Department of Mineral Resources Quarter 2 & 3 performance

This premium content has been made freely available

Mineral Resources and Energy

27 February 2019
Chairperson: Mr. S Luzipho (ANC)
Share this page:

Meeting Summary

The Committee was briefed by the Department of Mineral Resources (DMR) on its second and third quarter performance report for the 2018/2019 financial year.

The report indicated that the expenditure of the DMR as at December 2018 constituted 78% of the total allocated budget of R1 890.7 billion, resulting in a variance of 1.1%. Based on this, the available budget of the Department for the rest of the financial year was R415.9 million. The departmental revenue collection for the period had ended on 31 December 2018, and had amounted to R28.1 million against a projected revenue of R29.9 million, owing to a decrease in the collection of prospecting fees. With regard to pre-determined objectives, the overall performance attained by the Department at the end of the third quarter was 73.45%, a significant improvement compared to the 64% attained in the same period during the previous financial year.

Members requested an explanation from the DMR on when acting positions would be transformed into permanent positions. They asked for details about wasteful, fruitless and irregular expenditure in the Department and its impact on the organisation. Members also wanted to know about the specific performance of each entity in the Department beyond the general performance of the DMR itself. The Department was asked to highlight the number of court cases they were dealing with, and the measures that had been put in place to deal with corrupt officials.

Meeting report

Chairperson’s opening remarks

The Chairperson indicated that there had been progress with regard to the crisis in Mpumalanga, and he hoped that the issue would be completely resolved. The ambush of security guards was turning into a territorial war. Based on this, he appealed for calm to prevail, regardless of the differences of the people involved, as loss of lives was unacceptable for any reason. As such, there was a need for peoples’ right to life to be respected and an amicable solution reached as soon as possible. He also expressed concern over the possibility of job losses as a result of the incident.

DMR performance report

Ms Patricia Gamede, Acting Director General (DG); DMR, said the Department’s budget allocation for the 2018/2019 financial year was R 1.891 billion, with a projected expenditure of R1.492 billion. However, the actual expenditure as at December 2018 had been R1.475 billion, or 78% of the total allocated budget, resulting in a variance of 1.1%. From this, the available budget was R 415.9 million. It was likely, however, that the department would spend the remaining budget before the end of year. The departmental revenue collection for the period ended on 31 December 2018, and amounted to R 28.1 million against a projected revenue of R29.9 million. This was due to a decrease in the collection of prospecting fees.

In terms of pre-determined objectives, the overall performance attained by the Department at the end of the third quarter was 73.45%, which was a significant improvement compared to 64% attained in the same period during the previous financial year. However, the reported performance at the end of the third quarter remained lower than the full year results from the previous financial year. This was attributable to the fact that a significant number of measures, 7% or 8% in total, were due only at the end of the fourth quarter and would be measured and evaluated at the end of the year. Management was, however, committed to achieving measures that were reported as ‘not yet due’ at the end of the fourth quarter, and was positively recovering on measures that were reported as “partially achieved” during the third quarter, in order to bring the final performance outcomes in line with past historical trends.

Ms Gamede said that in terms of promoting awareness of the branch- corporate services, all three actions had been achieved at different levels, with a 100% achievement on communications strategy. Also, three out of the four targets to sustainably develop vulnerable groups had been achieved, as well as two out of the three actions to contribute to skills development had exceeded their targets, with one not yet due. The Department had also achieved its target of providing adequate facilities for effective service delivery and developing, reviewing and improving internal processes, guidelines/ procedures. Adherence to defined turnaround times and service level agreements had all been met. However, the goal to respond timeously to opinions, appeals, inquiries, agreements and litigation had only been partially achieved. 

The Department had also achieved all its actions to ensure the implementation of national strategies, compliance with legislation, and attracting, developing and retaining skills. In all, 82 vacant posts had been approved and the recruitment process was under way. The goals to promote corporate governance had all been achieved except for the risk management plans, which had a 50% achievement rate.

The branch highlights for the third quarter included the 16 days of activism campaign for no violence against women and children at Diepkloof Welfare centre; conducting of 10 career awareness initiatives against the target of eight:  the improvement of 14 business processes and the development of Standard Operating Procedures (SOPs) for each process in order to improve service delivery; and the observation of International Day for Persons with Disabilities at Toekomsrus Community Hall in Randwest City Municipality on 3 December 2018.

