontaneous relationship between the Ministry and the Committee. It was also a little bit awkward when people asked questions about things and you could not answer because the Ministry had not bothered to inform the Committee about them.

The Chairperson said that it came back to what Mr Sonto had said. The Committee was a different sphere of government, the issue was that they started an initiative which had gained momentum and it now seemed like they were being jettisoned. The issue was not the attending of a launch, but rather being supplied with the intended model of the SOMC. The issue was that this initiative was embarked upon due to the high levels of poverty and inequality in the country and that South Africa had vast mineral wealth.

The Committee needed to apply their minds to the reports and think about the two models that they had seen in Chile and Bolivia so that when they called the Ministry before them, they could discuss specifics. Therefore before they called the Ministry, the Committee needed to clarify its own standpoint. Otherwise the Department would come in and flood them with statistics and they would end up adopting the Department’s position. They also needed to know whether the SOMC would take care of political and economic stability within the country to prevent dissatisfaction like in Egypt and Tunisia. He suggested that Members go and study the reports and what stakeholders had to say about the SOMC so that they could refine the contents of the documents and then engage properly with the Department or Ministry.

Mr Mtshale said that it was not the Department that they needed to engage with, but the Ministry, as they had discussed this issue in Cabinet. He said that he must insist on the point.

The Chairperson replied that they essentially agreed on the point, but that before they called in the Ministry, Members needed to clarify what they wanted so that they could engage with the Ministry as equal partners.

Mr Gololo agreed and said that both Mr Mtshale and the Chairperson were saying the same thing. The Chairperson was in agreement about calling in the Ministry. However, before this, the Committee needed to ensure that they had their position sorted out and in order.

The Chairperson replied that this was good and that there was no point of difference. He stated that they were then in agreement that they table the
Northern Cape Oversight Report, Report on Public Hearings on the State-Owned Mining Company and Study Tour to Chile and Bolivia Reports and then go through them and discuss the changes that needed to be made to them at the next meeting.

The meeting was adjourned.


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