Mineral Resources and Energy Budgets: Committee Reports

Meeting report

Opening remarks
The Chairperson welcomed everyone and reminded the Committee that Fridays were also working days. He also informed the Committee that they were facing a time constraint. He noted Mr M Wolmarans’ (ANC) late arrival and said the Committee had been waiting for him to arrive. Apologies were received from Mr M Dlamini (EFF) and Mr D Mthenjane (EFF).

As per the consensus by Members, the Committee would deal with the reports in their entirety but focus on observations and recommendations. He briefed the Committee on the current climate of the industry and remarked that mineral resources and energy are in a state of trauma. There is a problem or a disaster. He noted that the directors of Aurora Empowerment Systems (Aurora) ripped off the company and left their workers with nothing. The Courts found the directors equally liable and were ordered to pay their workers, including fellow director, Mr Khulubuse Zuma.

The Committee would consider the two reports separately as Mineral Resources and Energy were separate departments in the previous administration.

Consideration and Adoption of the Report on Budget Vote of the Department of Mineral Resources (Vote 29)
Mr K Mileham (DA) said there was a contradiction on page two of the report. He felt that the first sentence contradicted itself. The sentence read, "Despite a more positive policy environment, mining remains under extreme pressure…”. The next paragraph talked about how South Africa is poorly ranked. The two paragraphs were contradicting each other. In terms of mining policy, South Africa is poorly ranked. The Committee was deluding itself thinking that South Africa’s mining policy is positive towards investment because it is not.

Mr M Wolmarans (ANC) appreciated that the Chairperson had accepted his apology for arriving late. He was late due to transport delays. In response to comments raised by Mr Mileham, the first part was an observation from the Committee, and the second was according to a different source. There was therefore no contradiction. It is fact. The policy environment remains under pressure, but there is investment attractiveness toward the mining industry.

Mr Mileham insisted that the policy environment is not positive. Capital is leaving the country instead of coming in. Big companies like De Beers are leaving the country because the country no longer has a positive policy environment and does not attract investment. South Africa is no longer an attractive mining destination due to the mining policies in place. Companies were not going to invest where they are insecure or if they are uncertain about what was going to happen the next day. The reality is that the country was not getting more mining licensing, the numbers of mines have decreased substantially, and the number of mining operations are decreasing. The number of applications had dropped because it takes too long to apply for and get a mineral right. The Department of Mineral Resources (DMR) had admitted to all these things. The Committee should refrain from making statements that assume the mining sector is doing well when it is not. He suggested that the statement be amended to "mining remains under extreme pressure despite the more positive mining environment".

Mr S Kula (ANC) remarked that the statement highlighted by Mr Mileham should not change. The views of an individual should not supersede research. He insisted that South Africa does have a positive policy environment, but accepted that there are challenges in the mining sector. That does not mean the policy environment is not positive. The statement should remain unchanged.

Ms C Phillips (DA) said that she would love to see the research that Mr Kula was referring to.

Mr M Mahlaule (ANC) said the spirit in which the Committee looks at the aforesaid sentence should be positive. He felt that the sentence should remain unchanged, while acknowledging that there are some problems in the mining sector. There is a mitigating factor that comes with reviews of the mining charter itself. The policy is widely accepted by company stakeholders.

Mr Mileham pointed out that commodity prices are not low, but are in fact at an all-time high, including gold, which is one of the country's major export minerals. The statement that commodity prices are low is incorrect and misleading. He stated there was no universally accepted review of the mining charter. The Minerals Council South Africa (MCSA) is taking the mining charter to review because the Minister’s constitutional authority to review the mining charter is in question. The legislation does not give the Minister the authority to review the mining charter. He assured the Committee that he does not deny that the mining charter has been reviewed by the Minister, but rather that the mining charter is in court because the mining sector does not agree that the Minister has the authority to review the charter. He insisted that the Committee needs to state facts if it wants to be honest in its observations. He concluded his commentary by reemphasising the point he made earlier that the mining sector is in decline and that commodity prices were high, not low.

