Mine Health and Safety Council, Council for Geoscience, Mintek, SADPMR & SDT on their 2016 Strategic & Annual Performance Plan

Meeting report

Opening Remarks by Chairperson

The Chairperson said that there were some questions that had not been answered at yesterday’s meeting and he would now allow Members to make follow up questions. The allocated time for the follow up questions would be 30 minutes and upon completion, the meeting would then proceed as per the agenda. He would like the Acting Director General of the Department of Mineral Resources (DMR) to address some questions raised yesterday, along with the follow up questions brought forward by Committee Members.  

Remarks by Department of Mineral Resources

Mr David Msiza, Acting Director General, DMR, referred to the issues raised by the Chairperson yesterday, and said there had been a Cabinet decision on the matter. Once they had dealt with it, they would engage with the Industrial Development Corporation (IDC) on it, and the Department’s Deputy Director General, Mr Mosa Mabuza would provide a response. On the issue of targets and achievements of 2014, the Department acknowledged the comment made by the Chairperson and said that they had over achieved what they had initially set out to do, but had not yet changed their target for 2016/17 and would see to it that the changes were made. He said that the Department had been engaging with Treasury with regard to its financial outlook which he believed would affect them in certain aspects, as the Minister had indicated yesterday. There would be continued engagement with Treasury on the issue of the financial minutes of the Department.

Mr Mosa Mabuza, DDG: Mineral Policy and Promotion, DMR, responded that he wanted to speak on the separation of the IDC transfer which the Chairperson had raised yesterday, in the context of the mandate of a Development Finance Institution (DFI). When the DMR had started to support small state mining as part of its support of small and medium enterprises (SMEs) in the mining industry, it used to have a small fund that averaged to R20 million per annum whose primary objective was to assist the entry of small scale miners into the industry. Over time, they had found that because the IDC was a financial institution, it could assist in the financial administration of the funds and the actual adjudication of mechanisms that could support small state development from within the Department. He said that this would not conflate the issues of State-Owned Mining Companies (SOMCO) and the developmental mandate of the state that it also invested in mineral development, specifically mining.

Mr J Lorimer (DA) wanted to know, with regard to discussion yesterday on the creation of black industrialist procurement, how the DMR decided which black-owned companies to promote. He also wanted to know if the DMR ever suggested to mining companies which black economic empowerment (BEE) companies to deal with. He asked how the Oceans Phakisa affected the DMR, and also whether a date could be given as to when the Mining Charter would be revealed. and what the process was towards getting it adopted.    

A DMR official said that the Department focused on compliance with the regulatory framework pertaining to BEE and as such, the Department did not suggest partners to mining companies. In the selection criteria for black industrialists, the focus was on procurement and more importantly, on those that were BEE controlled. From there, the selection of black industrialists was based on the criteria and the credentials of the parties involved. In government procurement, the cooperation of mining companies was very important.

Mr Mabuza said that when the President had initiated the Oceans Phakisa project, the focus of government had been to acknowledge that there was an economic asset in the ocean that had been overlooked as an opportunity for growth. As a result, related sectors such as fishing, agriculture, environment, government oil and gas, tourism as well as minerals, all constituted part of the economic activities around the ocean and the opportunities presented by the ocean. The DMR’s focus was both on upstream oil and gas as well as possible future mineral development in the oceans.

On the issue of the Mining Charter, he said that the Department had put forward a draft reviewed Charter and because Parliament had empowered and joined the Minister with the responsibility of the legislating process, they intended to gazette it for public comment in the following weeks. He was not in a position to give the Committee a specific date, but the Mining Charter should be published.in the next two to three weeks.

Ms M Mafolo (ANC) wanted to know how often the Department inspected mining companies, because it seemed to her that the Department had fewer inspectors, and this had led to the need for the 50 learner inspectors that had been taken in. She wanted to know if the vacancy rate was going to accommodate the number of inspections to be made, given the low number of inspectors. Did the inspectors have the right qualifications, and after the completion of inspections of a certain number of mining companies, did they then move on to the inspection of the remaining ones. She inquired about SMEs and what the process was regarding them.

Mr Xolile Mbonambi, Acting Chief Inspector, DMR, said that inspections were normally informed by the previous years’ mining health and safety issues. Each quarter they conducted no fewer than 2 000 inspections, which was equivalent to 8 000 inspections annually. On the issue of learner inspectors or assistant inspectors, a year ago the Department had recruited these learners from a pool of previously disadvantaged communities as well as unemployed graduates as a way to address the vacancies at the time. The learners had been taken on a two year training programme to gain practical experience in the mines and upon successful completion of the programme, they had been absorbed into the Department to assist with inspections.

Ms Futhi Mvelase, CEO of the State Diamond Trader (SDT), referred to the issue of vacancies in the Department, and said there had been a need to decrease the number and it had had to look at possible restructuring and rationalizing. This meant that those posts and vacancies which they could do without would have to be dropped from the system. The high vacancy level was a result of what was reflected on the system and knowing that these posts would not be filled, it would be prudent of them to drop the vacancies from the system, effectively decreasing the vacancy rate. They were making a concerted effort on their part to reduce the vacancy rate through restructuring and rationalisation. This did not mean that priority posts would be compromised as through the process of rationalizing, these posts would be identified and those that had no use and were not a priority, would be dropped off the system until such a time that they would be able to be filled.

Mr Mabuza then added that on SMEs, the 400 they were targeting over the medium term framework (MTF) were subject to the 80 that were supported on an annual basis. From that 80, the intention was to use the funds that were transferred to the IDC to support them. The first form of support would be the guarantees for environmental rehabilitation that were a requirement as part of the application for a permit by small scale miners. The second form of support was to provide technical support in the event that they required geological assessment. The third form of support was that in the event that they began to operate and required capital equipment, the Department would be able to contribute a part of the budget for the acquisition of the capital equipment. Lastly, they also assisted in providing non-financial assistance for those operating legally, and assisted illegal miners to migrate to legal mining and legalising these operations.

