AGSA on audit outcomes for Department of Mineral Resources for 2013/2014 financial year

Meeting report

Opening Remarks
The Chairperson said that they were not going to follow the agenda of the day and requested that the item on the consideration and adoption of the third term programme as well as the consideration of the minutes be postponed to another time, when the Committee had sufficient quorum.

Department of Mineral Resources (DMR) Audit outcomes: Auditor-General South Africa (AGSA) briefing
Ms Margaret Seoka, Senior Manager, Auditor-General South Africa (AGSA), tabled the presentation on the audit outcomes for the financial year 2013/2014 for the Department of Mineral Resources.

She was pleased to report that in the financial year under review, they did not have any qualified audit, adverse/disclaimer and there was no outstanding audit and this meant that all six entities within the Portfolio were able to submit their financial statements by the due date. In the 2012/2013 financial year; DMR’s opinion had regressed to a qualification with findings; two entities had been unqualified, with findings; and three had been unqualified, without findings. The Department’s audit outcome for 2013/2014 had generally regressed, because none of its entities had attained a clean audit; all the entities attained an unqualified opinion, with findings. The AGSA would like to see a situation where all the entities moved towards a clean audit. The main reasons for the audit opinion were non-compliance with laws and regulations and the predetermined objectives.

The DMR’s audit outcome had improved from qualified with findings to unqualified with findings; Council for Geoscience (CGS) and the Mine Health and Safety Council (MHSC) audit opinions remained unchanged, being unqualified with findings. Three entities -- MINTEK, State Diamond Trader (SDT) and South African Diamond and Precious Metals Regulator (SADPMR) -- had regressed from unqualified with no findings, to unqualified with findings. All the entities had no issues with their performance reports that were recorded in their financial statements. However, of concern was compliance with laws and regulations, because all six entities had issues with compliance with laws and regulations. If the entities could address the key risk areas identified by the AGSA, this would give them an opportunity to obtain a clean audit opinion.

The first key risk area was the quality of submitted financial statements. Five entities, excluding the State Diamond Trader had submitted financial statements which had errors and relied on the audit process to identify the errors, which they later corrected. If they had not been given an opportunity to correct the errors, they would have attained worse audit opinions. The Department and its entities needed to be advised on the quality of the financial statements they submit instead of just submitting for compliance purposes. They needed to make sure that when they submit, their financial statements they are accurate and complete. She commended the State Diamond Trader for submitting financial statements which were free of material mistakes on 31 May 2014.

The second risk area was the quality of submitted performance reports. Four entities had submitted performance reports which were complete and accurate, and two entities -- Mineral Resources and Council for Geoscience -- submitted reports with errors. They were given an opportunity to correct the errors and resubmit their performance reports.

The third key risk area was supply chain management. There was a need for focus on this area because within MINTEK, MHSC and CGS there were issues on supply chain management. The State Diamond Trader also had issues, but this was the first time that they had been really serious, with issues related to instances where contracts were extended without following the proper processes.

On the key risk areas of financial health, human resource management and information, the issues were not material and did not affect the audit opinion. However, AGSA had highlighted them to the entities to make sure that they were addressed, especially the issue of human resources. Where there were vacant positions within the entity, this affected the entity’s internal operations which could result in a failure to achieve some of their objectives.

The main root cause for the audit outcomes was the slow responses by management, specifically the accounting officer and senior management, to address the issues that had been identified either by the internal audit, audit committee or by the auditor general. Key officials lacked the appropriate competencies to execute their mandate. This had led to issues like the submission of financial statements with material errors and non-compliance with the financial reporting framework. If officials did not have the appropriate competencies, it would lead to financials which were incomplete and inaccurate. The Department was also affected by instability and vacancies in key positions, which contributed to the issues that were reported. There was also an issue related to the inadequate monitoring of compliance with financial reporting frameworks, and after the entities had prepared their financial statements there was a need for a senior official to review them to ensure that they complied with the reporting frameworks. There was also inadequate monitoring of compliance with laws and regulations. There were key controls which needed to be implemented to ensure that the department and its entities achieved good results. These were effective leadership, human resources control, ICT governance and controls, audit action plans, proper record keeping, daily and monthly controls, and review and monitoring of compliance.

There were significant issues under effective leadership which needed to be addressed. There were various issues under the control of human resources, but although these were immaterial, they had been highlighted to the entities and needed to be addressed, especially vacancies and acting positions. There were issues with proper record keeping which were related to the fact that when the AGSA requested information, it was not readily handed over. This had an impact on the budgeted audited fee and the timing for completing the audit. She encouraged the entities to have a proper filing system with readily available information so that when it was requested by the auditors, it was immediately submitted. There were also issues with the daily and monthly controls related to the daily and monthly reconciliation of creditors, cash in the bank (bank statements) and receivables. The review and monitoring of compliance with supply chain management processes were the area that caused all the departments to achieve unqualified audit opinions with findings, thus raising major concern. If this could be addressed, the AGSA foresaw a future where the department and all its entities would achieve clean audit opinions. There were no significant issues under the audit action plans, and this was because the entities and the departments were really doing their best to implement the audit plans that they had developed.

All the key indicators had a role to play in assisting the department and the AGSA during the audit process. The different roles were classified into assurance levels. The first level comprised the senior management and the accounting authority/officer. More needed to be done by the senior management in order to assist the Department to achieve a clean audit. AGSA was satisfied with the work of the accounting officers where they provided the necessary assurances, but there were two entities which had to strive for better results in this area. The Portfolio Committee had provided some assurance in the sense that the oversight had been done, but not timeously, and noted that oversight needed to be done timeously to enable the Department to take corrective actions.

The AGSA annually engaged in stakeholder interactions with the Minister and the accounting officers, where they made commitments to aid the entities in achieving a clean audit opinion. However, there were no commitments made during the year under review, except those which applied from the previous year. The AGSA was going to use these commitments to make a follow up with the Minister in order to determine the extent of fulfilling these commitments. The Minister had committed to filling key vacancy positions to facilitate effective monthly reporting, which would also assist in ensuring that when they submit the annual financial statements, they were correct and accurate. There was also a commitment to re-look at the structure of support provided to the Director General.

There were considerations for the Portfolio Committee to consider when dealing with performance monitoring, and they were the starting point at which the assurance levels could be linked and developed. In performance monitoring, the Committee had to consider whether an entity’s strategic and annual performance plans were aligned to the National Development Plan. They needed to inquire into the resources of the entity, to determine whether it had adequate resources, both human and financial, to achieve predetermined objectives. An understanding of the entity’s strategic plan was required to determine whether the targets were realistic and would assist the entity in realising its mandate. A combination of robust financial performance management systems, independent and relevant reporting by the AG, oversight and accountability -- which includes the Portfolio Committee -- and commitment and ethical behaviour was needed to create a clean administration which improved on service delivery, leading to a better and dignified life for the citizens of South Africa.

