Department of Mineral Resources 2014 Strategic Plan, Auditor-General, Department and Ministerial briefings

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Mineral Resources and Energy

08 July 2014
Chairperson: Mr S Luzipho (ANC)
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Meeting Summary

The Minister and Deputy Minister attended the meeting. The first briefing was given by the Auditor-General South Africa (AGSA) by way of an introduction and it focused on the audit process and its aims to improve oversight and accountability, and summarised the audit outcomes in the last couple of years for the Department of Mineral Resources (the Department) and its entities. There had been progress over the last few years, and a Chief Financial Officer had been appointed, although there were some other key posts that remained vacant. In 2011/12, the Department itself had an unqualified financial audit, but with some findings on compliance, but had managed to achieve an unqualified audit on pre-determined objectives. In 2012/13, however, there was a qualification in relation to receivables or royalties. South African Diamonds and Precious Metals Regulator achieved unqualified reports in both aspects over the last two years, as did the State Diamond Trade and Council for Mineral Technology Research and Council for Geo-Sciences (although there were findings on compliance). The Mine Health and Safety Council had findings on compliance in both the 2011/12 and 2012/13 years, although the financial statements were unqualified, and in the latter year it also had a problem with the measurability of predetermined indicators. Members asked what critical positions remained to be filled, and asked how the Department would handle its budgeting and planning, in light of the fact that new legislation would shortly come into effect. They asked why the Mine Health and Safety Council audit had regressed.  

The Minister of Mineral resources gave an overview of the 2014 Strategic Plan, highlighting the objectives of the Department, and noting that it aimed to empower the people, including youth, women, and people with disabilities, through prioritising employment for these groups and increasing job creation over the next five years. The plans of the Department were aligned to the National Development Plan. Oil and gas would receive much focus. He noted that the Minerals and Petroleum Resources Development Amendment Act (passed by Parliament, but not yet in operation) had been the subject of much concern from stakeholders in the oil and gas sectors in particular, and so an inter-Ministerial committee had now been set up to deal with the oil and gas matters. Members asked if this suggested that the legislation would have to come back to Parliament, asked how the Department would work in the transitional phase, with the old policies, and what changes could be expected. They asked about mine housing, problems cited by former mine workers, including lack of electricity and water in their houses on the mines, criminality and health issues, and asked for more detail on health compensation. More detail was also requested on transfer pricing and mineral prices. They were interested what sanctions would be applied against non-compliant mines.

The Department outlined its vision for 2019 and 2030, described its office structure and then outlined the work of the Corporate Services, Administrative and Mine Health and Safety branches. The Corporate Services branch would focus on projects for women, youth and the disabled. The aim of the Financial Administrative branches was to improve the financial management and compliance. The budget for 2013/14 was R1.39 billion and would increase to R1.66 billion in the 2016/17 year. The increase would be put to funding for rehabilitation of derelict and ownerless mines and specialised technical skills required for the implementation of the National Environmental Management Act (NEMA). The budgets for each of the programmes for 2013/14 were set out. Members were pleased to note the improved audit situation, and asked about training. The

Mine Health and Safety branch focused on the six occupational diseases, but noted that in 2012 the lowest rate ever of mine-related disease had been recorded. There had been an 85% reduction in fatalities over the ten year period to 2013, and 10% reduction in occupational diseases. The main challenges were highlighted, with corrective measures including collaboration with the Departments of Health and Labour. The 2011 Mine Summit commitments were being monitored, and another Mine Summit was due in 2014 that would assess the current state of health and safety and suggest further improvements. Legislative amendments to further strengthen enforcement were expected. Members asked if the training programmes for the youth could potentially be extended to Parliamentarians, asked about inter-departmental relations, asked about the main reasons behind fatalities and stressed that they should be reduced to zero.

Meeting report

Chairperson’s opening remarks
The Chairperson welcomed the Minister to the meeting, noted that a detailed presentation would be received on two programmes; with the others, and the adoption of the minutes, to stand over to a later stage.

Audit Outcomes of the Department of Mineral Resources: Auditor-General South Africa briefing -
Mr Jan van Schalkwyk, Corporate Executive, Auditor-General South Africa, welcomed the opportunity for his office (AGSA) to work with the Committee.

Mr Carl Wessels, Senior Manager, Auditor General presented an overview of what AGSA did, outlining the oversight and accountability model, and said that it would look to and report upon the portfolio audit outcomes and key control status, progress of previous commitments, special considerations for the portfolio and predetermined objectives.

Mr Yaseem Jeena, Senior Manager, Auditor-General South Africa presented the analysis of prior year audit outcomes for 2011/12. In this year, the financial statements for the Department of Mineral Resources (DMR) were unqualified, with findings on compliance. He explained that this meant the Department’s finances were generally in good order, and that the financial management was properly done. The audit on predetermined objectives of the Department was unqualified also, and he explained that this was an accomplishment, as most departments were not able to reach this, having not complied with their stated objectives. He emphasised that pre-determined objectives directly spoke to the work of the portfolio committees, because they related to the work that the committees were to oversee.

