Department of Mineral Resources 2012/13 Annual Report briefing

NCOP Economic and Business Development

22 October 2013
Chairperson: Mr F Adams (ANC; Western Cape)
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Meeting Summary

The Department of Mineral Resources (DMR) briefed the Select Committee on Economic Development on its 2012/13 Annual Report. The mining industry in South Africa was facing major challenges. However the global challenges within the sector needed to be acknowledged. Regardless of these challenges, the mining industry in South Africa had achieved many milestones; one of which was the DMR spending 99.4% of its total allocated budget. The budget structure of the DMR was outlined, and some of the major achievements were outlined. These included the establishment of an Inspectorate providing 317 posts, issuing bursaries to previously disadvantaged students, and decreased deaths at mines being reported. The challenges were then outlined, under specific programmes, as follows:
-Programme 1.1: Corporate services
The purpose of the programme was to provide strategic and administrative support services to the Ministry and the DMR. The DMR experienced a reduction in staff turnover. Targets were not achieved due to retirements, transfers and promotions to other departments and organisations.
-Programme 2: Mine Health and Safety
The purpose of the programme was to execute the DMR’s mandate to safeguard the health and safety of mine employees and people affected by mining activities. Fatalities in Limpopo were recorded to have increased from 9 in 2011 and 15 in 2012. Other key challenges included occupational safety, occupational health, skills development and illegal mining.
-Programme 3: Mineral Regulation
The purpose of the programme was to regulate the mineral and mining sector to ensure economic development, employment and to ensure transformation and environmental compliance. Challenges included global economic challenges and the industrial relations which resulted in fewer jobs created.
-Programme 4: Mineral Policy and Promotion
The purpose of the programme was to formulate mineral-related policies and to promote the mining and minerals industry of South Africa, making it attractive to investors. Key challenges in the programme were faced in attracting and retaining skills. In response, the DMR had collaborated with the Human Resources department and the industry to introduce innovative skills development programmes and also to attract the relevant categories of skills.

Members asked what timeframes were attached to the regulations on fracturing and what process was scheduled to follow next. They asked DMR to explain why it  did not have adequate systems to manage and receive revenue in place. They wanted to know how far was the DMR with mapping the country’s mineral resources, and what it was doing to ensure compliance and a clean environment. They asked how the DMR was addressing the matter of ownerless mines, what initiatives did DMR have in place to engage traditional leaders in rural mining communities, and how DMR was  planning to reach its transformation targets. The DMR was asked to provide a map of the location of all ownerless mines, together with update reports, though DMR assured the Committee that this was under control. The Department was further asked to submit a report on fracking.
 

Meeting report

Chairperson’s opening remarks
The Chairperson welcomed all the delegates to the meeting. He apologised for the venue, which had to be outside of Parliament, explaining that all venues for meetings in Parliament were fully booked. He noted that the Minister of Mineral Resources had forwarded an apology for not being able to attend the meeting.

Department of Mineral Resources Annual Report 2012/13
Dr Thibedi Ramontja, Director-General, Department of Mineral Resources, explained that the mining industry in South Africa was facing major challenges. However the global challenges within the sector also needed to be acknowledged. Regardless of these challenges, the mining industry in South Africa had achieved many milestones; one of which was that the DMR spending was at 99.4% of its total allocated budget.

The mission of the Department of Mineral Resources (DMR or the Department) was to promote and regulate the Minerals and Mining sectors for transformation, growth, development and to ensure that all South Africans derived sustainable benefit from the country’s mineral wealth.

Ms Irene Singo, Chief Financial Officer, DMR explained that the budget for the DMR was R1.176 billion for the 2012/13 financial year. The DMR spent 99.4% of the allocation, which was R1.173 billion. R395 million was spent for the compensation of employees, R228 million was spent for allocated goods and services, R525 million was spent as transfers to entities and R24 million was allocated towards capital assets. The DMR’s spending was in line with the DMR’s action plan.

