Department of Mineral Resources on their Annual Report and Financial Statements for 2011/12

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Meeting Summary

In the Department of Mineral Resources’ briefing on its Annual Report, its Financial Administration Branch reported successes in submitting reports on time, improved service delivery and availability of an Information system. Achievements of Programme 1: Corporate Services included communication of DMR programmes and policies through a new website and a new intranet, successful media briefings, public participation engagements and positive and balanced newsletters published and broadcast. Programme 2: Mine and Health Safety reported achievements which included an 8% reduction in terms of fatality rates from 127 in 2010 to 123 in 2011; no mine disaster accident occurred for the first time in five years; and 19 assistant inspectors were placed in regional offices for experiential training. Programme 3: Mineral Regulation exceeded targets for consultations with communities and industry workshops, inspections to monitor and enforce compliance, and for potential jobs created through new mining rights. Successes of Programme 4: Mineral Policy and Promotion included the Beneficiation Strategy implementation plans on iron and steel as well as energy commodities had been developed and approved by Cabinet; there had been an implementation of technical partnerships with Council for Geoscience, Mintek and Eskom. Common challenges among the programmes included inadequate funding, inability to reduce the staff turnover rate and high vacancy rates.

Major concerns raised by the Committee included the poor living conditions for miners, tensions between mining companies and host communities, under spending and the vacancy rate in the department, large increases in DMR office leases. Other comments and questions were:
▪ The need for increased
training of inspectors;
How was DMR helping disadvantaged groups to become owners of mines?
What effect did the issue of nationalisation have on the country?
What implementation plan did the department have on beneficiation in the diamond industry?
When would the integrated licensing system be implemented?
Marikana was a manifestation of what happened when transformation failed. How could SA use its mineral wealth to close the gap between the rich and poor?
Mining companies were recruiting workers elsewhere yet the youth in host communities were unemployed.

The Chair stated that DMR should submit a full list of companies that were not complying with corporate social investment (CSI).

Meeting report

The Chair stated that he had received apologies from the Director General, Minister and Deputy Minister, who had other commitments. He said that Mr David Msiza would be representing the DG at this meeting.

Department of Mineral Resources on its 2011/12 Annual Report
Mr David Msiza, Deputy Director-General (DDG): Mine Health and Safety (Programme 2), stated that it had an overall budget of R1 billion for 2011/12. It had an under spending rate of 0.92%, which was an increase from a 0.11% rate the previous year. However, under spending had been consistently under 3% for the last three years. An analysis of the actual expenditure showed that spending on advertising had declined by 16.5% from the previous year. DMR explained that this was due to successful cost cutting measures. DMR’s spending on operating leases increased by 28.25% from the previous year due to the department’s move to new offices. Spending on software and other intangible assets declined by 44.74% due to a pay-off from initial investments. DMR explained that “Prepayments and Advances” under their current assets catered for employee travels. There had been a slight increase in spending in this category, but the increase was acceptable. DMR had made transfers and subsidies to associated institutions like the Council for Geoscience to promote research; the Council for Mineral Technology Research (CSIR) for mineral rehabilitation projects; South African Diamond and Precious Metals Regulator; and the Mine Health and Safety Council. DMR was taking appropriate steps to implement the recommendations of the Auditor-General’s audit report.

Programme 1.1: Financial Administration Branch
This programme provided strategic and administrative support services to the Ministry and the Department. Its achievements included the provision of reliable and timely information: 92.9% of reports were submitted within prescribed timeframes, exceeding the target by 2.9%; there was improved service delivery as shown by a customer satisfaction index conducted that yielded 3 scores out 5. Availability of an Information System was achieved at 98.1%, exceeding the target by 8.1% and turnaround times improved by 47%, exceeding the target by 37%. In order to facilitate Management and Leadership development, all personal development plans were aligned to the Management requirements and five managers completed management courses as targeted. Wasteful, fruitless and irregular expenditure was reduced by 86%, exceeding the target by 26% to manage cost effectively. DMR maximized utilization of resources by a 99% reduction in the number of departmental assets disposed of prior to the end-of-lifespan, exceeding the target by 94%. Programme disappointments included the percentage reduction in licensing costs because integrating systems did not necessarily reduce licensing costs even though they achieved efficiency; the percentage reduction in vacancy rate, which DMR planned to fill within prescribed time frames; reducing staff turnover rate; and the execution of fraud prevention and ERM (enterprise risk management) implementation plans among others.

Programme 1: Corporate Services
This programme also provided strategic management and administrative support. Its successes included effective communication of DMR programmes and policies through a new website and intranet, and successful media briefings, public participation engagements and positive and balanced newsletters. The programme also sustainably developed vulnerable groups: three projects – Engcobo bricklaying, salt mining and copper beneficiation – were in progress for women. About 60 women were involved in these projects. Workshops and information sessions were also held for vulnerable groups. Major challenges were: inadequate / lack of funding for capacitating / implementing the new approved structure, inability to considerably reduce the staff turnover rate, and an escalated vacancy rate.

Programme 2: Mine Health and Safety
This programme’s objective was to reduce mining-related deaths, injuries and ill health through the formulation of national policy and legislation, the provision of advice, and the application of systems that monitor, audit and enforce compliance in the mining sector. Its achievements included an 8% reduction in fatality rates from 127 in 2010 to 123 in 2011. Additionally, no mine disaster accident occurred for the first time in five years; the reviewed Enforcement and Administrative Fine Policy and Procedures were fully implemented; and 19 assistant Inspectors were placed in regional offices for experiential training. Challenges included occupational health safety, skills development and illegal mining.