For 2012/13 the financial statements resulted in a qualified opinion. The explanation here was that there was one area with problems, namely on receivables or royalties. The compliance with predetermined objectives remained unqualified.

With regard to South African Diamonds and Precious Metals Regulator, in the year 2011/12 the financial statements were unqualified with no findings, and the predetermined objectives were unqualified. In the year 2012/13 the financial statements remained unqualified with no findings and the predetermined objectives unqualified.

The State Diamond Trader financial statements were unqualified with no findings and the predetermined objectives were unqualified, and the same applied also for the 2012/13 year.

The Council for Mineral Technology Research audits remained the same over the two years.

The Mine Health Safety Council, in the year 2011/12, had unqualified financial statements with findings on compliance but the predetermined objectives were unqualified. In the year 2012/13 the financial statements were unqualified, but there was a qualified opinion on findings on compliance because there were problems with the measurability of the predetermined objectives.

The Council for Geo Sciences’ financial statements were unqualified, with findings on compliance, and the predetermined objectives were unqualified. The 2012/13 financial statements received an unqualified opinion with findings on compliance and the predetermined objectives were unqualified.

He then reported that, to progress on the prior year commitments to improve audit outcomes, the main commitment was the filling of key vacancies to facilitate effective monthly reports. However, the post of Chief Financial Officer (CFO) had been filled. and the chief finance officer position was filled.

Mr van Schalkwyk said that many reviews were ongoing at the moment and more information would be made available to the Committee later in the year.

Mr M Matlala (ANC) said that he wanted clarity whether it was only the position of the Chief Financial Officer that was filled, and whether there were other key positions that had not been filled; if so, why.

Mr van Schalkwyk responded that three positions were critical, which were the CFO, and positions in supply chain management and Head of internal audit. The Director General of the Department of Mineral Resources (DMR or the Department) would be able to explain more on the issue of human resource.

Mr J Lorimer (DA) asked how the Department should handle budgeting and planning, as the new Minerals and Petroleum Resources Development Amendment (MRPDA) legislation would be enforced soon.

Mr van Schalkwyk responded that the Department would be aware of new requirements, as it would be aware of what was pending. He agreed that it was one thing to have new legislation but another to deal with the requirements. There were factors that needed to be considered, which include the risk, systems and operational procedures.

Nkosi Z Mandela (ANC) asked what led to the regression in terms of the mine health and safety function.

Ms Lufuno Mmbadi, representative for the Department, said that in 2012/13 the Mine, Health and Safety Council (MHSC) did not have a Chief Executive Officer (CEO). There were two senior managers alternating, which led to misunderstandings of what had to be done, and the relationship with other entities.

The Chairperson asked if there was an area that would need specific focus. He went on to ask if people took responsibility for their actions. He wanted clarity on the issue of clean audits. He said that people should not have a choice; the Department had to have a clean audit.

Mr van Schalkwyk responded that a clean audit was a must, although it always seemed difficult, as there were many factors that the departments faced, for example human resource issues.

Department of Mineral Resources 2014 Strategic Plan presentation
Minister’s Remarks

Mr Ngoako Ramathlodi, Minister of Mineral Resources, gave an overview of the 2014 Strategic Plan of the Department. In his presentation he discussed the objectives of the Department and highlighted the three challenges that South African people were facing, which included poverty, unemployment and inequality. The Minister emphasised that the Department of Mineral Resources’ main aim was to empower youth, women, children and people with disabilities through prioritising employment for these groups.

The Minister said that the main mandate for the Department for the next five years was to increase job creation. The National Development Plan (NDP) set out the role of the Department of Mineral Resources and for this reason, the plans of the Department were aligned with it. The health of mine workers would remain a priority for the Department. A further focus would be the development of the oil and gas industry in the next five years. There had been concerns from stakeholders who represented organisations in the minerals sector, about the Minerals and Petroleum Resources Development Act (passed by Parliament, but not yet in operation) and these concerns had been heard and an inter-ministerial committee has been put in place to deal with the oil and gas matters.  The Minister said the Department was looking forward to working with the Committee and promised that the Department was going to provide accurate information, on time.

Mr J Lorimer (ANC) thanked the Minister for his attendance. He asked the Minister if there were going to be new pieces of legislation and asked how the Department was going to work in the transitional period, when it was still working in terms of the current legislation and awaiting the new. He asked if the Committee and Department were going to work with old policies until the Bill was signed into law.

Mr Lorimer asked when the inter-Ministerial committee would be reporting back. He also asked the Minister to elaborate more on the Bill, and asked what other measures might be put in place, as he had mentioned only regulation.

