Department of Mineral Resources 2012/2013 Annual Report: Auditor-General and Department's briefings

Meeting report

Chairperson’s opening remarks
The Chairperson noted that the Auditor-General South Africa (AGSA) would brief the Committee first, on the audit outcomes of the Department of Mineral Resources (DMR or the Department), and asked that the Department take note of these discussions.

She also briefly mentioned the public hearings and said that permission to hold a two or three day workshop had been requested, and a draft programme would be sent to Members.

Department of Mineral Resources 2012/13 Annual Report: Auditor-General South Africa briefing
Mr Kevish Lachman, Business Executive, Auditor-General South Africa, and Ms Margaret Seoka, Senior Manager, Auditor General South Africa, together gave a presentation on the DMR and entities audited, noting that the key focus areas of the audit were supply chain, predetermined objectives, HR management, IT controls and material errors in the submitted Annual Financial Statements.

Mr Lachman said that this graphic showed that the Department of Mineral Resources was very close to obtaining a completely clean audit, which could probably be achieved with a little bit of effort from the entities. Most of the areas were shaded in green, with some yellow (warning signs) on the IT controls, although the seven blocks shown in yellow were preventing the portfolio as a whole from getting a clean audit. He would ask, through the Chairperson, for commitment from the Portfolio Committee to put some pressure on the Department to achieve the clean audit status.

Ms Seoka presented slide 12, (see attached documents), which showed irregular expenditure and fruitless and wasteful expenditure.

Mr Lachman said that the commentary here was that this was reflective, although there were no excuses for fruitless and wasteful expenditure. However, the portfolio as a whole showed no such expenditure, which was a positive.

Slide 13 showed the pyramid of accountability. Mr Lachman said that this was one of the most important slides for oversight, as it showed how the Department could get to a clean audit. The items shown at the base of this pyramid needed to be in place, and they were essentially the internal control environments for all the entities within the portfolio, and for broader government as well. If these were in place, the internal control environment would be very strong. The middle of the pyramid showed that the Portfolio Committee should be getting assurances from the Audit Committee, Internal Audit and accountable leadership that all these controls shown below were in place. This is one of the most important slides. There must be a focus on the base, starting with local leadership of each entity, a commitment to the controls, and testing by the Audit Committee, Internal Audit and leadership. That may be the monitoring mechanism needed.

Ms Seoka said that Slide 14 supplemented the diagram of the pyramid that was already discussed. It dealt with the assurances required.

Mr Lachman said that various committees had discussed how to achieve green shading. This essentially said that departments would need to reflect on the audit outcomes, and be honest when doing so, recognising that lack of green shading meant that more work had to be done. He highlighted one point on page 7 of the document entitled “Briefing Notes” and noted that only one report in the whole portfolio had been qualified. The basis for this was set out under point 2.3: “The Department of Mineral Resources does not have adequate system to manage value receivable for departmental revenue. The outstanding balance relating to prospecting fees and royalties as generated by the system in place is incorrect. Consequently, the balance for receivable for departmental revenue and provisions, as disclosed in notes 23 and 27 to the financial statements, is misstated by R151.194 million (2012: R110.629 million).“ The predetermined objectives showed the entity’s name, the findings, root cause and recommendations. The AGSA was available for further discussion on this if required.

Discussion
The Chairperson asked if a slightly different approach could be used, at this point, and allow the Director-General of DMR to participate and discuss this issue, to get his side of the story, and allow Members to engage with that.

Mr Thibedi Ramontja, Director General, DMR, said that the AGSA report had been noted and the Department had looked at the matter. A detailed action plan had been put in place to address this issue, and it had been presented to the Audit Committee who recommended that the internal audit must ensure that the controls on this issue were tight.   

Mr H Schmidt (DA) said that this Department had had unqualified reports in the past, and it looked like it had regressed.

Mr Lachman said that this was true, but the problem on the revenue had been a historical one. It was a matter of whether the amounts were considered material or not material for purposes of the qualification. The previous report showed a control weakness around revenue. The Department had tried to resolve this issue in various ways. The Department would certainly talk much more about this in their presentation. The Director General seemed to have a plan in place that involved revenue service and the funding for those services. He emphasised that the report was qualified because this issue was regarded as material.

