Committee Report on Western Cape oversight; Second Term Programme

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Mineral Resources and Energy

15 March 2017
Chairperson: Mr S Luzipho (ANC)
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Meeting Summary

The Portfolio Committee on Mineral Resources met for the consideration and adoption of the Draft Report on the Oversight Visit to the Western Cape and to consider and adopt outstanding minutes. Discussion was held on the support systems for emerging mining companies adhering to requirements of compliance and mechanisms to assist them so that the purpose of mining would not be undermined. Other Members argued that all mining companies were affected by the rigorous regulatory systems regardless of size. There was agreement that the Draft Report should make explicit reference to emerging companies which may not have the capacity to withstand the high burden of compliance with regulations – too often the same law that applied to big companies, in terms of environmental assessment impact, also applied to small companies, of which the assessments were so expensive that it did not make mining worthwhile. A recommendation was then formulated for the Department of Mineral Resources to revise the application of the regulatory system, in particular, to small emerging mining companies. This was not to ask for a special dispensation but to address the burden of compliance on emerging and entry-level companies. The Draft Report on the Oversight Visit to the Western Cape was adopted with these amendments.

The Committee then considered and adopted draft minutes dated 8 March 2017 after which there was consideration of Committee programme for the second parliamentary term and pending oversight visit for the end of March 2017.

Meeting report

Draft Report of the Oversight Visit to the Western Cape

The Committee went through the draft report page by page.

The Chairperson highlighted that the manner of the usage of the word “involving” insinuated that the quality of emerging companies were not on par with well-established companies. This posed the question, simultaneously, how does one use a support system for the emerging companies to adhere to the requirements of compliance? Thus, if it was a matter about the cases, there should be a system in place to support them to evoke compliance, as opposed to terminating the emerging companies on the virtue of non-compliance. In essence, requirements were to be obligatory implemented but on the other side, there should also be mechanisms available to assist them so that the purpose of mining would not be undermined. Hence, the word “involving” by means of referring to the emerging companies was an issue.

Mr H Schmidt (DA) noted that another part of the sentence was the subject of who the people were which were affected by the involvement. This involvement noted mining companies, which were not necessarily emerging mining companies. The emphasis should not be on emerging companies because it pertained to all mining companies as they were all affected irrespective of the magnitude of their size. For instance, Maxam Dantex South Africa (Pty) Ltd and Elandsfontein Exploration and Mining (Pty) Ltd were big companies.

The Chairperson did not quite agree with Mr Schmidt because, upon review of the structural set-up, it could not be said that Maxam was a big company at all. Maxam, on its sole basis, fell under the direction of a small emerging company. The years in which it was operational could warrant consideration as a big company but, due to the quantity that it produced, it still remained an emerging company. This would be proven true when reviewing the analogy of comparison. The point was that the Draft Report noted, “it may create uncertainty”, which implied that the emerging companies did not have the same capacity as those that were well established. For instance, regarding cases, the capacity required by well-established companies such as Anglo-American to tackle adversity and even represent itself in court, could not be expected from emerging companies. The issue was that whether it was from the Department of Economic Development or the Department of Mineral Resources itself, in regard to the question of the compliance - it should not be assumed that emerging companies could withstand it, therefore it may create uncertainty on the issue of mining in the Western Cape.

Thus, the issue was not about whether the company itself was an emerging company or not. For example, if Anglo- America were cited, it would be assumed that the company could withstand adversity or imposition. However, if a smaller company, such as Mickala Mining, were taken to task, it would need to redirect the funds that were necessary to invest in its growth in the industry to defend itself in court. This was done instead of ensuring that it was compliant with the regulatory prerequisites on mining with the licence it had. This example should clarify the context of inequality of capacity. Therefore, usage of an appropriate word to highlight that the companies were not the same should be used in this Draft Report. To reiterate, if a smaller company were to use funds on an area that it had not projected expenditure for, it would not withstand it in the same manner as a larger company. This was not to say that smaller companies were exempt from certain obligatory compliances but a mechanism should be in place to assist them so that the mining itself would not become secondary for the companies as the regulatory prerequisites imposed became the primary focus. Even so, it did not mean that environmental compliance should be ignored. However, if the focus became court cases, it would result in uncertainty, due to the financial inability to face all challenges that would bring. The R12 million spent by Maxam for its defence in court could have been ploughed elsewhere for its growth in the industry. Yet if a mechanism existed to safeguard it, such expenditure could have been prohibited. Therefore, after the licences were issued, if non-compliance existed, a monitoring aspect should have intervened as opposed to automatically resorting to the legal court system that would prove impoverishing on those who did not have sufficient funds for it. Emerging companies were essential as there was a demand for small-scale mining. However, if those companies spent the bulk of their revenue on defence in court, they were not only taken out of the system by means of focus but their ability to grow in the industry was impeded upon too. Therefore, there should be explicit intention to note that emerging companies may not have the capacity to withstand and thus a mechanism should be devised to ensure they remained in the mainstream of mining.