Ms Ditsietsi Morabe, Acting Chief Financial Officer, DMR, said that the Department had achieved its objectives regarding the management of financial resources, with a variance of 1.1% on its allocated budget. The variance was attributed to delays in filling of vacant posts, as the funds would be used to pay bonuses and progressions. Corporate Services (CS) and Mine Health and Safety (MHS) spent above the target on leased accommodation and unplanned audits and inspections resulting from disasters. This shortfall would, however, be addressed by the end of the financial year as the MPP and FA would release funding to cover the deficit in CS (R14.9m) and MHS (R1.4m) respectively. The expected shortfall on leased accommodation at the end of the financial year would be R14.9m, which would be funded from transfers. Items that were committed under payments for capital assets included

 1) computer equipment for Head Office and Regional Offices;

 2) replacement of worn-out/ irreplaceable furniture in Cape Town and Durban Regional Offices;

 3) Walk through metal detectors for Limpopo, Klerksdorp, Rustenburg, Durban and Gauteng Regional Offices;

 4) surveillance and access control systems for Welkom Regional Office; and

 5) switches for servers. 

That notwithstanding, an order had been issued for all these assets, except for computer equipment. Delivery of all assets would be concluded by mid-March 2019, and payments were anticipated before 31 March 2019. Also, the objectives of promoting corporate governance had all been achieved except for implementation of information communication technology (ICT) initiatives, which were not yet due.

Mr Xolile Mbonambi (representing Mr D Msiza), Chief Inspector of Mines, said that all actions pertaining to the objective of promoting health and safety had been over-achieved. However, with regard to the reduction in occupational fatalities and injuries, the Department could achieve only 9% and 14% instead of the targeted 20% and 20% respectively. Also, it could achieve only 64% instead of the targeted of 80% on completing inquiries initiated. 56% of all mine injuries were general injuries, 17% were transportation and mining injuries, 16% were falls on the ground, 7% were machinery related injuries, 1 % were electricity related injuries and 2% were other injuries.

The Department had issued 37 Mine Engineering Certificates of Competency, as well as 20 Mine Managers’ Certificates of Competency in the third quarter, compared to 31 and 21 respectively in the first quarter. Further, the branch had achieved all its actions to ensure an efficient, effective and development-oriented Department except for adherence to prescribed timeframes for Mining and Petroleum Resources Development Act (MPRDA) applications, where it had achieved 97% instead of the 100% target. The Department had also achieved 100% on its objective of promoting good governance, except for its action on the implementation of its management action plan (internal audit).

Its highlight for Q2 was a successful rescue of 644 employees from underground at the Gold One’s Modder East operations, following a fire outbreak. The highlight for the third quarter included the hosting of the 2018 mine and occupational health and safety summit, in partnership with the Mine Health and Safety Council (MHSC), and the commemoration of World AIDS Day.

Adv Mmadikeledi  Malebe, DDG: Mineral Regulation, DMR, briefed Members on program 3 (mineral regulation), and said that the branch had not completed its targeted social and labour plans’ (SLPs’) development projects. Further, the number of jobs created through mining numbered 3 694, instead of the targeted 5 250 and the Department achieved nothing in relation to the publication of approved SLPs. It had, however, exceeded its target of seven with regard to the number of black industrialists created through procurement, and also achieved its 100% target with regard to the promotion of sustainable resource use and management. It had also achieved all its targets in relation to the reduction of state environmental liability and financial risk, except for its target on ‘complaints closed and received’ where it achieved 42%. The branch had achieved its objective of implementing transformation policies and legislation, except for the action on compliance by mining industries, which had been deferred to Q4.

Adv Malebe further indicated that the number of environmental compliance inspections conducted was 1 156, which was above the target of 957. The branch had realised 19.64% instead of 70% regarding its action on the adherence to prescribed timeframes committed to the Department of Performance Monitoring and Evaluation (DPME), but had achieved 100% on enforcement of procedures to collect arrear prospecting fees. However, all the branch’s targets on promoting good governance had been achieved. The highlights of the branch included the delivering of projects in the Northern Cape, Mpumalanga, Limpopo, Guateng and the FreeState; the donation of refuse trucks to the Lekwa Local Community by Seriti Mining Ltd; and the construction of an early child development (ECD) centre in Denysville.

Ms F Ntokozo Ngcwabe, DDG: Mineral Policy and Promotion, DMR, said that the branch had achieved all its targets in the implementation of the Oceans Economy Operation Phasika plans, and had further supported 75 small, medium and micro enterprises (SMMEs) instead of its initial target of 60. Also, the branch had organised 32 investment promotion events/forums/ workshops. The branch had engaged in one social dialogue instead of its target of two. The Department had achieved its target on the implementation of the shale gas action plan instruments, but had achieved only one of its four targets on the implementation of international strategic partnerships. On the implementation of Shale Gas activities, two monitoring boreholes had been drilled and geological logging, sampling of percussion chips, downhole geophysical surveys and hydrogeological tests had been conducted on the boreholes. Also, a technical specification for the 2-D seismic survey had been concluded and submitted in preparation for tender publication. A consultant had been appointed to oversee the technical specifications, the bid evaluation, contracting and technical auditing for the 3 500m ultra deep borehole, and a specification document had been produced. 