Mr Schmidt expressed concern that, as was stated on page 7, the basis for the qualification related to one of the core activities of the Department – “prospecting fees and royalties as generated by system.” Royalties were serious income revenue and he asked if the misstatement by R151.194 million was positive or negative. He asked what the real factual consequences were of a negative misstatement.  

Mr Lachman said that the collection of revenue was one of the responsibilities of the Department, and it was one of the concerns of AGSA, who had worked closely with the Department on this area for the last two years. There had been a lot of commitments but a change in the leadership. There had also been talk about the stability of the leadership. One of the key points raised was the issue of the vacancies, and filling the position of the Chief Financial Officer, who was tasked with trying to get systems in place for the financial reporting. If there was not a permanent appointment to this position, problems would exist as it would take a long time to sort out these issues. Therefore the breakdown in that leadership became a problem. AGSA was not comfortable with the amount that was disclosed. The amount shown was the full financial amount; it was not the misstatement itself. 

Mr S Mohai (ANC) noted some of the comments expressed by the Auditor-General about areas of progress and areas that just needed consistent leadership for the Department to improve. He asked how regular the interface over the financial year was between the AGSA and the Department, and the Director-General (DG) and the Minister.

Mr Lachman said that there were lots of interactions between the AGSA and the Department where these issues were discussed at length. The DG had put in a lot of work but he needed adequate support. The DG needed to look at whether those structures were effective in what he needed to deliver.

Mr Mohai asked what were the capacity constraints with Mine Health and Safety Council (MHSC) and the Council for Geosciences.

Mr Lachman said that the issue was not about capacity; for example, irregular, fruitless and wasteful expenditure were not capacity issues. DMR as a whole had a lot of work that it needed to do to address the adverse opinion on the predetermined objectives. It was about tightening up, and saying to the entity that it needed to come and account and keep providing the AGSA with updates about progress. The audit opinion was finally unqualified, so DMR had the capacity to get to an unqualified opinion, but things needed to be tightened to reach a clean audit. It was all about daily, simple disciplines that were not followed.

Mr D Lorimer (DA) asked if the R151.194 million (and the R110 million in 2012) was a cumulative figure. He asked further if steps had been taken to recover or correct that figure from 2011/12

Mr Lachman said that where there were material adjustments to financial statements, it meant that the financial information for the financial year upon which the decision-making was based, could have been flawed. Once again, it was not about capacity but about having the daily disciplines in place.

Mr Lorimer asked if the Department had an adequate system to manage value receivable, and if this was a breakdown of system.

Mr Lachman replied that this a projected error based on the sample. The error was seen as something the Department could resolve. Largely, it was about the incorrect input of information from files into the system, so DMR must go back to the files, and ensure that the correct information was raised. The DG had already committed himself to doing so, and relooking at the system to ensure that it could do this. The AGSA regarded this as a projected error.

Ms K Khunou (ANC) asked what the main problem was that prevented this Department from having a clean audit, and how the problem could be solved.

Mr Lachman replied that there were a lot of areas in the system that needed to be “tied down”. For example there should be exception reports, and DMR should be able to draw on these, quarterly, to check what figures were out, why, and this should raise alarms. AGSA had regular interactions with the Department and monitored those commitments. 

The Chairperson referred to slide 5 and asked if there was not an opportunity for the Department to communicate with the National Treasury to find out if there were any exemptions that could be made on some of these issues.

Mr Lachman replied that with regard to the National Treasury interaction, this Department and its entities could also improve, to have a better understanding of the requirements of Treasury, and how National Treasury could assist the Department, especially on issues of compliance.

The Chairperson said that there seemed to be very little communication between entities, yet this was where they could be assisting each other. She asked if the DMR and entities communicated to try to find the best practices and apply them throughout.

Mr Lachman agreed with the Chairperson that communication across entities offered huge scope for the sharing of information, knowledge, skills, resources and information. If three of the entities in the portfolio could get it right, then surely the Department should be learning from that. DMR could focus on facilitating better communication across the entities and with National Treasury.

Ms N Ngele (ANC) asked if anything could be done to help with MHSC, whose results were not so good. She noted AGSA’s comment that the problems were not related to capacity, but questioned if anything could happen without capacity and properly trained people.

