South Africa Diamond and Precious Metals Regulator, State Diamond Trader, Mintek & Council for Geoscience on their Strategic, Annual Performance Plans and Budget

Meeting report

South Africa Diamond and Precious Metals Regulator (SADPMR)

Mr Levy Rapoo, Chief Executive Officer (CEO) of the South African Diamond & Precious Metals Regulator (SADPMR), said the main objective of SADPMR was to ensure diamonds in South Africa were exploited in the best interest of the country. Other objectives included promoting sound development of diamond undertakings in the Republic, and to regulate the trade of diamonds in the country.

After the establishment of SADPMR in 2007, there had been an amendment to the SADPMR Act, in which the objectives to ensure compliance with the Kimberly Process Certification Scheme (KPCS) and promote equitable access to and local beneficiation of the Republics diamond were added. The Regulator also had to adhere to the objectives of the broad based socio-economic empowerment, as prescribed. It referred to the SADPMR ensuring some of the elements of the Mining Charter were achieved. This responsibility was incorporated in the second amendment to direct the Regulator to ensure there was transformation in the industry. All the Regulator’s objectives were aligned with the National Development Plan (NDP), national outcomes and the State of the Nation Address. Furthermore, the mandate of the SADPMR was to implement and enforce the provisions of the following legislation:

1. The Diamond Act, 1986 (Act No 56 of 1986)
2. Diamond Export Levy (Administration) Act, 2007.
3. Diamond Export Levy Act, 2007.
4. Precious Metals Act, 2005 (Act No. 32 of 2005)

The entire complement of the organizational structure of the Regulator was 126 employees.

Mr Rapoo said that the Annual Performance Plan (APP) for 2015/16 was informed and aligned to the NDP, national outcomes and the State of the Nation Address, as well as all applicable legislation. The strategic objectives informed by the APP were to improve competitiveness, sustainable development and job creation in the diamond and precious metals industry; transform the diamond and precious metals sectors; promote equitable access to resources for local beneficiation; enforce compliance with the legislative requirements; and to improve organizational capacity for maximum execution of excellence.

The key activities towards achieving the first strategic objective revolved around issuing licences to enable the diamond and precious metal trade. The Regulator would assist new entrepreneurs in the diamond and precious metals industries, as well as facilitate skills development initiatives for the industries. The SADPMR would oversee the provisions for the issuing of beneficiation licences.

On the second strategic objective, the SADPMR would promote participation of historically disadvantaged South Africans (HDSAs) in the diamond and precious metals industries, as well as decrease the number of inactive businesses due to some economic factors. For the third objective, the Regulator would increase access to diamonds for local beneficiation, while the fourth objective would propel the SADPMR to conduct diamond valuation services, improve diamond valuation services (disputes regarding fair market value), conduct inspection services within the diamond and precious metals sectors, conduct compliance inspection audits on licencees, oversee the administration of the KPCS, and comply with legislation, policies and procedures (and reduce audit findings). The CEO added that the Regulator also conducted inspections on new premises in the diamond and precious metals sector. 

The fifth objective had to do more with the support services that the Regulator received from some organizations, and the key activities would include implementing the approved Human Resources Plan (HRP), the approved SADPMR communication policy, the minimum information security standards (MISS) and the Master System Plan (MSP).

The SADPMR would also provide legal support to the Regulator.

Mr Rapoo gave a progress report on the transformation agenda of the SADPMR. There was a feeling that one did not receive a report which showed achievements in the Mining Charter elements, hence the transformation agenda. The Regulator had therefore appointed delegated officials that would actually follow and see why some things were not achieved. The basis for transformation agenda were the provisions of the Mining Charter, so the board had approved the transformation plan which was implemented by a transformation team to monitor the progress on ownership, human resource development, procurement and employment equity. The creation of the transformation team had resulted in exposing companies that were misrepresenting their compliance with the Charter requirements, and corrective measures were starting to take form after serious warnings of possible suspension or revoking of licences had been issued to defaulters.

Mr Rapoo also discussed the progress report on the establishment of a State Bourse. He had been given the task by the Chairperson of the Board to research the establishment of the Bourse, and his team had not only carried out the research but had also produced a concept document as to how it should unfold. More had been achieved than what had been mandated. He commented that many countries producing diamonds had embarked on joining the World Federation of Diamond Bourses for the purpose of enhancing trade. Research benchmark studies had been completed last year on Antwerp in Belgium,

Shanghai in China, Dubai Diamond Exchange and the Russian Federation, which formed the key centres among the 27 bourses registered with the World Federation of Diamond Bourses. These countries were chosen because they had long been in the trade were more active. The team did not have to spend money to go to these countries, but the research was done through the normal duties they performed.