There was need for accountability and remedies to address the transgressions and poor performance of the entities. The AGSA “In Brief” booklet provided some of these remedies and recommendations, and should be consulted in such instances. It highlighted the legislation that enabled remedies to be applied. It addressed the failure to comply with legislated obligations and responsibilities; unauthorized, irregular, fruitless and wasteful expenditure; possible fraud and corruption; poor work performance amongst officials and suppliers, and other non-compliances with legislation; all of which were the typical matters reported on in the general reports.     

The Chairperson commended AGSA for their presentation. He requested redistribution of the “In Brief” booklet which he thought has been distributed to Members earlier. From the submitted report it seemed that the Committee was going to be friends with the AGSA because there was a lot that needed to be discussed and done.

Discussion
Mr J Lorimer (DA) commended the AGSA’s report for being comprehensive. He asked why the financial statements had not been reported according to the financial reporting frameworks. Was this due to a change in personnel or a loss of staff, leading to a regression in the audit outcomes of some of the entities, because on the whole it seemed that the Department had regressed with regards to its audit process? Why was the problem of deficiency in internal controls recurring in every financial year without being fixed? He asked the AGSA to highlight vigorous recommendations and solutions to help solve some of the problems going forward.  

Mr H Schmidt (DA) said he was concerned about the leadership issues at the entities. The presentation, as well as the annual report, highlighted the fact that key officials lacked the appropriate competencies to execute their mandate. The Department’s co-function was the monitoring of mining companies and other related entities. He requested clarity on where in the reports it had been shown that the entities had adequately executed this function in an efficient manner, or that it had not done enough. There was a lot of concern regarding the performance of directors and compliance with legislation, and in time all the parties would start pointing blame fingers at each other.

Mr I Pikinini (ANC) said that it was contradicting for the Committee to receive information from the Department indicating that their internal structures were highly effective, yet the annual reports indicated that they still had issues with financial control. This problem should have been resolved by the internal controls, and not reflected by the AGSA. He asked whether the proposed recommendations by the AGSA had been implemented in order to help the Department solve the problems which had been highlighted. Overall, the presentation indicated that internal controls, like daily and monthly monitoring, had not been effectively implemented. The Committee needed to follow up on these issues to ensure that in 2014/2015, the Department moved towards a clean audit.

The Chairperson requested clarity on the extent to which the Portfolio Committee could intervene without interfering with the affairs of the Department in trying to solve its problems. From the reports, especially on the internal controls, it had been indicated that there had been no continuous monitoring of what was happening within the Department until the last moment. He requested clarity on the assurance levels, as well as their meanings, especially with matters relating to internal audit, because some parts of the presentation showed that things were in order while others presented contradicting statements in this regard. He said that the primary task of the Committee was oversight, but he was not going to protect the Committee if they failed to perform this function. He was not going to inquire into the all the internal structures of the Department, because this would mean running the Department, but was going to assess in order to determine that the Department was performing according to the expectations of the Portfolio Committee. If the Department had good internal control mechanisms, then there would probably be no need for the day’s meeting, because there would be no issues to address. The Department’s audit performance was not promising because overall it indicated a regression. The oversight role of the Committee was not intended to be exercised on a Department that was going down. They needed to address all of the problems. He needed an understanding from AGSA of the actual position of the Department so that when the Committee dealt with the actual report, they could effectively engage with it. He emphasized that focus needed to be directed to the issue of internal controls, because this was where the actual problems lay. 

AGSA’s response
Mr Yaseen Jeema, Audit Manager, AGSA, said that overall there had been a slight regression in the portfolio, where some of the entities had moved from a clean audit to an unqualified audit with findings. However, there were also entities which had moved from a qualified opinion to an unqualified opinion, which was good for the portfolio, and he hoped that AGSA could now guide the Department towards a clean audit. The problems arose in instances where the findings had either one or two instances which needed to be corrected. The non-compliance came from the identification of these problems and the Department had been given an opportunity to correct these mistakes. This problem was evident with the Department of Mineral Resources, where there were issues of submitted financial statements which did not comply with the required financial framework. Some of these problems had been resolved but the report was indicating an unqualified opinion with findings because this was the initial state of affairs. During the audit process, AGSA looked at the financial statements in terms of frameworks, the annual performance information in terms of fulfilled objectives, and compliance with various laws and regulations, and it could be deduced that the entities were not affected by all three problems at the same time. The issues of concern that had been highlighted had been corrected, thus showing an improvement in their position from the time when they had submitted their financial statements for auditing. They were currently free of material error. He commended the Department’s Chief Financial Officer on the good work done of getting the portfolio where it was, but urged for sustainability of this position. There was room for improvement and there were no reasons why the portfolio could not strive for a clean audit opinion.

From the Member’s interactions, he concluded that they seemed worried about the Department’s audit outcomes. He wanted to give them some comfort on the Department’s audit future, which seemed to be on the right track towards achieving a better audit. There were one or two material errors with the financial statements, and these had been corrected. Those that still existed could be corrected. The Department had made plans and was ready to engage with the various stakeholders with the aim of achieving a clean audit. Teams had been appointed and dispatched to the various areas in the country to address the problems. Overall, the Department was doing well, as it had moved from a qualified opinion to an unqualified opinion with findings. 

Ms Seoka said that the two key issues for consideration was the submission of the financial statements on the specified date, and ensuring that they were complete and accurate, because if they were submitted with errors, this would lead to an unqualified audit opinion. Another crucial element affecting audit outcomes was compliance with supply chain management, and this mainly related to the stage at which the monitoring was done. If they waited until the last minute to do the monitoring, the process would be tedious and compliance with supply chain management processes would be unattainable. If the two areas were adequately addressed, the Department would achieve better audit results thus move to the clean audit opinion.

There were specified procedures used when monitoring the mining sector to test their compliance with regulations. With regard to internal audit, the AGSA often started by checking the competencies of the auditors used, the level of independence, their scope and the extent of their risk assessment, because the risk assessment informs their audit plan for the given financial year. They had to have a properly planned internal audit process in place so that when assessed by the AGSA, it was capable of informing their audit plans for the specified year under review. The Department’s risk assessment policy focused mainly on the controls, while that of the AGSA focused mainly on the financials. The Department’s procedure was therefore unable to detect all the issues which the AGSA would be able to detect, due to their different objectives, but AGSA was satisfied with the Department’s risk assessment policy. Where there were gaps, they looked into them and advised the Department on how they could be addressed. The Minister was committed to urging the internal auditors to review the financial statements before they were submitted to the AGSA for review. In the case of any non-compliance with the financial reporting framework, the internal auditors would be able to pick it up.   