Dr Ramontja then gave an overview of the DMR’s performance information, noting at the outset that the DMR divided its activities between the following programmes:
•Programme 1: Administration
•Programme 2: Promotion of Mine Health and Safety
•Programme 3: Mineral Regulation
•Programme 4: Mineral Policy and Promotion
Some of the DMR’s achievements were:
- The establishment of an Inspectorate provided for 317 posts, of which 253 were currently filled and 64 were vacant
- DMR issued five bursaries during the reporting period to previously disadvantaged students in the fields of electrical engineering, mine engineering and mine surveying
- 112 deaths at mines were reported during the financial year, in comparison to 123 deaths reported in the previous financial year
- With regard to fracking, the DMR established an inter-departmental Task Team in order to among other things, evaluate the potential environmental risks posed by the process of hydraulic fracking.

More specific achievements and challenges were then outlined for each of the programmes.

Ms Singo, dealing  with Programme 1: Financial Administration branch, said that this branch was set up to provide strategic and administrative support services to the Ministry and the DMR. Some of the key achievements were the improved service delivery and turnaround times for processing transactions, and the provision of reliable and timely information. Some challenges were that the DMR still needed to improve on irregular expenditure and key senior management vacancies needed to be filled.  The Chief Financial Officer vacancy was filled and the remaining posts were being filled. Interviews were under way.

Ms Patricia Gamede, Deputy Director-General: Corporate Services, DMR, said that the purpose of the Corporate Services branch was to  provide strategic and administrative support services to the Ministry and the DMR. Some of the key achievements included the fact that the website and intranet were updated in a timely manner. The DMR held successful media briefings and public participation engagements and an internal communication strategy was approved. She explained that 16 mining career awareness initiatives were held for communities and universities. Financial disclosures were also submitted within the prescribed time frames. Some challenges were that the DMR experienced a reduction in staff turnover. Targets were not achieved due to retirements, transfers and promotions to other departments and organisations.

Mr Xolile Mbonambi, Deputy Chief Inspector, DMR, reported on Programme 2: Mine Health and Safety. The purpose of the programme was to execute the DMR’s mandate to safeguard the health and safety of mine employees and people affected by mining activities. The objective was to strive towards a safe and healthy mining industry. Key achievements included a 9% improvement in all fatalities, from 123 in 2011 to 112 in 2012. For the first time in two years, the platinum and coal sectors had recorded a reduction of 24% in fatalities. Fatalities in the transport and mining fatalities decreased by 24%. Audit and inspection were exceeded by 6% and 8% respectively.

In addition 14 assistant inspectors were undergoing inspector training at various regional offices and 71 officials attended technical and administrative courses. Fatalities in Limpopo, however, were recorded to have increased from 9 in 2011 up to 15 in 2012. Some key challenges included occupational safety, occupational health, skills development and illegal mining.

Mr Joel Phaphele, Deputy Director-General: Mineral Regulation, DMR outlined the performance in Programme 3: Mineral Regulation. The purpose of the programme was to regulate the mineral and mining sector to ensure economic development, employment and to ensure transformation and environmental compliance. Some key achievements included development of 41 Small Medium and Micro Enterprises (SMME) projects were developed. These were implemented in rural areas where mines operated, and there were 94 Local Economic Development (LED) projects towards sustainable job creation. Some of the challenges included global economic challenges and the industrial relations, which resulted in fewer jobs created.

Mr Mosa Mabuza, Deputy Director-General: Mineral Policy and Promotion, DMR, outlined the achievements in Programme 4: Mineral Policy and Promotion. The purpose of this programme was to formulate mineral-related policies and to promote the mining and minerals industry of South Africa, making it attractive to investors. Therefore, through research, information would be provided to enhance competitiveness, review policies and formulate legislation to achieve transformation and attract new investment into South Africa’s minerals industry. Key achievements included the drafting and certification of the Minerals and Petroleum Resources Development Act (MPRDA) and the Mine Health and Safety Act. A Platinum Task Team was established to jointly respond to the challenges facing the sector. In addition, 13 derelict and ownerless mines were rehabilitated. However the key challenge in the programme was attracting and retaining skills. In response, the DMR had collaborated with the Human Resources unit and the industry to introduce innovative skills development programmes and also was trying to attract the relevant categories of skills.