The concept document had been produced and submitted to the Board of Directors for their consideration. It would be considered by the technical committee on 16 April 2015, and was expected to be presented by the technical committee during the next board meeting scheduled for 29 April 2015. The outcome of their deliberations would inform the next steps, which may include consideration of the concept document by the Department of Mineral Resources and the Cabinet.

Ms Irene Tshifura, Chief Financial Officer, SADPMR, gave a presentation on the budget allocation for 2015/16 to 2017/2018. She outlined the projected figures for the SADPMR to achieve its objectives. (See document).

Mr Rapoo described the challenges facing the SADPMR. He said that an inadequate budget allocation greatly affected their operations. There was a need to look for measures that would assist the Regulator. Lack of funding in the diamond industry, especially for diamond beneficiation, hampered their logistic functions. Beneficiation was the only measure that could create jobs in the industry, so government had to address the lack of funding. Other challenges included pending legislative amendments. The amendments were dependent on key legislation from the shareholder, which was the Department. Other concerns included the declining jewellery manufacturing industry and the declining diamond and gold industries. Generally, bourses stimulated the growth of the industry, so the establishment of the state Bourse could reverse the situation. The complexity of platinum beneficiation indicated that a capital intensive environment, requiring specialised hi-tech equipment, made it difficult for new entrants particularly previously disadvantaged individuals. Furthermore, developed technologies had attached intellectual property rights, which also made it difficult for new entrants.

The SADPMR continued to implement Regulation 10 (2) (b) for revenue generation and was also exploring other mechanisms that could be introduced for additional generation of revenue.

Discussion

Ms M Mafolo (ANC) wanted to know why the CFO had not been included in the organisational structure of SADPMR in the document presented. Although numbers had been given, there had been no indication of how many were females, and how many were males. What was the vacancy rate at the Regulator? She also noted that the Regulator was exposing companies that were issuing licences to defaulters, and wanted to know what was being done to the officials who had issued those licenses.

Mr J Lorimer (DA) was interested in finding out more about the Regulator’s procedures, and how they worked. He asked how confident the Regulator was in getting all diamond miners to comply with all the regulations, particularly the small diamond miners and those in joint ventures with overseas companies. Was there a system that balanced diamonds that were mined against diamonds that were exported? Was there a central registry for all diamond mines, and at what stage did the Regulator become aware of their existence? How closely did the Regulator work with the SA Revenue Service (SARS).

The Chairperson said that the presentation did not reflect what the Regulator had presented. This also applied to other agencies’ presentations. If the Committee was to approve figures, it would be difficult to approve what was not written down in the papers before them. He could not see the figures the CFO had mentioned in the documents before him. 

On the challenges, the Chairperson said that the issue of lack of funding should be specifically targeted. There should be core areas where funding must be. What were the areas of focus and what would be the returns from them? He agreed that this might take a lengthy discussion. 

Response by SADPMR

Mr Rapoo said that details would be included in subsequent presentations. The reference to skills development in the structure was that there was a responsibility to train employees who were supposed to be part of the regulation process. These employees had to carry out all those areas of human resource development as required by the Charter, which included the issuance of bursaries. The Regulator had to facilitate the process and make sure the employees did it.

On the relationship with SARS, Mr Rapoo said that had been a challenge. He commented that SARS was doing things that could embarrass the country. Through customs, there were things that were happening that only the SADPMR had the legitimate responsibility to decide. However, a process had started last year which was coming together and which could culminate in a memorandum of understanding (MOU), as the law allowed. SADPMR had taken the initiative of writing to the Commissioner and he had promised to create a team. Previously, the situation was bad and there were loopholes which could hurt the country in actually retrieving a lot of revenue from tax, because there was a lot of evasion going on.

The system of mining and export of diamonds was primarily regulated in terms of the Kimberly Process Certification Scheme. This affected the movement of diamonds. Every country had a responsibility to have registers. The SADPMR did not regulate the mining of diamonds -- this was done by the Department, and the SADPMR only regulates their movement. The companies that produced at the mines recorded their diamonds in their registers. When the diamonds start moving – when they were sold -- they also had registers that they had to submit to the SADPMR. All these entries were checked during inspections. Any diamonds that needed to be exported had to come to the Regulator, and the Regulator had to put it on a tender for a minimum of four days, to see if it could not be bought locally, particularly for beneficiation purposes. The compliance to regulations was linked to the fact that all producers of diamonds were required to register with the SADPMR. Even if they had a license from the Department, the SADPMR still had to be aware that they were dealing with diamonds. Irrespective of SARS, the first requirement was that every producer must offer the whole production to the State Diamond Trader (SDT), after which the SDT could choose ten percent that had to be distributed for beneficiation. The SADPMR may not have captured everybody, but there had been an effort made to capture everybody.