The Chairperson said that on the issue of the budget proposal, Mintek and the Council for Geoscience (CGS) had been present at the meeting and although he had searched, he had not been able to find any serious commitment to carrying out or conducting research. 

Mr Msiza responded that most of the Department’s research tried to ensure that there was an alignment with the mandate of the SMEs which were present at the meeting, and that most of the research done by the Department was also being conducted through the projects that they had allocated.

Mr Mabuza said the Department had noticed that since 1994, there had been a substantial decline in the Research and Development (R&D) underpinning the mining industry, to the extent that they argued that part of the contribution to what had become known as the “lost opportunities” was precisely because the Department had over this time neglected R&D in the mining industry. The focus had now been renewed and the Department was looking at R&D as the basis of sustainability and growth of the industry. It would aid in becoming globally competitive and as a result, every effort was being made to ensure that the objectives were achieved. 

The Chairperson said that he wanted a distinction to be drawn between the Department’s allocation to the Mine Health and Safety Council (MHSC) and its duty as a Department responsible for mine health and safety. This was because in the narrow sense, the MHSC was a separate body and this did not mean that there was a specific responsibility on the issues that related to mine health and safety. He then added that when the Department did its annual performance plans (APPs) and budget, it should talk first to the primary responsibility of the Department so that when the allocation to the MHSC was dealt with, it was referring to a collective responsibility. There was an allocation that was a mandated responsibility in terms of the Department on health and safety.

There were some projections of inspections that he currently did not understand and he hoped that after the presentation by the MHSC, he would understand the downward negative projection, as this could be referring to the shared responsibility between the Department and MHSC. It was therefore important that the Committee knew what it was approving in terms of budgets as it would not be regarded well if it turned out the MHSC was the one conducting inspections when in fact it was the job of the Department to do this. If however there had been a delegation of work from the Department to the MHSC, then this issue needed to be flagged, as this would point to an integrated system which would need its own discussion.     

Mr Msiza responded that the budget referred to by the Chairperson had been discontinued by the Treasury at a time when the economic climate had not been favourable for the country. All Departments had been required to prioritise according to the budget that had been provided. The Department had had to come up with plans based on the outcomes of the inspections and the accidents that had occurred previously. One of the things that had happened while putting the plan together was that the dynamics of the sector were continuously changing and one could say that historically, the types of accidents and health risks had changed -- in the past two years, the accidents that occurred frequently were those caused by fires. While there had been improvements, there had also been times this year where there had been a number of unprecedented accidents that had unfortunately led to fatalities. There had been requests to the Department to come up with initiatives to respond to the challenges that they were facing. This was why in some instances there had been a certain number of inspections done, and the variations between the 8 000 and 390 planned inspections was based on the budget the Department had been given. Given certain challenges that had arisen, the Department had tried to come up with effective initiatives to combat these challenges. The role played by the MHSC was very critical to the work done by the Department, such as the some of the research it had conducted for the Department, as seen from the statistics that had been presented yesterday. The Department’s role was therefore to conduct the inspections and audits and for the MHSC to support the Department by doing the appropriate research and to promote the outcome of the research, and to promote the culture of health and safety.

Briefing by Mine Health and Safety Council (MHSC)

Mr Thabo Dube, CEO, MHSC, began by providing a brief history of the MHSC. The turning point had been when 104 lives were lost at Vaal Reefs, as this had led to the promulgation of the Mine Health and Safety Act (MHSA) in 1996. This had followed the establishment of the MHSC and in 1997 the Safety in Mine Research Advisory Committee (SIMRAC) had been formed to focus on what could be done to improve the state of safety in mining.

The MHSC had a legislated mandate to advise the Minister on all occupational health and safety issues in the mining industry, such as to:

• Review and develop legislation;
• Oversee research;
• Liaise with other bodies concerned with health and safety;
• Promote health and safety culture;
• Sharing of best practice in health and safety.

The MHSC had to align itself with national initiatives and focused especially on the National Development Plan (NDP) chapters 9, 10 and 13, as well as paying special attention to issues raised by the President in the State of the Nation Address. The MHSC had ten strategic objectives grouped under four headings:

Customer Perspective: deals with service delivery.

1. Delivery against MHSC mandate and summit action plan on Occupational Health and Safety (OHS) to ensure stakeholder satisfaction.
2. Promote and communicate MHSC programs to improve OHS awareness.

Internal Perspective: deals with internal processes.

3. Adherence to turnaround times for the procurement of services to ensure delivery of MHSC.

4. Enhance effectiveness of employee performance management.

5. Deliver MHSC projects on brief, budget and time.

6. Implement and maintain information, knowledge and record management system.

Learning and Growth: deals with bursaries.

7. Identify skills required by MHSC office and Council members and develop a programme for implementation.

8. Improve organisational climate and environment to make it conducive for good staff morale within the MHSC.

Finance Perspective: deals with availability of funds and efficient and effective use of resources.

9. Manage financial resources for sustainability and viability of MHSC.

10. Monitor efficient and effective utilisation of financial resources.

The MHSC business model described how the organization creates and delivers value to its stakeholders through the services and products it offers. The business model could be used as a marketing tool to illustrate the MHSC mandate. The MHSC structure operates within a three-level structure. On the first level there was the Chairperson, who was also the Chief Inspector, who operated within the MHSC. On the second level there were two oversight bodies -- the Audit and Risk Committee and the Human Resources and Remuneration Advisory Committee. On the third level, there were five core council committees -- the Mining Regulations Advisory Committee, the Mining Occupational Health Advisory Committee, the Culture Transformation Advisory Committee, the Safety in Mine Research Advisory Committee and the Mining Industry HIV/AIDS and TB Advisory Committee.

The MHSC aimed to reach their 10 strategic objectives in the following manner:

Customer and Stakeholder Perspective

• Objective 1 was to be realised through the implementation of safety milestones that included the elimination of fatalities and injuries, and every mining company must have a target of zero fatalities. It would also be realised through the implementation of occupational health milestones by eliminating noise-induced hearing loss, eliminating lung diseases and facilitating rehabilitation of mine workers injured on duty, as well as the integration and simplification of compensation systems, and lastly through the prevention of TB and HIV/AIDS. This objective would also be realised through the implementation of the Culture Transformation Framework (CTF) as well as the Centre of Excellence (CoE). This would include some special MHSC projects, such as women in mining, commemoration of mine disasters, development of a comprehensive system for mining and to host the OHS tripartite summit.
• Objective 2 would be realised through initiatives aimed at stakeholder engagement in communication and promotions. Constant communication with existing stakeholders had proven to be very beneficial for the MHSC and had focused on four categories – the general public; the mining industry; professional bodies, research organisations and academia; and  executives, unionized mine workers, senior management, MHSC staff and stakeholders.

Internal Process Perspective

• Objective 3 would be realised through the following procurement turn-around time initiatives: 1. Supply chain management (SCM) capacitated, with two new SCM practitioners.  2. Training of SCM and Bid Committees’ members completed. 3. Implementation of SCM sourcing strategies completed. 4. Advertising of the annual supplier database, with updating and migration to the National Treasury Database in progress. 5. Provision of regular SCM reporting to ensure monitoring and necessary interventions.
• Objective 4 would be realised by cascading the APP objectives and actions into the performance contracts of all staff and the conducting of staff performance appraisals.
• Objective 5 would be achieved through the development of a milestone schedule and the tracking of implementation, monitoring projects utilizing milestones and a contract register as part of Enterprise Project Management, and implementing the Centre of Excellence (CoE) model. The MHSC projects management system would evaluate the capability of the system and make sure that they all delivered on time. The CoE was a feedback platform that would report on how far the MHSC was on implementing chapter nine of the National Development Plan.
• Objective 6 would be achieved through monitoring the records management system, looking at the knowledge management system availability and monitoring the knowledge management system effectiveness.

Learning and Growth perspective

• Objective 7 would be achieved through the development of personal development plans (PDPs) to provide inputs to Workplace Skills Plans (WSPs), through submitting WSPs and annual training reports to the Mining Qualifications Authority (MQA), monitoring the implementation of PDPs, developing and implementing training plan for the Council and committee members, conducting the induction for the new Council and committee members and conducting the induction for new MHSC office staff.
• Objective 8 would achieved through the implementation of initiatives from the exit trend analysis identified from the previous financial year.

Financial Perspective

• Objective 9 would be achieved through validating the database of active mines, implementing the Levy Task team Phase 1, to ensure that the MHSC was adequately funded for delivery of OHS needs in the mining industry, and finalising Levy Task team Phase 2. This was a different model for addressing risks in the mining industry, but the proposed model was currently in the process of being finalised by the task team.
• Objective 10 would be achieved through the development and implementation of a zero-based budgeting process to determine cash flow, approving a budget for predetermined objectives and monitoring the implementation of spending plans.

Discussion

The Chairperson commented that some of the introductory information that had been presented had been unnecessary, as it was common knowledge and had taken up a lot of the speaker’s time. He added that when using abbreviations, it was important for the presenter to precede the abbreviations with the full word.

Mr N Mandela (ANC) said he understood that it was the responsibility of the mining houses to look after their employees and to ensure that those who were injured on duty were attended to and taken care of. On this point, he wanted to know from the MHSC what the role of mining houses and chambers was in ensuring mine workers injured on duty were rehabilitated. He then referred to the integration and simplification of the compensation process particularly for ex- mine workers living in rural areas. He said that the issue of compensation had been a seriously challenge, and he wanted to know how the compensation system sought to ensure that those living in rural areas were able to be compensated for the duration of their work on the mines. With regard to the zero fatalities target set for mining houses, he said everyone knew in reality that this would not be the case, so what measures were in place to hold mining houses accountable so that in the event of a fatality, their main focus was not on having the remains of the deceased mine worker sent to their family but also to ensure that there was real compensation for the family. How did the MHSC intend honouring ex-mine workers who had passed on -- what had their discussions with the DMR been on, and were they also collaborating with the Department of Arts and Culture regarding the issue?

Mr Dube responded that on the issue of rehabilitation of mine workers, they realised that there had been an attempt by the mines to conduct some form of rehabilitation, but there had been a number of challenges in implementing it. The mining indaba to be hosted in May would go into detail of how they would ensure mining rehabilitation and what needed to be done. This would be spearheaded by the Deputy Minister of the DMR and the Ministers of Health and Labour on ways to deal with the issues of rehabilitation, which had now become a serious challenge. It was true that it was the responsibility of the employers for the rehabilitation of injured mine workers, as well as to make sure that if someone had become incapacitated as a result of their injuries, there would need to be consider an alternative form of employment, and these were some of the issues that would be engaged on at the indaba.

He agreed that there were indeed some compensation issues and that there was money available with the Department of Health that had not yet been collected. There had been challenges with the administration system, and this would be discussed to find a way to make the administration system easy for even mine workers living in rural areas to be able to claim their compensation.

Mr Siyabulela Gcilitshana, National Secretary: Health and Safety, National Union of Mineworkers (NUM), said the challenge on the issue of compensation was related to the two Acts dealing with the matter, as one Act seemed to be better at paying its compensation funds than the other. Although there were other issues, NUM believed that both Acts could be equally efficient, which was why there had been a call for the integration of these two areas of legislature. The next issue would be the availability of data, especially that of ex-mine workers. When mine workers needed data, they usually had to pay for it and so there needed to be a system that allowed for mine workers to freely access their data.