Mr J Lorimer (DA) noted that the Committee was touching on a much wider issue. Since not only in this case, but also in other provinces, particularly applicable to certain types of mining such as diamonds, many reports were received that companies were not exiting the industry simply because of the high burden of compliance with regulation. Hence, if the word “emerging” from that sentence were omitted, it would read, “the number of court cases involving mining companies creates uncertainty.” However, it should be pursued by the Committee perhaps through a recommendation around the regulatory burden on small mining companies. Too often the same law that applied to big companies, in terms of environmental assessment impact and so on, also applied to small companies, of which the assessments were so expensive that it did not make mining worthwhile. Could the regulatory burden on small mining operations be examined as a Committee? Or was this a matter that the Department on Mineral Resources were to review?

The Chairperson replied that the query regarded the word “involving” required amendment - the word “emerging” should remain and be further reinforced by the word “especially” since most of the mining companies affected by court cases were the emerging ones. Thus, the sentence would read, “the number of court cases involving especially emerging mining companies”. Or it should be amended to read “court cases especially involving emerging mining companies”, as means of specific reference. Then the issue that Mr Lorimer highlighted would be considered as a recommendation. The recommendation could perhaps read “the Committee recommends the Department on Mineral Resources should revise the application of the one environmental system”. The Department should be advised to consider the impact of the one environmental system compliance, in particular, to small emerging mining companies. This was not asking for special dispensation but to address the burden of compliance along with its impact on emerging and entry- level companies. Was the impact ensuring growth in the sector or was the impact making it implausible for new entrants to enter the industry? This recommendation was applicable to the entire industry and was not specific to the Western Cape - experience in the Western Cape was cited as motivation but specific reference to one province would not be made. The recommendation to the Department, and its sister departments, should ensure the mining industry expanded and continued to function beyond constraints due to the environment.

Mr Lorimer was satisfied with the proposed recommendation however the Draft Report should not only cite constraints of the environment but should include other limitations imposed too. The oversight visit reflected that environmental constraints were inclusive of the problems faced but broader issues implicated progress as well. Hence, instead of specifying environmental issues, the entire regulatory burden should be advocated.

The Chairperson agreed.  

Mr Schmidt added that it could it be noted that, “In relation to compliance issues, there was concern that the number of court cases involving emerging mining companies created uncertainty for the future of mining”. It would encapsulate what the Chairperson was saying.

The Chairperson agreed and asked if there were any other questionable matters.  

The Chairperson, on page 20, asked if the recommendation discussed could be added to the bullet point talking to the regulatory framework. The bullet point noted that “the intergovernmental relation was not functioning optimally” - the recommendation could then expand on that.  

Ms M Mafolo (ANC) moved for adoption of the Draft Report with amendments.

Mr S Jafta (AIC) seconded the move.

The Committee adopted the Draft Report of the Oversight Visit to the Western Cape with amendments.

Draft Minutes dated 8 March 2017

The Chairperson noted that page one shall incorporate a section called “Absent”, which would reflect Committee Members who had not duly apologised for the inability to attend the meeting. This newly added section would be standard for the Minutes going forward. However, since Honourable J Esterhuizen (IFP) was an alternate Member of the Committee, he would fairly be enlisted under the section of ‘Apologies’, as opposed to ‘Absent’.

Mr Nkosi Z Mandela (ANC) moved for adoption of the minutes dated 8 March 2017 with the proposed amendment.  

Ms Mafolo seconded the motion.

Committee minutes dated 8 March 2017 were adopted with amendments.

Second Term Committee Programme

The Chairperson noted that this was the last Committee meeting for the first parliamentary term of 2017. Upon return from recess, matters of the annual budget of the Department would be deliberated. The Committee was of the view that it would be impractical to start immediately on 2 May when Parliament returns since travelling on a public holiday may prove troublesome for some Members. The suggestion was that the Committee meet again on 3 May 2017. A draft programme for the second term would be sent to Members.

The Committee would have to deliberate more presentations than initially anticipated. Expected presentations included the Financial and Fiscal Commission, Auditor- General, Committee Researcher and, if possible, presentation by the Department of Monitoring and Evaluation (DPE). This was beside reports from the Department and entities. Sometimes these obligatory regulatory systems curtailed the oversight work of the Committee, thus, these should be conducted thoroughly and then dispensed og as quickly as possible.

The Committee was also due to embark on an oversight visit. On 26 March, the Committee would overnight in Centurion, Pretoria, and then meet with the Department to discuss illegal mining. Other government bodies will also be present, including the Chamber of Mines, to participate in possible interventions. From there, the Committee would go to Mpumalanga, Burgersdorp and Lily Mine before heading to Springs.

The Committee was working with the help of the Department to visit the area that the five mine workers sunk in a shaft even though it was not initially stipulated on the programme. It would be deemed insensitive if the Committee visited Springs without showing consideration for the incident. The family of the deceased child could not be visited, to extend sympathy, due to the aspect of time. Thereafter, the Committee Report on the Oversight Visit would be dealt with.  

The meeting was adjourned.


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