He explained that the SADPMR has presented the organization structure in terms of programmes, hence the CFO was not particularly stated. The CFO would come under Administration Programme 1.

The defaulters were those who were not complying with the Charter. It did not affect the officials. They were the ones revealing the non-compliance.

The CFO conceded that the presentation was lacking the breakdown required, and this information could be submitted to the Committee. 

Mr Lorimer observed that with regards to the SARS issue and the gap between the SADPMR and the Department’s records, there had been loopholes. He asked if there was any possibility that revenue had been lost to the state, and what was the amount of diamonds that may have slipped through all these gaps. He also asked what the difference was between the concept of the Bourse, and what had been in existence before it in South Africa. 

Mr Rapoo responded that the difference was that bourses were independent. They were not a regulatory regime. What was happening was that some of the processes were being done by the Regulator -- such as the tendering -- and at the same time the SADPMR was the regulatory regime. In all the countries mentioned, there was a regulatory regime, there was a bourse, which the regulatory regime oversaw, and there was an environment made conducive by having some of the benefits of business, such as tax incentives. SADPMR was conducting trade enhancement while at the same time being a regulatory regime. With a bourse, one could introduce other commodities that had value to manufacturing.

Other than the gaps, a lot of revenue was being lost in South Africa. Smuggling and others activities were wide gaps that existed. SARS were doing their best. They were the ones that could actually expose people who were evading tax and involved in money laundering. It was difficult to have an exact figure of the amount of loopholes, but it was certain that there was a big loss and this loss could be avoided if there was a cooperative arrangement with other law enforcement bodies to end the cartel of smuggling. The CEO promised to itemise and send to the Committee the areas that the SADPMR was worried about, where loopholes might exist.

State Diamond Trader (SDT)

Ms Dolly Mogatle, Chairman of the SDT, said that the presentation was in the context of a very difficult diamond market. Through observations of the past few months, the industry was facing headwinds that were borne by the pricing signals of the polished products against the prices the producers were asking for.

The performance of the market would always be a liquidity risk for the SDT especially when one looked at the trading model where the diamonds were sold to clients. The selection of diamonds leaving the SDT, with diamonds that could not be sold to specific customers, became a problem especially when one considered the market in this particular context. She assured the Committee that the SDT’s role did not change and any challenge placed at the door of the SDT would continue to be a catalyst for the transformation of the diamond beneficiation industry in South Africa. This constantly required the SDT to ensure the suitable and equitable access of rough diamonds especially to HDSAs. This was an ongoing challenge, because the run-off mine policy highlighted earlier did pose a risk. The HDSAs had to continue to emerge and have their own businesses develop in a sustainable way in order to compete in this particular sector in future. 

The SDT’s goal was to continue to promote diamonds and the industry itself to South Africa, and to create a much better understanding of its role. The entity had to continue to seek opportunities for a mandate for clients to get exposure to international markets so that they could expand their own trade and products.

The funding framework continued to play an important role in the sustainability drive as an entity, otherwise there was a risk of not being able to fulfill the government’s imperative of transforming the diamond industry. The SDT continued to ensure it grew its sustainability through prudent financial management that would enable it to be a good client to the funders.

Ms Futhi Zikalala, Chief Executive Officer (CEO) of the SDT, said that diamond market conditions had been adverse from mid-2014 to date, and were forecasted to continue in 2015. This was a negative outlook for the SDT and the South Africa diamond industry. Working in the mineral industry had given her some degree of experience. It was obvious that the industry’s performance was cyclical. However, when the prices went down for a period of time, the impact could be dire.

She said that there were plans to promote diamonds and the industry in the provinces. The SDT had taking the route of working with provincial governments to ensure the work of the entity reached as many areas as possible. Its work would also include the hosting of a Diamond Indaba for engagement with local players, with some international involvement. The SDT desired to be the heartbeat of diamond beneficiation on the continent, despite the challenges being faced. Its work would also include employment and the training of youth in diamond matters. 

