The South African Mining Development Association (SAMDA) stated that historically mining in Southern Africa was exploitative. Foreign companies mined the minerals, made massive amounts of money, but paid nothing back in royalties to the communities within which they operated. In the 25 years since democracy, a new mining law, the Mineral and Petroleum Resources Development Act (MPRDA) had come into operation in 2004. This law was progressive in that it prescribed a different approach to mining, where the communities which host the mines, should benefit from the proceeds of the mine. This law is not being implemented by government. SA is bleeding massive amounts of money due to a financial process called transfer pricing, applied when selling minerals to foreign countries, which the government can stop, but does not. The process of obtaining exploration and mining rights is inefficient and difficult, leading to a decline in mining exploration. SAMDA has been petitioning government for many years to implement the sections of the MPRDA that deal with empowering junior miners as well as those sections on the beneficiation of communities in the broader sense, but to no avail. This presentation was made with a sense of optimism for the future, because the new Minister of Mineral Resources and Energy has a background as a trade unionist and will hopefully be sympathetic to the aims and objectives of SAMDA.
Members asked why the MPRDA was not implemented and how beneficiation could be fast-tracked; why the definition of junior miner differed from the international definition of junior miner; why SARS and Treasury did not stop transfer pricing and allowed mining revenue to flow out of the country. Members asked if capitalism was a good economic system for South Africa and how mining towns could thrive post-mining, instead of becoming ghost towns.
The South African Petroleum Industry Association (SAPIA) explained it has seven strategic initiatives: refining sustainability, combating climate change, the industry’s impact on health, safety, security and the environment, fuel price regulation, security of supply, transformation, advocacy and communication. South Africa has a highly developed and regulated liquid fuels sector with a 8.5% contribution to the economy. More than 27 billion litres of liquid fuels are sold per year, which represents 18% of SA’s primary energy needs. During 2019-2024 R155 billion is going to be invested in this industry, including the Clean Fuels II investment. This industry contributed R123 billion to the national fiscus in 2017.
The total number of people employed directly and indirectly by this sector is 750 000, and the sector supports institutions of higher learning which train engineers and technicians for the high level of technical proficiency needed in the sector. The role of fossil fuels is declining due to the changes needed to mitigate climate change, but South Africa is caught in a Catch 22 situation. It needs cleaner fuel, but it cannot afford it. Government has to accelerate the development of a suitable fiscal arrangement to facilitate these investments by existing refiners. SAPIA looks forward to sharing relevant research with the Committee to contribute to evidence-based policy making and implementation.
The Council for Scientific and Industrial Research (CSIR) is a science council, classified as a national government business enterprise. It aims through research and technological innovation, to foster, in the national interest industrial and scientific development, and contribute to the improved quality of life of South Africans. It has 2344 staff of which 62% is black and 36% female, 320 have PhDs and 586 have Masters. It holds 19 patents and has a total income of R2 534m.
Challenges in the mining industry include that health and safety need to improve, some mining operations are not viable or profitable, skills shortages, expensive mining equipment and mine rehabilitation processes, as well as social issues such as lack of decent, affordable housing and HIV and TB prevalence.
Opportunities in the mining sector include the vast deposits of mineral wealth that rate first in the world for chromium, manganese, titanium and gold reserves. South African mining attractiveness has improved dramatically since 2017. The Policy Perception Index showed a 21% improvement and South Africa’s mineral potential is ranked as 20 out of 91 (Fraser Institute, 2018).
Within the current scenario, the CSIR sees RDI opportunities in the mining sector in the formation of the SAMERDI Strategy, a unified approach to addressing the key challenges to mineral extraction. The sector requires support in the form of funding to improve health and safety.
Minerals Council South Africa said it represents mining and exploration companies operating in South Africa and, on their behalf, supports and promotes the South African mining industry. It provides strategic support and advisory input to its members. Minerals Council SA acts as a principal advocate to government, to state-owned enterprises, communicating major policies and positions endorsed by its members and represents the industry internationally. The Minerals Council represents more than 70 large, medium-sized, small and emerging miners, and three associations that collectively represent over 200 entities. Minerals Council members make up around 90% of South Africa’s mineral production by value.