The Chairperson said that whenever there was a regression, however slight and despite the explanations around the regression, there was cause to worry because a regression on the whole indicated poor results. Compared to the previous years, which had a combination of clean audits and unqualified audits with findings, the year under review had 100% unqualified with findings. This was worrying, because all the Department’s clean audits had disappeared. They should not be comforted with such results, because this would indicate they were in denial of their current audit position. They were dealing with the 2013/2014 financial year and had to accept that it was not good, but should not reject the projection that in 2014/2015, the audit outcome would be better.

He commended the post-audit interventions, because the financials of the Department were good. He understood that the audit approach for the different entities would differ, but advised on the application of a similar policy for all the entities. The Committee would make a quarterly follow-up on all the areas of concern with the Department, and requested more frequent engagements with the AG so that they could detect common problems before they happened and address them accordingly. However, he advised against interference in areas where the Committee was required to execute an oversight function, because then oversight would have to be done to those who were supposed to execute the oversight. There was need to understand the Committee’s function, which was the exercise of oversight to ensure that there was accountability, particularly by the executive, for the issues at hand. Even in the executive, there was a need for balancing of powers and functions so that the executive did not usurp the powers of the administrative body. Proactive measures were very difficult for a portfolio committee to engage in, because actual compliance was a post mortem exercise to look into whether people had complied or not. As a Committee, all they wanted was a clean audit from the Department, and so far this target had not been achieved.

Researcher’s analysis of the annual reports for 2013/2014 financial year
Dr Martin Nicol, Researcher, Portfolio Committee on Mineral Resources, presented the analysis of the 2013/2014 annual reports. His analysis was based a comparison between the annual performance plan, which was presented to the Committee last year, and the annual report, according to the requirements of the National Treasury. He had critically analyzed the performance objectives, but not necessarily the financial issues. The selected performance expenditure of the DMR came out of the budget. The Department had set 166 performance measures, but only a few had been selected for purposes of the presentation.

The first performance measure was decent employment through inclusive development which had links to the National Development Plan (NDP). This measure had exceeded its target under its indicator on the number of occupational health and safety inspections and mine audits conducted. The indicator on the number of mining rights granted to historically disadvantaged South African was a reflection of the transformation in the industry, trying to open up access to previously disadvantaged South Africans. Here the target was not met, but had been 96% achieved, and was thus in the target range. The Department did not have control over the economy, as well as the requests for the mining rights that were made. It was not advisable to reply on it in order to determine Departmental performance, because it depended on how people and the economy were doing in order for them to come forward to purchase mining rights. However, the target achieved was within target range.

There was an indicator on the number of mining charter inspections -- currently referred to as the Social and Labour Plan (SLP) inspections. Here the target was 201 and was over achieved, as 285 mining inspections occurred. The inspections did not provide details on the actual levels of compliance and this might be a problem, because they did not reveal that the mines were complying with the law during the inspections. The measure was that the Department had conducted the inspections as required.

There was over-achievement with the indicator on the number of sustainable small, medium and micro SMMEs supported, which spoke to a programme with the Industrial Development Corporation. On the measure of the environmental assets and natural resources that were valued, protected and continually enhanced, there was an over-achievement under the indicator on the number of environmental inspections by 10%, where 1 700 had been targeted and 1 868 had been achieved. The Department had set new requirements under its new environmental system which would result in the training of additional inspectors on environmental issues which would come into effect in the next year.

The Department’s derelict and ownerless mines rehabilitation target was not achieved. 28 sites were rehabilitated, instead of 30. The report indicated that the two sites were in the process of rehabilitation, but were just not completed within the financial year. The target for next year was 50 sites and the target for the previous year was 15. There was an improvement in the number of mine sites which the Department was aiming to rehabilitate every year. Although it was a small number compared to the number of problematic mine sites that needed to be rehabilitated, there was an improvement in the number of derelict mines rehabilitated every year. There were no direct performance measures in the report relating to the control of asset mine drainage or the control of illegal mining. The DMR had important responsibilities in both of these areas. This was discussed in a narrative of the DMR report and also in the Mine Health and Safety Inspectorate, where they speak about a remarkable improvement with respect to combating illegal mining.

On the composite targets, he counted 166 predetermined performance targets for the year. 77% of the performance targets had been met, while 23% were not met or partly achieved. 2013/2013 had seen a similar result, with 79% of targets being achieved. The AG had indicated that the minimum performance on the set targets was 20% -- if a department got less than 20%, there was an indication that the strategic planning process had not been undertaken completely. The DMR had not met this threshold this year or last year, but was very close to the target range. The evaluation of the performance of the Department was extremely difficult. It was a balancing act, because not all the measures which are selected are of an equal weight. For example, the Department was able to report 100% achievement on the measure of whether all mining certificates and closure certificates issued complied with laws and regulations. This was really required by the law -- it was not really a performance measurement. It was an easy target to meet because it meant that the processes were sufficient. When an application was made that did not comply with the rules, one just refused it and as long as this was done consistently, on got 100% for that support measure.

Finalisation of the “women in mining” strategy had not been achieved. Women in mining had been dealt with by the Portfolio Committee for many years as a matter of concern, and the strategy had been a target of the Department since 2011. However, the completion date of this strategy had been postponed four times. It had been put into the annual performance plan on several occasions. This time it was not in the annual performance plan for next year, so one should hope that the process would be completed as promised in this annual report by 31 March 2015. The Department reported that the number of reported incidents of women being sexually harassed underground had increased. It was hoped that the strategy would deal appropriately the need for women mine workers to have a safe and dignified working environment.

Dr Nicol said he encountered difficulties in going through the report because the order of the measures the Department dealt with differed between the performance plan and the annual report. The information was in the report but one had to search for it. He commended the Department for having posted on the website the detailed way in which it calculated each of the performance measures, but it would have been so much better if the measures were in the same order.

He thought that there was a clear improvement in 2013/2014, compared to 2012/2013, in the financial performance, with the DMR moving to an unqualified audit and in compliance with the principle Act. There had been problems in compliance with the principle Act the previous year -- in particular, the Department had not been sufficiently careful in collecting the results from the mines where they received their annual performance reports on compliance with social and labour plans, or on the environment, and so forth. Standards had been maintained with respect to the five entities over the Department playing an effective monitoring role, according to the Financial and Fiscal Commission (FFC). He understood the point of view of the AG, when she had said that the DMR had shown important signs of improvement over the last year.