Programme 3: Mineral Regulation
The purpose of this programme was to regulate the minerals and mining sectors to ensure economic development, employment and ensure transformation and environmental compliance. Its successes included: exceeding its target for consultations /engagements with communities and industry workshops, its target for inspections to monitor and enforce compliance, and its target for potential jobs created through new mining rights. Funding remained a major challenge as well as the increase in tensions between host communities and mining companies, the fragmented licensing processes amongst departments, and underdeveloped application and licensing systems.

Programme 4: Mineral Policy & Promotion
The purpose of the programme was to formulate mineral-related policies and promote the mining and minerals industry of South Africa, making it attractive to investors. Its successes included consultations held with communities on the Mineral and Petroleum Resources Development Amendment; the B
eneficiation Strategy implementation plans on iron and steel as well as energy commodities had been developed and approved by Cabinet; and implementation of technical partnerships – partnerships with Council for Geoscience, Mintek and Eskom.

Challenges included
retention and attraction of professionals; attracting investment into the mining industry; gaps in legislation; finalisation of the beneficiation implementation framework; and slow rehabilitation of derelict and ownerless mines. DMR was working on a programme of verification of derelict and ownerless sites, amending acts to address gaps, and working on a comprehensive plan for all prioritised commodities for the Beneficiation Strategy implementation.

Discussion
A member stated that he was disappointed that the Minister, Deputy Minister and the DG were absent because some of the pertinent questions which Members had were policy questions that could only be answered by the heads of the ministry.

The Chair stated that they would postpone such questions to a later date when the relevant officials would be present.

The member proceeded to ask a question on property rentals: how was DMR able to save the millions stated in the report? How did it plan on reducing the vacancy rate? On reduction of disposable assets, DMR exceeded their target by over 90%. Was their planning correct? How was DMR helping disadvantaged groups to get into the mining industry in terms of ownership of mines?

Ms E van Lingen (DA) asked why there was an increase of R18 million in spending on leases. Why was there an increase in spending on machinery? She stated that it seemed as if DMR was trying to squeeze too many things into the presentation. There was no specificity. She was concerned that there were many mine closures, yet only 19 inspectors had been trained. Why was this case? She asked DMR to provide her with details on partnerships with different entities.

Mr D Gamede (ANC) stated that under spending was just as bad as overspending. He was concerned that spending on leasing was too high and felt that the government could build its own buildings using that money. DMR was not taking living conditions in the mines as seriously as it needed to because the current conditions were responsible for spreading diseases. What effect did the issue of nationalisation have on the country? What implementation plan did the department have on beneficiation in the diamond industry?

A member asked what PTB and STB meant. What was the department doing about tensions between communities and mining companies? When would the integrated licensing system be implemented?

Mr K Sinclair (COPE) reiterated that it was important for the Minister and Deputy Minister to be present to answer questions on strategic development. He stated that Marikana was a manifestation of what happened when transformation failed. He explained that Marikana made a few people very rich while others suffered from low wages. He stated that there was a need to talk about the role of corporate social investment (CSI). How could SA use its mineral wealth to close the gap between the rich and poor? GDP growth in SA was less than 1.5%. In addition, investors did not want to invest in SA. DMR played a key role in promoting the image of SA. He wished DMR had talked about Shale gas. He had received reports that in Northern Cape, there was no regulation on mining of Tiger Eye and there was no benefit to the community. He was also concerned that there were large sums of money outstanding to the Department of Energy.

Ms M Dikgale (ANC) stated that during a community visit, the Committee received complaints that mining companies were not involving the communities and were recruiting workers from elsewhere yet the youth in the host communities were unemployed.

Mr Joel Raphelo (DDG: Mineral Resources) replied that training of inspectors was a continuous process. The first 19 trained were just the beginning. He stated that PTB stood for pulmonary tuberculosis, while STB stood for simple tuberculosis.

Ms Cathy Leso (Acting CFO) replied that the only part of the staff turnover rate that they had no control over was retirement and death. They could improve the vacancy rate by filling posts immediately. There were 134 vacancies as of 2012. The challenge was attracting professionals. She added that people mostly left because of better monetary offers elsewhere.

Ms Irene Tshifura (CFO) replied that on reduction of spending on buildings, there had been fewer relocations, upgrading and fixtures. Maintaining buildings did not cost the department much. The reduction of losses in assets was due to implementation of new measures to manage assets better, hence they exceeded their target. On leases, the amount reported was inclusive of all the accommodation that the department had. Increase in spending on equipment was proportional with increase in staff and equipment. On under spending, they had committed all their funds till the end of the year. Service providers who had not been paid within 30 days included contracts not completed.

Mr Raphelo replied that on participation of disadvantaged groups, the department did not determine applicants. On living conditions, he said the department was taking the matter very seriously. The challenge was capacity. The Department of Health did inspection of mine safety in terms of health. He added that if they discovered tensions in the communities, they established a task team to investigate the issue. On the impact of Marikana, he said that work was being done to promote collaboration between government departments and other stakeholders to improve living conditions. On the Tiger Eye matter, he said that they would investigate the matter and get back to the Committee.

A member of the delegation said that they would supply members with maps on the extent to which geological marking was happening to establish where minerals were.

The Chair stated that DMR should submit a full list of companies that were not complying with CSI. He stated that in future, DMR needed to have a better relationship with the Committee.

Meeting adjourned.

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