Relying on the International Diamond Exchange (IDEX) Online Polished Diamond Price Index and other reports, Ms Zikalala said that the diamond market report showed a continued slide in polished diamond prices due to slowing consumer demand for diamond jewellery and a buildup of polished diamond stocks at retail and wholesale level. Furthermore, producers continued to demand high prices for rough diamonds. The discrepancy between rough and polished prices continued to erode the margins available for beneficiation, which were already minimal. In 2014, the year-end sales of diamond jewellery in the United States had seen some modest growth. This had been counter-balanced by poor sales in other regions, particularly China. Participants at the Hong Kong Show had noted that due to discounting, the price of polished diamonds was significantly below that of the rough diamonds needed to manufacture them. There was pressure on the industry, and the country had to take serious note of this. Some commentators felt that the industry was returning to the situation that had occurred from the end of 2008 to the beginning 2009. However, this had been driven by a significant fall in consumer demand brought about by the onset of the global economic recession. Although consumer demand was currently lower than expected, it was not at the levels experienced at that time. The current market weakness was due mainly to internal forces within the diamond industry and could result in restructuring, including consolidation and downsizing. Due to stocks in the diamond pipeline, particularly polished stones, some mining companies may consider curtailing production. The impact of the above was that it was likely that beneficiation strategies in producing countries would come under severe pressure, as cutting and polishing companies would want to focus on low cost manufacturing operations. In Botswana, for instance, the industry had already reported retrenchments of approximately 500 people since the start of the year.

Ms Zikalala emphasised that South Africa was not immune from the effects of the current depressed market. Large manufacturers, both cutters and polishers, were carefully monitoring the costs of their operations and some retrenchments had occurred. However, the presence of large numbers of buyers at local tenders indicated that interest in South Africa as a supplier of rough diamonds was still strong.

The SDT was continuously challenged in the buying and selling of rough diamonds due to the run-of-mine supply model and the fair market value it had to pay to the producers. The major concern was that market conditions would have a significant bearing on the SDT’s financial performance and its sustainability as a commercial entity. Nevertheless, the SDT was embarking on a number of initiatives to support the local beneficiation industry and its transformation. This included the facilitation of skills development and increasing access to local and international markets, the training of HDSAs and new entrants and employment of youth with disabilities into the SDT’s diamond trainee programme.

The Annual Performance Plan for 2015/16 showed the strategic outcomes linked to the DMR’s programme, national outcomes and the SDT’s strategic objectives. (See document).

The first strategic objective dealt with the SDT’s contribution to the growth of the local diamond beneficiation industry. The key activities aimed at achieving this objective were the implementation of the SDT marketing strategy aimed at the growth of the industry, hosting a Diamond Indaba that would discuss issues affecting the industry and key growth determinants, establishing partnerships for the expansion of Jewellex SA, and facilitating client participation at international and local exhibitions and shows. The Diamond Indaba would also afford participation for Jewellex SA and HDSA clients at the event and an opportunity to showcase their businesses and potentially develop new markets. There would also be provincial promotional visits to promote the industry in all provinces of South Africa.

The second objective was based on increasing sales of rough diamonds to HDSA for beneficiation. Achieving this objective would be based on implementation of the SDT sales strategy of HDSA growth and transformation-focused segmentation of clients. The SDT needed to continue to ensure that it leveled the playing field so that clients could come in, buy and grow as much as they could. The entity had been in discussion with funding agencies to assist in to trying to facilitate funding for small players. Incubation programmes would also be the established to create platforms for SMMEs to beneficiate diamonds. The SDT would continue with the facilitation of industry specific business training for HDSA clients by relevant partners and identify amendments to the Diamond Amendment Act 29 of 2005.

The third objective was to contribute towards youth skills development. This would be achieved through recruitment of youth with disabilities into a two to three-year diamond valuator trainee programme. SDT’s target was to have at least 75 percent of the youths employed. There would also be the acquisition of an accredited learnership programme that would assist in educating and training the youth about the diamond industry and the potential participation in small and medium enterprise (SME) programmes for new entrants.

The projected sales for 2015/16 were R574 million against the projected cost of sales of R552 million. The market was not where it was supposed to be now, and this had implications for the budgeting of the entity. At the budgeting stage, it had been envisaged that there would be no stock at year end, but due to the persistent adverse market conditions, the stock was R20.8 million. Other projections of the SDT were detailed in the presentation. (See document).

Discussion

Mr Lorimer sought clarification on what exactly the SDT intended to come out of the Diamond Indaba, and what the total cost would be. On training and events overseas, he asked whether the SDT had taken some persons overseas or funded various people overseas. If so, who were those that had been taken overseas, and how did the SDT decide on who were taken? He also wanted to know the costs incurred.

In her response, Ms Zikalala said that the Diamond Indaba was aimed at talking and discussing. There were issues raised by government that were not happening, such as transformation in the industry. This was one of the issues to be discussed at the Indaba. The SDT also wanted to know where the industry was going in the coming years. How did one get the young South Africans of all persuasions to enter this industry? The SDT wanted the industry to speak. Its desire was to be the heartbeat of diamond beneficiation in Africa. In order to get there, a number of issues that were happening locally needed to be resolved. Where could the SDT get funding for local participants and how did it augment their skills? Many other issues will be discussed at the indaba. The cost was actually not high. The major cost would be getting the venue, and that had been sorted out. It was a one-day meeting. It did not have to have a dinner.

