Alignment with Industrial Policy Action Plan 6 (IPAP6): DMR briefing, New Development Plan with regards to beneficiation: DTI briefing

Meeting report

Department of Mineral Resources (DMR) presentation

Dr Thibedi Ramontja, Director General: Department of Mineral Resources (DMR) apologised for the absence of the Minister and the Deputy Minister, who were involved in other Parliamentary commitments.

Mr Mosa Mabuza, Deputy Director General: Mineral Promotion and Policy, DMR, said that his presentation would be focused on the alignment of the beneficiation activities located in DMR with other programmes of government. In 2011, the beneficiation strategy had been adopted by government as policy, and it had provided a broader framework aimed at turning the country’s comparative advantage in mineral resource endowment into a competitive advantage for downstream industries.

The mineral beneficiation policy had five objectives:

• increasing the ratio of beneficiation extent to mineral productions and increasing export revenue;
• facilitation of South Africa’s economic diversification;
• expediting progress towards a knowledge-based economy;
• creating opportunities for new enterprise development; and
• contributing to the creation of decent jobs and poverty alleviation.

The mineral beneficiation policy was complementary to a number of government programmes, especially those which focused on science and technology, the national skills development strategy, the integrated energy plan and infrastructure building programmes.

The National Development Plan (NDP) had recognised beneficiation as having a ‘game-changing’ nature. However, the NDP stressed the need for prioritisation of key value chains, as it would neither be possible nor feasible for beneficiation to occur with all of the country’s minerals. It thus emphasised the need for the country to leverage its strengths and capabilities in mining manufactured goods and services. In line with the vision of the beneficiation policy, the NDP further required that mineral beneficiation value chains which were in existence, be extended further down to the more labour-intensive fabrication level.

In terms of the Industry Policy Action Plan (IPAP) and mineral beneficiation, the Government’s Medium Term Strategic Framework had identified the Department of Trade and Industry (DTI) as the lead department in developing value chain specific interventions which would draw on the mineral beneficiation policy document for constraints and policy levers in unlocking the identified constraints, as outlined in the NDP.

The DMR had identified the Minerals and Petroleum Resources Development Act, as amended, and the Broad-Based Socio-Economic Empowerment Charter for the South African mining industry as two policy levers administered by the DMR

The constraints of the IPAP 2015-16 were the delays in finalising the Mineral and Petroleum Resources Development (MPRD) Amendment Bill and Mining Charter revisions which would enable access for locally manufactured capital goods, consumables and services to the local mining industry market.

The alignment of DMR activities to NDP, IPAP and the Nine-Point Plan encapsulated the prioritisation of mineral value chains, including amending section 26 of the MPRD Amendment Bill through the process of designation, which would enable the Minister to designate minerals as critical for local beneficiation, setting aside predetermined volumes of designated minerals for domestic beneficiation after consulting relevant departments.

The alignment further included leveraging the mining industry as a market for locally manufactured goods through the amendment of the Mining Charter, in specifying that the companies had to source locally manufactured goods, services and consumables.

The Nine-Point Plan, as announced by the President in the 2015 State of the Nation Address (SONA) had identified nine critical government interventions aimed at catalysing the desired growth, including mineral beneficiation. The plan prioritised the value chains identified in IPAP which included, inter alia, iron-ore and steel led by the Department of Trade and Industry (DTI), platinum group metals, also led by the DTI, titanium led by the Department of Science and Technology (DST) and the energy value chain, led by the DMR.

Unlocking iron ore and titanium resources in the Bushveld complex would result in South Africa being one of the top three producers of iron ore in the world. Titanium dioxide pigment, on the one hand, was regarded as the largest driver of the demand for titanium -- used in the manufacture of paints, coatings, plastic and paper -- while on the other hand, titanium metal was mainly used for power generation and aerospace applications.

The energy value chain was considered an essential input for the growth and continued sustainability of any economy, as borne out by the relationship between growth in the global economy and global energy consumption. Energy security was therefore a crucial driver for the future growth and prosperity of the country, especially in its industrialisation drive.

In addition to value chain projects, the National Jewellery Forum in 2013 had set deliverables which were related to beneficiation projects. Among them was the development of a curriculum intended to produce jewellery manufacturing entrepreneurs which had been sent to the South African Qualifications Authority for accreditation. MINTEK also supported 60 projects through its small scale mining and beneficiation unit.

The South African Diamond Indaba was due to be held later this month in an effort to delineate challenges and constraints to local diamond beneficiation, and to develop interventions to unlock these.