The Chairperson replied that the Committee should consider the report without dealing in theories of the economy. The paragraphs are an illustration of facts rather than a contradiction, and he also believed the sentence should remain unchanged. He added that there is no current compliance with policy in the industry. The mining charter was not taken to court, but the issue raised in court is a part of the mining charter. The section of the mining charter taken to court deals with the renewal of a license. It states that “when you make an application of renewal of a license, you should comply with the new proposal of the mining charter.” The MCSA does not have a problem with the mining charter but are satisfied with the process of the mining charter. They do take issue only with a section of the charter that was being heard in the court. However, it is not a big issue.

Report Observations
The Chairperson took Members through the observations section of the report. He informed the Committee that there may be some imperfections on the draft as it is drafted by humans. He implored Members not to reopen previous discussions. Some of the observations were as follows:
There is no backup plan on how the Department will address the issue of illegal mining, especially the approach that addresses the whole value chain of illegal dealings. There is no clear timeframe when benefaction will be implemented, and there is no clear description of the roles to be shared between minerals and energy. There is a need for mining benefits to flow into the community. This is not possible without making sure communities are fully informed on what to expect from mining projects.

It is not clear how the Department will deal with the problem of staff skills in the industry, which could eventually reduce the country's dependence on foreign skills. The issue of occupation decision continues to negatively impact the mining industry. There is still a need for investment in research and development to ensure that the burden of decision making is drastically reduced.

The roadmap for the institutional legislative agenda needs specific commitments in relation to rock mechanics, which are an important discipline in ensuring that the rate of fatality in the industry decreases. However, there is minimal consideration towards other critical skills which are also crucial in dealing with emergencies like mine clearing.

60 mining projects were in the pipeline. There is a problem with licensing mines in Polokwane. Compliance and enforcement in the department remains a huge problem. The effort to utilise healthcare facilities by communities residing near the mines was welcomed by the Committee.

Report Recommendations
The Chairperson highlighted the report recommendations as follows:

The Department should devise a plan that will deal with the whole value chain of illegal mining; clarify the stage of its beneficiation strategy and present to the Committee; invest more in publicity drives on the mining charter three and its associated benefits to mining employees as well as host communities; have a balanced approach in financing studies related to mining scarce skills.

Focus also needs to be given to mine rescue skills; reducing the burden of occupational health in the industry; production of a time-frame specific legislative program, with a binding time frame; investing in rock mechanic to reduce mine fatalities; explore all possible funding avenues, including approaching National Treasury (NT) to seek the speeding up of modernising of facilities; finding a way to mitigate retrenchments in the sector and should ensure that the legislation problem is submitted to the Committee by 31 July 2019.

Further, the Department should: present to the Committee strategies which are outstanding from previous financial year’s commitments, namely the Woman in Mining and Coal Strategy, etcetera; must present a plan to the Committee that clearly demonstrates how the department plans to address the backlog on the Medium Term Strategic Framework (MTSF) goal for the rehabilitation of derelict and ownerless mines; facilitate a resolution to the Lilly Mine tragedy, and continually provide progress reports to the Committee.

Discussion

Illegal Mining
The Chairperson stated that there is a multi-departmental structure that deals with illegal mining. It involves departments such as DMR and South African Police Service (SAPS) to mention a few. Despite acknowledging the existence of such a structure, he felt it is not effective in dealing with the problem. It is ineffective in tackling the problem. Illegal mining is not only a crime issue but also some form of corruption. To deal with illegal mining one needed to address both crime and corruption.

Mr J Bilankulu (ANC) said that DMR does not prioritise illegal mining despite the loss of R20 billion a year. This is huge loss and the Department should prioritise the challenge and not delegate responsibility to the police saying, “it is a criminal activity". The Department should also take responsibility because of the huge economic impact and loss that illegal mining has on the mining industry. The police cannot take sole responsibility in dealing with this broader challenge. The illegal mining challenge is the attitude towards the problem. It is not viewed as a criminal activity and tends not to be prioritised enough by the Department.

Ms Philips, avoiding being misconstrued, said she believed the majority of people that commit such crimes are foreigners. She believed foreigners were largely responsible for illegal mining. She suggested that illegal mining should be integrated into formal mining, as had been successfully done in countries such as Venezuela. She questioned why such expertise has not been utilised or considered in South Africa to deal with illegal mining. Integration would minimise the annual loss of the mining industry caused by illegal mining. Integrating “zama zamas” into the formal economy would help reduce the number of informal miners.