She stressed that the SDT was training young people. The entity also took industry players overseas. This was funded by the Department of Trade and Industry. It issued an application, informed everyone in the country who was in the sector to apply, and people applied. Their applications were assessed by the Department, and if SDT clients were among those whose applications were successful, then the entity took them overseas. The SDT paid nothing for people who went overseas.

Mintek

Mr Abiel Mngomezulu, President and CEO of Mintek, said the presentation reflected a summary of the shareholder compact presented earlier to the Committee. He reiterated that the core business of Mintek was to research and develop efficient mineral processing technologies, and value added products and services. Most of Mintek’s work and finances were concentrated on this core function. Other functions included promoting the mineral-based economies of rural and marginalised communities, and developing human capital and organizational skills to build world class R&D excellence. Other tasks included upholding good governance and enhancing Mintek’s visibility and credibility among all stakeholders.

The annual income of the entity had dropped. Details of the income were indicated in the presentation (See document). 

He said that Mintek, through its efforts, had been able to increase the number of women in the industry. The average age of employees at Mintek was 38 years, which the entity felt was a good average. This had been measured in terms of people with a Master’s degree and had eight years of experience. 

Dealing with Mintek’s business development programme, Mr Mngomezulu said that the mining sector’s commercial environment was very bad. There had been a sharp fall in project development and exploration, major mining companies had cut back on capital expenditure, while smaller operations were unable to raise money. These factors had implications for Mintek. Firstly, far less work on new capital projects and junior companies was being done. There were more requests for operational efficiency improvements. Mintek expected the slowdown to bottom out in late 2015, with a surge in investment, exploration and project development from 2017. Because of these implications, Mintek had responded by adapting its structure and emphasis to supporting existing mine operational improvements, rather than technologies aimed at new projects. It had also maintained and developed its capacity to handle the expected upturn in 2016/17. It had developed the technology for new resource opportunities, such as Bushveld titaniferous magnetite and Springbok Flats coal/uranium, and had focused on strategic areas of energy and water efficiency, environmental impact and waste treatment.

The business development division served as a commercial support to other Mintek operating units. It had another division within it -- the Mineral Economics and Strategy Unit (MESU) -- which carried out the  mineral industry’s business intelligence. It also coordinated the intellectual property management and commercialisation of Mintek. It coordinated Mintek’s marketing and managed Mintek’s contribution to the DMR’s rehabilitation programme.

On the rehabilitation programme, there was a target to complete four sites during 2015/16 -- Mang-le-mang, ga-Madiba, Motsane and Betle -- bringing the total under contract to eight. Mintek was currently busy with the design of an additional further four sites, which would be commenced in 2015/16 but completed in 2016/17. These were Buisvlei North, Buisvlei South, Masaneng and Sithilo. The entity was also busy with design of a further four sites, on which a decision would be taken around September 2015 as to whether to proceed with the construction, or to defer until the future.

Mr Mngomezulu spoke about the technology programme which was at the core of Mintek’s business. There was a SAVMIN pilot plant, which used Mintek technology to treat acid mine drainage (AMD). Research over the past ten years had shown that SAVMIN had the potential to cost-effectively remove heavy metals and sulfates from AMD. What Mintek was currently working on was to reduce the cost of purifying water. This project had been completed and the plant was being operated in collaboration with Veolia, the world’s largest water treatment company, to further reduce costs.

The Rare Earth pilot plant project had been developed, to improve the recovery of Rare Earth Elements (REE). The pilot plant had been tested and its performance confirmed. A range of internally and externally funded projects were now being undertaken using the facility. Mintek was promoting the establishment of a South African REE refinery. Progress was being made but was slow due to the depressed market conditions.

Another programme was urban mining, which covered all sources of metal-bearing material other than primary ores. It basically focused on urban waste. This was the second year of Mintek’s effort, and one area of focus was on e-waste (electronic waste). Test batches of e-waste had been processed for precious metal alloys. Larger batches would be processed on a semi-commercial scale. Mintek intended to be a “business incubator”, assisting start-ups in the early stages of their business cycles.

On energy and water, Mr Mngomezulu said that new medium term expenditure framework (MTEF) funded projects addressing the shortages of water and electricity in the minerals processing sectors had commenced. This programme would address the following aspects:

• Energy usage in furnaces;
• Energy usage during crushing and milling;
• Underground processing;
• Waterless and low water processing flow sheets;
• Recycling and reuse of water – best practice being to recycle water at least ten times.
• Waste removal prior to processing.

