Petra Quarry briefing on compliance with the Mining Charter

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Mineral Resources and Energy

17 April 2013
Chairperson: Ms F Bikani (ANC)
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Meeting Summary

Petra Quarry briefed the Committee on its compliance to the Mining Charter, taking the Committee through various issues following the format of that Charter, to put it into context. The issue of ownership was explained, noting that Petra Quarry was 100% owned by Inzalo Crushing, a BEE company in which Raumix Aggregates was a 74% shareholder, and 26% was presently held by Vishal Chaggan, on behalf of two trusts that were in the process of being registered with the Master, and that would attend to social development. The empowerment was not of individuals but of trusts for communities. Dividends directed to the trusts must be disposed of to beneficiaries within ninety days.

Employment equity statistics, for directorship and empowerment representatives at all levels of management, as well as scarce skills, were outlined. The targets for procurement of services, capital spending, and procurement of consumables, were outlined, noting that Petra Quarry had widely varying capital spend both across and within financial years, that it had fallen 2% short of the target for procurement of services, but exceeded the target for consumable spending. Petra was nurturing two small companies, one supplying hygiene services and safety equipment, and the other a transport company that transported the workers to their homes each day. Petra paid all invoices on receipt to assist the small businesses with their cash flow. Petra spent R356 275 on learnerships, apprenticeships and training initiatives, all for historically disadvantaged South Africans, and it was noted that it consistently offered work placements and apprenticeships. It had not yet implemented any mining community development projects, although it was busy identifying them. The Health and Safety Report was presented. Petra noted that it had implemented the approved Environmental Management Programme, complied with the statutory requirements for monitoring and performance assessments, and was up to date on rehabilitation. A report was submitted on Environmental Performance in March 2012. Finally, it was noted that Petra did not need to offer accommodation as the mine was close to workers’ homes.

Members noted that in previous discussions, it was noted that Petra and the Department of Mineral Resources (DMR) had some issues, and asked for clarity. Although the DMR said it did not have any relationship problems with Petra, it later became apparent that there were some misunderstandings and Petra made a remark that lack of communication was found from the DMR side. What did emerge was that DMR had served Petra with an Order preventing it from mining until it had complied with various requirements, with a date given for compliance. One of the conditions was that Petra must submit a revised Social and Labour Plan (SLP) but nothing had yet been submitted, so DMR was unable to measure progress and comment on the current presentation. It was apparent also that Petra would have to increase its provision for rehabilitation. Members questioned what exactly was still needed, and heard that DMR had visited the quarry, had been helpful and was complimentary about the EMP However, Petra had experienced great difficult in selecting a suitable SLP project, eventually opting to build classrooms at a school, and DMR still needed to give consent on this, so Petra could not understand how it could complete a Mining Charter report until this as approved. It was noted that a regional manager had met with Petra in April, and the Committee suggested that it would be premature for the Committee to act before the 21 days for compliance had expired, and emphasised that reasonable timeframes for compliance must be set. Members then enquired about the composition of the trusts and urged that a committee representative of employers must be set up, and that copies of the trust deeds be sent to the Committee.

Meeting report

Ms F Bikani (ANC) noted that she had been requested to act as Chairperson and tendered the apologies of the Chairperson, Mr F Gona (ANC).

Petra Quarry briefing and presentation, following format of Mining Charter
Mr Chester Aldridge and Mr Robert Shedlock, Representatives, Petra Quarry, noted that their briefing on Petra Quarry’s compliance with the Mining Charter would follow the format of that Charter, to put the matters into context and make them more readily understandable. They reinforced that essentially Petra Quarry was about people.

Mr Shedlock firstly dealt with the issue of ownership. He noted that Petra Quarry was an entity for which a mining licence was needed. Inzalo Crushing and Aggregates Pty Ltd owned 100% of Petra Quarry. Raumix Aggregates Pty Ltd, under the leadership of Vishal Chaggan, owned 74% of Inzalo Crushing Aggregates Pty Ltd, and Inzalo Crushing was essentially the black economic empowered company for several quarry companies with mining licences issues in the respective regions. He tabled the share certificate to the Committee.

