The Department of Mineral Resources briefed the Committee on the development of the Ikhwezi Quarry Mine in Libode and Civil and General CC in Queenstown. The DMR was tasked with providing the Committee with a progress report which emanated from the previous Committee’s site visit and interactions with the two companies. During the site visit the two companies were found to be non compliant with the Mining Charter.
Civil & General was a holder of an unconverted mining license which expired in April 2009 and the applicant failed to convert the license as contemplated in terms of Item 7 of Schedule II of the Mineral & Petroleum Resources Development Act (MPRDA) of 2002. The company applied for a new mining right in August 2010. However, the new mining right application did not comply with certain areas of the Social and Labour Plans (SLP), - There were no learnership, bursary, portable skills and internship plans, Procurement progression was not addressed, No LED projects were identified, and Employment Equity was not addressed. The DMR had on several occasions invited the company to make representations on the dispute and the company had not been committal. A compliance inspection was scheduled for 19 June 2014 and the company was not available for inspection.
The Ikhwezi Quarry mining right was issued on 22 March 2007 and the mine started to operate in August 2009. The company was 100% black owned. With regard to compliance with the Mining Charter, the company has implemented a poultry farming project in the Nyandeni local municipality in OR Tambo district municipality costing R250 000.00: this was a collaborative project with the Department of Social Development. However the following issues were raised by the community: the company ceased to pay surface rental to the Mdlankomo Community Trust Fund and the Company failed to provide bursaries to engineering students in the community.
Members asked which Social and Labour Plans Civil and General did not comply with. Why were contract workers at Civil and General not employed on a permanent basis? How much was the monthly rental to the Mdlankomo Community Trust Fund? How was Civil and General Contractors structured; was it also 100% black owned like Ikhwezi? A compliance inspection was scheduled for 19 June 2014 but the company was not available what reasons were given for this unavailability?
Adoption of Committee Minutes
The minutes for the 3 September 2014 was discussed.
Mr I Pikinini (ANC) moved for the adoption of the minutes.
Ms M Mafolo (ANC) seconded the adoption of the minutes.
The minutes were adopted.
Presentation by the Department of Mineral Resources (DMR)
Mr Joel Raphela, Deputy Director General: Mineral Regulation, DMR explained that the team from the DMR was tasked with providing a progress report emanating from the Committee’s site visit and the interactions Members had with the two companies; Civil and General and Ikhwezi Quarries. He explained that these two companies were holders of mining rights for stone in the Eastern Cape. During the last Parliament, the previous Committee had conducted a site visit to the Eastern Cape in January 2013 and the two companies were found to be non compliant with the Mining Charter. The Committee then made recommendations to DMR, and these were what would be the focus of the presentation.
Civil & General was a holder of an unconverted mining license which expired in April 2009 and the applicant failed to convert the license as contemplated in terms of Item 7 of Schedule II of the Mineral & Petroleum Resources Development Act (MPRDA) 2002. The company applied for a new mining right in August 2010. However, the new mining right application did not comply with the following areas of the Social and Labour Plans (SLP): There were no learnership, bursary, portable skills and internship plans, Procurement progression was not addressed, No LED projects were identified, and Employment Equity was not addressed. As a result, the mining right was refused in October 2011. In February 2012, the company appealed the decision and subsequently took the DMR to court for the refusal of the mining right. The DMR sought a legal opinion which advised the Department to issue the right as applied for in view of the Bert Bricks court judgment and the mining right was issued in April 2012 with a commitment to implement a Local Economic Development project to the value of R 50 000 for the current SLP spread over 5 years. The company’s SLP proposal remained unacceptable to the DMR and Lukhanji Local Municipality. As at August 2014, the company employed 31 employees; nine permanent and 22 contract workers, renewable every six months. The DMR issued a Section 93(1)(a)(i) directive to Civil and General in December 2013 for contraventions pertaining to non-compliance. The company responded to the section 93(1)(a)(i) directive in April 2014 and disputed the content of the directive. The DMR has on several occasions invited the company to make representations on the dispute and the company has not been committal. A compliance inspection was scheduled for 19 June 2014 and the company was not available for inspection.
On the Ikhwezi Quarry, the mining right was issued on 22 March 2007 and the mine started to operate in August 2009. The company was 100% black owned. With regard to compliance with the Mining Charter (the Charter), the company has implemented a poultry farming project in the Nyandeni local municipality in OR Tambo district municipality costing R250 000.00: this was a collaborative project with the Department of Social Development. However the following issues were raised by the community- the company ceased to pay surface rental to the Mdlankomo Community Trust Fund and the company failed to provide bursaries to engineering students in the community. In response, a workshop was held on 9 May 2014 between between DMR, Local Government and Traditional Affairs, Nyandeni Local Municipality, Mhlanga Traditional Council, Ikhwezi Quaries and community members. The workshop resolved that the company needed to review its SLP commitments and consult the municipality and the community, and lodge a new SLP with the DMR; the SLP was lodged on the 14 July 2014. In addition, the company needed to apologise to the community for the failure to implement its SLP commitments.