The key challenges to beneficiation were:

• the sustained depression of the bulk of commodity prices, consistent with the global economic climate;
• the slow recovery of the key economic zones that were traditional demand drivers for beneficiated goods,
• finalisation of the MPRD Amendment Bill; 
• construction of the Mining Charter, which focused on sourcing from Black Economic Empowerment (BEE) entities as opposed to emphasising on local content; and
• the limitation of access to cost competitive energy supply for energy intensive beneficiation initiatives.

Discussion

Mr M Matlala (ANC) said that he was aware that the presentation, 60 projects had been reported to be community-based. He sought clarity on which provinces the DMR had identified as beneficiaries of the projects, how the communities were benefiting from the projects and whether the projects were sustainable.

Mr H Schmidt (DA) sought clarity on what the phrase ‘more labour intensive fabrication part’ meant. The DMR had said that there were two key factors which created an environment for a competitive domestic beneficiation sector. He was of the opinion that this premise could not be true, as all the factors were needed for the creation of competitive domestic beneficiation, not just two factors, as depicted in the presentation. The amendment of Section 26 of the MRPD Act was not going to create an enabling environment, but rather a forceful environment, where mining companies were going to be forced to comply.  The proposal to increase competition in the local steel industry was a futile exercise, since three major steel companies were facing business rescue. How would competitiveness be increased, as it was already there? He maintained that the problem did not lie with competitiveness but with some other aspects, as the businesses were having financial difficulties.

He asked what the statement,‘ the cost structure of South African-based upstream polymers operations was not directly comparable to international standards’ meant. He also did not understand what was meant by traditional demand drivers in key economic zones.

Mr J Lorimer (DA) commented that the key policy levers were not strong. For example, the MPRD Amendment Act was still expected for discussion in Parliament. Was the DMR expecting to incorporate the suggestions from the Operation Mining Phakisa into the MRPD? On the other hand, the Mining Charter was facing a case where it could be overturned by the courts, and he asked what would happen if it were overturned. The DMR had stated that it was intending to finalise the coal policy in 2016 – what were the precise contents and problems which were being addressed by the coal policy? He asked how a state-owned steel company was going to run its business, and whether it would make a profit or not in light of the fact that the steel companies were already facing financial losses. Clarity was also sought on the titanium resources in the bushveld complex, and what the programme entailed in depth. On the fluoride plant that was proposed, he asked who was going to own the plant and what would be the source of funding. On the shale gas development, he sought full disclosure of what it entailed, whether there would be a public report to this effect, and when the public report would be issued.

Mr I Pikinini (ANC) wanted to know the details of the intervention of the new investment in a state-owned steel company.

Dr Ramontja provided clarity on the issue of jewellery manufacturing by MINTEK, indicating the challenges that they faced, including the widening of their programmes to the rural communities, and the lack of statistics on the number of the communities who were benefiting from the programmes, as the numbers differed from one area to another.

On the question of designated minerals, he emphasised that the government had to focus on strategic minerals which would maximise profitability and sustainability. In that regard, the Operation Phakisa in Mining would discuss a possible win-win situation when it came to issues of beneficiation.

Mr Mabuza said the creation of labour-intensive fabrication was important for creating labour absorption for new industries. On the question of pricing of minerals, he emphasised that there needed to be a win-win situation between the state and the mining companies.

On further details of the programme on steel manufacturing, they were looking at a large steel player which had not transferred benefits to the economy of South Africa. He clarified, however, that they were not proposing a state-owned steel mining company -- the proposal was to ensure an enabling environment for steel manufacturing.

On the possible overturn of the Mining Charter by the courts, he said that they were waiting for the court processes to unfold in order to take the necessary measures which would be consequent of the court order.

The objectives of the coal policy were on how South Africa could reclaim its coal dominance in the global manufacturing of coal, and what technologies were needed to implement the policy.

On the project of titanium and iron ore in the Bushveld, there was no technology to separate titanium and iron ore, so South Africa was looking for an opportunity to separate the two minerals and trade them differently.

On the question of who would own the fluoride plant, he said that they were only proposing to create an environment conducive for private investment.

The shale gas strategic and environmental assessment was an initiative led by the Department of Environment Affairs and once the investigations had been completed there would be a public report to that effect.

Regarding investment in the iron and steel industry and its sustainability, the industry was currently in a low, but it was cyclical, so they hoped that they would reap rewards when the market returned to the upside.

On the question of failing steel manufacturing companies, he said that they had noticed with concern that some of the companies had failed to invest in the maintenance of their plants when the market was flourishing, and that had led to their failure.

Mr H Schmidt (DA) felt that the investment decisions made by the Department should have been made by the private sector, not the Department, since mining needed billions of rands in funding, which the government could not afford. There was an expectation that the market would make an upturn, but he was sceptical as to what degree profits and margins would improve, so any investment in minerals by the government was a high risk. He then proposed that there should be tax exemptions for businesses, otherwise the Department was engaging in a fruitless exercise of beneficiation if they excluded tax exemptions. The Department’s approach to the implementation of beneficiation had no win-win approach to it, and this was a matter of concern.