Discussion

Mr A Pikinini (ANC) said that issues of litigation usually resulted in a loss of money if not properly handled, and therefore requested that the Department highlight any such litigation and loss. He expressed concern on corruption incidents that had occurred in three regions in the past and the associated security challenges. This could result in the Department spending more money. From this, it appeared that it did not have cost cutting measures to deal with the payment of money, saying that if a contract had been entered into, it would have been possible for the DMR to get out of it. It was also necessary for the Department to look out for best possible ways to minimize government expenditure. These challenges at the end of the day resulted in compromising service delivery matters.

Ms H Nyambi (ANC) commended the team from the DMR on their performance and asked if acting positions had been included in the summary of job vacancies stated on page 20 of the document, since acting positions were only temporary. She sought clarity on whether or not the UNISA office in Mpumalanga was a satellite of UNISA. She inquired about the project for the vulnerable, and wanted to know why the target had not been achieved.

Mr M Matlala (ANC) expressed concern over when the Department would fill vacancies that had people in acting positions, indicating that during their last meeting, the Minister had said that by end of year, the Department would have filled all such positions. The concern was based on the fact that, ‘actors’ may do as they wish, since they were uncertain of their positions. He also requested a breakdown of the performance of each entity rather than a general performance of the Department so the Committee could determine whether they are doing well or not.

Adv H Schmidt (DA) requested an objective measurement on how the Department did its work, especially with regard to mineral regulations. He also enquired about the number of court cases the Department was dealing with in the year, and the outcome of those cases. At the beginning of last year, the Committee had made a mental note of a number of cases in the human resources of the Department of which it was not aware, and as such needed an explanation on which cases had been taken to court without the knowledge of the Committee. He also wanted to know what criteria were used for selecting the schools and students.

Ms Y Yako (EFF) referenced page 5 of the document, and asked if it was realistic to say that the available budget of R 415 866 million would be spent or rolled over to the next financial year. Also, page 8 of the document indicated a decline in performance from 31 March, and she wanted to find out what the reason for the the inability of the Department to achieve above 80%. Why were there no specific bursaries for education in mining? Was this as a result of a lack of funding? How did the Department plan on working on security-related issues in mining areas? Were these security concerns related to workers striking or protecting workers, and were there no measures in place to ensure that all staff were covered?

Mr S Luzipho (ANC) expressed concern at the difficulty in answering some questions in the absence of the Minister, Deputy Minister and Director General, and added that the quarterly report was for the people in the Department to account for how they had utilized the limited resources given to them. It was risky that the entities in the DMR did not interact with the Committee until it was time to account for the budget expenditure, and requested consideration of a different module of accountability with regards to entities. Also, it was important that the Department updated the Committee on new appointments for the purpose of clarity. He further made reference to the budget speech of the Minister, which had indicated that the government intended reducing the public service wage bill. He therefore wanted to find out if there was a possibility that vacancies in the Department would be filled any time soon? What was the potential risk of losing current skills to voluntary retention, and what were the implications?

Ms Gamede responded to the concern about risk management at the three regions, and how the DMR was dealing with the issues of corruption there. The Department had written to lawyers in one of the regions, requesting them to terminate the contract as it was an invalid contract. However, the issue had not yet been taken to court but was still at the deliberation stage between the lawyers. The Department was, however, looking out for other options. It had not experience a loss because of those rentals, as the contracts benefited the Department in terms of lowering of rental fees. However, that did not validate the contract and in view of that, the DMR was effectively trying to secure alternative accommodation with the Department of Public Works (DPW) before the end of the contract in 18 months’ time. The DG had requested the services of a consultant to assist with the issue. With regards to the cases of corruption, she said that the case had been reported to the South African Police Service (SAPS), and the Department was awaiting a report. A process had been initiated  to relook at all lease agreements.

Efforts were under way to improve security in the regions where the upgrade had not yet been done. These regions included the Western Cape and Rustenburg, as highlighted in the report. This was to make access easier for staff and the public, and to tighten security around those places.

The only acting positions she could report on was that of the chief financial officer (CFO), who was no longer with the DMR, making it necessary for the position to be temporarily filled. The position had already been advertised and a new CFO would be appointed by June, since the Department usually filled vacant positions within a period of six months. The Department had progressed far in terms of finalising other appointments, and the Minister would announce the appointment of chief executive officers (CEOs) of other entities of the Department soon. It was finalising interviews together with the Department of Energy.

On the question of the UNISA office in Mpumalanga being a satellite office, she confirmed that it was indeed a satellite office.