Civil and General had not shown any willingness to transform or to implement the Mining Charter; on the other hand, progress with Ikhwezi Quarries would be closely monitored.
Mr H Schmidt (DA) said the first mining operator, Civil and General Contractors, was relatively a large operation while Ikhwezi Quarries was relatively a smaller operation. The first time, visit by Members to Civil and General and to Ikhwezi were met with a bit of resistance. However from DMR’s report, it seemed as though Ikhwezi had substantially complied with the standards of the DMR, therefore not much discussion was needed. Which Social and Labour Plans did Civil and General not comply with?
Mr J Esterhuizen (IFP) said the report by the DMR was not very comprehensive. If the mine did not comply then strict measures should be taken against them to enforce compliance.
Mr Nkosi Z Mandela (ANC) said according to the report by DMR, the company employed 31 employees; nine were permanent and 22 were contract workers who were renewable on a six month basis- why were the contract workers not employed on a permanent basis? The joint operation between DMR and the Department of Social Development which involved poultry farming was at a cost of R 250 000, what did these costs entail? The community had indicated that the company needed to pay a monthly rental to the Mdlankomo Community Trust Fund; how much was the rental? According to the presentation, the company had also taken initiative in providing bursaries to engineering students; how many students were targeted for these bursaries?
Mr M Matlala (ANC) said according to the presentation, Ikhwezi Quarry Mine was a 100% black owned company, how was Civil and General Contractors structured; was it also 100% black owned?
Ms N Mdaka (ANC) asked what reasons were given for the unavailability of the company at the compliance inspection scheduled for 19 June 2014.
Mr Raphela responded that the suspension of a license would have to be as a result of gross non-compliance. The DMR did not want to suspend licenses recklessly.
Ms Rebone Nkambule, Chief Director: Regulation, DMR responded to the question on cancellation of licenses and said all the principles of the Mining Charter needed to be considered first, and the rationale for Section 93 applied. The company provided the DMR with misleading information on the loan agreement of the HDSA partner; reporting that the partner has been empowered through a free carried interest whilst there was a loan agreement in place. Secondly, HDSA suppliers were not provided an opportunity to enter into the procurement database of the company. The Mining Charter required that a company create an environment which was receptive to HDSAs in the database. The Charter therefore allowed for the DMR to take a company on which did not comply in this regard. Lastly, as stipulated in the presentation, the company was instructed to lodge a revised SLP, but it however failed to implement the SLP. A detailed report on the matter would be submitted to the Committee. However the areas which the company failed to address were on matters of learnership and the implementation of the local economic development employment equity. On the question of the mine employees, the most companies mined was three to four times per annum; therefore contract workers would be brought in during those times. On the joint project between Ikhwezi and the Department of Social Development, the DMR has conducted a site inspection on the structures and the DMR was pleased with the level of employment which has been created. On the question on bursaries, the DMR was in the process of reviewing the SLP for Ikhwezi and the issue of bursaries was addressed, however because of the size of Ikhwezi they were supposed to give two bursaries to students and had made a commitment to this effect. The surface rental for Ikhwezi depended on the production, however the last rental was R 15 000. The main shareholder for Civil and General was Mr Quwe and the company was a close corporation. The DMR was however committed to unpacking the issue of ownership at Civil and General; the DMR would return to the Committee in a few months to report on its work.
Mr Raphele responded to the question on compliance and said Civil and General was problematic. The most important thing to note was that the company had a history of non-compliance. To this effect, the DMR was busy with a legal compliance process.
Mr J Lorimer (ANC) requested that the DMR provide the Committee with some background information on Civil and General- how long had the company been in business? How big was the business and what was the company’s turnover? What were details of the misleading information given on the loan agreement; did everyone have the same understanding of “free carried interest”? Did the DMR know whether or not Civil and General had no HDSA’s completely in their database? Was the SLP being proposed unacceptable or was the company simply not implementing the SLP submitted. What made a SLP acceptable according to DMR; did it have to have a certain value of turnover? Civil and General were not the only company to breach the requirements of the Mining Charter; why was the DMR specifically interested in this company- why was it attracting so much attention?
The Chairperson responded to the last question and explained that the DMR did not share information on other companies with the Committee because the Committee had identified the work on Civil and General as outstanding work from the last Parliament.
Mr Lorimer replied that he would like to hear the explanation from the DMR.
Mr Pikinini said the DMR needed to indicate clearly that it had conducted site visits however they were unable to get hold of management from Civil and General.
