Council for Geoscience, State Diamond Trader, South African Diamond and Precious Metals Regulator, Mine Health and Safety Council on their 2014 strategic plans

Meeting Summary

Council for Geoscience (CGS) major 2014/15 activities are the Strategic Mine Water Management Project, feasibility studies for ingress control measure implementation; mine water and seismicity monitoring; and wetland Acid Mine Drainage rehabilitation. CSC had identified 6000 derelict and ownerless mines between 2005 and 2008 and field investigations were ongoing. Its Human Resources strategy continued to transform the organization and retain skilled scientists, and young scientists were attracted to geoscience through full and part-time bursaries, internships, mentorship programmes and the Geological Mapping Field School. A challenge for the CGS was that its scope was already wide and the Minerals and Petroleum Development Act (MPRDA) would require new competency within the organization. It was currently not feasible for the CGS to tackle implementation without the appropriate funding and expertise.

Members asked for more information on how CGS performance was limited due to lack of budget; for more information on the criteria for allocation of bursaries; and how CGS planned to address the aging infrastructure. CGS was also questioned about its ability to take on the additional functions that the new Mineral and Petroleum Resources Development Amendment (MPRDA) Bill would give it if the Bill is signed by the President.

South African Diamond and Precious Metals Regulator (SADPMR) strategic objectives included improving competitiveness, sustainable development and job creation in the metals industry, transformation of the secor and promoting equitable access to resources for local beneficiation, and enforcing compliance with legislation. The allocation from government for 2014/15 was R47 million and the shortfall was overcome through SADPMR’s capacity to generate revenue through regulator service charges. Other challenges were: declining and shrinking diamond and precious metals industries since 2008; complexities in the beneficiation of precious metals; and lack of access to rough diamonds for beneficiators. The law required that each producer had to provide 10% of total production (of run-of-mine) to the State Diamond Trader. The SADPMR had introduced facilitation of increased market access and trade transactions for polished and unpolished diamonds at the Diamond Exchange and Export Centre (DEEC) for newcomers to the industry. It was also focused on strengthening working relations between the SADPMR and the diamond and precious metals industry. SADPMR would report back to the Committee with progress on these developments and on the tenders for polished diamonds at the DEEC, which SADPMR had facilitated.

Members asked for clarity on whether the SADPMR checked and regulated transfer prices; what mechanisms were in place by SADPMR to ensure that the white minority capitalists provided exactly 10% of diamond production of that mine; how long it took for a licence application to be issued.

State Diamond Trader (SDT) fulfilled its mandate of promoting the diamond beneficiation industry, growing small and medium enterprises, and sourcing and selling rough diamonds, thereby enabling transformation of the industry as a whole. It was eligible by law to purchase up to 10% of the run-of-mine from all diamond producers in South Africa. Its strategic objectives included contributing to the growth of the local diamond beneficiation industry by increasing the number of rough diamonds beneficiated in South Africa; enterprise development (SMMEs); and establishment of large scale historically disadvantaged South Africans-owned entities in the diamond cutting and polishing industry; and to develop efficient means to market diamonds not suitable for local beneficiation. One of the SDT’s strengths was its access to rough diamonds on a “no-competition basis”, as the mining company had to start with the SDT before it could sell its 90% elsewhere. Projected sales for the year totaled R534.3 million, with the cost of goods sold being R513.7 million, resulting in a gross profit of R20.5 million. Projected overhead costs were projected to be R15.8 million: Employee salaries (R9.3 million) and general operational expenditure (R7.4 million). Projected net income after interest was R4.06 million.

Members asked how many customers SDT sold to and what quantities were sold to each of them; if certain customers were sold large parcels of diamonds at favourable prices; if the number of beneficiators (cutters and polishers) was increasing or decreasing; if the number of rough diamonds being beneficiated in South Africa was increasing or decreasing; and for more information on the international projects. They asked if there were challenges to achieving the 10% target and if the SADPMR would allow SDT to buy 100% of a customer’s product; how the SDT could ensure maximum participation in the diamond industry when it was limited to access of only 10%; and if beneficiators were assisted with marketing poor quality diamonds to international markets. They also asked what strategy was in place to ensure that the previously disadvantaged communities, primarily of African origin, would grow into the diamond trading arena; what programmes were available for young people to become involved and what the youth profile was like in the industry; for more information on overhead expenditure; and for SDT’s strategy to deal with the general view that the diamond industry was a shrinking industry, which would impact on personnel. On follow up, a Member asked if the SDT could submit a list of the SDT clients and the value of diamonds (even on a yearly basis) that had been sold to each client, as well as the Allocations Policy; and if SDT kept records of what percentage of diamonds produced locally were cut locally and how many of the diamonds that SDT sold were actually cut in South Africa.

Mine Health and Safety Council (MHSC) strategic objectives included delivery on Occupational Health Safety (OHS) to ensure stakeholder satisfaction; MHSC programmes to improve OHS awareness in the Mining Sector; improved turnaround time for procurement of services to ensure delivery; enhanced effectiveness of the employee performance management process; delivery of MHSC projects within budget and time to the required quality and standard; implementation of the knowledge and information management system to support staff and stakeholders by deposits into the repository; continuous development of office staff and council members competencies; and improvement of climate and environment for good staff morale. In the current financial year, expenditure on promotion, health and safety, research projects, and the strategic objectives would break even from income of R70 million from levies.

The Chairperson asked for the expenditure pattern to be presented to the Committee at an upcoming meeting and suggested cutting costs for research by coordinating it from a research hub together with entities such as Mintek.