Mr Aldridge emphasised that the new development and employee trusts were in line with social development of employees. The trusts had not yet been fully registered by the Master and Vishal Chaggan was holding the shares on behalf of those trusts. He tabled to the Committee the front page of the both the employees’ and education development trust documents, proving that they had been lodged at the Master’s office. Together, these two trusts would hold 26% of shares in Inzalo, The dividend flow that was directed to the trusts must be disposed of, within ninety days,  to the represented beneficiaries. This was a simple structure, but was also more broad-based so that empowerment was not limited to a single individual.

He outlined that the directors of Petra Quarry were Una Adonis and Freddie Kenny, both f whom were historically disadvantaged individuals, then Robert Shedlock, Tobie Wiese and Chester Aldridge.

Mr Aldridge turned to issues of procurement and spending, which followed in the Mining Charter reporting structure. The target, for 2012, was that 20% must be spent with BEE Entities. The total capital spend over the last financial year, both discretionary and with the BEE entities, in this category was R209 657, but Mr Aldridge noted that this was not “normal” and that indeed the amounts spent in Petra Quarry varied drastically within and between every financial year. He noted that the Mining Charter stated that the definition of a BEE entity was an entity that was 26% empowered.

The target for procurement for services in 2012 was that 50% must be spent with BEE Entities. The total service spend was R6 697 500, of which the non-discretionary service spend was R2 813 484, which was predominantly in relation to the account with Mangaung Municipality. The discretionary spend was R3 884 016. The spending with BEE entities represented 48% of the total. In the BEE Entity category, Petra Quarry was therefore 2% short of the target.

The procurement of consumables target for 2012 was that 25% must be spent with BEE entities. The total consumables spend was R13 020 366,  with no discretionary service spend. The spend with BEE Entities was R3 667 765, or 28% of total spend, which was 2% over target.

Petra Quarry was nurturing two small companies. It was spending R15 000 with Sun Hygiene Services CC, owned by a black lady, and this company supplied hygiene services and safety equipment. Petra Quarry was also supporting Valashiya Transport by paying R66 000 per annum for the transportation of the quarry workers to and from work in a taxi. Petra Quarry paid these two BEE entities immediately on presentation of their invoices and did not wait 30 days, in order to assist them with their cash flow situation.

Mr Aldridge presented the employment equity figures to the Committee, noting that top management of the company comprised one African male, one Coloured female and three white males. For the remainder of the levels, HDSA was represented in 40% of top management, 100% of senior management, 100% of middle management, 60% of junior management and 100% in terms of core and critical skills.

Petra Quarry had spent R356 275 on learnerships, apprenticeships and training initiatives, all in the HDSA category. The total HDSA pay roll for Petra Quarry during the 2012/13 financial year was R4 200 000. The Quarry management believed that any type of training or learning within this sector was an advantage to the business. Petra Quarry constantly took in HDSA Mechanical Engineering students from the Central University of Technology for their practical work experience, and he noted that the quarry was a desirable environment for students to complete their practical, because the spectrum of mechanical equipment in the quarry was vast. Petra Quarry had three apprentices during 2012 and seven people involved in Adult Basic Education and Training (ABET).

In the area of mining community development, Petra Quarry had not yet implemented any projects nor had it made provision for the transfer of skills and capacity building within the relevant community. However, Petra Quarry was now addressing this issue and was considering the profiles of relevant communities and identifying credible leaders within the communities. The company consulted with such leaders prior to the implementation of projects, both in relation to the needs analysis of the projects, and priorities.

Petra Quarry then presented its Health and Safety Report. Four people were on the Occupational Health and Safety (OHS) representative training. The training was valid for two years and represented 8.5% of the workforce. All mandatory reports, including those for annual medicals, hygiene reports, personal exposure, and personal noise exposure, had been submitted. Eight people had attended the HIV awareness course in 2013, representing 17% of the workforce of Petra Quarry. The company had a number of Health and Safety and Environmental audits conducted. Every year the relevant body ASPASA conducted audits according to the Occupational Health and Safety Act Standard 18001 of the 2007 standards.