In the case of the Council for Geoscience, they had not achieved about 30% of their targets. This could be deemed as an awful performance but it was actually one of the best most capable entities within the DMR. Their problem was that they set unrealistic monitoring measures for their own standards, and the Council needed to be asked why. This was an issue which the AG had raised several times -- why were they setting standards which they cannot realistically meet? Was it because their budget was correct and sufficient, or had they set high standards which they could not meet because they were dealing with problems with of staffing and so forth? He thought that the measure was a false reflection of the CGS, having read their most recent report.

MINTEK had performed extremely well in both years, achieving 85% of its objectives. The State Diamond Trader had “pulled a fast one” by completely changing the way in which it measured its performance between the two reports. A new board had come into existence in 2011 and they had changed the performance measures, so one could not really compare the 69% achieved in the previous year with the 81% achieved this year. The South African Diamond and Precious Metals Regulator had actually given themselves 100% in both years. What he found was that there was one measure where they got 96%, so to be consistent he had given them 97% for last year. MHSC was also not in the comfort zone below 20% in either year, but it had improved from the 77% achieved last year to the 88% achieved this year. This gave an idea of the great scope of the entities in the numerous ways in which they measured themselves.

There were some areas of repeated non-achievement. When one looked at the achievements of the departments measured over a number of years there several recurring issues. The first was on the strategic goal five -- to create an efficient, effective and development oriented department and to attract development and retain appropriate skills. This was a problem across all levels of government, covering staff turnover, the filling of vacancies and employment equity objectives, and the DMR is no exception. It was interesting to note, however, that the performance indicators going forward from this point had been substantially altered, so instead of having specific racial targets for the employment of people across the department, the indicators were now saying “number of permitted action measures implemented.” This indicator wouldl look a lot better next year. The same thing applied to the vacancy rate, where the target is 10%; this is a reasonable stretch goal, compared to the achievement in the past few years. The changes in the targets in the next performance plan were reasonable.

On the implementation of management plans, one of the measures which had been used in all divisions was the percentage of agreed management plans implemented.  In 2012/2013, there had been 100% performance across all the divisions. However 2012/2013 was the year where the Department had a qualified audit, and this year where there seemed to be problems, they had had an unqualified audit. He was not confident whether these measures were close indicators of the performance of the Department. They needed to be monitored by the Portfolio Committee and 100% performance must be expected from the Department, just as it was when they issued their licences.

Another area of concern was the health and safety inspectors. The number of posts filled in the MHSC had never matched the number of posts provided for since 2001. There was always a gap of 50 or more every single year. One of the reasons for this was that the Department trained people and they were poached -- a long-standing difficulty which dated back at least ten years. One questioned whether the new measures which are described in the annual report were going to be adequate. For example, they included identifying 50 people who were going to be given bursaries and training towards the achievement of the qualification that would allow them to become mine inspectors. The Department was aware of this problem on an annual basis, but he questioned whether it was being dealt with adequately. Under the Mine Health and Safety Act, there was a provision for the Mine Health and Safety Inspectorate to be made a separate entity under the Public Finance Management Act (PFMA), which would release it from the requirement to pay government-banded salaries. If the Mine Health and Safety Inspectorate were established as a juristic person, as is provided for in the Mine Health and Safety Act, it would be possible for them to pay salaries which were more attractive, to improve the situation of the mine health and safety inspectorate.

There were three areas which were not well covered in the annual report. The Department’s reports were fully in line with the formal requirements and were based on the content of the strategic plan and the budget, so one must be cautious in saying that there should be more material in the annual report. However, there were three areas which reflected on the future growth and impact of the mining industry. The first was the South African Mineral Resources Administration Database (SAMRAD), which went to the heart of the requirement under the Mineral and Petroleum Resources Development Act (MPRDA) to allow people access into the mineral industry in a transparent and responsible manner, and where the State is the custodian of the mineral wealth of the country. Despite all of the upgrades which are reflected in the annual report, the online system has been criticized for lacking transparency and efficiency and there are no performance measures in the report that specifically indicate whether the SAMRAD is adequate or not. These questions are raised by journalists, commentators and analysts in the Mining Weekly, where they say that South Africa’s online administrative system is not up to world class standards. The transformation objectives of the MPRDA were compromised without such a world class system. There have been efforts to bring it in since 2004, but the question was whether there had been progress or not.

The second area dealt with the issue of the DMR and the environment. Concerns had been raised all over the press on the way that the DMR went about its environmental management duties in practice. The DMR did all the inspections, but there had been an increase in the number of mines in South Africa and even bigger increase in the prospecting rights awarded. This meant there was a greater impact by the mining industry on eco-systems and on communities. One example was Mpumalanga, where the DMR had been given several forms of mining rights. The report by the Bench Marks Foundation, which is endorsed by the Centre for Environmental Rights, speaks to the almost total lack of compliance, monitoring and enforcement by the DMR, and this indicates that this is an area of concern. Many communities, NGO groups and environmental lawyers have said that the DMR was not carrying out its regulatory duties correctly. Obviously it was possible they were saying that it was not being done in the way that they would prefer, but it was an area which needed reflection in the annual report.

Thirdly, there was the area of legal cases. The MPRDA, under the Mine Health and Safety Act, had brought in a fundamental change in our legal system, as it dealt with minerals. It was referred to as the “Systemic Change in Mineral Law”. When this took place, over time there would be a development of case law, as amendments were made to the provisions of the Act. It would be appropriate for the annual report to reflect on how these currents of change which were coming to the interpretation of MPRDA through the courts, were having an impact on the DMR’s own goals and functions, and therefore on the transformation of the industry and the provision of security of tenure to mining companies, and so forth. There was need for Parliament to implement a law to control illegal mining. 

Discussion
Mr Schmidt said this was the first time they had experienced a report by the researcher, which was a big step forward for the Committee. His concern was that the Committee had received only one briefing by the Department on legal matters in 2011/2012 although the Department was continuously in the court and there was no little, if any, attention given to these matters. There was a need for better reporting concerning legal matters. The concern over the lack of an Act concerning illegal mining had been raised in a different forum and the judge had confirmed that there was no such legal framework. This confirmed that there was no legal forum in which trespassers and illegal miners could be arrested. The best charge they could lay would be trespassing. There had been no briefings made to the Committee over the years on the SAMRAD, which had previously been a controversial issue and described as being inadequate for South Africa’s mining sector. The best system in this field was found in Canada. He requested the Department to clarify this issue.  

Mr Lorimer asked for the details of the Bench Marks Foundation report on the Mpumalanga mines. He had visited five mines in Mpumalanga and it appeared that four of them were in breach of their environmental compliance plans. This was a big problem that needed to be addressed.  

Mr Pikinini commended the analysis, and said that it would enable them to do their work properly. He requested a special session with the researcher to take them through the comparisons of the annual reports so that they are able to pose questions. A systematic approach was required to engage with the problems highlighted and create a platform on how to deal with the Department.