Ms Nkambule responded to the question on why Civil and General had attracted the DMR’s attention and said Members needed to understand that DMR came to the Committee on an annual basis to present the Annual Performance Plan and in the course of this, there were some outstanding issues which the DMR had picked up. Further, the Committee had requested that DMR briefed the Committee on the work which the DMR had done on Civil and General. There were many other companies which the DMR went after with regards to non-compliance with the Mining Charter. Civil and General was a holder of mining rights for stone in the Eastern Cape, which expired in 2009 and the company requested a renewal in 2010, but the DMR withdrew the mining rights in 2011. The rationale for withdrawing the mining rights was so that the company could separate the mining area from the brick-making area because the DMR realised that the company had to comply with the Mining Charter with regard to the brick-making side of its operations. The company however still needed to go ahead with a SLP for the mining right they applied for. The DMR refused the mining right on the grounds of non compliance with the SLP on learnership plan, local economic development and employment equity. The rationale was that Civil and General only wanted to contribute R 10 000 per annum of its annual turnover to the SLP, but the company’s production figures indicated that in 2010, production was at R5.27 million. Civil and General took the DMR to court on their refusal to implement the SLP, the court ordered DMR to grant the mining rights as non-compliant as it was. However the DMR could not allow that as this was unfair to the local communities where the company was working.
Before the DMR approved a SLP it required that the company compared the SLP with their Integrated Development Plan (IDP) as well as with those of municipalities. The IDPs of municipalities generally informed the needs of the community. When drafting their SLPs, companies also needed to draft their procurement progression plan which would be part of the IDP of the local municipality. Therefore before conducting inspections, the DMR engaged municipalities to assess whether the company had indeed consulted municipalities on their IDP. Procurement was therefore one of the tools used to empower the local communities, but Civil and General was not procuring anything from these local communities. Upon inspection, the DMR realised that Civil and General did not have a database for procuring services from locals. On the question on “free carried interest”, historically most old order rights were converted before 2009. The companies then identified HDSAs to partner with as equity partners at a mine and allocate share holdings to HDSAs on “free carried interest” meaning there would be no debt attached to the agreement. The DMR found that Civil and General indicated that they had a “free carried interest” with their partner but this was actually not the case. The amendments of the MPRDA made a proposal that the contribution of a mine towards SLPs must be aligned to a certain percentage of the company’s annual turnover. However the Charter and the MPRDA were currently non prescriptive on the contributions towards mine community development; the DMR simply considered a company’s annual turnover and determined how much the company needed to contribute towards SLPs. In the MPRDA the DMR had prescribed a certain percentage which the company needed to contribute to SLPs.
The Chairperson asked whether the 35% contribution from the company’s turnover was enough for the community trust fund, which was established to develop the needs of the local community. What were the qualifications needed for a student to receive a bursary? It was clear that Civil and General did not want to comply with a number of issues stipulated in the Mining Charter, DMR therefore needed to take serious measures to enforce compliance; it was problematic that even the executives of the company were not available to meet up with DMR on inspection matters. Was it a pre-condition that the mining executives be present for inspection to take place?
Mr Raphela said it was a fair observation that Civil and General was refusing to comply with some of the requirements of the Mining Charter. It was a pre-condition for the executives to be present during inspection. DMR operated according to an inspection schedule. The DMR had put a deadline for the end of September and the company has been summoned to appear before the DMR.
Ms Nkambule explained that when the DMR conducted its inspections on Civil and General the DMR had requested that the company make available its empowerment partners but the DMR did not get an opportunity to interview the empowerment partners. When the company responded to DMR on the ownership issue and on its empowerment partner, the company indicated that the partner was no longer available to come to meetings. The DMR however wanted to know what the company was doing to ensure the economic benefit of the partner. On the mining rights, the company’s refusal to comply with the SLP was initially taken on review. However the DMR has since insisted that the company amend its SLP to be in line with the company’s turnover.
Mr Lorimer said the issue of non-compliance was a very complicated matter. The DMR needed to guard against a situation where the 31 people employed by Civil and General end up losing their jobs.
The Chairperson said the DMR had to do its job in one way or another; this was a company which was asked by the previous Chairperson to appear before the Committee but had refused. There was a legal opinion sought on the matter, unfortunately there was not enough time to implement it. In addition, in terms of ownership, the company did not have an employee scheme as part of its Black Economic Empowerment component. While accepting that job losses needed to be guarded against, the DMR also needed to do its work. The legal opinion indicated that if the Committee subpoenaed the company to appear before it then the Committee needed to take care of travelling costs. The Committee should re-write to Civil and General and invite it to appear before the Committee so the company could provide Members with some explanation.
Mr Nkosi Mandela agreed with the Chairperson’s suggestion.
The meeting was adjourned.
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