Petra Quarry had implemented the approved Environmental Management Programme (EMP). It was in compliance with the requirements of the Minerals and Petroleum Resources Development Act (MPRDA) Regulation 55 on Monitoring and Performance assessments. All mining activities and related activities were included in the existing approved EMPs. All closure liability assessments were done for all operations. All the operations with the EMP commitments towards concurrent rehabilitation were up to date with the rehabilitation process. There was not a great deal of concurrent rehabilitation to be done at this stage, because of the pit design, although small amount of sloping had occurred. Closure plans had been developed and a revised EMP had been submitted in August 2012, which was under review.

The Environmental Performance Assessment took place in March 2012 and the report was submitted to the Department of Mineral Resources (DMR or the Department).  Such assessments were done once every two years, but every month Greenmine Environmental Management conducted an environmental control report for Petra Quarry. This was a very comprehensive report, and was requested in recognition and acknowledgment of the fact that Petra Quarry’s environmental situation needed improvement.

Finally, it was noted that Petra Quarry had never addressed any housing options for the workers, because the workers lived close enough to the operation to return and stay at home every night. Petra Quarry was in Bloemfontein and there was sufficient accommodation for the workers. For this reason, no report was submitted on housing and accommodation.

In conclusion, Mr Freddie Kenny, one of the founder Members of Petra Quarry, noted that he had been a local businessman in Bloemfontein for the past thirty-one years. He anticipated that the Committee was likely to ask how Petra Quarry started. He noted that Petra Quarry had originally belonged to the Council but when it was closed a tender notice appeared and although he personally had not had a substantial knowledge in the mining arena, he and other founders had taken it over. Today Petra Quarry was part of a much bigger group of mining companies. The Department of Mineral Resources in Welkom had done its best to assist Petra in overcoming all possible hurdles.

The Acting Chairperson asked for comments from the DMR, stating that she recalled that the relationships between Petra and the DMR were stated at a previous meeting not to be running that well.

A representative from DMR responded that DMR had never had relationship problems with the company. Even after this presentation, however, there remained some areas where DMR was concerned. During the last meeting with Petra Quarry, the DMR had noted various areas where the company was not complying, and it was served with a Section 93 Order, preventing it from mining until those issues were addressed. The company had now addressed some of those identified areas, but not everything. The Order that was served outlined that by a certain date the company must have addressed all the issues and this had not been achieved.

One of the specific conditions of this Order was that Petra Quarry must submit a revised Social and Labour Plan (SLP). The company had not submitted anything on the SLP that the Department could use as a yard stick to measure the progress. DMR therefore was unable to comment on the presentation or progress of the company, because there was nothing in place that permitted compliance to be measured. The deadline given to the company was June 2012. Since that date there were different meetings and engagements. There was still no documentation in place that allowed for the Department to comment on the SLP. Furthermore, he noted that Petra Quarry had R4 100 000 in place as a financial provision for rehabilitation, but the latest site inspection results showed that the company needed to increase that amount by R3 900 00.

Mr H Schmidt (DA) asked if Petra Quarry had a revised SLP. He noted that certain companies did provide for housing allowances, and enquired if this had been discussed in Petra Quarry.

Mr M Sonto (ANC) explained that during the last visit that the Committee had undertaken to the site, Petra Quarry stated that relations between the company and DMR were not good, but he conceded that unfortunately DMR was not present on that occasion. Now, Petra Quarry was noting that relations with DMR had improved, but DMR said it was still struggling to get the company to comply. Mr Sonto thought that a straight and definite undertaking needed to be given to this Committee, to the effect that Petra Quarry and DMR were working together to address the SLP issue. He sought Petra Quarry’s response to DMR’s announcement that there had been no progress with the SLP.