Dr Nichol did not respond to the questions raised.

The Chairperson said that Dr Nicol’s presentation was just meant to give Members a perspective on the annual report and help them develop a complementary opinion on the Department’s annual report. He requested a separate comparison meeting so that by the time they engaged with the DMR there was a common perspective between the AG’s report and the Researcher’s presentation.

DMR and Mine Health and Safety Inspectorate on their annual reports for 2013/2014 financial year
Mr Thibedi Ramontja, Director General, DMR, opened the presentation by introducing the members of his delegation. The annual report of the Department dealt with the financial statements and the outcomes of the predetermined objectives. He commended the audit team for their guidance and support during the audit process, and said that the DMR would continue to cooperate with the proposals of the AG.

He reported that the Department was doing well with regard to the monitoring performance tool which was used to look at other elements of management of the Department, and in 2012/2013 they had been ranked among the top five departments in the country. This reflected the commitment of the staff to the execution of their mandate. The collective effort of the Department was well demonstrated by the audit results, and through the leadership of the Minister and the Deputy Minister, they would continue to coordinate and align the activities of the Committee and those of the Department. The DMR and its entities were monitored closely by, amongst others, their quarterly reports.

The DMR was presenting its annual report at a time when the mining industry was recovering from the protracted strikes that had affected the platinum industry and the economy as a whole. South Africa had weathered the storm and he was confident that the mining industry would recover fully and continue to contribute to the soci0-economic development of the country, in line with the National Development Plan. The Department continued to provide support to special and presidential projects, especially the framework agreement for a sustainable mining industry, which was critical in terms of ensuring that there was stability in the mining industry and also addressing other socio-economic issues.

There had been a number of good initiatives that had been implemented to address the socio-economic conditions of mine workers, one of which was the housing and living conditions of mine workers. An example of such initiatives was the home ownership scheme of the platinum mines, valued at R460million, to build a village in Limpopo. The DMR’s drive in monitoring and enforcing compliance with social and development plans and related transformation tools would continue. They had issued a number of oral directives to ensure that the matter was properly addressed.

Mining had been identified as central to the implementation of the National Development Plan. The Department would continue to promote the responsible development of the mineral and petroleum sector, both on and offshore. They were a Department that cared about the lives of the employees in the mines and were concerned about the loss of lives in the mines and the health of mine workers. They would continue to strive for zero harm and the Department was insisting that those who could not mine safely must not mine at all, because the loss of lives in the mining industry was high. With regard to illegal mining, the DMR would work with all stakeholders to address this issue.

Referring to internal capacity within the Department, he said they would work with the National Treasury to ensure that they were provided with enough funding to address the human capacity problems, and also to cope with the IT system. The main objective relating to IT was to develop an integrated system which would ensure that all the data bases of the Department were interlinked and also to ensure that they improved their service delivery in Africa. In November, they would be hosting a Mining and Health workshop, whose objective it was to take stock of progress made in achieving the health and safety targets that had been set by the Department. They were also launching a centre of excellence, aimed at addressing mine safety and health. They were presenting the current report at a time when they had developed a system for regulating the mining environment and the authorization of mineral resources in South Africa. The introduction of this system would present a strategic step on their journey towards an integrated mining and licensing system -- a journey which would improve South Africa’s investment environment. 

Briefing on 2013/2014 Annual Report
Mr Thibedi said the revenue collection of the DMR amounted to R109 million, against the estimated R41.6 million for the 2013/2014 financial year. The over collection related to, among others, royalty payments received from holders of converted rights and the improvement of systems to ensure more efficient and effective collection. The Department had two key deliverables; revenue and royalties and prospecting. The Department had faced many challenges in these areas in the past but had improved in the current year under review. The department had continued to improve systems to ensure more efficient and effective collection. They were working hard on this matter to ensure that they could account for all their receivables. The Department’s final appropriation from government was R1.391 billion, and it had spent R1.387 billion. R435.251 million was spent on the compensation of employees, R249.551 million was spent on goods and services, and R13.908 million was spent on capital assets.

The increase in operational costs, amongst others, related to the payment of obligatory membership fees to the African Diamond Producers Association (ADPA), of which South Africa was a member. From this participation, it had been seconded to build the head office of the ADPA organisation in Angola.

The Department had successfully implemented the recommendations of the AG from the previous financial year, and would continue to improve the internal controls to ensure that its financial reporting was reliable and in line with legislation. The key area for improvement was the material adjustments to the annual financial statements. The Department’s improvement plan involved the implementation of Standard Operating Procedures (SOPs) and the implementation of new debtor’s management system. With regard to progress, the SOPs were being implemented and a revenue management system was in its final testing stage.  Once the revenue management system was finalised, they would have reached a point at which the issue of revenue in the Department was addressed.

The presentation engaged with four of the Department’s programmes. Program one related to corporate services. These enabled the Department to deliver on its mandate by providing strategic management and administrative support. The issue of submission of financial statements within the prescribed time was an important aspect. In the year under review, they had managed to achieve this. The Department had been critically challenged by the loss of staff to the private sector, but was ready to engage with the National Treasury to find a solution to this problem. The Department had fully transformed from its state in 1994, and this meant that it had achieved its transformation objective. They had built capacity in the Department. The senior management posts of the Department had been filled and the people who were in senior management were effectively executing their mandate. Retention of critical skills would always remain a challenge but they were going to engage with the National Treasury to find a lasting solution.

Programme one had a sub-program which dealt with the financial administration of the Department. The purpose of this sub-programme was to provide strategic and administrative support services to the Ministry and the Department. It had several key achievements, some of which were the improvement in service delivery, empowerment and education of stakeholders, and promotion of transformation policies. The Department was striving for 100% with regard to the payment of invoices within 30 days, but in the year under review 98% of the invoices were paid within 30 days. This was an improvement from the previous year’s 95%. The Department’s expenditure was in line with the original allocated budget. Action plans on internal audit and the compliance framework were fully implemented to promote corporate governance within the Department. Whenever they set the targets for the Department, they often wondered whether they would be able to achieve them because it was very difficult to have the full control of most of them, since they were not only within the Department but in the mines, with mine workers who often did not have a clue of the targets. In order to achieve the targets, their trick lay in continuous mine inspections, which helped in the reduction of risks and health hazards.

Programme two related to mine health and safety. The purpose of this programme was to execute the Department’s mandate to safeguard the health and safety of mine employees and people affected by mining activities. The programme had several key achievements, like exceeding their targets on audit and inspections conducted, all of which were achieved by over 100%. The programme had also seen the year record the lowest number fatalities reported by the Department. The programme had developed an internal process of HIV and TB reporting. 13 assistant inspectors were undergoing inspector training at various regional offices on human resource development, to address the capacity problem within the Department. He added the issue of inspectors could be resolved by a retention policy for the learners who undergo internship training with the Department. Currently there were 50 learner inspectors placed at mines, in collaboration with the Mining Qualifications Authority (MQA) for experimental training.