Mr Msiza responded that on the issue of commemoration, after a visit conducted to Venda by the Portfolio Committee last year, the Department had engaged with the police and the Department of Home Affairs, and this engagement had helped them to retrieve the names of some mine workers. The Department had also been working together with the Department of Arts and Culture through the National Heritage Council, which was guiding the Department on the appropriate processes to follow with regards to the commemorations, and with local traditional leaders on how to go about respecting the various cultures. Lastly, they had also been engaging with Sasol and Anglo American to provide something more sustainable than a monument.

The Chairperson said that on a point of curiosity, it seemed there was a standing tradition that the Chief Mining Inspector was ordained to be the Chairperson of the MHSC. He pointed this out only because under normal circumstances, if the Chairperson were not available, there was supposed to be a Deputy Chairperson who would then take over in their absence. He was uncertain about how balanced the system was, but there were some blurry lines in the structure. There had been a surplus of R25 million and looking at it now, it seemed to have increased to R55 million. Looking at the current projected surplus on the approved budget, it sat at R9 710 817 and wanted clarification on the different amounts.

Mr Dube responded that there was a variance of 5%, for which they were trying to account.

The Chairperson replied that mentioning there was a 5% variance did not help him, because when the CoE had been established, there had been no suggestion or projection that it would be sustained through the surplus. Having covered what the role distinction was between the DMR and MHSC, it would seem that the MHSC was an extension of a research unit. Given that, maybe the Committee needed help in explaining the expenditure of the surplus, as there was no mention of where it would be allocated. The Committee was tasked with approving the budget and if they could not see how the MHSC planned to spend the surplus, even if it was supposed to be committed to the facilitation of the CoE, they could not approve the budget. He suggested that perhaps the Committee needed time and would have to return to this issue, and the MHSC would have to return to the Committee to reflect on the intended spending of the surplus.

He also said that the Committee wanted a report relating to the activities at Evander, where around 1 000 mine workers had been buried in a stark cemetery, as the report lacked what the Committee had requested. Instead, what they had been given was by word of mouth. One issue that was requested to be included in the report was other incidents -- such as workers who had perished underground and had never been retrieved -- and accidents from inspections. Also, what were the cost implications of setting up certain commemoration sites, and how did the 1 000 graves come to exist in the way they did.

He requested that the Council for GeoScience (CGS) introduce its team and proceed with their presentation. He had brought the CGS and Mintek together specifically because they were research institutions.

Briefing by Council for GeoScience (CGS)

Mr Simon Skhosana, Acting CEO, CGS, said the focus areas of the Council were comprised of mineral and energy resources, engineering and geo-hazards, and environmental and water affairs. Within these three main areas of focus lay the intersection of the environment, the economy and the social sphere, with geoscience mapping at the centre of these overlapping sections.

Ms Mosidi Makgae, Chief Operating Officer (COO), described the key national priority projects. These were:

• Stimulation of investment in the mineral resources of South Africa.
• Shale gas.
• Mine rehabilitation – derelict and ownerless mines.
• Mine water management.
• Microzonation of Johannesburg.

Some of the work that had been conducted by the CGS had established that there were several places in South Africa that had uranium potential. This was particularly important because where nuclear power was concerned, the CGS had to evaluate whether the country had enough uranium resources to sustain it.

The CGS was also involved in a shale gas project. Shale gas was a natural gas that could be extracted from shale and could be used for power and energy production. South African had an estimated 390 trillion cubic feet of technically recoverable natural gas that could be extracted from shale. Shale gas exploration in South Africa could be facing various major unknown geological questions, including the geo-environmental problems linked to the nature and the structure of the rock. Shale gas was crucial for South Africa because it could provide clean energy, the country could be less reliable on coal and it would boost the South African economy. The CGS shale gas project planned to support the South African government by serving as a baseline study for future shale gas research work and play a vital role in reviewing petroleum exploration and exploration regulations. The National Environmental Management Act (NEMA) regulations would be used as a framework in identifying shortfalls in the environmental impacts of the shale gas exploration.

CGS had begun capturing derelict and ownerless mines in 2012 and since having started the project, it had managed to capture over 90% of the mines on to the database. Mine and water projects had been undertaken in the gold mines of the Witwatersrand and the coal mines in Mpumalanga. CGS had also been involved in recording seismic events in the Witwatersrand basin from January 2008 to date. Some commercial projects that the CGS had been involved in included:

• Geological mapping of Namibia.
• Hydrogeological mapping of Malawi.
• Geological mapping of Malawi.
• Supervisory role in mapping of Cameroon.
• City of Johannesburg- ground water study.
• ENVIREE (EU) – feasibility of extraction of rare earth elements (REE) from mine wastes.
• South African National Energy Development Institute (SANEDI) -- carbon capture storage.

Mr Skhosana spoke on the human resources aspect of CGS. He referred to the employment level, gender and racial composition of their staff profile as at 31 March 2016. He then gave an account of their world-class people perspective, which detailed details their key objectives, measures and targets. The key objectives included:

• To attract and retain a skilled workforce.
• To enhance present levels of excellence.
• To build a positive organisational culture.
• To reflect and embrace the South African diversity.

Mr Dibela Matsepe, Chief Financial Officer (CFO), provided a financial overview that covered the budget for 2015/16 – 2018/19 with the detailed projected income and expenditure, as well as an analysis of government grant allocations for 2015/16 – 2018/19 and the baseline allocations versus personnel and operational costs.

He concluded by advising that the CGS would be hosting the 35th International Geological Congress (IGC) in Cape Town from 27 August to 4 September 2016, and encouraged all relevant stakeholders to attend the conference.