Mr Lorimer commented on the win-win beneficiation strategy, saying that it was a welcomed approach on the part of the government. He wanted to know whether the Department proposed coal exportation when they stated that they hoped to reclaim their global coal dominance.

Mr S Jafta (AIC) asked whether there was any plan to balance the conflict created by the level of technology at the expense of labour, which resulted in most of the work being done by machinery, and thus leading to higher rates of unemployment in South Africa.

Mr Matlala said he was not convinced about the projects which were aimed at alleviating poverty in the rural areas, as there had been no mention of the details on how the communities were going to benefit and under what terms. He sought clarity on the life span of the coal task team and emphasised that there should have been clear timeframes and feasible deliverables.

Ms M Mafolo (ANC) asked whether the women were involved in the 60 projects, and sought clarity on the timeframes for accreditation. How many of the 60 projects were unsustainable?

Dr Ramontja pointed out that MINTEK was driving the projects, so he asked to be given an opportunity to consult MINTEK for comprehensive information. However, on the question of coal policy, he said that there were timeframes for the accreditation, which ought to be completed in 2015.

On the issue of how the Department was going to balance the use of technology against the need for higher employment, he said that all the options needed to be considered, including the issue of profitability. He emphasised that technology had to be engaged, and the best possible solution was the local manufacture of this technology in order to create jobs.

Regarding the viability of state-owned companies in minerals, he said that there was evidence of many state-owned companies around the world which were flourishing. He was confident that during the Operation Phakisa in Mining, they would find a win-win solution between the relevant parties.

Mr Mabuza, on the question of accreditation, said they were anticipating that the process would be finalised in 2015 so that the programme would start in 2016.

The Chairperson asked whether the presentation should have been considered as an introduction to broader issues. There should be an acknowledgement that MINTEK was of the opinion that the stated projects rested primarily on them. There was a need to debate about beneficiation on its own, and not on transformation of the mining industry as one and the same thing, without understanding the effect of what Operation Phakisa in Mining would do. He pointed out that there could not be a win-win situation without the engagement of all the relevant stakeholders and without looking at the mandate of all departments on how they would be affected by beneficiation.  The DMR had to come with MINTEK and the relevant bodies which were dealing primarily with the issues of beneficiation, and in that way the Committee would get comprehensive information on the issues involved.

Mr Mabuza  said that they had taken note of the issues raised and would provide a framework of the Department for better clarity on the issues involved.

Mr Lorimer said that the officials of the department were tasked with implementing policy and not making it, so escalating issues beyond the Committee, if necessary, was a welcomed approach.

Mr Schmidt asked to what extent the Committee was expected to participate in Operation Phakisa in Mining.

Dr Ramontja pointed out that the Operation Phakisa in Mining was coordinated from the Department of Monitoring and Evaluation, so they were not in a position of knowing who the invitees would be.

The Chairperson said that they would look at the different perspectives from different stakeholders regarding beneficiation. He emphasised that the issue of MPRD Amendment Bill had to be expedited so that it could give certainty. The DMR should consult with Dr Martin Nicol, the Portfolio Committee’s parliamentary researcher, to furnish them with outstanding issues relating to the Mining Charter, inclusive of the names of the companies that had not complied with the Charter.

Adoption of minutes of 9 September 2015

Chairperson said that Mr J Esterhuizen (IFP) had told him that he was not a Member of the Committee, and this posed a challenge to the membership of the Committee.

The Minutes were adopted without modification.

Adoption of minutes of 14 October 2015

Ms Mafolo said that under ‘apologies’, her name title should be changed from ‘Mr’ to ‘Ms’.

Ms H Nyambi (ANC) said that on page 3, last line, the word ‘ought’ should be changed to ‘to’. On page 4, after the phrase ‘financial year’, ‘2014/15’ had to be included.       

The Chairperson said that the minutes had not included the fact that the Mine Health and Safety Council was not spending its surplus, and this had to appear in the minutes.

The minutes were adopted with these minor modifications and alterations.

Adoption of minutes of 16 October 2015

Ms Mafolo again asked for her name title to be changed from ‘Mr’ to ‘Ms’.

The minutes were adopted with minor these modifications and alterations.

Adoption of minutes of 20 October 2015

The minutes were adopted without modification.

Chairperson said that there had been an invitation from the SDT to the Diamond Indaba, but he was not sure whether it was directed to all Members. He would follow up to provide clarity.

The meeting was adjourned.