Mr Sonto said that he was somewhat confused at the attempts to explain who owned the company.

Mr Sonto sought further explanation on the Mine Community Development and asked why Petra Quarry would need to identify credible leaders within the communities, and requested some more clarity on the structure of the communities with whom Petra Quarry was working.

The Chairperson stated that there was not a lot of detail given on the community development and the divided ownership. She mentioned that the quarry was in the centre of town, and was concerned that the housing in nearby areas might be negatively affected by the quarry.

Mr Aldridge responded to the questions. He firstly explained why he viewed the relationship between Petra Quarry and the DMR as very healthy, because communication had increased between the entities, and in the previous week an environmental contingent from the DMR had visited the quarry in response to a submission of a revised Environmental Programme, which had been first submitted in August 2012. After the closure of Petra Quarry, as mentioned earlier, pursuant to the Order, the DMR asked Petra to revise and submit three new documents, namely the EMP, Mine Work Programme and the SLP. Petra Quarry submitted revised documents for all three. The SLP was posted on 3 August 2012. Mr Aldridge asserted that the relationship between the company and the DMR was healthy. Communication was strong, and the relationship was evenly balanced. The DMR and officials had been incredibly helpful and relationships were stronger now than before. DMR was advising Petra if it was not satisfied with something, a positive move that allowed for the company to improve.

He reiterated that after the DMR requested that the EMP, SLP and Mine Work Programme undergo a complete revision, Petra had complied and the EMP was now on the verge of being approved, although Petra Quarry was open to implementing any amendments. As it stood currently, the guarantee on the EMP was acceptable. During the EMP process, the DMR officials were complimentary about the progress that had been made.

The SLP was a dynamic document that required change. The company had met with untold difficulty in selecting a project that was suitable for both the company and for the local municipality, and the SLP would be incomplete until every necessary element had been addressed. The DMR still needed to give its consent on the project. He noted that spending that amount of money would prove difficult for a small mining company. However, he gave the assurance that Petra Quarry had submitted all other documents. The company had identified a school, and it was verbally agreed that it would build a classroom for that school. The plans were put in place and a contractor was getting involved. The company needed to build the classroom now, to get the project out of the way and move on, as it was causing huge problems for the company.

The representative from the DMR responded that Petra Quarry had not yet submitted a fully revised SLP, and had also not submitted its annual progress report or its Mining Charter report. The DMR was not in a position to say that Petra Quarry was therefore on the right track, because documents had not been submitted to prove this.

Mr Aldridge repeated that the DMR had informed the company that its previous documents were unacceptable. Petra Quarry did indeed submit a revised SLP but the DMR believed the new document was also sub-standard. The EMP and Mine Work Programme were with the DMR, and Petra assumed that DMR was satisfied with the content of those documents. He was worried how Petra should or could report or complete a Mining Charter report on the basis of a document that had not yet been approved by the DMR. The reason the SLP was not acceptable was that the company had not undertaken a community project. However, he reiterated that Petra could only report against the SLP that was accepted in October 2010, and not against any later report that had not yet been accepted.

Mr Sonto reinforced the importance of Petra complying with the requirements from the Department. Compliance was assessed against the measuring tools that DMR used to monitor the company.

Mr H Schmidt asked what had happened since October 2012 in relation to the SLP, and in particular asked if Petra Quarry had undertaken any more discussions with the DMR.

A representative from the DMR stated that a regional manager from the DMR had a meeting with the company in April, and had specifically informed Petra of her unhappiness with the SLP still. The law required that the company, within twenty one days, must comply with the task as given by the regional manager, and should it fail to comply, legal action would be taken.

The Acting Chairperson inquired into the timeframes set by the DMR, and wondered if they were reasonable.

The DMR representative responded by outlining the engagements between the DMR and Petra Quarry. These showed that the DMR had had reasonable engagement with the company, prior to the last meeting.