Mr H Schmidt (DA) asked if the Bill was to be re-considered by Committee, when it was likely to come back to Parliament and what changes could be expected.

Mr Schmidt asked about the strike on mine housing.

Mr S Jafta (AIC) asked about the health and safety of workers. He said that he knew that the government was offering funds to people who suffered from disease due to working in the mines, like TB. He asked if there was any contribution made by private mining companies by way of compensation.

Mr J Malema (EFF) asked the Minister if he was aware of the problems that were raised by former mine workers in the Northern Cape and Eastern Cape. He said that the situation of mine workers was depressing. The mine areas had water and electricity while the homes that the workers stayed in did not. He highlighted other problems in the mining sector and emphasised a concern on criminality.

He asked if the Department had mechanisms in place to deal with other problems that occurred in the mining sector. In relation to mines that did not comply with the rules and regulations, he asked if they would be getting any sanctions, and whether the Department was likely to shut them down.

Mr Malema said that the Department was letting people de-value its minerals, and explained that people buying the minerals were doing so at low prices in South Africa, then re-selling them at higher price elsewhere. He suggested that there be an investigation into transfer pricing. He asked if people were not doing anything because of self interest in the mining sector.

The Minister responded that the Committee would be kept informed on whether any changes to the Bill were proposed. Usually, bills only came back to Parliament if there were constitutional problems. Oil and gas was a new industry in South Africa. Before the Bill came into operation, government wanted to check that the people of South Africa were not put at a disadvantage and also wanted to unlock investments. He said that the industry complaints about lack of thorough consultation had been heard. There was also a percentage that was supposed to be put to black economic empowerment (BEE). There had been concerns expressed on the Bill’s clauses relating to State’s participation interest percentage. Stakeholders wanted the 20% to be included in the Bill, not regulations. The regulations had not yet been made.

The Minister emphasised that the Bill must be able to help people of South Africa. At the moment, the Bill said that anyone buying minerals would pay the extracting price, and that was where the country was right now. With regards to the transfer pricing, the Minister said that the issue here was that there were agents who had offices in London and South Africa, so it was difficult to regulate, but that the Department would look into it. The Minister also said that with regard to minimum wages for miners, the Department of Labour would have more answers on that.

Mr Godfrey Oliphant, Deputy Minister of Mineral Resources, responded on the health issues. There were one-stop centres being put in place in some areas, and they seemed to be working, especially in the Eastern Cape, where there were plans to put in place another one. He also said that there were laws to deal with non-compliance. However, it must be recognised that much had been achieved in the last ten years, although there remained a lot still to be done. The Department of Mineral Resources was working together with the Department of Health on health and safety issues, to try to improve the health of mine workers. There was a compensation fund meant for people who were injured in the course of their employment.

Dr Thibedi Ramontja, Director General, Department of Mineral Resources, also reminded Members that there was a Charter dealing with compliance and non-compliance. He assured the Committee that there were plans to deal with non-compliance.

The Chairperson said that when the legislation came back to Parliament, that issue would be discussed again. He also noted that Programme 2 of the Department dealt with Mine Health and Safety and thus the Committee was likely to get further, more accurate answers after the presentation.

Mr J Lorimer (DA) asked about the issue of “mine gate pricing or another agreed price”.

The Deputy Minister responded that there were issues there as the mine gate pricing in itself did not benefit the people of South Africa. That was why the Minister had said that if and when the Bill came back it would have to dealt with

The Chairperson agreed with the Deputy Minister and said that the Committee and Minister must urge the President not to sign the Bill until the matters had been discussed further.

Strategic Overview
Mr Thibedi Ramontja, Director General, Department of Mineral Resources, presented the Department’s overview. The vision and mission for the Department were that, by 2019, there must be a globally competitive, sustainable and meaningfully transformed mining and minerals sector, whilst it aimed to be a leader in transforming and developing South Africa, through sustainable development, by 2030.  The Department’s legislative mandate included the Mineral and Petroleum Resources Development Act (Act 28 of 2002) and the Mine Health and Safety Act (Act 29 of 1996). The Department of Mineral Resources had five branches with offices in all provinces, and its head office was in Pretoria.

Strategic Plan 2014/2015: Corporate Services branch
Ms Patricia Gumede, Deputy Director General: Corporate Services, Department of Mineral Resources, highlighted the purpose and structure of the branch and its key focus areas (see attached presentation for more detail). Corporate Services included chief directorates in human resource management, legal services, auxiliary support, communication, and special projects and programmes. It focused on the facilitation of projects for women, youth and the disabled, which were some of the special projects. It was important in that it  attracted, developed and retained skills in order to maintain the vacancy rate at acceptable level.

Programme 1:  Financial Administration
Ms Irene Singo, Chief Financial Officer, Department of Mineral Resources, highlighted the purpose of the Financial Administration programme. This would enable the Department to deliver on its mandate by providing strategic management and administrative support to the Ministry and the Department.

Ms Singo highlighted the budget summary for 2014/15, expenditure estimates per programme and expenditure estimates per economic classification. The budget, by 2016/17, would have increased by an average growth rate of 6.7%, reaching R1.66 billion as compared to R1.394 billion in the 2013/14 financial year. The increase was attributed to increased funding for rehabilitation of derelict and ownerless mines and specialised technical skills required for the implementation of the National Environmental Management Act (NEMA).

She noted that the programme aimed to attract skills. For administration, the 2013/14 budget was R310.144 million, rising to a 2016/17 budget of R314.525 million. The budget for promotion of mine safety and health was, in 2013/14, set at R153.998 million, to increase over the next years by 1.5% to R188.1934 million. For mineral regulation, the budget for 2013/14 was R205.521 million and the 2016/17 budget would be R259.950 million. Mineral policy and promotion - which focused mainly on small and medium enterprises – had a budget in 2013/14 of R724.186 million and for 2016/17 would be R900.642 million.

The presentation highlighted the strategic objectives of the Department as including:
- ensuring system availability and processing of requests within the required time frames
- improving financial management controls
- implementing the ICT governance framework
- managing budget and assets effectively
- reducing irregular expenditure
- reducing internal and external audit findings, and implementing risk management strategies and promoting compliance.

Overall, the Department wanted to ensure improved processes and systems by improving financial management maturity, and implementing of master systems plan which would be developed to support the strategic objectives of the Department through ICT.

Some of the targets were also highlighted (see attached presentation). The Department was committed to ensuring effectiveness and economic utilisation of resources, and overseeing structures, and its plans would be implemented in line with the budget.

Mr Malema asked whether the achievements of the clean audit were done under the leadership of the current CFO. If so, he encouraged her to continue with her good work.

Mr Ramontja responded that these achievements were done under the current CFO, since she had joined the Department.

Mr Lorimer asked who was doing the training.

Ms Gumede responded that the Department was working with other groups to ensure that the vulnerable groups received opportunities.

Programme 2: Mine Health and Safety
Mr David Msiza, Chief Inspector of Mines, Department of Mineral Resources, outlined the purpose, process and the structure of the Department of Mineral Resources. He highlighted five strategic objectives of the Mine Health Safety branch, which included promoting health and safety and developing and reviewing internal processes (see attached presentation for more details).

He noted that six occupational diseases were found in mine workers, including silicosis and asbestoses. 2012 statistics showed the lowest number of occupational diseases in mines so far. There had been an 85% reduction in fatalities from 1993 (when there were 615 across all commodities) to 2013 (when there were 93 fatalities). There was a 20% improvement per annum
with regards to occupational fatalities and injuries. There had also been 10% improvement in the reduction in occupational diseases, including tuberculosis.

Challenges and some of the corrective measures taken were also highlighted. The corrective measures that were being implemented in the Occupational Health arena include collaborating with social partners in monitoring the implementation of the 2011 Mine Summit commitments on elimination of silicosis, TB, HIV/AIDS. The Mine Health and Safety Council was coordinating research on prevalence of non-communicable diseases in the mining sector. These efforts were also in support of National Development Plan.

Key topical issues and projects for 2014 included a Summit which was planned to take place in November 2014. The purpose of the Summit would be to review the state of mine health and safety, assess the achievements over the last ten years and make recommendations to improve it further.

There were legislative amendments also expected, and these would strengthen enforcement provisions, streamline the administrative processes, re-enforce offences and penalties, remove ambiguities and certain definitions and expressions, and to harmonise the legislation, in particular, with the MPRDA and other sector laws.

Mr M Matlala ANC) asked about the training programmes, which the Department wanted to impart to the youth and wondered if some members of Parliament could be included in the programmes.

Mr Msiza responded that the Department was willing to look into this.

Mr Lorimer asked for details of the relationship between the Department of Mineral Resources and the Department of Health.

Mr Msiza responded that the two were working on programmes together, and there was also help from the Department of Labour.

Nkosi Mandela (ANC) appreciated the Department’s work on reducing fatalities, but said that any fatalities remained of concern. He asked for the main contributing factors to fatalities, and wondered if this was linked to issues of illegal mining. The aim was to reduce them to zero. With regards to Health and Safety, he asked if there was proper training for the miners.

Mr Msiza responded by saying that many of the fatalities were linked to past practices, but there was research and new technologies. Besides the diseases, there were other factors like accidents, machinery, and fire, among others, that caused fatalities.

Mr Ramontja repeated that there would be new legislation coming to Parliament in the next few months as there was a need for amendments.

The meeting was adjourned.


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