Programme three related to mineral regulation. Its purpose was to regulate the minerals and mining sectors to ensure economic development, employment and ensure transformation and environmental compliance.The objective was to transform the minerals and mining sector into one that competitively contributed to the sustainable development of the country. There had been several achievements, like the implementation of 60 SMME development projects which contributed to the nation’s social development. The programme had also managed to conduct 272 consultations and engagements with communities and industry workshops. Some of the social development projects changing the lives of the mining communities included the Sunrise Secondary School in Rusternburg municipality, built by Impala, the platinum village and the online project in Westrand.

Programme four related to mineral policy and promotion. Its purpose was to formulate mineral related policies and promote the mining and mineral industry of South Africa in order to make it attractive to investors. It had managed to draft and certify the MPRDA and MHSA bills. It promoted investment in the mining sector by encouraging strategic and technical partnerships. It also promoted investment in the mining sector by providing support to the framework agreement for a sustainable mining industry. The DMR had hosted two jewelry forums on skills development, which was critical to the development of this sector. The programme had provided non-financial support for SMME’s interested in entering the mining industry, thus opening the industry to small and medium capital investors. Another significant achievement was the chairing of the 10^th anniversary of the Kimberly Process Certification Scheme. The two anniversary events took place in South Africa and this highlighted the development of the South African mining sector. The next such even would be held in China and the Department was going to participate. 

On the whole, he said that there was an upward trend in terms of the revenue earned in South Africa from mineral resources. Employment in the industry was also increasing when compared to other years since 2004. Thus, the Department had to work very hard to continue with the growing trend. 


Briefing on Programme 2: Mine Health and Safety
Mr David Msiza, Deputy Director General, DMR, tabled the presentation on programme two. He said that MSHI strives towards a safe and healthy mining industry and this could be achieved by reducing mining related deaths, injuries and ill health through the formulation of national policy and legislation, the provision of advice, and the application of systems that monitor and enforce compliance with the law in the mining sector.

On the employment statistics of the Department, he said that there had been a significant improvement in the employment levels of the entity, mainly in the coal and platinum sector. This improvement was very encouraging, because it showed that since the introduction of the Mineral and Petroleum Resources Development Act (MPRDA), significant progress had been made. As newcomers within the Department, this was the type of progress that the inspectorate was checking. Overall, between 2002 and 2013 there had been 103 000 people employed in the mining sector. There was significant improvement of women employed in the mining sector, from 11 000 in 2001 to 50 000 in 2013. This employment of women in the mining sector was not just at the lower level -- there were women in management portfolios in the Department, like female mine managers, executives, and CEOs. There was room for improvement, but the current improvement was pleasing.

The Inspectorate had to look at the health and safety considerations involving women, including issues of sexual harassment, especially underground. Most of the noise-induced hearing loss diseases affecting mine workers were reported by the gold sector. However there had been some improvement on this issue, especially from 2008 to 2013.

Although there had been some improvement on the number of mine workers affected by pulmonary tuberculosis, the statistics were still high, affecting workers mainly in heavily dust-infested mines like the platinum mines. Other miners affected by pulmonary tuberculosis had contracted it as a side effect to HIV/AIDS. The higher cases affected by silicosis were in the gold sector and this was because of the type of rock with high acidic content in the gold mines, which was not found in other mines. The instances of silicosis reported in the platinum sector resulted mostly from the transfer of miners from the gold sector to the platinum sector. There was a significant reduction in the number of miners dying from tuberculosis and silicosis, which was encouraging for the Inspectorate. This progress had been achieved because of compliance to, amongst others, the mining charter which required improvement in the living conditions of miners and the Department of Health programmes that had been implemented over time on HIV/AIDS.. The mines as well had gone a long way in ensuring that they implemented appropriate measures for people suffering from HIV/AIDS, including ARV’s. Although the statistics had improved, on the whole more miners lost their lives to disease than accidents, thus the need to focus more on the issue of health.

Although there had been an increase in the number of people employed in mining sector, the injuries and the fatality rate were going down. The coal sector had performed better than the others in reducing the number of fatalities per hours worked. It was followed by the platinum sector, while the gold sector recorded the highest number of fatalities, although there had been an improvement from the previous year’s statistic. On the matter of reduction of fatalities, the South African coal sector was performing favorably when compared to other countries like the USA. There had been an increase in the injuries suffered by women, in the sector and the Inspectorate was devising ways of solving this problem. The fatalities had decreased but the problem too needed to be addressed. There had been a significant improvement in the fall to ground fatalities, but despite all the improvements, the Department was still interested in finding ways of solving these problems so that they could get to zero fatalities within the sector.

There had been a 30% overall improvement in the injuries suffered by mine workers and this improvement had been championed by the platinum sector. This might be attributed to the strike, for if it had not occurred, the statistics would have been different. The main contributors to disasters were rock bursts underground, explosions -- in terms of missiles and coal dust explosions -- fires, shafts and rock falls. The trends had been analyzed over the last 30years. However what was encouraging was the significant reduction in the number of disasters over the past ten years. The highest level of reductions had been between 2010 and 2014. For example, between 1990 and 1999, rock bursts were a serious problem, but in 2010 to 2014, there had been no disasters relating to rock bursts. Of concern to the inspectorate were the continued fire disasters, mainly in the coal sector, and they were working tirelessly on ways in which they could try and resolve this problem.

The Department had been doing some commemoration with the National Union of Mine Workers. They had commemorated the Kinross disaster in Mpumalanga about two weeks ago. There were over 1 000 graves in the cemetery, all of which contained plaques with numbers, because no one knew the names of the miners who had perished in the disaster. The most painful for him about this experience was the fact that the hostel where the mine workers stayed overlooked the cemetery, so they knew that when they died, they would be buried at the cemetery and not sent home. The only identification item put on the graves was mining equipment, like gloves and boots. The Inspectorate, through the Council, had decided to come up with a project to look into this matter because so many South Africans were unaware of some of these events

He said that the last three months of the year were generally a big problem for the sector because they see more fatalities during this time because of complacency. For example, they had recorded three fatalities in October. They were undergoing a campaign with the sector and also doing more inspections and audits. This was also reflected in the audit report, where it was shown that they were doing more inspections than targeted. They were also engaging the CEOs and had requested some of the CEOs of different sectors to get independent service providers to audit their systems were standardised to all the requisite requirements, and to make sure that they reviewed their systems.