Briefing by Mintek Strategic

Mr Abiel Mngomezulu, President and CEO: Mintek, gave a brief overview of Mintek’s planning cycle, which dealt with the progress review from quarters one to four. Mintek had five core business objectives but put a focus on two – research and development (R&D) of efficient mineral processing technologies and value added products and services, and the promotion of mineral-based economies. Mintek continued to support national priorities and as a result, its R&D strategy was aligned to the NDP. The points specifically identified in the NDP were:

• Improved extraction efficiency to extend ore resources.
• Improved energy and water efficiency.
• Beneficiation to downstream, value-added products.
• Mining, industrial and consumer waste treatment.
• Small-scale and artisanal mining.

On the synergy between Mintek and Operation Phakisa, there were six specific Phakisa interventions which were closely aligned with existing Mintek projects. There was also a need to coordinate these projects to derive maximum synergy and build on existing Mintek achievements in these areas.

Mr Peter Craven, General Manager: Business Development, said that on a global scale, the mining industry had been in a period of unprecedented difficulty. There had been a sharp fall in exploration and project development, major companies had cut back on capital expenditure and junior companies had not been able to raise money. In relation to Mintek, this meant far less work from new capital projects and junior companies and more requests for operational efficiency improvements.

Fortunately, increased state funding was available for use by Mintek to carry out valuable R&D. Now there was an expectation for the slowdown to bottom out in late 2016 and investment, exploration and project development to build from 2017. Mintek planned to respond to this by:

·         Continuing to support existing mine operational improvements, rather than technologies aimed at new projects.

·         Continuing to develop capacity to handle the expected upturn in 2017.

·         Developing technology for new strategic resource opportunities.

·         Focusing on strategic areas of energy and water efficiency, environmental impact and waste treatment.

Minteck business development activities included intelligence for the minerals industry, commercial support to other Mintek operating units, technology commercialisation, intellectual property management, coordination of Mintek marketing and the management of Mintek’s contribution to the DMR’s rehabilitation programme. Mintek had completed nine projects on derelict and ownerless mine rehabilitation, and had four projects that were a work in progress, one project on hold and eight that were in the pipeline for future work.

Mr Sakhi Simelane, General Manager: Finance, gave a brief overview of the Mintek revenue, the state revenue grant per commodity, and an analysis across local, international and government revenue. He said Mintek had in the past had a surplus and they hoped to maintain it. While the surplus had been declining each year, they had still been able to maintain a surplus, except for the year 2011.  Mintek’s 2016 financial outlook included:

·         Mintek’s base remained at about R600 million.

·    Income and expenditure trends would continue, with income expected to remain around the R500 million mark during the medium term expenditure framework (MTEF) period.

·         The liquidity ratio was 2:1.

·         Expected decline in commercial revenue

·      2015/16 was the final year of a three year rehabilitation project, but a new contract was expected to be signed soon.

·         It expected the trend to continue on smaller projects and a few large ones.

·         MTEF work for research and capital to continue.

In conclusion, he said that the Mintek finances were stable, well resourced and were not for profit, but rather for development.

Ms Gugu Nyanda, General Manager: Corporate Services, spoke on Mintek’s human capital by giving a staff profile across employment categories and gender. She provided Mintek’s staff employment equity targets for 2016/17 – 2018/19, and added that on human capital development, Mintek had a twofold initiative with an external and internal focus. Mintek had some projected bursary targets for both undergraduates and postgraduates, was looking at internal efficiency indicators such as sick leave utilisation and vacancies. The priorities for 2016/17 included increasing women’s representation, employee cost management and training and development.

Mr Alan McKenzie, GM: Technology, spoke firstly on R&D, which included energy materials in rural communities, in collaboration with various role players. There had been the development of rapid test kits that were accurate and low-cost, and were both simple to operate and interpret. There had been industry and community involvement with regard to water treatment, and collaborative research conducted with the EU.

Current technology issues included:

·         Sensor sorting, which was a MTEF funded project aimed at upgrading low grade coal to Eskom specifications.

·         Savmin acid mine drainage, which was a programme that continued further in the laboratory and demonstration plant activities. It continued to reduce treatment costs and improved the recycling of reagents.

·         Water treatment activities were an expansion of current Savmin sites to incorporate additional treatment technologies, and aimed to demonstrate the suite of technologies for total remediation of Robison Lake, a highly toxic site.

·         Underground processing, which involved significant research programmes, looking at underground processing of ores and fundamentally at different approaches to processing on the surface.

·         Commercialisation of technologies, which was a concept that continued in spite of poor market conditions.

·         The NAM training programme, for which South Africa currently holds the Presidency for the NAM Science and Technology Centre. The first programme had been held in 2015, with 20 Fellows that had spent three months at Mintek as part of the programme. The next one was to be held from May to July 2016.

 

Discussion

The Chairperson suggested that while the State Diamond Trader (SDT) was preparing for their presentation, the Committee would in the meantime ask questions of clarity to the CGS.

Mr Mandela referred to shale gas, asking what the challenges were that they had experienced on the ground considering that shale gas had been said to be a game changer, yet there had been protests and resistance of some sort, as threats of being taken to court had emerged and wanted to know what their findings would be in terms of shale gas. What had been the stakeholder engagement and consultation with communities, given that they could assist with the protests on what action could be taken? What consultation had been made with the national or provincial houses of traditional leaders on these explorations, because he had noticed that some of the areas that had been marked off for Anglo and Shell constituted land where the custodian was a traditional leader, and he would be interested in knowing what engagement had been made in this regard.

He enquired about the rehabilitation of derelict and ownerless mines, asking if this was not the responsibility of the mining companies, and why the DMR was taking on the rehabilitation as opposed to the owners who should be held accountable. Lastly, he wanted mention that staff seemed to be profiled on a racial basis, which he found to be problematic given that the country was 22 years into democracy, yet there was a continuation of the apartheid legacy fueled by racist tendencies.   

Mr I Pikinini (ANC) referred to R&D, particularly the issue of laboratories, and while the planning was good he was concerned about the mapping process in SA. This matter had been raised a number of times and he feels as though there needed to be an exploration to see what kind of resources there were in the Eastern Cape. He asked for the CGS to provide an update on shale gas exploration.  

Mr Lorimer DA said that projections on when shale gas drilling would start this year were vague and he wanted to know what the baseline information on this was and when the Committee could expect a report on the shale gas project.

The Chairperson said it would have been nice to see the structure of the CGS in totality. He wanted to know whether as an entity they had the capacity to have a CEO and a COO, and what determined the structure that they had. He then spoke on the women in mining project and asked what, in the absence of this strategy, would inform their demographics to ensure that they were still represented in the entity. What were the cost benefits for the offshore projects, and could the Committee be provided with what the calculated risks and advantages were? He had brought this question up because often he had found that it was the entity that carried the costs, and he wanted to know in commercial terms what the costs would be in the event of a default. Were the CGS’s unskilled labourers constituted of one group, as he was aware of the historical background of the country, and wanted clarity on why this was only constituted of one group? He said that given that CGS was a research institution, their personnel costs seemed to be too high and wanted to know what the justification for this was.

Mr Skhosana responded on the issue of staff profiling, saying it was an employment equity requirement that the statistics of the organisation were to be submitted, so that had been the information given in the presentation, as well as the targets that needed to be reached according to employment equity. On the issue of unskilled workers, this was based on historical factors. It was a fact that unskilled workers were black individuals, and it was difficult to answer any further as to why this was the case. On the issue of women in the organisation, they had a very aggressive gender mandate and as a result, wanted to balance the gender requirement. There was a need for female scientists, as this was very important for the organization, and they aimed to achieve 50% female representation.

Responding to the question of personnel costs, he said that this was due to the fact that even though they were a baseline organization, their top scientists still needed to earn competitive salaries as they were competing with the mining industry. They had also started a collaboration with MPA Consulting to receive funding for students who immediately got absorbed into the organization, and any remaining became available for the private sector. He said that the CGS had established a Foundation and there was an agreement between them and CGS. The Foundation was constituted of the organisers for the Conference as it was high profile and had thus been created to focus solely on the event. The Foundation had scientists of high calibre assisting in making the Conference a success. The Foundation was not a private entity but rather one that had been created for the CGS.   

Prof Phuti Ngoepe, CGS Chairperson, said that with regard to gender, there should be an overall strategy in the industry which cuts across all entities that worked in the Department. Traditionally, the sector had had very few women who were geologists in the past but as the Mr Skhosana had indicated, it was encouraging to see the number of women who were coming on board, not only at the CGS but also who were being trained at universities. It was obvious that there would be a number of obstacles which originated either from tradition or the structure which could be tackled jointly with the Department, and hence the derived strategy to allow them to participate more fully.

Another aspect concerned the role of the COO, which was related to how the organisation had been positioned during the time of the economic recession of 2008, when the Council had been found to be very vulnerable in terms of how it depended on commercial work. There had therefore been a need to reorganise the structure, as it used to have different divisions which operated mainly in silos and had different executive processes. It had become necessary to look at competencies in the Department and how they could be bound with the various projects. For the competencies matrix to work, there needed to have been very good coordination across the organization, and that was when the idea of the COO had come into the picture. It had been tried for the last two years and in the past year, they had managed to see how it “gelled” together with the organization. It had not been easy and the transition had been very challenging. Later in the month, the position would be reviewed to see how well it had been working.

Ms Makgae said that public consultation was an exercise being assisted by the Department. Key questions had been raised at a previous Imbizo regarding job creation from projects, adding that applications hadbeen made for certain areas but no explorations rights had been issued. The 3.5 km deep drilling in Beaufort West was not for production but rather for research purposes, and financial constraints limited projects to the Beaufort West area only. There were plans to partner with PetroSA and other entities to bolster research functions. Addressing questions around the mineral resources of the Eastern Cape, she said that the province did not have major mineral resources but the CGS aimed to assist with economic and infrastructure development by trying to tap the minimal mineral resources available. As for the risks associated with carrying out major commercial projects outside of the country (in Malawi and Namibia), she said the operating risks were minimal, as risk assessments were conducted before the projects were embarked upon.

Mr Matsepe said that the projects conducted outside the country were fully funded by the European Union and World Bank and consequently possessed low risk profiles.

Prof Ngoepe said that the proper keeping of records for over 100 years by the CGS had assisted Eskom in finding stable sites to build nuclear power stations after the country witnessed its first load-shedding. Proper mapping, record keeping, and environmental interventions had been hampered by limited resources. He confirmed that countries such as Namibia and Mozambique were being supported financially by the World Bank and European Union as regards commercial projects.

The Chairperson noted that MINTEK and the CGS had failed to highlight their main challenges as entities.

Mr Mngomezulu said that current funds would be prioritized to allow Mintek to fulfil its mandate. The Department was striving to finalise the issue of there being few women in the mining strategy. There would be consultations with all affected stakeholders, such as organised labour and other entities. Efforts were being made to trace previous owners of mines and also to curb acts of illegal mining to mitigate risks. Efforts were being by the organisation to ensure compliance with the Health and Safety Act.

Mr Mabuza disclosed that a comprehensive advocacy programme has been established by the DMR regarding consultation. He added that traditional leaders were consulted prior to exploration of lands where they owned custodianship.

Mr Mandela said that the onerous mine rehabilitation highlighted as a mandate of Mintek was a duplication of a mandate of the CGS. He suggested that the mandate be adopted solely by the CGS.

The Chairperson questioned why the financial surplus was on a decline and inquired if it was a result of a decrease in commercial revenue. He also sought clarity on the financial implications when new contracts were not signed. He also sought clarity on the status of the “Sikisiki” quarry.

Mr Craven clarified that the CGS as site custodians dealt with database maintenance, prioritisation and ranking, and the hazard identification of mines. He also clarified the roles of the DMR and Mintek. He affirmed that fewer than 30 sites had been rehabilitated in eight years of operation. As regards the “Sikisiki” rock quarry, he said that there was no accumulated water on the site and the proposed N2 gateway would cut across the side of the quarry. The high walled quarry had been fenced off as a temporary safety measure and there was no form of illegal mining on the site. The financial implication of not signing the contract with the DMR, was a loss of R50 million in potential revenue.

The Chairperson mentioned that there were rumours that mining licences were being issued at some mine sites.

Mr Mngomezulu said that there was no duplication of mandates, as every institution on a three-year contract was fully aware of its respective mandate. Cutting costs in institutions could also imply cutting jobs, which should not be taken lightly. He then clarified that the “surplus” indicated in the report referred to profits and not reserves. There had been a decrease in the surplus as a result of a decrease in commercial work.   

 

Briefing by State Diamond Trader

Ms Futhi Zikalala, Chief Executive Officer (CEO): State Diamond Trader (SDT), identified the strategic objectives of the SDT as contributing to the growth of the local diamond beneficiation industry, increasing sales of rough diamonds to Historically Disadvantaged South African (HDSA) beneficiators, and also contributing towards youth skills development. The main aims of the strategic objectives were to create a sustainable, growing and transformed diamond beneficiation industry, diamond industry enterprise development, establishing a large scale HDSA-owned sustainable diamond cutting and polishing companies, and ensuring the SDT was an efficient, innovative, and development orientated organisation.

The ten key activities of the entity were:

1. The implementation of a marketing strategy under prioritised areas, such as conducting provincial promotional activities, promoting enhanced access to local and international markets, and piloting the establishment of “Diamonds SA” brand.
2. Organising and hosting the SA Diamond Indaba 2016, as the Indaba in 2015 had achieved its main objective by getting all stakeholders conversing about the status quo and the future of the SA.
3. Facilitating access to international and local markets such as the Hong Kong Gem and Jewellery Show, Jewellex South Africa, and the Africa Jewellery Show.
4. Measurement of the impact of SDT marketing initiatives on its client businesses. The participating client business growth target for the current financial year was set at 5%, consultations and surveys would be conducted on participating clients, and the need for further engagements would be commensurate with the results obtained.
5. Development of youth enterprises in diamond beneficiation. The SDT had commenced its three-year enterprise development programme for the youth in the previous financial year and would continue in the current year. Industry partners had expressed interest in partnering with the SDT and the entity was currently looking at a 75% success rate as regard participants establishing their own beneficiation enterprises starting in 2018/19 financial year.
6. Conduct provincial promotional activities with state and private sector partners. The SDT had begun the visitation of provinces in this regard two financial years ago and the entity planned to conduct five provincial promotional activities across the country. This activity marketed both diamond beneficiation and the SDT.
7. Piloting the establishment of the “Diamonds SA” brand. There was a synonymity between diamonds and South Africa, and the SDT intended to capitalize on the sentiment by extending the potential for new entrant businesses. The entity would enhance local knowledge on diamonds and jewellery and also increase local diamond jewellery consumption.
8. Continued implementation of the approved sales strategy by increasing the amount of overall sales to HDSA beneficiators to a minimum of R50 million, increasing the number of actively trading HDSA clients, and increasing total purchases of inspected SA diamond production.
9. Employment and training of youth with disabilities on rough diamond valuations. To achieve this, the entity would continue with the work done in the previous financial year in preparing for the employment of youth with disabilities. The training was scheduled to commence in the second quarter, would last for three years, and was strictly for employment by the SDT once completed.
10. The launching of a short term learnership programme on general diamond skills. Two youths at a time would benefit from the programme and a total of six persons would benefit in the year.

Ms Zikalala said that the objectives were linked to the DMR and national outcomes in areas such as contributing to the growth of the local diamond beneficiation industry, increasing sales of rough diamonds to HDSA beneficiators, contributing to the growth of the local diamond beneficiation industry, and contributing towards youth skills development.

The financial year budget indicated that sales amounted to R425.25 million, the cost of goods added up to R408.9 million, resulting in a gross profit of R16.35 million. Overheads (including salaries, leases, computer and IT, travel, fees, and others) amounted to R21.16 million. Earnings before income tax (EBIT) came to R4.8 million, interest income was R1.27 million, interest expense was R1.39 million, profit before taxation was R4.92 million, and net loss was R4.92 million.

Briefing by South African Diamond and Precious Metals Regulator

Mr Levy Rapoo, CEO: South African Diamond and Precious Metals Regulator (SADPMR) moderated the entity’s presentation and Ms Linda Nkhumishe, General Manager: Corporate Services, gave a brief background on the organisation.

The entity had been established in July 2007 through section 3(1) of the Diamond Act 2005 to ensure that diamond resources were exploited in the best interests of South Africans, to promote equitable access to and local beneficiation of the country’s diamonds, to ensure compliance with the Kimberley Process Certification Scheme (KPCS), and to adhere to the objectives of the broad based socio-economic empowerment as prescribed. The mandate of the SADPMR was to enforce the provisions of legislation such as the Diamond Act No 56 of 1986, the Diamond Export Levy (Administration) Act 2007, the Precious Metals Act No 32 of 2005, and the Mining Charter in terms of section 100 of the Mineral Petroleum Resources Development Act (MPRDA) of 2002.

The SADPMR had a total of 125 employees - 52 males and 73 females, of whom 115 were Africans, four coloureds, four Indians, and two whites. Of the 52 males, eight were senior managers and executives, 31 were professionals and skilled employees, 11 were semi-skilled, and two were unskilled. Five females were senior managers and executives, 49 were professionals and skilled employees, 13 were semi-skilled employees, and six were unskilled. There was only one employee (semi-skilled) with a disability. 

Ms Nkhumishe said that the APP was aligned to the National Development Plan (NDP), the nine-point plan of the government, and all applicable legislation. The first SADPMR strategic objective was to improve competitiveness. The second was to deal with sustainability and job creation in the diamond and precious metals industry. The third was to transform the diamond and precious metals sectors, the fourth was to promote equitable access to resources for local beneficiation, and the last was to enforce compliance with the legislative requirements, and to improve organizational capacity for maximum execution for excellence.

Mr Cecil Khosa, GM: Regulatory Compliance, briefed the Committee on the activities of the SADPMR’s strategic objectives. These were:

• To issue licenses to enable diamond and precious metals trade, assist new entrepreneurs in the diamond and precious metals industries, facilitate skills development initiatives for the industries in the form of training, and to oversee the provision for the issuing of beneficiation licences.
• To promote the participation of HDSAs in the diamond and precious metals industries and also to decrease the number of inactive businesses.
• To increase access to diamonds for local beneficiators.
• To conduct and improve diamond valuation services, conduct inspection services within the diamond and precious metals sectors, conduct compliance inspection audits on licences, oversee the administration of the KPCS, and to comply with legislation, policies and procedures.
• Implementing the approved Human Resources Plan (HRP), the approved SADPMR communication policy, the minimum information security standards (MISS), the Master System Plan (MSP), and the provision of legal support to the regulator.

Referring to the transformation agenda, he said that the board was implementing the mining charter in terms of section 100 of MPRDA. The board had approved the transformation plan which was being implemented by the transformation team to monitor the progress on ownership, human resource development, procurement, and employment equity. The transformation team was ensuring compliance to the commitments and undertakings made by companies while applying for their respective licences. A a sizeable number of companies had since adhered to their signed undertakings and corrected their infringements, which had resulted in the inclusion of a significant number of HDSAs in the management, operations, and decision-making processes of the companies.        

Ms Karabo Sibanyoni, Company Secretary, said that the concept document for the establishment of a state diamond bourse had been approved for submission to the DMR on 28 July 2015 and the DMR had in turn submitted its inputs to the document. The process is still in its consultation phase. The SADPMR was involved in on-going engagements with the Gauteng Industrial Development Zone (GIDZ) which was currently in the roll-out phase of the approved Industrial Development Zone (IDZ) at the OR Tambo International Airport. The IDZ would contain a jewellery manufacturing precinct which would be an ideal environment for the location of the state bourse once its approval and establishment was finalised.

Ms Irene Tshifura, CFO, presented the budget allocation for the entity. Grants for the next three financial years amounted to R53.2 million, R55.86 million and R59.21 million respectively. The projected in-house generated revenues were R41.39 million, R43.76 million and R46.23 million respectively. Projected expenditures were R90.5 million, R95.20 million and R100.51 million. Deficits would be R4.09 million, R4.42 million and R4.94 million respectively. Staff remuneration was the main cost driver of the R90.50 million projected expenditure for 2016-17.

Mr Rapoo commented on the challenges facing the entity, saying that it required more resources to adequately fulfil its mandate. There had been an adverse effect of the global economic downturn on the industry and the it was yet to recover. There was anticipation that the State Bourse would address some of the challenges faced in the industry and stimulate the economic sector. The entity was currently engaging with some international companies to make investments and settle in the country to ensure the imparting of their skills and knowledge, specifically in the cutting and polishing of melee (small) diamonds. He affirmed that the SADPMR continued to implement principles and provisions of the DMR’s women in mining and national youth strategies both internally and externally within the industry.

Discussion 

Ms Mafolo commended the SDT on their projects, specifically in areas of women’s empowerment. She inquired if indabas were organized yearly and how the entity intended to implement decisions from previous indabas. She also sought clarity on the three-year training periods, asking if the trainees would be given preferences for vacant positions.

The Chairperson commented that the frequency of the indabas make it cumbersome to implement the suggestions and recommendations. He also inquired about the activities of the SDT in provinces without diamond deposits.  

Ms Zikalala responded that the main purpose of visiting the provinces was not solely for the exploitation of diamonds, but rather for a creation of awareness and to assist citizens to establish beneficiation firms and create employment opportunities. Indabas were conducted annually as part of Jewellex and not as a stand-alone project, and the second indaba was being streamlined to major industry players. She added that trainees were paid a fairly reasonable amount of money for the duration of their training period and there were potential opportunities for fulltime employment of the candidates after their training. 

Ms Mafolo inquired about the gender of the disabled staff member of the SADPMR, and about the various categories and types of licences issued.

Ms Nkhumishe responded that the disabled employee was a male who worked in the communications department and was therefore categorised as a major employee and classified as semiskilled.

Mr Khosa said that there was an array of licences and that the beneficiation licenses were typically issued within two months, subject to the provision of accurate information.

The Chairperson said that the font size adopted by the SADPMR for its presentation was not reader-friendly especially in the area of the key activities of the strategic objectives. He added that the organogram presented was misleading, and asked why only one disabled staff member was employed by the SADPMR. He sought clarity on the definition of “unskilled staff” as depicted by the entity. He finally questioned why there was no strategy that encouraged women in the SADPMR and why there were irregularities in the staffing statistics.

Mr Rapoo replied that the SADPMR was aware of the irregularities in its staffing statistics. He assured the Committee that there were still vacant positions within the organisation and that the entity aimed to amend the statistics as regards employment equity.

The Chairperson implored departments and entities to complement and learn from one another to achieve a common goal, rather than competing. He then commended the presentations of both entities and thanked all attendees for their participation.

The meeting was adjourned.