Mr Lachman said that for MHSC, capacity was not the problem, but there were definitely training concerns. Continuous Professional Development was needed, even in entities that had clean audits. AGSA’s comment on capacity meant capacity to the reported establishment. Vacancies referred to the establishment, and not beyond. It was the strategic imperative of the executive and accounting authority of that entity to establish a structure. AGSA could only talk to whether the Department had timeously filled the positions in that structure, but could not talk beyond that.

Mr Schmidt again asked if the misstatement of R151.194 million reflected a shortfall, or an over recovery. He asked how the Department rectified the situation, if the consequences were a lack of funds.

Mr Lachman replied that the information was taken from the files, and there were some over-payments and some under-recoveries, but the net effect was that AGSA projected there to be a R151.194 million under recovery. He stressed that this calculation was projected, not actual, as the actual errors were found only from the sample audited. When DMR did the corrections, it must correct all the capturing, and only then would it be able to determine the actual error.

Mr J Moepeng (ANC) asked why, if AGSA was meeting with Department on a quarterly basis, it was only identified now that there were no predetermined objectives.

Mr Lachman replied that this comment related to the Mine Health and Safety Council as the DMR’s own audit of predetermined objectives (AOPO) was fine. He referred the meeting to the detail on page 7, which stated that “The information presented with respect to the objectives mentioned below was not reliable when compared to the source information and/or evidence provided.” On a quarterly basis, the AGSA did highlight what was presented to it, and entities with whom it engaged were asked to have information ready. AGSA was stressing the need for interim audits, but the main problem was that entities were not ready, and would say that they were still busy with the information and it could not be reviewed. By the time the review was finally done, it was too late. AGSA tried to have a pro-active approach with certain departments, to engage on and review the setting of pre-determined objectives in the previous year, to check that they met the S-M-A-R-T principles. This was part of the audit process and AGSA was attempting to become more proactive. Entities should be reporting consistently, not just at the end of the year.

Mr Moepeng asked what the misstatement was on the audited financial statements.

Mr Lachman replied that this had to do with the projected understatement of R151.194 m, but it was a combination of over-and under-statements.

The Chairperson said that it was not the first time that vacancies were an issue. The DMR had a problem retaining employees. She asked what measures were in place to retain staff.

Mr Lachman replied that if page 5 of the PC Briefing Note, under the heading “DMR – Findings on compliance with laws and regulations” noted that “Employees received overtime compensation in excess of 30% of their monthly salaries, in contravention of Public Service Regulation I/V/D.2d” This indicated that it had problems in getting the right capacity and filling vacancies, and improvements were needed.

The Chairperson asked the Department to respond on the Mine Health and Safety Council audit outcome.

Mr Ramontja, said that the issue of the Mine Health and Safety Council had been noted. The organisation had put a detailed action plan in place. The main issues were around the indicators and targets, and the MHSC had since developed new indicators and targets. This matter had actually been solved and it would not happen again next year. Furthermore, in the MHSC, the Chief Executive Officer had resigned, although a new one was appointed in March 2013. The capacity had now been strengthened and he had confidence that matters would improve.

Mr Lorimer said that non-collection of prospecting fees and royalties was not a new problem. He asked why it had not been fixed.

Mr Ramontja confirmed that it was not a new issue. Capacity was being strengthened in the DMR. An action plan had been put together and the Audit Committee was quite impressed with it. The medium to long-term strategy would involve the integration of the systems of the Department, and this would assist with working on the problem. It should also be remembered that the mining industry had been growing, with the number of mines in the country having increased to around1 600 mines, so the DMR had to ensure that its own capacity was strengthened. The Minister was driving a process to reposition the Department, especially around enforcement. He assured the Committee that the action plan, which focused on the medium to long-term goals, would resolve that problem.

Mr Lorimer asked if Mr Ramontja was confident that this would not happen again next year.

Mr Ramontja confirmed that he was confident that it would not happen again.

The Chairperson said that the issue had been fully discussed, and the Committee would recommend that there had to be more communication and enforcing of truly effective oversight, rather than “oversight for the sake of an improved report”. The Committee would be making recommendations which aimed to assist the DMR in getting a completely clean audit; strategies were needed and there had to be communication. She thanked AGSA for its input.