On women’s safety, the council was developing promotional material, including videos on preventing sexual harassment and was doing research on health and safety for women in the mining sector. They were also developing guidelines on fire and worker tracking technology. One of the biggest challenges that led to causalities in the past was people getting lost underground, especially when there was a fire. They were working together with the sector to develop tracking systems underground that would help them during an emergency situation. They were implementing a guideline on fatigue management. In the last quarter, one of the factors of accidents was fatigue and they had come up with a guideline to help them in managing this issue.
They had asked the MQA to come up with a plan which they could use to try and develop the youth employed in the sector without the necessary fees, to train them in the necessary skills which would help them gain employment in municipalities as well.

In conclusion, he said that even though there had been improvement, there was still a long way to go for the department to achieve zero harm.

The Chairperson said that there were two important aspects of mining. The first was revenue generation, whose resultant effect was on the nation’s GDP; and the second related to mine health and safety. The Department needed to give specific focus to those areas.  

Discussion
Mr Pikinini said the AG’s overview on some of the aspects of the Department’s work indicated its future prospects. He asked for this information to be tabulated, as had been done with the comparison statistics, because they gave a snapshot understanding of the state of affairs with regard to what was supposed to happen, what was happening and what they hoped would happen in the future. He commended their efforts on the issue of health and safety. He was happy with their women employment position where the numbers of women working in the department had more than doubled over the years and at the various levels of management, but requested that this policy be sustained and reinforced especially in the rural areas so as to achieve the government’s 50/50 requirement. He requested the Department to find a way of dealing with the problem of sexual harassment, especially underground in the mines. Heavy penalties were needed to help dealing with this problem. The penalties may be in the form of expulsions or exorbitant financial penalties to put a stop on this problem and turn the mining environment into a working space free from sexual harassment.

Mr Schmidt asked why the royalties of the department were more than expected, because he expected the Department would know the royalties they were going to receive in a particular year. Which funds of the Department were supposed to be surrendered to the National Revenue fund? He was impressed with the mine health and safety presentation on the level of fatalities. This showed that there was progress. He requested clarity on the reports in the “Mining Weekly” which had created an impression that South Africa received 2% of the mining business of the world, yet the presentation reported on the contrary. This indicated that one of the entities was reporting on inaccurate figures.

The Chairperson said that the Committee needed more time to process some of the issues raised by the presentation in order to execute their oversight effectively by putting out a report on recommendations on the issues raised.  Part of the work of the Committee was to give recommendations on how things were supposed to be done in the Department. He said that the presentation had not given him a clear picture of the problems faced within the Department. This had been one of the reasons for the presentation, and this limited the Committee’s oversight function, which should lead to the achievement of targeted objectives. What was causing the failure to achieve 100% on the payment of invoices within the department -- did the problem lie with the Department or with other entities with which it was conducting business? Was the 30 day payment rule an audit requirement, or was it a policy statement so that if they were not complying with it, they could be held accountable for not complying with it. Clarity on this issue would also address on some other problems within the Department, like corruption and non-compliance to supply chain management processes, which often remained unknown to the top officials until the time of submission. He requested clarity on whether the remaining projects and activities on corrective measures relating to external audit and risk management, as had been reported, were finalised after the year end. The statistics on the acquired revenue from the mining sector were worrying, since local sales were limited when compared to export sales. He asked why this was so, because he thought that the sector was meant to be more beneficial to South Africa than the outside world in terms of using its products.

There was cause to applaud the increase in the number of female workers in the Department. However, he felt that the increase in the number also correlated to the increase of injuries suffered by women in the sector, like sexual harassment. What were the causes of this increase and what was being done to address this problem? The burials at the mining sites were a shocking revelation to him. He knew mines as areas of precious mineral explorations, but not as burial grounds. Nonetheless, he thought that the issue was very serious as well as emotional. He requested a follow-up on this matter to ascertain that the requisite permission to conduct burials at the mining sites had been obtained, because for burials to be carried out, one needed to have permission for them. They also needed to inquire into the numbers attached on the graves, to help identify the people who were buried there. Law enforcement officers often had details of such incidents, and could help in trying to identify the victims because of the procedures that needed to be followed on death, like certification of death and obtaining permission to conduct burials. This research could also help in shedding more light on the history of the mining sector in South Africa. Overall, was there no proposal that could be made in relation to this issue? This could also be done in the form of the commemorations that they were engaged in. They needed to sit down with the unions and come up with an idea which could include the creation of monuments, because if they were to keep the legacy of the mining sector they would have to commemorate some of the past events within the sector.

The inspections within the Department reflected in the report seemed to be substantial, but the initial report by the AG and the researcher reported to the contrary. He requested clarity on the number of offices the DMR would require setting up in the nine provinces across the country and how many inspectors would be required per office, and in what fields. He thought that this would be helpful in addressing the budgetary issues of the Department. He wanted a clear picture, generally indicating the composition of a mine health and safety office. This could also shed light on the issue of turnover and where they needed prioritisation, because the Department was also faced with litigation issues, indicating that there were areas that needed to be addressed.

DMR’s response
Mr Thibedi said the problem of sexual harassment existed in the Department, but they were taking the necessary steps to ensure that this matter was addressed. However, this was not the only problem involving women that was being addressed. The Department had set up a programme to ensure that women, as well as other miners, were provided with the necessary protective gear. They were engaging other stakeholders in trying to solve this problem as well as educating people working within the sector on the fact that women and men were equally entitled to work in the mining sector.

On the issue of royalties, he said that they had collected more than they had budgeted for, and the problem related to the conversion of the royalties. There were people who owned royalties but had not registered them, and as long as they had not been registered, the Department had to collect revenue from them. However, once these royalties were registered, this issue would be solved. Adherence to environmental policies during mining was one of the areas that was still challenging to the Department. However they had initiated a programme on the mapping of mining areas to try and identify the affected areas, so that solutions could be provided. Geological information attracted mining industries to certain parts of the country, thus geological information, and information generally, was necessary to attract investors as well as address the problems in the mining sector. 

The Department was willing to look into the past recommendations of the Committee to identify solutions to recurring problems, so as to address them. South Africa was a rainbow nation and the sector had transformed in terms of bringing in more black people into the mining department. However, the problem remained with the engagement of Coloureds and Indians. The Department had to introduce measures to attract them to engage with the sector.

The 30 day payment rule was a PFMA requirement, and the Department had to adhere to it.

On the two projects that had not been finalized, the Department had completed them in May 2014, so they could not form part of the annual report, but would be reported on in 2014/2015.

The Department exported more minerals than what was consumed in South Africa. However, the resultant beneficiation was for the country as a whole, and he hoped that the export trend would also catch on within the country.

Mr Msiza said that the Department had taken the issue of the graves to the Council where the union sat so that it would be better addressed. After this engagement, they would have to go back to the Minister and the DG to present their proposals on the issue with regard to monuments and commemoration. Additionally, they had requested the cooperation of Pan African Mines, the company that currently owned the mines, on the ways in which they could search for the names of the miners that were buried in the Kinross cemetery in a bid to try and identify them. They assured the Inspectorate that they would engage with them on this matter.

Sexual harassment was still a serious problem affecting the mines and in previous years fatalities had been recorded in this area. However because of the developed programmes, including women forums, the Inspectorate had been able to engage with women to acquire first hand information on the problems they faced, after which they had engaged with management in trying to find lasting solutions to this problem. They were also working with the police in terms of trying to deal with this problem.

In terms of the health issues, whenever they issued a strategic plan, they had to be given time because these problems took a long time to be manifested in the miners. That was why the progress statistics were over a long period, because opinions could not be formed on such issues in just a year. That was also why the results on these issues included the postmortem reports, because these clearly indicated the causes of death within the sector. The inspectorate was encouraged by the measures employed by the coal sector on mine health and safety, because they had managed to suppress most of their problems over the years. He agreed that there might be some inaccuracies in terms of the injuries contracted by women in the mines, but the statistics were based on the change in the trend of injuries suffered. From the given statistics, it could be shown that 36% of the recorded injuries related to general accidents. Remedy plans by the Council and the Inspectorate had been put in place to address some of these problems, like heavy boots and torn gloves. They were also addressing the issue of an increase in capacity so that this did not result in an increase of injuries within the sector. 

Mr Schmidt requested a proper briefing on the number of legal matters that the Department was involved in. He wanted to ascertain the issues that the Department was dealing with. What were the issues relating to the MPRDA, because the MPRDA might be coming back, and they could then the cases to the content of the Act and clearly ascertain the clauses against which actions had been instituted? He was not sure about the DG’s argument about the mapping, because the Citi Bank report had indicated that South Africa had about six trillion dollars’ worth of mineral reserves. This was a known fact, and would probably be the guide for those in the mining industry. There was surely enough evidence on the extent of mineral reserves in South Africa. In fact, the  CGS was supposed to be fed with information collected by the mining industry. He believed that in some instances, they were in possession of information that the CGS did not have, so it was not true to conclude that the mining industry was dependent on the CGS. It needed to be noted that the mining industry had not operated on their exploration information until recently. However, all the mining roles had been given to the CGS in terms of the conversion of the mining licences, and so forth. His concern was on the other issues which had not been highlighted by the Department, not on the lack of capability by the mining industry. It equally did not follow that the mapping was the key to unlocking the investment potential of South Africa’s mining sector.

The export sales, as presented, were too high when compared to the local sales. This was a matter of macro mathematics, and not politics or policy, but a question of mineral economics. The issue in defining or bridging this gap was not an issue of mining, but an issue of manufacturing which did not belong to the mining sector. The mining sector should not be held responsible for the beneficiation of mined products, because this was not its primary mandate or co-business --  it was a manufacturing issue.  Mineral exports accounted for 60% of the balance of account payment. If they were going to make it more difficult for mining companies to invest, they were equally going to make it difficult for mining companies to explore, which would impact on the 60% balance of account payments. If they did not have investment and it was not replaced by beneficiation, there would be a growing deficit in the government’s balance of accounts payments. If the department was going to reduce the level of exports and was not going to replace it with a viable beneficiation strategy, over time the Department would not have adequate funding to import new things. The inadequate funding would limit importation which in turn would curtail exportation. The whole situation was just a matter of economics -- and not mining economics. The presentation on the earnings from exports in relation to domestic earnings was a very narrow-minded approach. To consider the earnings, one needed to consider the rate of production to determine the level of export income, and from the presentation it had appeared that the production levels had gone down, and this would affect the income returns both domestically and from the exports.

The Chairperson also sought clarity on the issue of earning from the mined products because from the outset, it seemed that the majority of the produced items were used for export. It was the responsibility of the Department to determine the beneficiaries of the mined products, but all were interrelated with the question of manufacturing and taxation on the mining sector, amongst other issues. All in all, the above discussion had all been based on the availability of knowledge, leading to the conclusion that ignorance was very expensive. The most important thing was to determine whether the Department was getting value for money from its operations, because the issue of minerals was central in terms of its contribution to the development of the country.

On the level of the export earnings, he asked the Members to wait for the report from the Council for Geoscience, because it would shed more light on the matters raised, even though the Department could still respond to the questions. The CGS needed an opportunity to explain to the Committee about the mineral potential of the country. During oversight with the CGS, they had informed the Committee that they had made findings on the mineral potential of the country for about 30% of the total region of South Africa. The reason they said this had not been carried out with the rest of the country was because the exercise would be very costly.

DMR’s response
Mr Thibedi said that the issue of exploration was an interesting one, because if one looked at the history of South Africa and how minerals were discovered, there was very little information.  These days, however, one needs good geological data to operate effectively in the mining industry. Companies had stopped investing in the mining sector without the requisite information. Thus, before they engaged with the process, they looked at the geological findings in order to make an informed decision on the entry points into a particular mining activity. Currently all major mining countries had a geological department in order to create a competitive edge in determining the specific mineral resources within the particular country, and to decide on whether to mine or not. Namibia was at the forefront of collecting geological data when compared to South Africa. In terms of the MPRDA on the beneficiation from exploited minerals, it was stated that companies should make mined products available to the local population. People were not forced to benefit from the minerals, but they should be made available to them with same enthusiasm as they were to the export market. The Minerals Bill also contained provisions addressing this issue, and was thus a necessary matter to look in to. 

The Chairperson asked the Department to assure him, as well as the Committee, that they would achieve an unqualified audit with no findings from their next audit, because they had given the Committee an assurance that they were working on those issues. They had an opportunity to run to the Committee to inform them if the AG was giving them problems, because he had had problems with them on always changing individuals dealing with the audit process. This caused confusion when one person would require a certain practice and the other would not conform to the given practice. If such an instance occurred, he requested the Department to raise the issue with the Committee, even before the AG brought it to their attention.

Mr Thibedi thanked the Committee for their advice and said that their ideas were of great value to the Department in terms of its personal growth. They would strive to ensure that the Department was among the best in South Africa and were confident, because they had the people who could do the job. They were going to work very hard in addressing all the issues which had been raised by the Members relating to good governance.

The Chairperson clarified that the problems of the Department did not relate to its generated revenue. In that aspect, they were doing very well. Similarly, there were minimal problems in terms of governance. The most important thing the Committee required from the Department was a clean audit in the next financial year. 

The meeting was adjourned.