The Chairperson said the solution would be impossible to apply because there are many illegal miners in South Africa. It would be impossible to fully integrate them into the formal mining sector. Integrating illegal miners into the formal mining sector was an issue of payment. The money paid to formal miners was nothing to illegal miners, and would therefore influence their decision in wanting to be integrated into the formal sector. Someone who makes more than the money paid in the formal sector will be reluctant to leave illegal mining behind.

The Chairperson said as long as the multi-departmental structure remains ineffective in dealing with illegal mining, there will be no change. He added that the police are not able to mitigate illegal mining because tackling the problem requires special skills, and most police officers do not have these skills. Some minerals are more protected than others. Diamonds are more valued than gold. There are not too many laws that restrict the illegal mining of gold, unlike diamond which is protected by laws that make it difficult to sell it illegally. When mines shutdown, commodity remains, which results in illegal mining because the abandoned mines become an opportunity for illegal miners. There needs to be an efficient multi-departmental structure that works effectively in dealing with illegal mining, and there needs to be an understanding that illegal mining is not only an issue of crime but corruption as well. There are many factors that contribute to illegal mining. A single solution approach cannot mitigate the problem.

Mr Kula said the Committee should not repeat echoing that government has no proper plan or strategy to deal with illegal mining. The Committee should move forward and not dwell on something that had already been acknowledged.

Mr Mileham expressed concern that the Committee was discussing the report without the ability to amend it. The Committee should have the ability to amend the report then after a day or two meet again to make a determination as to whether the said amendments were agreeable to or not. Although the time constraints were understandable, this was a procedural matter. As it stood, this was a Committee Staff document. It could only be a document from Members after amendments are effected, flowing from the latter’s thoughts and inputs.

The Chairperson agreed with Mr Mileham. However, the Committee was following parliamentary procedure. The reason being that there is a limited timeframe in which the draft must be discussed. He added that the Committee does not have a day or two within the timeframe provided. In the future, Committee Members will deal with issues in their respective political parties. He told the Committee that he takes full responsibility for how the procedure has been conducted. Next time, the Committee will do things the proper way. He acknowledged that Mr Mileham was right in raising the issues he had raised.

Mr Kula said the draft report reflected the observations made by Members, summarised by the Committee Staff[HN3] . It was incorrect for Mr Mileham to say the report was from Committee Staff as it summarises inputs and comments made by Members during meetings.

Mr Mileham raised a point of order. He said he had been misconstrued by Mr Kula. He clarified his earlier comment. Yes, the observations may have been recorded, but they may have been recorded incorrectly even though all Committee discussions might have been captured. Members need to be given an opportunity to make amendments, and identify what they agree with, and what they do not. Once the report has been corrected, the Committee could adopt it and at that point it becomes a Committee report. The process he just outlined has been the standard practice of Parliament since 1994. He added that he understood that some Members were new, which is why they might not fully understand parliamentary processes.

Mr Kula refuted the claims made by Mr Mileham that some Members might not understand parliamentary processes because some they were still new. Mr Mileham was out of order in saying the Committee does not understand parliamentary processes.

The Chairperson said the Committee should focus on the report and not argue about something everyone knows. He added the observations in the report reflect Committee discussions. There was nothing wrong with Mr Mileham’s comments and no one had said the report is the Committee’s. The report could never be a Committee report if it is not adopted by the Committee. He would never allow a report to come to the Committee if he as the Chairperson never participated in its drafting. It is a report prepared for the Committee, which includes the Chairperson. It is not a Committee report until it is adopted.

Mr Mileham said if the Committee decided that they wanted to add something in the recommendations, and all Members agree that it is something they want to amend, would the Committee get a query why it cannot be adopted?

The Chairperson, in response said, clearly not. He explained that the report could be corrected as recorded. Minutes of the meeting that adopted the report will reflect in the next meeting. Even if the Committee were to be given two days – one cannot come back and say they will wait for the report. The report could only be adopted if all Members of the Committee are satisfied. Amendments might be made to the report, but it must return to the Committee and can only be passed if all the Members are happy. Even if recommendations for amendments are made the following week, there might still be more queries. The adoption of a report follows this process and must be reflective of what members of the Committee agreed on. If it does not reflect what the Members agreed on, it will return until it is finally adopted.