The inability of the Department to achieve special projects had been due to the Sibanye strike, which resulted in the non-conclusion of the agreement. As a result, there had been a shift in focus from operational matters in order to deal with the extraordinary situation. However, the situation had been resolved and so the agreement would be finalised in the fourth quarter, and the project subsequently implemented.

With regard to the performance of state-owned enterprises (SOEs), she said that this was not included as part of the DMR’s performance. However, the CFO could respond to budget performance, if such information was available.

In response to the question on court cases, she said that the Department had reported on over 10 major court cases at its previous meeting with the Committee. The ones reported on had gone through the normal court process. However, the Department still had some more court cases to deal with. Some of the appeals were being dealt with by the Department and those had not gone to court yet. Nonetheless, there had not been any court cases between the Department and an employee.

The criteria for skills development were based on a rotation from schools that were in need, depending on the province. The Department chooses one or two of those schools, based on the available budget, and rotates provinces in order to identify the towns and areas that have been supported.

On the question relating to the performance of the Department, she said that the performance would be achieved in the last quarter.

With regard to the question on the number of bursaries, she said that reporting was not yet due and that the figure would be known by the end of year. However, the target was likely to be over-achieved because the Department had had a lot of assistance. The bursaries would be awarded in the mining sector to capacitate employees of the sector and critical skills relevant to the mining industry. 

She said the communique relating to the possible voluntary retrenchment was received only on the night before the meeting with the Committee. The Department had been contemplating how to release employees voluntarily, but had come to realise they might lose people with critical skills. On the other hand, it did not want to retain people who did not want to be retained. However, it would evaluate the modalities for carrying out the directive so it would be to everybody’s benefit, including the Department.

Mr Luzipho expressed concern about how the Department could have an irregular contract yet would not lose any money, citing the claim by the Attorney General that the Department had irregular and wasteful spending amounting to about R20 million. He also cited the payments from the Department for an office in Mpumalanga which was non-existent, and the payment for two offices in the Western Cape. He therefore requested that the Department regularises wasteful expenditure and find better ways of dealing with corrupt officials, rather than dismissing them.

Ms Gamede said that the reason there were no court cases was because one person had been fired, and the other person was still an employee of another government agency. The DMR had, however, written to the employer of the person since the case had to be dealt with by that agency, and had been communicating with them to find out how far they were with dealing with the matter and assisting in that regard.  She further indicated that the other official had been released, but the case had been reported to SAPS and part of the person’s pension grant had been deducted to pay for part of what he owed the Department. Should the court ruling demand that he pay back, the Department would find a way of retrieving the rest of the money.

Adv Schmidt requested an explanation for the unforeseen incidents of irregular expenditure, as stated in the document.

Mr Matlata enquired how much had been budgeted for SOEs, and asked about the performance of entities. 

Ms Morabe responded that the irregular expenditure had not resulted in any financial loss to the Department, as the reviewed contract had resulted in a reduction in the amount, rather than an increase. The only challenge with that irregular expenditure had been that it had not been put out to tender for competitive bidding. The Department had therefore received value, because the accommodation for which the contracts were signed was still being used. 

The Department had, however, lost R9 million to fruitless and wasteful expenditure. This was expenditure incurred from the beginning of the irregular contract, since 2014, but was only for the regional office in Cape Town. However, there had been no irregular contract in the case of Welkom, because the contract had been signed by the DG and the payment being made to the service provider was based on the terms of the regular contract.

The incident at Mpumalanga constituted a financial loss, which was fruitless expenditure, because the Department had paid for installation to the DPW. However, there had been another submission prepared, which was approved by all the officials of the Department who were supposed to approve, including the DG. With this, the Department had been misled into paying another installation to TPG Africa, although the money was supposed to be paid to the DPW.

The second incident of fruitless expenditure was from the Department paying for a building that did not exist for ten months. Although the building was supposed to have been used for storage, upon investigating, the Department had realised the building did not exist. Payment for the installation and for rental of the building that did not exist added up to the R6 million, including the Western Cape installation. The Department had realized that it may have missed other payments, however, and as a result it had hired the services of a consultant to help identify if all payments had been done properly. The outcome of the consultant’s work would be ready by the end of the financial year. There was the likelihood of excess financial loss based on similar happenings in the Eastern Cape.

Ms Yako expressed her worries about the wasteful and irregular expenditure. She wanted to know if the DMR had proper supply chain mechanisms to ensure that it did not incur such losses. What costs had it incurred as a result of irregular expenditure?

Due to time constraints, the Chairperson requested the Department to return the following week with prepared answers to complete the process and clarify issues pertaining to wasteful expenditure.

The meeting was adjourned.

Download as PDF

You can download this page as a PDF using your browser's print functionality. Click on the "Print" button below and select the "PDF" option under destinations/printers.

See detailed instructions for your browser here.

Share this page: