Department of Mineral Resources on its Strategic/ Annual Performance Plans 2015/16

Meeting report

Chairperson’s Opening Remarks

The Chairperson welcomed everyone to the meeting. He acknowledged the presence of the Deputy Minister, the Director-General of the Department of Mineral Resources (DMR) and his team. He conveyed condolences to the family of the late Minister of Public Service and Administration and urged Committee members to extend their condolences to his family and also to the Police Service for the demise of its staff members.

The Committee Secretary read an apology from Mr J Malema (EFF), who would be late for the meeting.

The Chairperson apologised to the Committee Members for the meeting not being held last week due to the Department’s request that it was not ready for a presentation. He proposed that the consideration and formulation of the recommendation for an oversight visit to KwaZulu-Natal and Eastern Cape be sent to the Committee Members during their recess period.

Mr Z Mandela (ANC) moved the adoption of the Agenda, and was seconded by Ms H Nyambi (ANC).

Briefing by Researcher/Content Advisor

Dr Martin Nicol: Parliamentary Researcher, briefed the Committee on the issues in the 2014 Budgetary Review and Recommendation Report (BRRR) which had been adopted by the Committee last year:

- More funds were required to strengthen inspection in respect of transformation, health and safety and the environment;

- Specific funding was required for the integration of DMR database to ensure transparency in the applications for and granting of licenses;

- The Council for Geosciences (CGS) lacked an annual amount of R115 million to fund the requirements of the 2010 Geosciences Amendment Act;

- The future growth of the mining sector was dependent upon continued mineral exploration and a substantial national investment of around R1 billion in geological mapping was needed by the CGS to provide the knowledge base to attract exploration companies;

- State liability for the environmental harm caused by mining operations in the past exceeded R40 billion across the country;

- Present resources allocated towards the rehabilitation of hazardous mine sites, acid mine drainage and research on these issues were clearly inadequate, and there was need to address them.

The Minister of Finance had not tabled a response to these issues. The Department had reprioritized funds in its baseline to ensure that some of these issues were dealt with. The CGS had been granted an additional amount, but 56 staff and researchers were needed to fully implement the Geosciences Amendment Act, as only 20 staff could be employed over the MTEF period.

On the issue of environmental harm caused by mining, the Department had indicated in the APP that a report on the estimated state liability for the rehabilitation of mines had been completed by actuarial scientists. The Portfolio Committee should expect an update on the amount of money needed to correct this process. There were still legislative issues involving the Mineral and Petroleum Resources Development Amendment (MPRDA) Bill, the State-Owned Mining Companies (SOMCO) Bill, and the Mine Health and Safety Act (MHSA) Amendment Regulations for presentation to Portfolio Committee on shale gas. There were also legislative issues in the 2014-2019 Strategic Plan that were not being brought to Parliament in 2015/16.

Mr Nathi Kweyama, Parliamentary Content Advisor, briefed the Committee on two key issues for consideration by Parliament in 2015/16.The urgency of dealing with the MPRDA Amendments had been identified as critical by the National Planning Commission in 2011 to achieving a sustainable mining industry. The need to promote transformation in the mining sector was a key objective of the MPRDA, and the difficulty in judging the performance of the DMR in achieving these goals should be addressed.

Briefing by Auditor General

Ms Margaret Seoka, Senior Manager, AGSA, briefed the Committee on the DMR’s 2015/16annual performance plan (APP). The AGSA had a constitutional mandate and as the supreme audit institution of South Africa, it existed to strengthen the country’s democracy by enabling oversight, accountability and governance in the public sector through auditing, thereby building public confidence.

After giving the Committee an overview of its role, mandate, budget and oversight responsibilities, as well as the requirements of the Department to fulfill its commitments, she presented AGSA’s review of the DMR’s 2015/16APP.

There were no significant findings reported for the reliability of reported performance information for validity, accuracy and completeness. The appropriation by economic classification showed compensation of employees for 2014/15 was R476.8 million, R505.7 million in 2015/16and R539 million in 2016/17. Transfer payments for 2014/15 were R717.9 million, R803.3 million in 2015/16and R756.4 million in 2016/17. Irregular expenditure in 2013/14 was R1.567million, R3 348 million in 2012/13 and R7 905 million in 2011/12.

The audit of the 2015/16APP had been completed and no significant issues had been identified. The planning for the 2014/15 financial year had been completed and the execution of the audit was currently in progress. No significant issues had been identified to date.

Discussion

Mr Mandela asked about the legal steps that had been taken against defaulters who did not manage and safeguard the assets and liabilities of the Department. There were officials who continuously did not account for government funds, yet no steps were taken against them. He asked for the main contributory factors to the irregular expenditure of about R1.5 million in 2013/14, and the disciplinary measures undertaken.

Ms Seoka replied that the Department had to do proper investigations in order to confirm that funds had been misused before asking a culprit to refund. Legal action would be taken in serious cases of fraud. Irregular expenditure in the Department had to do with quotations. For instance, if the law required the provision of three quotations and the Department obtained only two, then there would be irregular expenditure due to non-compliance with the law.

Mr M Matlala (ANC) urged the Department not to relax, as more work needed to be done. He asked if it was legal to deduct funds from the pension funds of defaulters, rather than just arresting them in order to reclaim misappropriated funds. He required further clarity on the AGSA review of the 2015/16APP. He asked why the compensation of employees was low in comparison with the transfer of payments.

Ms Seoka replied that the Department would investigate to confirm the misappropriation of funds before there would be a deduction from the defaulter’s salary. The 2015/16APP had to do with the reliability of the reported performance information; the validity of the performance outputs of the APP, as confirmed by the evidence presented; the accuracy of the report would be checked from the evidence and the completeness would be confirmed from the investigation report. It had to do with the validity, accuracy and completeness of the APP. She added that the DMR was not as labour intensive as other Departments, hence the reason for low compensation of employees. This meant that most of the budget went to service delivery.

Mr J Lorimer (DA) required information on the status of the legislation with regard to the state mining companies, as presented by the researcher.

Dr Nicol replied that the information was on page 3 of the analysis in the presentation.

Mr S Jafta (AIC) commented on the need to promote transformation in the mining sector, and asked why it was hard to judge performance in the sector, as indicated by the researcher. Why it was difficult to implement transformation -- was the sector resistant to change or was it a lack of commitment on the side of the people?

Dr Nicol replied that most companies claimed to have complied with the mining charter, but DMR contended that companies had not complied, hence the reason for the lack of transformation. The DMR had the power of Parliament to drive transformation in the industry.

The content advisor replied that it was evident that transformation was not as fast as most stakeholders would have liked. However, given that there had been a review of the Black Economic Empowerment (BEE) Charter, this would give the DMR an objective picture by which to measure the scale and pace of transformation.

Mr I Pikinini (ANC) commented that there was a need to deal with the issue of control in the Department. The audit committees of the Department should deal with the failure to stick to controls and quotation requirements before taking them to the Auditor General’s office. There should be ways of monitoring and dealing with the issues of controls in order to deal with the repetitive findings of the AGSA. He added that transformation officers were employed in the Department to drive transformation.

Remarks by Deputy Minister

Mr Godfrey Olifant, Deputy Minister of the DMR, conveyed his condolences to the family of the late Minister of Public Service and Administration, whom he described as a leader, a visionary and hard working Minister. He added that this country was a better place for his contributions.

Opportunities for economic inclusion and expansion had increased in the mining industry in the last ten years of the implementation of the Mining Charter. The Department was in the process of evaluating progress and compliance with the Charter, and the report would be available by the end of March 2015. The DMR was mindful of the challenges facing the country and the mining industry due to the volatile economic situation. In this phase of the economic transition, the DMR required bold and decisive steps that would place the economy on a path to prosperity and build sustainable livelihoods. The Department would continue to play an important part in ensuring that South Africans gained sustainable benefit from the country’s natural wealth by promoting and regulating the mining minerals and upstream sector of South Africa in order to inspire investment growth in the country. Peace and stability in the industry continued to be a priority for the Department as it continued to work with the Presidency to implement the framework agreement for a sustainable mining industry.

The security of energy supply, in the light of the demand, had galvanized the need for a diverse energy mix. The DMR would therefore continue to promote, amongst others, the exploration of shale gas. It would put in place the necessary legal framework to ensure that the exploration of resources was taken in a responsible manner, to ensure that the environment was protected for future generations.

Working with other government departments and institutions, the DMR would continue to promote mineral value addition which would strengthen the interface between the industry and the socio-economic development of SA. As part of improving the socio-economic development of mining towns, the Department would continue to outline the special Presidential package in distressed mining towns.

There had been some improvements with respect to safety in the mines. This, as well as health issues, would remain a priority for the Department, which would continuously monitor compliance and implement appropriate enforcement measures in terms of the law in order to safeguard the health of mine workers and communities affected by mining activities.

The issue of the public announcement regarding pulling out of shale gas activities would be discussed in detail later.

The announcement by Optimum Coal of the retrenchment of about 1 000 workers had been taken up by the DMR, which was leading the process together with Commission for Conciliation, Mediation and Arbitration (CCMA), the Department of Labour and unions, in order to save these jobs. An update on illegal mining activities would be provided.

The DMR was vigorously continuing with programmes to deal with the plight of ex-mine workers by providing very active one-stop service centres in the Eastern Cape and Gauteng. The Kimberley Hospital had opened a section on 2 March to deal with the collection of data and rehabilitation of ex-mine workers. The DMR was planning to roll out two centres before the end of the year in Kuruman and Limpopo.

The Department was collaborating with other stakeholders to ensure zero harm. It would monitor the implementation of the new health and safety commitments. It would continue to be greatly concerned about the health and safety of women workers in the mining sector, and condemned the recent alleged rape of a female mine worker in Rustenburg. It welcomed the arrest of the suspect by the police. The DMR appealed to the sector to implement effective measures to protect women against abuse and violence.

With regard to strengthening the mineral legislative framework, appropriate processes would be followed to address concerns raised over the MPRDA Bill.

In the Department’s quest to improve efficiency and provide certainty around the regulatory framework, together with the integration of information communication technology (ICT) systems to make SA a competitive investment destination, there would be implementation of an integrated licensing system.

The Department would continue to collaborate with respective stakeholders and law enforcement agencies in implementing measures to ensure that illegal mining activities were ultimately eradicated. He commended the recent confiscation of unprocessed gold worth about R20 million following a coordinated raid by the law enforcement agencies in Ekurhuleni. He commented that the DMR was concerned with the incidence of violence associated with illegal mining, including murder, as a result of gangs competing for limited territory. The Department, together with stakeholders, would continue with the implementation of interventions, including the sealing of holes and supporting the police operations.

Briefing by Department of Mineral Resources

Dr Thibedi Ramontja, Director General: DMR, briefed the Committee on the 2015/16annual performance plan of the Department. After describing the Department’s mandate, mission and location of its offices, he outlined its strategic outcome-oriented goals. These were:

• Strategic goal 1 -- increased investment in the minerals, mining and petroleum sectors. National outcomes included decent employment through inclusive economic growth and an efficient, competitive and responsive economic infrastructure network;
• Strategic goal 2 -- transformed minerals sector. National outcome included decent employment through inclusive economic growth;
• Strategic goal 3 -- equitable and sustainable benefits from mineral resources. National outcomes included environmental assets and natural resources that were well protected and continually enhanced;
• Strategic goal 4 -- efficient, effective and development-oriented Department. National outcome included an efficient, effective and development-oriented public service and an empowered, fair and inclusive citizenship.

The 2015/16budget overview show the DMR received a baseline increase of R150 million over the Medium Term Expenditure Framework (MTEF), and a baseline reduction of R73.5 million, resulting in a net increase of R76.3 million over the MTEF. R42 million had been allocated for the enforcement of the Minerals and Petroleum Development Act 2002, and R108 million had been allocated for shale gas exploration, consultation, advocacy and research.

Dr Ramontja outlined the strategic objectives of the Department. These covered corporate services, financial administration, mine health and safety, mineral regulation, and mineral policy and promotion.

New health and safety commitments were made. These included the elimination of fatalities and injuries; rehabilitation of mine workers injured in the line of duty; elimination of occupational lung diseases, including silicosis, pneumoconiosis and coal workers’ pneumoconiosis; the elimination of noise-induced hearing loss; and the reduction and prevention of TB, HIV and AIDS infections in line with the national strategic plan.

The Department was committed to continue with the journey of good financial management and implementation of the APP, and would continue to work with stakeholders.

Discussion

Mr Lorimer asked if it was possible to reprocess the MPRDA before the end of the year, as indicated by the Minister. What proactive steps was the Department taking to change the position on oil and gas? How many jobs were threatened with retrenchment at Optimum Coal? He asked if the DMR had engaged with Eskom on its insistence that its coal suppliers be 51% BEE owned. When would the new shale gas regulations be released? Were there plans to make legislative changes to assist with the prosecution of illegal miners? Would these changes be necessary and helpful?

Mr Olifant replied that jobs in mines were not steady, as they changed from time to time. There had been an increase in both jobs and mine creation. Since 2004, there had been absolute certainty in the mining industry. The MPRDA had been a solid piece of legislation in the last ten years since its implementation. He attributed the increase to the current government, which had implemented transformatory laws. At the moment, the DMR was looking at the amendment of the MPRDA because there was a need for certainty in the industry. He was not aware of employees with mining or prospective rights. The DMR’s objective was to increase the number of jobs in the economy. South Africa was an open economy affected by different factors, hence the need to create industrialists. The DMR had engaged with Eskom on some of its policies aimed at promoting black industrialists. He was not sure about the Optimum Coal retrenchment situation. The proposed MPRDA amendment lay with Parliament, and it was possible to have it passed before the year ended. The National Council of Provinces (NCOP) and the Committee would determine the speed at which the amendment would be handled. The Minister had been consulting on the issue of separating oil and gas changes -- the Bill may have to be implemented if the President consented. The DMR would continue to dissuade people from illegal mining activities, but its focus was on catching the kingpins of the syndicates.

Mr David Msiza, Chief Inspector: DMR replied on the issue of legislation to deal with illegal mining. The Department had received a legal opinion through the State Law advisers on which part of the legislation should be considered. The MPRDA had been suggested, because the licensing part did not deal with the phenomenon of illegal mining. All other legislation, such as that covering the use of mercury, was being looked into. The Department was in collaboration with other departments and law enforcement bodies.

Mr Joel Raphela, Deputy Director General: DMR, said that the process of engaging with the parties to save jobs at Optimum Coal mine was ongoing. This involved the participation of the CCMA, the Department of Labour, Productivity SA, the mine itself and all the registered unions at the mines. A meeting would be held with all the parties in order to save the jobs, and the outcome would be clear once it was concluded.

Mr Lorimer commented that funds had been allocated for shale gas exploration, consultation, advocacy and research, but no funds had been allocated for the oversight of shale gas. He asked if the DMR had funds for oversight. He also asked how many employees of the Department owned mining or prospective rights. He commented on the strategic objective of job creation, which was measured by the number of black industrialists created through procurement, and expressed his fundamental disagreement, as emphasis should be based on the number of jobs created. Referring to the performance of the mining industry, he said he disagreed with the analysis that the passing of the MPRDA had led to an upward turn in the mining industry. The reason for the upward turn was that uncertainty in mining had declined, and his concern was that the current uncertainty in the industry would lead to a downturn.

Mr Ramontja said that the MPRDA amendment proposal was currently with Parliament. The Optimum Coal jobs that were threatened involved 1 000 permanent jobs and 500 contract jobs. The oversight of shale gas was undertaken by the Petroleum Agency of South Africa (PASA). PASA should be moved to DMR, thereby integrating their funds for the oversight of shale gas. The bulk of the DMR’s shale gas allocation would focus on undertaking research. Geological institutions would be critical in the issue of shale gas in terms of developing regulations. The drafted regulation document that had been released had received little criticism from companies, and the aim of these regulations was to ensure that the environment was protected. Communities would be consulted before the regulations were released. Submissions received from a number of stakeholders would be added to the regulations. He was not aware of any employee who held mining or prospecting rights. The mining industry was a cyclical industry, so there would always be a situation when jobs were shed due to an unfavorable economy. Currently the industry was faced with the challenge of depressed commodity prices, which had created operational challenges. He added that there was need to look at the long term vision of the industry to ensure growth and create jobs. Stakeholders should be engaged and portable skills be provided for the people in order to address the challenges in the industry.

Ms Nyambi asked about the possibility of having satellite offices that could be nearer to the people. She also asked for the programmes of the Department, to ensure the promotion of health and safety in mines, were conducted correctly.

Mr Ramontja said that the Department would like to expand its footprint across the country by ensuring that it went out to the people, and would hold workshops in order to inform the people about the services provided by the Department. It would also partner with relevant institutions and other departments that had offices where DMR did not have offices.

Mr Msiza said that the DMR had ten regional offices, depending on the size of the region and the level of risk, and there were a number of inspectors that did inspections and audits at the mines. Their proactive work had resulted in positive outcomes on health and safety.

Mr Mandela expressed concern at the contradiction on job creation -- the Deputy Minister had raised the issue of job losses, while the strategic objective of the Department was to create jobs. He referred to the Deputy Ministers presentation on building an ex-mine workers’ clinic in Kuruman, Northern Cape, and pointed out that the Northern Cape had only 1% of ex-mine workers in the country, while North West had 18%. He asked for the selection criteria for the placement of ex-mine workers’ clinics, as there were provinces in need of clinics due to the population of ex-mine workers in those areas. He expressed concern over the diseases that challenged mine workers, as it was the Department’s priority to ensure that these diseases were decreased. Silicosis had been rising from 2011 to 2013 in gold mines, while tuberculosis in mines had been an ongoing disease. He expressed concern over the mechanisms put in place to regulate the health and safety of mine workers.

Mr Olifant replied that the rate and intensity of examination of mine-related diseases had increased, as both current and ex-mine workers were being examined with “genexpert” machines. With this intense examination, there would be more records of tuberculosis and silicosis. The ex-mine workers’ clinics were interventions for now that would have to be integrated into the National Health System of the country in the long-term. Currently, hospitals did not have the equipment that could detect mine-related diseases. These ex-mine workers’ clinics were interventions that had hi-tech equipment that could detect silicosis, tuberculosis and other mine-related diseases. The location of clinics was informed by the burden of diseases, not the number of mines. The placement of clinics had started in the Eastern Cape because majority of the people in the DMR’s database were from the Eastern Cape. The law provided that every mine worker was entitled to a free medical examination every two years, so the DMR was working together with the Departments of Health and Labour to get the database of ex-mine workers. Gauteng and Kuruman had a high number of mines, hence the need to place a clinic there.

Mr Msiza agreed that the challenge surrounding the health of mine workers was still immense. In 2003, 18 300 disease cases had been reported, compared to 6 800in 2013. Though there had been a significant reduction, the number was still high. The challenge with mine workers’ health was the latency of the diseases, as some mine-related diseases would manifest themselves after 10 to 20 years. A disease like tuberculosis would get immediate medication unlike silicosis, which was irreversible. The President’s initiative on the framework agreement was welcomed by DMR, as it addressed the living conditions of workers. By improving the living conditions, there would be a reduction in HIV/AIDS, which related to TB.

The Chairperson commented that from the Eastern Cape oversight report, the issue of service centres for ex-mine workers needed attention, and there was a need to discuss this with the Department of Health as well. There was only one regional office of the DMR in the Eastern Cape, and satellite offices often did not enjoy the full status of regional offices. He required clarity on the funding of the Council of Geosciences (CGS), as it was not working for DMR only in terms of its geological tasks. He asked if the funds allocated to the CGS were meant for mineral rights exploration, or any other task it was expected to undertake. He said that the presentation had been silent on the task of the State Diamond Trader in its strategic outcomes. He asked to what extent the issue of abuse against women was part of the DMR’s programme. He asked about the output of the South African Mineral Resources Administration Database (SAMRAD). He expressed concern at the inconsistency of the trends in disease cases reported. Was it possible for the Committee to get state litigation reports on illegal mining? There was no allocation for the project on the history of mining in South Africa with regard to the graves of ex-mine workers that were close to the old hostels.

Mr H Schmidt (DA) said he had not heard about the audit report on the Mining Charter. There should be a fixed measurement in terms of production and employment statistics, mortality rates, etc, in order to determine the trends of health and safety in the industry.

Mr Olifant commented that all the points that had been tabled would be taken seriously. The evaluation of the audit report would be out by the end of the month and the Committee would get it then. The legislative framework would be provided in order for the Committee to “connect the dots.” The issue of litigation on illegal mining would be presented to the Committee too. The inconsistent measurement of diseases would be addressed, as intensive examinations would be conducted on both the current and ex-workers. He added that the CGS research was needed for economic development.

The Chairperson said that a follow-up would be made in order for the Committee to make an informed decision on the APP and proposed budget of the Department. Issues raised would be forwarded to the Director General ahead of the Department’s next meeting with the Committee.

Mr Mandela moved the adoption of the proposal, which was seconded by Mr Matlala.

Adoption of Minutes

 Mr Mandela moved adoption of the minutes of 4 March, and was seconded by Ms Nyambi. The minutes were unanimously adopted, without amendment.

The Chairperson thanked the Members and the team from the Department.

The meeting was adjourned.