The projects would address a number of parallel approaches and a site was currently being negotiated as a demonstration site for the water technologies.

There was also the sensor-sorting of coal. Through this MTEF project, the aim was to assist in the securing of quality coal for Eskom. The entity was working with the African Exploration Mining and Finance Corporation (AEMFC), a state-controlled mining business, on upgrading their low grade coal. The initial testing was very promising and there would be testing of the technology in a dual sorter demonstration facility near the Vlakfontien mine site.

Mr Mngomezulu informed the Committee about some technologies that were being commercialised. These included:

• Ongoing activities with commercialization of ConRoast. Requests for tenders for the first commercial furnace had been advertised. There would be at least a two to three-year timeframe before production.
• Low grade chromite processing technology. A test and development programme was commencing that was aimed at leading to a new chromite smelter.
• Sensor sorting would be assessed at a four-sorter demonstration plant being assembled for Anglo American Platinum, with the technology being testing on the Platreef. This followed extensive testing of Anglo materials at Mintek.
• Significant test work was planned for the pressure oxidation pilot plant that had been installed over the past 18 months. Mintek was looking mainly at the gold and base metals sectors.

Mintek was also involved in community development, and in line with this had set up five new businesses, created 60 jobs, trained about 120 learners in jewellery, gemstones, glass beads/slumping, pottery and small scale mining. It was also developing or adapting two technologies.

There were emerging efforts in Southern African Development Community (SADC) countries. This was evident in the metals technology, foundry and metals R&D programme. The aim was to extend the metallurgical products and services business, foundry technology and R&D activities to the SADC countries. A presence had already been established in Botswana and Zambia.

On employment equity, there had been women’s empowerment and increasing representation of women at Mintek. The entity was hosting a Mintek Women’s Indaba, and there had been a streamlining of the recruitment processes.

The CEO also provided the financial outlook and needs of the entity for the year. (See document). He noted that 2015/2016 was final year for a three-year rehabilitation project, but a new contract was expected to be signed. He expected the trend to continue on smaller projects and a few large ones.

Although the future did not look that bright, looking at the financial statement, the entity was stable and well resourced. He reminded Members that Mintek was not for profit, but for development.

Discussion

Mr Lorimer asked what had informed the CEO’s assertion that the slowdown was expected to bottom out in late 2015, with a surge in investment, exploration and project development from 2017. On the projects highlighted in the presentation, he wanted to know what happened when Mintek completed the projects. What would happen after June? On the rare earth pilot project, he said that there were signs the rare earth market was picking up, but wanted to know how far this was picking up before the project was going to be viable. 

Mr M Matlala (ANC) wanted to know the purpose of the indaba to be hosted by Mintek for women only. He asked if it was to replace men who were in top positions.

Ms M Mafolo asked for the procedure to follow when Mintek had to rehabilitate somewhere.

Mr Mngomezulu responded that there had been increased activity on the continent, so by 2017 Mintek expected that exploration activity would become a factor for the entity. 

On what would happen after June, he clarified that until then, Mintek would be looking at the chemicals being utilized currently and how often they could be replaced, and how often water could be turned around to take out the effluent. Once this was determined, Mintek would withdraw because there were other divisions that were dealing with lots of water issues and would check whether Mintek could influence the cost. If the price of water after the work Mintek had done was already very low, the chances of Mintek incorporating other methodologies would be reduced. If the prices were high, Mintek would try to incorporate other methodologies.

Community development in the Northern Cape was a current project. Wherever there was material, and the money to help Mintek to do it, it would always go there. 

The CEO took the Committee Members down “memory lane” to explain the reason for the Mintek Women’s Indaba. In 1985, it was the first time a mining company in South Africa had employed black people as professionals in the mining industry. There had been many problems and those black people had experienced a lot of racism. It was only around 1992 when women of South Africa had first been allowed to be professionals on the mines. The men had had to help them to come into the industry and guide them. This Women’s Indaba was not only for women -- it was for women and men, but under the leadership of women. It was managed by the Board of Mintek, knowing the history of what had happened in the industry. He reminded Members that women had done a lot in the mining industry. The first Mining Charter had been drafted by a black woman, and the BEE Charter of the DTI was first done by a black woman.

Ms Mafolo requested the CEO to supply the name of the Northern Cape project.