Mr Mileham interrupted the Chairperson to state that he does not agree with some of the observations. He wanted to make amendments to the recommendations in addition to those he had highlighted. The first amendment would be on the first bullet point. It should deal with the whole value chain of illegal mining. He wanted to add “including the bringing the illegal number into mainstream mining.” It should deal with how the Department is dealing with illegal miners into the mainstream mining sector. The Minister of Mineral Resources should report annually on mine health and safety issues and fatalities, and how they intend of address those problems. The other amendment was on the second last bullet point. It is a reactive plan to increase investment strategies. The Department needed to bring new mining investments into the country instead of band aiding the job losses. The Minister should present how he will mitigate job losses.

The Chairperson said that he did not have a problem with Mr Mileham’s suggestions. The Department should report to the Committee on its comprehensive strategy, which will deal with issues of crime and corruption. A comprehensive strategy will deal with all aspects of illegal mining.  They cannot single out the conversion of the illegal mining sector into the mainstream. The Department must continually brief the Committee on the challenges in relation to fatalities. On the last suggestion, he did not think the Committee has a problem with Mr Mileham’s proposal. The recommendation should include "strategies to improve investment attractiveness".

The Chairperson put the report up for adoption with amendments.

The report was adopted with amendments.

The DA reserved its position on the report.

Consideration and Adoption of Report on Budget Vote of the Department of Energy

The Chairperson highlighted the contents of the report and asked if there were any comments from Members..

Mr Mileham raised questions on the energy plant proposal. He remarked that he had difficulties in understanding what the Minister had said about the opening of a liquefied natural gas (LNG) plant in Gourikwa. He wanted clarity on what the Minister meant. Was it the licensing and registration that was preventing the private investor from opening the plant in South Africa? There was also the question of whether the plant would open in Richards Bay or Gourikwa. He added that he does not know whether government is in the process of opening an energy plant. The Minister had also stated that if the Department does not fix the issue within a year, the plant would go to Kenya.

The Chairperson explained that the Gourikwa and Richards Bay proposals were separate. Whereas, an LNG plant was proposed for Gourikwa, a  refinery was proposed for Richards Bay. In his  understanding, the Minister was referring to the refinery. There was an investor who wanted the refinery to be in Richards Bay. The Minister had claimed that if government told the investor where to invest, the investor would likely to take their money to Kenya.

Report Recommendations
The Chairperson opened the floor for discussions on the recommendations. He informed the Committee that there were 30 recommendations all in all but only eight were up for discussions during the meeting. The rest of the recommendations would be discussed in the next session.

Mr Mileham said that the first recommendation should be amended because it only included the integrated resources plan and did not include the integrated energy plan which is supposed to be updated annually. He recommended that “interested energy plan” be added. Municipalities should be allowed to directly purchase electricity from independent power producers. He advocated for the licensing of small renewable energy, stating that the framework around it should be changed. He added that the Minister had the power to respond to the issue immediately, with ease. He clarified that he was not pushing the Minister to a solution in relation to issues of renewable energy regulatory frameworks. He wanted the Minister to inform citizens of his decision on how he plans to deal with these issues.

The Chairperson said it was long process before a conclusion is reached on such decisions. The Department must deal with the energy sector in order for all the requests made by Mr Mileham to be possible. The process cannot be sped up.

Mr Kula said the Recommendations section of the report should not be amended, but rather be left as is.

The Chairperson clarified that the Minister will appear before the Committee and inform Members on his decision and approach in resolving some of the issues. Only once the Minister has briefed the Committee on the issue can the Department decide how they approach the situation. The Committee should leave the sentence as it is until the Department reports to the Committee on their approach toward the finalisation of the integrated resource plan. The Committee could amend the paragraph only once Members know the Department’s attitude towards the issue. The Minister would be expected to discuss the whole energy issue, not deal with a specific area when he appears before Committee. He reiterated that this will be dealt with later, and no amendments should be made at this stage. He put the report up for adoption without amendments.

Ms V Malinga (ANC) moved.

Mr Wolmarans seconded.

Mr Mileham reserved the DA’s right on the report.

The report was adopted without amendment.

The Chairperson adjourned the meeting.