Department of Mineral Resources 2012/13 Annual Report: Departmental briefing
Mr Thibedi Ramontja, Director-General, DMR, noted that this report was being presented at a time when the mining industry was facing unprecedented and new challenges. These included the global economic environment, and challenges related to industrial relations. Notwithstanding the challenges of the global financial crisis, the mining industry still remained the mainstay of the South African economy. It continued to contribute significantly towards the economic development of the country. The transformation of the industry, through the introduction of a progressive legislative framework, more particularly the Mineral and Petroleum Resources Development Act and the Mine Health and Safety Act, had resulted in significant growth and an improved health and safety environment.

He set out some of the major milestones achieved in this period. Mining contribution to GDP grew from R196 billion in 2009 to R262 billion in 2012, representing a percentage basis increase from 9% to 9.3%. Employment in the sector increased from 492 000 people in 2009 to 524 000 in 2012. The transformation of the industry had resulted in increased employment of women in the industry, with the figure almost doubling, from 24 600 in 2007 to 48 400 in 2012, whilst women represented about 9% of the workforce in the sector. The sector’s contribution to the country’s export basket increased from R176.8 billion in 2009 to R269.1 billion in 2012. The fixed capital formation also grew from R64.1 billion in 2009 to R74.5 billion in 2012. The Department had been facilitating around 100 projects per annum in social and labour plans. In mine health and safety, there had been a reduction in fatalities from 172 in 2008, to 112 during 2012. This was largely attributed to intensified enforcement of measures the Department had put in place.

The number of mines had also increased, from 993 in 2004, when the Mineral and Petroleum Resources Development Act (MPRDA) was implemented, to 1 515 in 2009, and around 1 600 in 2012. The Platinum Group metal sector remained the largest employer, contributing 38% to the total mining industry’s labour force, followed by the gold and coal sector. The Department was confident about the future of the mining industry. In South Africa specifically the global economic growth outlook represented a significant upward potential, with the USA and European economics emerging out of the crisis, while the new engines of global economic growth – the developing countries - were expected to experience economic growth.

Given the inherent cyclical nature of the industry, the Department anticipated that a better economic environment was imminent. The signals provided a positive outlook on the South African mining industry, especially with regard to the platinum sector, which had been experiencing depressed prices for some time. The anticipated improvement would contribute to the acceleration of inclusive growth of the industry and job creation, consistent with the objectives of the National Development Plan.

The investment community was one of the key stakeholders in the development of the mining and petroleum sector in South Africa. Accordingly, the Minister continuously engaged with national and international investors to promote the industry.

He reported on the financial performance and non-financial performance. DMR had achieved 79% of the targets set for the year under review, which was an improvement from the previous year’s 72%. The Department would continue to strive to ultimately achieve all its planned targets. The Department had spent R1.17 billion or 99.4% of the allocated budget of 1.176 billion, for the 2012/2013 financial year.

The Department had developed an action plan to address issues that were raised by the Auditor-General as discussed earlier. The action plan was presented to the Department’s Audit Committee and was currently being implemented, with this to be checked by the internal auditors. He assured the Committee that the DMR would continue to strive for a totally clean audit, which he believed was achievable, as also intimated by AGSA, in the coming year, given the plans the Department had put in place.

The Department had initiated a process to align its capacity to match the significant growth in the industry. This would also assist the Department in its drive to increase its monitoring in respect of compliance. and enforce legal provisions where necessary. In line with the recommendations, the Department would have a dedicated monitoring inspection team to oversee the process. This was part of the plans which were still being discussed with the Minister.

Ms Irene Singo, Chief Financial Officer, Department of Mineral Resources, provided an overview of the performance for Programme 1, the Financial and Administration Branch. The purpose of this branch was to provide strategic and administrative support services to the Ministry and the Department. The key challenges were to educate and empower stakeholders and the filling of vacancies.

Ms Pat Gamede, Deputy Director-General: Corporate Services, Department of Mineral Resources, said that the purpose of the Corporate Services Branch was to provide strategic and administrative support services to the Ministry and the Department. The key challenges were contribution to skills development, the need to attract, develop and retain skills, and ensuring compliance with Human Resource legislation.

Mr David Msiza, Chief Inspector of Mines, Department of Mineral Resources, reported on the Mine Health and Safety programme, which aimed to safeguard the health and safety of mine employees and people affected by mining activities. The key challenges were occupational safety; occupational health; skills development and illegal mining.