Dr Ramontja concluded that the DMR was assisted by the Audit Committee to monitor closely the implementation of the management action plan to resolve the Auditor-General findings. In addition, the DMR was involved in various projects to pursue government and national objectives. These projects included, among others, initiatives to stabilise the mining industry. A coal resources and reserves study was completed and preparations to host the International Geological Congress were in place.

Discussion
Mr K Sinclair (COPE; Northern Cape)asked for clarity on the processes followed with the regulations on fracking. What timeframes were attached to the regulations and what process was scheduled to follow next? When would role-players be engaged?

Mr Sinclair was worried that the DMR annual Report indicated that the DMR did not have adequate systems to manage and receive revenue; and as a result R151 million was mis-stated. He wondered how it was possible that the DMR did not have such a system in place?

Mr Sinclair asked what plans DMR had to put in place satellite offices in the Northern Cape.

Mr Sinclair noted that the DMR’s strategic report indicated that the DMR had plans to label coal as a strategic resource; and asked if this report could be made available to the Committee.

Mr B Mnguni (ANC; Free State) said the DMR’s planning of mapping the country was at attempt to make the country more investor-friendly, by pin pointing the exact locations of all the country’s mineral resources. He asked how far this process had gone.

Mr Mnguni wanted some comment from the DMR on the European Union (EU) resource initiative campaign, which was partly aimed at South Africa, in response to the recent incident in Marikana. The campaign’s aim was to secure resources.

Mr Mnguni said that the DMR had indicated that mines in South Africa had increased from 900 to 1 500 in number, but that the rates of non-compliance had not decreased. What measures was the DMR taking to ensure compliance and a clean environment?

Mr Mnguni also asked questions on ownerless mines and said that the DMR had set a deadline whereby 26% of South African mines would be owned by previously disadvantaged groups; and wondered how far the DMR was in reaching this target.

Mr Mnguni asked that the fracking report should also be submitted to the Committee.

Ms M Dikgale (ANC; Limpopo) thanked the DMR for the presentation. She argued that the DMR was not putting in enough effort in engaging traditional leaders in the Sekhukhune area. The DMR needed to visit these mining communities and hear the concerns of the local residents.

Ms Dikgale asked what the DMR was doing to reduce the accident fatality rates even more for the coming financial years.

Mr D Gamede (ANC; KwaZulu Natal) asked that the DMR provide a full list of all the new mine owners. He wanted more detail on how the DMR was planning to reach its transformation targets. The DMR’s achievements in this regard had not been satisfactory to date. He also asked who were some of the DMR’s social partners, especially in the rural areas. He asked that a list of all 41 Small to Medium Enterprises projects, per province, be provided to the Committee, including a list of all the owners of these projects. He mentioned an incident where a young female student was struggling to get a bursary from the DMR and said that, given the low skills within the DMR, this was not acceptable and a letter would be forwarded to the Minister.

The Chairperson said due to time constraints his questions would be forwarded to the DMR in writing.

Dr Ramontja replied to the question on regulation and fracking and said the DMR had gazetted the regulations for 30 days. Comments would be received from the public and these would be consolidated and incorporated into the regulations for finalisation. The consultation process would be led by the Minister.

Dr Ramontja added that the DMR had developed a detailed action plan with regard to receivables, and this plan was discussed with the DMR’s Audit Committee, and various workshops had been held. However it was important to bear in mind that many of the issues were as a result of the past legacy. 

Dr Ramontja said, in respect of the coal report, that this report still needed to go to Cabinet, after which it would be handed over as a public document. A copy of the report would be forwarded to the Committee.

Dr Ramontja explained, in regard to mapping, that South Africa needed to upgrade its geological infrastructure. The infrastructure needed to be modernised so that it could compete with international countries. Additional funding for these upgrades had been made available. Namibia and Mozambique were examples of countries which were also embarking on the process of mapping their geological infrastructure.

The EU campaign on security of supply for mineral resources came about because the whole world was looking into securing minerals for strategic development, manufacturing and developing their economies. South Africa was therefore also addressing security of supply. Coal was a very important mineral and it needed to be protected.