Council for Geoscience

Mr Mxolisi Kota, CEO of the Council for Geoscience (CGS), gave an introduction to the legislative mandate of CGS, and emphasised the selected outcomes for the entity. These included:

• Decent employment through inclusive economic growth -- increasing the benefit of the mineral resources to the country by delivering geoscience information and services to increase the rail, water and energy infrastructure;
• A skilled and capable workforce to support an inclusive growth path -- building capacity in respect of scientific, administrative and managerial/leadership skills; and the development of products, systems and services;
• An efficient, competitive and responsive economic infrastructure network -- geoscience information and services input to infrastructure development, contributes to South Africa’s economic development;;
• Vibrant, equitable and sustainable rural communities with food security for all -- CGS assistance in the development of South Africa and its people through improved infrastructure development;
• Environmental assets and natural resources that are well protected and continually enhanced -- the CGS conducts research with regard to AMD, climate change and carbon capture technology;
• An efficient, effective and development-oriented public service and an empowered, fair and inclusive citizenship -- ensuring CGS compliance with legislative requirements, development of CGS regulatory systems and alignment with national mandates; addressing gender equality and employment equity.

Mr Kota gave a situational analysis of the CGS, which included declining contract revenues, inadequate statutory funding, the implementation of the Geoscience Amendment Act (Act No. 16 of 2010), ageing infrastructure, and refocusing and aligning the organisation to address SA’s developmental challenges.

The strategic outcome-oriented goals for the next five years should reflect that employees viewed the CGS as an attractive career opportunity, that it was responsive to the developmental needs of the country, and was recognized among global leaders in the geological field because of its commitment to excellence. The CGS was a financially viable and structurally robust organization catering for all stakeholders and used multiple revenue streams. The entity needed to manage the issue of overhead efficiency and generate revenue. It also needed to address stakeholder requirements, effectively promote itself and disseminate strategic information to the public, develop and implement effective policies and procedures, and drive preferential procurement. 

The wide range of CGS achievements was covered in the presentation (See document).

On the key programmes and projects Mr Kota said there were four business thrusts -- mapping, mineral resources and energy, engineering and geohazards, and environment and water. 

The objective of the strategic minerals programme was the assessment and quantification of minerals used in high technology industry in support of the beneficiation strategy. Details of the prospecting activities of the CGS were contained in the presentation.

The APP for the CGS was to generate revenue, to contribute towards South Africa’s economic growth and to serve stakeholders, to promote the CGS and disseminate information, to develop and implement effective policies and procedures, as well as to drive preferential procurement. Others plans included attracting and retaining a skilled workforce as well as enhancing present levels of excellence. CGS also needed to build a positive organizational culture because within the organization, culture was very important in order for the CGS to become as productive as it ought to be. The entity also looked forward to reflecting and embracing South Africa’s diversity.

Mr Leonard Matsepe, the CFO, linked the APP to the budget. He gave a pictorial representation of the budgets for the period 2014/15 to 2017/18. (See document).

Mr Kota said that the CGS, like any other science councils, was expected to undertake a five-year review of its activities. The last review had been done in 2009 and another review had taken place from 19 to 30 January 2015. The CGS had appointed a five-member international panel of independent geoscience luminaries to perform the review. The outcome of the review processes of all the state-funded national science research institutions provided the DST with valuable input for their national science planning, management and funding functions for all the national research Institutions.

The draft report had been introduced to the CGS board on 26 February 2015. The review panel was in the process of finalising the report for submission to the DST. The key outcomes and implementation plan would be reported to the Portfolio Committee once the report had gone through the DST process of approval.

Discussion

Mr Matlala appealed to the Chairperson to prevail on the presenters not to present half reports. Several of them had said some of the slides were not included in the entire presentation. It was important to have those slides so that the Committee was aware of what was going on in the institutions.

He also asked the CFO about the funds budgeted for people who were going to work temporarily at the CGS. He wanted to know if that provision would not conflict with the wage provisions in the Labour Relations Act, especially the provisions on employing people for one or two years, after which they leave. 

On the number of papers and articles published, Mr Matlala wanted to know whether they had been published in the eleven official languages, or only in English. If it was only in English language, he asked how the CGS reached the deep rural areas because according to him, 90 percent of the population of the country was very illiterate. He also sought a further and thorough explanation on the shale gas project, as little or no explanation had been made concerning it during the presentation.

The Chairperson expressed worries that the budget presented by the CFO was very systematic. He noted that the figures were the same. There should be an anticipation of unforeseeable circumstances. For example, there was load shedding at present, which had implications for cost. The failure to look at the escalation of costs hampered the operation of the entity’s operations. The income and expenditure were all the same. He reminded CGS that they were an oversight committee. The surplus must be stated in the budget. There should be no hiding. There should be motivation for the Committee to give more money, but this could not be done if it was seen that the entity was hiding money from the Committee. He agreed that the surplus the entity had was for emergency situations. 

On Mintek, the Chairperson asked the CEO for clarification of its presentation, with particular reference to Osizweni. He was worried by the fact that the project was at a tendering stage. He recalled that when the Committee had visited Osizweni, they had encountered some shoddy preparation, so there was no way work on that project should have got to the tendering stage. He went further to assert that the planning stage itself indicated that it was highly improbable for it to succeed. From what the Committee had seen at Osizweni, even if the school there was relocated, it was impossible to have still got to the tendering stage. Furthermore, with what was reported on the fight between the provincial government and the previous contractor, Osizweni could not be at that stage. He asked the CGS to shed more light on this since both entities had worked on the project together.

The CEO for CGS dealt with the question of misinformation and half reports. He said he had not made himself clear. He was trying to make sure the Committee did not miss information it needed. The APP had already been tabled in Parliament so there was an assumption that Members had seen this information. The task was to look at what happened in respect of the previous year of the APP. The current information for the year ended in March, so it was difficult to make it available at this stage. The APP had not been presented to the Board and was still undergoing auditing and the verification process. What had been presented was the 2015/16 APP, which was the forward looking APP.
Response by CGS

The CFO responded that under the Labour Relations Act, there was a threshold and if a worker earned anything less than that threshold, then the Act applied to such a situation. The CGS operated far above this threshold, and interns were not considered employees in terms of the Labour Relations Act. There was only one particular employee that fell within the threshold, and CGS would consider this matter according to provisions of the Act. 

With regard to the budget, the CFO said that the best plan would be to have a roll-over, and to decide where to spend more funds on. In terms of planning, funds should be tied to projects. The CGS had taken cognisance of contingencies, such as the inflation and unexpected expenses. 

When there was money left over, the CGS had an obligation to request National Treasury to retain whatever surpluses there might be. The intent was to generate funds and spend them so that there would be service delivery.

Response by Mintek

The response on the shale gas issue focused on the potential for shale gas in the Karoo. There were people who were interested in shale gas exploration in South Africa. To date, however, there was no information on the benchmark to apply. It was therefore the responsibility of CGS to carry out research so that it could have this information as a benchmark. The CFO’s presentation had stated that the CGS had been offered funding to do research on shale gas around the Karoo. 

All the publications so far were in English. However, the CGS had its outreach programmes during the Science and Water Week, but these outreach programmes were mostly to schools. The CGS also invited schools to come to the CGS museum. With the kind of work going on in the CGS, there was a need to disseminate information effectively, particularly at the provincial level.

On the Osizweni project, the CEO of CGS clarified that the entity had done two different projects. Work had commenced prior to when Mintek had become involved with the issue of rehabilitation in Osizweni. The project with which the CGS was involved dated back about eight years, when the entity was brought into to the area in issue. There had been a clay deposit which the community needed to be moved. He confirmed that the project CGS was involved with was not the one Mintek was referring to in its presentation.

The CEO of Mintek, on his part, clarified that the project was not easy or straightforward. It was very complicated. There were different roles for different people who were affected by the project. Mintek, the Department of Cooperative Governance, the DMR and the Provincial Department of Housing all had their own roles. Mintek’s role was to prepare the place for rehabilitation. The other stakeholders’ role of moving the homes and houses, was not Mintek’s. As CEO, he had been at a stakeholders’ meeting where he had informed them that as Mintek, a tender would be put up in March to rehabilitate the area. At that meeting, he had asked the stakeholders if they would be ready with their own part, but none had confirmed their readiness. He had further informed them that if at the end of March, the other stakeholders had not done their part, he would write to them telling them of his readiness and intention to start his own part, as Mintek.

He asked Members to look at the presentation holistically. The presentation said Mintek had finished and was ready to put up a tender. This meant that Mintek was waiting to be instructed on when to move on site -- that is, when the houses and the people had been moved. This was important, because Mintek had to move in immediately those people were removed. However, if those people were not removed by September, it was Mintek’s desire to work on other projects so that the money on Osizweni was not wasted, with the permission of Treasury. Mintek had been ready since March. He assured Members that all the documentation to show the tender was ready could be published at any time for whoever needed it. It had been given to the DMR, and Mintek was waiting for instructions. 

The Chairperson agreed to Mintek’s preparing the documentation for tender. However, the fact of the matter was that the process was not on tender. The error lay in the fact that it ought not to have been presented in the way it had been presented in the document, considering the fact that he had personally been there. He agreed that the detailed design had been done, but the process of tendering had not begun.

The Chairperson thanked everyone for attending.

The meeting was adjourned.