Mr Joel Raphela: Deputy Director-General: Mineral Regulation, Department of Mineral Resources said that the purpose of the Mineral Regulation division was to regulate the mineral and mining sector to ensure economic development, employment and ensure transformation and environmental compliance. The key challenges were the continuous need to increase capacity to enforce compliance at all mines; global economic challenges and the industrial relations challenges, resulting in fewer jobs created. There had been less applications from Historically Disadvantaged South African (HDSA)-controlled entities as a result of, amongst others, barriers to entry such as funding.

Mr Mosa Mabuza: Deputy Director-General: Mineral Policy and Promotion, Department of Mineral Resources, said that the purpose of his division was to formulate mineral-related policies and promote the mining and minerals industry of South Africa, making it attractive to investors. The only key challenge was to attract and retain skills. The corrective measure in this regard was to collaborate with Human Resources and the industry, to introduce innovative skills development programmes and to attract the relevant categories of skills.

Mr Ramontja summarised that the DMR, assisted by the Audit Committee, would closely monitor the implementation of management action plans to resolve the AGSA findings. He thanked the Committee for raising issues experienced during oversight visits. The Department assured the Committee that those issues would continue to receive priority action.

Discussion
Mr S Mohai (ANC) said that the Annual Report inspired hope. He expressed concern about the loss of technical skills in the Department. The Financial and Fiscal Commission (FFC) raised the issue that the revenue-calculation system was not integrated with other systems, such as the Basic Accounting System (BAS). He feared that large amounts that could thus be made available to boost the fiscus might be “lost in the cracks” because of the absence of proper systems. He asked the Department to comment on what was raised by the FFC.  

Mr Ramontja replied that the Department was constantly faced with a competition for limited resources, and this was the heart of the problem. It had been evident that sometimes, when mining companies were looking for people, they tried to recruit directly from the Department. Some people who were now working at the Chamber of Mines used to work at the Department. This problem had to be addressed. The system had to be boosted, and this was why the Minister had actually initiated a programme to develop and recruit Learner Inspectors. The Department was now training 50 learner inspectors a year in mine health and safety areas, and it meant that in the next three to five years the Department would be training between 150 to 200 Learner Inspectors. They would have to sign contracts to ensure that they stayed with the Department for a good time frame.

Ms K Khunou (ANC) said that an area of concern was the staff turnover or retention of skills. She suggested that there was a need for better career guidance to assist in recruitment. The Department had to look into getting into schools to expose scholars to mining education. The Department did have bursaries.  

Mr Ramontja replied that the Minister had launched a programme for training artisans with Mining Qualifications Authority (MQA). The Department had realised the need to ensure entry into strategic partnerships with mining companies, especially in areas like Mineral and Mine Economics. This would allow staff members to be placed in those mining companies. Discussions had been started with some companies and they were more than willing to co-operate with the Department. The issue here was to train as many people as possible to “flood” the system.

Ms Khunou asked for clarity about the communities the Department had spoken about.

Mr Lorimer asked about illegal mining being concentrated in Gauteng. He asked if the problems in the Free State and Mpumalanga were under control.

Ms Gamede said that she had heard the Committee suggest that maybe Durban and Gauteng were concentration points. This was not the case; in fact there was more of a focus on Limpopo, the Northern Cape and Kwa-Zulu Natal for career guidance. Gauteng had been neglected in many respects. Next year, the Department would focus on Gauteng. Her reference to communities related to schools in those rural communities, where career guidance programmes were run. These students were very keen as they even came on Saturdays. It was a two-legged programme, for the schools as well as for universities. In universities the DMR concentrated on technical education, such as mining engineering and the Human Resources directorates would run those at universities. It was also promoting other aspects in rural communities at the moment.

Ms Khunou said there had been great improvement in mine safety and health. She asked if there was a prevention plan for asbestosis.

Mr Msiza said that the Department was still greatly concerned about the loss of life. There were plans, and a strategic plan to support and sustain improvement. The ultimate goal was zero harm, for both health and safety, and the DMR was also working on the Summit Commitments of 2011 to achieve the goal of zero harm. There was also a plan in place through the Mine Health and Safety Council. As Mr Ramontja had indicated, the DMR was also working with the Mining Qualification Authority (MQA), and some of its programmes enhanced health and safety, such as a programme to train about 40 000 Health and Safety representatives. The Department would ensure that the workers themselves took responsibility for their own health and safety also, so it continued with this programme.