The Chairperson urged the Committee and DMR to be considerate with each other and ensure that they were communicating on a consistent basis. The timing for that meeting did not appear to be fair, and it was necessary to consider whether the reporting system and time frames might be sensible or reasonable.

The representative from the DMR referred to the expectations on companies that they must report to the DMR annually. It was necessary to bear in mind that the report that a company submitted was a summary of commitments that the company had made. It was prudent for DMR, when assessing a company, to analyse all levels of SLP. It was evident that the communication between Petra and the DMR had improved. It was important to give a company a reasonable time period to rectify documents. Members should allow the process of administrative law to be followed.

Ms B Tinto (ANC) stated that DMR did not appear to be thoroughly prepared for this meeting and said that the National and Provincial offices must have the same understanding. Petra Quarry still had time to prepare the documents, and, after the 21 days, would be able to move forward.

Mr Sonto said it was important to acknowledge the time frame the regional DMR officer gave Petra Quarry. He agreed with Ms Tinto that the DMR could revert to the Committee, should it be necessary, after the lapse of that 21 day period.

Mr Kenny acknowledged the communication breakdown between DMR and Petra Quarry but maintained that this was on the side of the DMR. The communications had, however, improved after interventions from the Committee.

Mr Aldridge wanted to shift the focus away from the SLP, and comment on the questions asked on ownership. He noted that Petra Quarry’s partnership with a listed company came to an end in February 2013. Petra Quarry had to look at alternatives to ensure each of the mining licenses were, in their own right, compliant with the requirement for 25% ownership of an empowered partner. For that reason, within the structure of the listed entity, it put an intermediate company between the listed entity and the quarry, which was Inzalo Crushing and Aggregates Pty Ltd. The company that owned the quarry was 26% empowered, but it must be noted that this empowerment related not to a single individual or to a single group of individuals, but was rather split between an employee trust on the one hand, and an educational trust on the other. The company had done this because it could not afford to give away another 26% of an entity, every five years. The dividend flow from Petra Quarry would go to the trusts. The trusts would allocate, within ninety days, to employees and to the development programme. The trust was in consultation and in agreement with DMR to spend that money.

Any profit that came out of Petra Quarry would thus be distributed, with 26% to trusts and 74% to the holding company. The 26% that went to the trusts would be put to social development and to the empowerment of the employees. The trusts were in place, and the company was waiting for the Master to send the duly registered documents back so that the cash could be distributed.

The Chairperson asked who comprised the board of trustees, for both trusts.

Mr C Aldridge identified one trustee as a representative from the quarry company Raumix Aggregate. The other trustee was a non-executive development trustee who held various representations on various boards throughout the group. There was also one representative with a legal background. The Trust must always have a non-executive development trustee, a legal representative and a representative from the Aggregate company. This would ensure that funds would always be channeled in terms of the Deed.

The Chairperson asked who represented the employees.

Mr Aldridge responded that the employees still needed to form a committee to negotiate with the trustees, and to confirm that the determination of the dividends in the Trust Deed was not unfair. Every employee was graded and, based on the grade, the employee was allocated points and the dividend was split by a total division of the points of employees.

Mr Schmidt asked for clarification on the 26% BEE.

Mr Aldridge explained that Raumix Aggregates paid Vishal Chaggan for his 26% share. That payment was by way of an interest free loan to the two trusts. South African Revenue Services (SARS) was in agreement with this arrangement. It acted as a channel to get the shares to where they needed to go. The shares remained in the trust and the dividend flow went to the individuals. This process ensured a flow and maintained a continuous process of empowerment.

The Acting Chairperson requested copies of documents explaining the trusts.

The representative from DMR stated that it could not dictate to a company who should be a beneficiary but could act only in an advisory capacity.

Mr Aldridge reiterated, in conclusion, that Petra had experienced great difficulty in identifying the correct projects. There was difficulty in working concurrently with local government and local people.

The Acting Chairperson reminded Petra Quarry to send the Committee the documents confirming the trust conditions. She urged that representatives of the employees must be visible in negotiations.

The meeting was adjourned.


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