Dr Ramontja said that ownerless mines was also another legacy of the past 100 years of mining within South Africa. However, there were new laws aimed at tackling this issue and mine owners were now not allowed to simply close down a mine; a closure certificate needed to be obtained from the DMR before closure.

On the questions of transformation and the 2014 deadline, he said the DMR had already started with a process of assessing the levels of transformation within the industry and within the Department. An external company had been appointed to assist the DMR, but it was recognised that the process of transformation was not an easy one. As soon as the process had been completed, detailed information would be provided to the Committee. Beneficiation of South African minerals was also part of the transformation process. The state, however, also needed to play an even greater part in the transformation of the petroleum and gas industries.

Mr Phaphele replied to the question on Sekhukhune and said the DMR had had a number of engagements with the traditional leaders in the Greater Sekhukhune area and with various stakeholders there. There was agreement that the issues pertaining to how the mines impacted the communities needed to be addressed as a matter of urgency. There were also issues of crime and instability within these communities. The DMR was also working with the Mine Crime Combating Forum within these communities, together with the South African Police Services, to deal with acts of de-stabilisation. Inputs from traditional leaders have been taken into account as the authority of these leaders could not be ignored.

Dr Ramontja replied to the question on the DMR’s social partners and said the DMR had a tripartite structure which included the Chamber of Mines and organised labour. In addition the Minister had initiated a process where all stakeholders, traditional leaders, provincial and municipal leaders were called in for engagements. The DMR also agreed that the Mining Legkotla would be held on all the rest of the provinces. On transformation he replied that the DMR was engaged with assessing the Department’s performance, in terms of the Black Economic Empowerment ratings. By the end of the 2013 financial year, the DMR would be able to provide the Committee with accurate statistics. The Minister was driving the transformation process and the private sector would also be engaged.

The DMR had also intensified its compliance with the MPRDA by strengthened inspections and compliance measures but it was true that small companies were still struggling with issues of compliance. He assured Members that the DMR was more than willing to assist young people from disadvantaged backgrounds with skills development. The Minister had started a process where the capacity of the DMR was assessed and monitoring needed to be strengthened. The mining industry had indeed grown significantly, but the DMR itself was still a small department and this posed some serious challenges. Issues of capacity would be addressed.

Mr Sinclair said he was not a racist, but the DMR was not representative of the greater demographics of South Africa, and he wanted to know how this was being addressed, and what exactly the DMR was doing to address issues of representation within the Department.

Mr Mnguni asked about security of supply to ensure beneficiation within the mining industry, and asked what regulations there were for the gold industry, and how much gold could stay in the country?

Mr Sinclair asked about how far the minerals beneficiation programme had gone.

The Chairperson asked that a list of all ownerless mines be provided to the Committee, together with all progress made.

Dr Ramontja replied to the question on representivity, and said the DMR was working with the Auditor-General to ensure that people from all communities and demographics were represented within the DMR, such as Indians and Coloureds. The DMR would be transformed.

Ms Gamede added that the DMR would be embarking on a process of advertising posts in regions to target specific races for broader representations. Regional demographics would therefore be taken into account.

Dr Ramontja replied, in relation to beneficiation, that two issues needed to be considered. The first related to access to the minerals, and section 26 of the MPRDA was addressing this issue. As a result, a portion of all products needed to be made available for local beneficiation. Other products such as petroleum, oil and gas also needed to be easily accessible.  The second issue was that of price. In terms of the current amendment, people needed to be able to buy minerals at a price they could afford, which would allow them to establish factories and industries within the country.

Dr Ramontja said that in relation to ownerless mines scientists had been engaged to quantify liability for these mines and the Auditor-General has commended the DMR on its work in this regard so the matter of ownerless mines was no longer a concern. A full report on the DMR’s progress would be provided to the Committee. 

The Chairperson said mining was a national issue and not a matter of provincial competency. The DMR therefore needed to brief provinces on the MPRDA Bill.

The meeting was adjourned.
 

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