Mr Msiza said that continuing cases of asbestosis showed the challenge of latent problems arising from previous over-exposure to dust or other hazards. There were no asbestos mines in the country any longer, and work had ceased on the last asbestos mine about 20 years ago, so the cases now showing had taken that long to manifest themselves. Each disease took a different time to become apparent, and this also depended on the person – for instance silicosis could take ten to twelve years. Mines’ medical surveillance showed traces of silicosis, which must be reported upon, and the law required that systems of medical examinations must be put in place. The measures put in place were effective, but there were risks depending on the susceptibility of the individual. There had been some encouraging improvements.

Ms Khunou asked how many mines there were.  

Mr Ramontja replied that there were approximately 1 600 mines in the country.

Mr Lorimer asked for more information on the statement that roughly 2 500 jobs were created in the industry.

Mr Ramontja expanded that in 2012 there were over 524 000 employed in the industry. In the past few months there had been challenges but there were still above 500 000 employees. The mining industry was not a static industry.

Mr Lorimer asked about the average time taken to adjudicate mining and prospecting licenses.

Mr Raphela said that there had been some improvements in processing applications in the Department itself, but the South African Mineral Resources Administration System (SAMRAD) had addressed this matter and it has been resolved. Issues such as double granting no longer existed. The design of the MPRDA had been geared to compliant applications, where there would be no need to having to recall applicants for ratification. There was a need to effectively and continuously enforce and apply pressure in the to and fro process. This had an impact on the time frames. He noted that, as indicated in the Annual Report, the Department had achieved 61% in processing of applications for both mining and prospecting, and the target of 70% recognise the challenges around the need to continuously have the engagement with the applicants.

Mr Raphela added that SAMRAD was first launched as an application platform because at the time the Department needed to begin to implement very important recommendations coming out of the mining sector strategy. There was a need to reposition mining in the country to deal with some of the perceived challenges around the regulatory framework, and to draw on the lessons of the first phase of the implementation of the MPRDA. There was at one stage a moratorium, but when the SAMRAD system went live the platform allowed the launching of categories of prospecting rights and mining applications. Over time, this was upgraded to allow for launching of mining rights applications, and the so-called ancillary applications, which were made under section 11, section 102 and other types of applications. The system also recognised the need to further integrate with the Department of Environmental Affairs and the Department of Water Affairs and was loaded with data around environmentally sensitive areas. Subsequently, the speed of the system was improved and DMR procured additional hardware for it to cope with the capacity and the demands. Later on, further modules were added to help it better manage Section 91B applications. He explained that these were competing applications which had to be processed in order of receipt, to counter challenges around which application was lodged first. The system managed to eradicate contestations on time of application, and perceptions around tampering with documentation.

Mr Lorimer noted that National Treasury had proposed that the Department submit a progress report on the rehabilitation of ownerless and derelict mines He asked if the Committee was going to see this report.

Mr Ramontja replied that this report was available, and provided information about the quantification of the liability, as DMR had appointed an actuarial scientist to assist with that process, to counter the issues raised by the Auditor-General. The part of the report on rehabilitation was available to the Committee.  

Ms Ngele said that it seemed that the Department was taking the problems of retaining its skilled staff too lightly.

Mr Msiza replied that there were skills development programmes ready to support the sector. The Department’s target was to issue 750 bursaries a year on technical subjects including mining, electrical, mechanical engineering and geology. There were also learnership programmes, including an artisan programme, which was intending to target 3 000 people per year, both employed and unemployed. There was also an Artisan Aid Programme.

He added that it had been estimated that there were about 15 000 artisan trainees in the sector, but they did not progress upwards to become fully-certified. The Department had a programme in place through the MQA, to help those artisans to progress to the next level to become fully-fledged artisans. The MQA had established six regional offices, to bring the Department’s programmes closer to the communities, especially in the mining areas. There were programmes in the mining areas of Free State, Mpumalanga, Sekakune West in Limpopo, Rustenburg in the North West, and in the Northern Cape, to encourage the youth.   The Department also had a maths and science programme to help grade 11 and 12 students in particular, in high schools, to improve. There was also a programme, run together with DMR’s policy team,  to support beneficiation work.   

Ms Ngele noted that when comparing gold and coalmines, coalmines were very shallow with lower fatalities. She commented that nothing had been said in this report about women and safety, and asked if conditions for women had improved.

Mr Msiza replied that the Department agreed with Ms Ngele about the need to address women and their safety, and measures had been put in place and research was being done through the Mine Health and Safety Council. The Department had even written departmental directives to the mines to look at this matter, and implementation was monitored. There had been change in attitudes, and some mines had been without accidents and fatalities for six months.

Mr Ramontja added that the Mine Health and Safety Act has been amended to address the matters, and these amendments were presently with Cabinet.

Ms Khunou asked how many inspectors there were.

The DG replied that there were different types of inspectors, in areas of mine health and safety (MHS), inspectors who focussed on environmental issues, inspectors involved with mine economics and subsidence management plan (SMP) inspectors. There were challenges around having enough SMP Inspectors and MHS Inspectors, followed by mine economics inspectors. The challenges with environment inspectors were being dealt with. The new proposal, which the Department was still working on, was to have a dedicated inspectorate, similar to the Mine Health and Safety Council, with sub-divisions. They should be completely separate from those dealing with the applications.

Ms Khunou asked for clarity about the Departments’ relationship with the Industrial Development Corporation (IDC), and if it was useful.

Mr Ramontja replied that funding for new entrants was a challenge in the mining industry. Countries like Canada had introduced special funding, like a tax incentive, whereby people investing in exploration activities would get some form of rebate. In South Africa, people used risk money. People needed to be educated about the whole value chain of mining. The Industrial Development Corporation (IDC) would never enter this environment. It was addressed by funding the Council for Geoscience to do detailed mapping, so that attractive areas could be identified.

Ms Khunou commented that transformation was slow because of funding issues. She asked the Department to comment on any success stories around mining transformation, as well as the current challenges.

Mr Raphela replied that the Department was working on a major project at the moment that would make navigation, as an interactive part of the system, a lot better and more user friendly. DMR was also showing improvements in generating various types of reports for the purposes of monitoring impact interventions, and monitoring the performance of officials, which was done through the requirement that they log on each time they used the system, making it easier to track the movement on applications from the time of launching to finalisation.

Mr Raphela added that one of the continuing challenges was access for people in areas where the ICT infrastructure was not as modern or advanced as in the urban centres. Those operating in small-scale mining environments often raised this, but the Department was confident that, with the funding that it was beginning to receive, it could address this developmental issue.

Ms Khunou asked why there could not be programmes to incorporate and perhaps legalise the currently illegal mining activities.

Mr Ramontja replied that illegal mining was a real problem. He said there was perhaps room to look at legalising some mines, but there were huge risks involved, especially with regard to deep mines. Illegal mining was also linked to other illegal activities, and syndicates were involved in these processes. Great caution had to be taken when addressing the issues.

Mr Msiza confirmed that illegal mining involved a number of criminal elements.

Mr Lorimer referred to shale gas and asked the Department to outline each step of the process; clarify when hydraulic fracking was going to begin, in terms of the regulations that were issued, and what needed to happen next. He asked who would be doing the oversight, on behalf of the DMR, around the shale gas drilling, and what training had been received.

Mr Ramontja replied that there was a team of experts. The report was available, the risks had been assessed and the resources available were listed. The second step was to augment the framework with the regulations. The focus was on fracking. People were given 30 days to comment on the raft regulations. The comments would then be incorporated into the final regulations, which would be published again. There would be public consultations on this matter. There was an action plan, but the public would be informed by public consultation processes. The ground water environment was the main risk.

The Chairperson asked why travelling costs had increased so much.

Mr Ramontja replied that travelling costs had increased because of increased inspections, which involved people having to be transported to the mines visited for purposes of inspection.

The Chairperson asked what the cost implications of inspections were.

Mr Ramontja confirmed that the Department would provide this information, as it was not to hand at the moment.

The Chairperson asked for clarity about the Department’s relationship with the National Treasury.

Mr Ramontja replied that there had been engagements with the National Treasury, especially when it came to royalties. The collection of royalties was going to be transferred to South African Revenue Services (SARS), in terms of the Royalty Act, who would then be the competent authority, and this would solve a lot of problems. SARS was also to be responsible for collecting the remaining royalties that were currently with the Department under the old order dispensation.

The Chairperson asked if the Committee could get a copy of the investigation report that had been done about audit queries in relation to fruitless expenditure. 

The DG replied that there had been an investigation into irregular expenditure.  A report was written, and the Department had actioned what needed to be done, by submitting information to the relevant authority. The report would be made available to the Committee.

The Chairperson said that out of the 60 bursaries given, two bursary holders had fallen out. She asked why this had happened.  

Ms Gamede replied that the two were absorbed into the system elsewhere. They had received very good marks in maths and science at matric level, but for some odd reason they had dropped out of the university system.

The Chairperson asked if the Department’s bursaries were outside of the MQA. She asked further if the Department was solely dependent on outside funders to ensure that people were trained.

Ms Gamede replied that there were three types of bursaries, namely: internal bursaries for staff; bursaries that the Department attempted to facilitate through the MQA; and bursaries that the Department tried to identify offered by mining companies or other institutions that could provide assistance. The process with the MQA was sometimes very difficult because the MQA had its own programmes as well. The Department has tried other programmes with mining companies.

The Chairperson asked for clarity about the selection process for staff, and asked if the Committee could get a presentation on the retention strategy.

The DG said that there was a retention strategy in the Department, but there were still negotiations on that strategy with employees at the bargaining council. Once that process has been completed, the strategy would be made available to Members. 

Mr Lorimer asked if it was possible to standardise the way the annual reports were laid out because it was difficult to compare year-to-year if the formatting kept on changing.

The DG replied that the Department used the guidelines from the National Treasury, and if it deviated from that, there would be problems.

Mr Lorimer asked about the time frame for tabling amendments to the Mine Health and Safety Act, and whether it had been presented to Cabinet.

Mr Ramontja replied that the Mine Health and Safety Bill had gone through Cabinet, and would probably be gazetted in the next week or two.

The following questions were asked but not responded to at the meeting:

Mr Lorimer asked how mining companies or contractors were assessed. He asked further for a breakdown of the assessment process.

Mr Lorimer said that there was a problem with safety inspectors and major interventions were needed on this.

Mr Lorimer asked how many visits on average were done, per year, by safety inspectors. He asked further if these visits were unannounced.

Mr Lorimer asked for clarity about closure certificates. He asked further if mines were closing even though there was growth.

Mr Lorimer said that it was well known that there was a shortfall in funding for rehabilitation and derelict mines. He asked if the problems were only to do with shortage of money.

The Chairperson asked if the Regulator could take the Committee through the systems that were being put in place, and how best they were starting to align to the issuing of licenses.  This would allow the Committee to see practically that the work was becoming easier for an ordinary miner to apply for a license.

Mr Lorimer asked how many of the operating mines had submitted the reports, during the year, in terms of section 28B of the MPRDA, and how many did not comply with the law.

Chairperson’s closing comments
The Chairperson said that the Committee needed to agree on the recommendations that were to be added to the Committee Report on today’s meeting. They would relate to the information received from AGSA. The Pyramid of Accountability as shown on page 13 of the presentation from AGSA could be incorporated as a tool to be used during the next oversight visit. She added that quarterly reports to the Portfolio Committee should be looked at, rather than waiting until year-end to hear about activities, and to monitor what was happening. Furthermore, the Committee needed to consider and agree upon the retention strategies for existing skills in the DMR, checking also the number of vacancies, and how those posts were going to be filled, and the time frames allocated.

She noted that the Department had said that it was not getting enough budget. The entities should sit together so that struggling entities could get assistance from more stable ones. Remedial measures could be learned from each other.  Capacity was also an issue. The Committee needed to get an understanding of the issues and the problems. Inspectors were needed. A report was needed with setting out the remedial action. The Department had promised to provide the Committee with the report on fruitless and wasteful expenditure. She noted that it was important that each of those reports to be forwarded to the Committee, must have been approved and reviewed by the Director-General, and signed off by the Internal Audit.

She added that the Committee, as part of its oversight, should check exactly what the DMR was doing on alignment and integration of the Department’s financial management system. This would improve the issuing of licenses and all other systems within the Department, so that they functioning optimally. If, at the end of the day, those programmes did not talk to each other there would be questions raised on what was happening. Finally, the audit-clean up had to be assured. The Committee appreciated the DMR’s report, and noted the improvement and growth could be seen.

The meeting was adjourned.