The Minerals Council has a five-pronged strategic plan. Its slogan is: Making Mining Matter and the five goals are to resuscitate the mining industry; create a conducive environment for successful mining; rally the Minerals Council and its members to implement a positive contribution model; lead by example with regards to transformation, safety, social and environmental imperatives and improve continually.
The economic contribution of mining has declined. Mining has fallen from 15% of GDP in 1990 to 7% currently. While fatalities and mining related lung diseases have been declining steadily since 2007, more needs to be done to live up to the ideal of to do “Zero Harm”.
The Minerals Council provides thought leadership in ensuring its member companies operate in an environmentally sustainable manner. It wants to ensure a stable legislative and policy framework for mining to thrive in. There is still work to be done as there are a number of unresolved challenges impacting on mining which include the value added tax (VAT) and tax system, the environmental laws as well as the implementation of carbon tax.
Mines depend on government infrastructure involving water and electricity supply, ports and roads. Mines use 30% of Eskom power. Problems with these facilities impact on mining performance.
The Minerals Council’s proposed strategy for a thriving mining industry includes that all stakeholders should have a shared vision of the future of the RSA mining industry, ethical leadership and good governance, policy and regulatory certainty and competitiveness, available, efficient, cost competitive and reliable infrastructure, improving productivity and competitiveness and creating a Greenfields exploration boom.
The Chairperson explained that this being the first meetings of the Sixth Parliament, the Portfolio Committee was familiarising itself with the entities which existed within the field of mineral resources and energy. The previous day the Committee met with the unions which function within this space. This meeting was allocated to the employer umbrella bodies as well as the CSIR, which was not an employer, but a strategic partner in the field.
South African Mining Development Association (SAMDA)
SAMDA promotes emerging junior mining operations and those who are historically disadvantaged. Ms Bridgette Radebe, SAMDA president, accompanied by Mr Peter Temane, stated that historically, investments in mining had an exploitative nature in South Africa and the rest of Africa. There was no black ownership and mining companies extracted minerals, but paid no royalties to the communities around the mine. Twenty five years after the advent of democracy, the political emancipation of South Africans has been achieved but the economic emancipation of the majority of South Africans is a fallacy and not a reality.
She defined neo-colonialism as “the intrusion of foreign economic domination, as well as military and political intervention, in states that have already achieved independence from colonial rule.” There is a need for the mining industry to move from the exploited industry model to a sustainable mining industry model.
Section 100(2)(a) of the MPRDA reads: "To ensure the attainment of Government’s objectives of redressing historical, social and economic inequalities as stated in the Constitution, the Minister must within six months from the date on which this Act takes effect develop a broad-based socio-economic empowerment charter that will set the framework, targets and time-table for effecting the entry of historically disadvantaged South Africans into the mining industry, and allow such South Africans to benefit from the exploitation of mining and mineral resources.”
The Mining Charter defines “ownership” as the meaningful participation of Historically Disadvantaged Persons with: Unencumbered net value ownership; Voting rights attaching to an equity instrument owned by or held for a participant measured using the Flow-Through Principle or Control Principle; Economic interest representing a return on ownership of the entity similar in nature to a dividend right, measured using the Flow-Through Principle.
Beneficiation should be a tool for job creation, skills enhancement and achieving the goals of the National Development Plan (NDP). Mining companies should facilitate local beneficiation of mineral resources by adhering to the provision of section 26 of the MPRDA and the mineral beneficiation strategy. It is unfortunate that the majority of the companies import finished (manufactured) goods from off shore, instead of manufacturing goods locally, hence causing severe job losses and denying the country skills enhancement opportunities. Job creation for retrenched workers through beneficiation promotes skills transfer and development in the mining industry. By complying to the Mining Charter through beneficiating minerals, small and medium enterprises and manufacturing industries will be promoted, thus stimulating job creation and diversified economic development, through industrialisation.
Slide 14 of the presentation describes how the state intends to use the different minerals for added value creation and beneficiation through the Strategic Minerals Investment Policy.
In 2014, a decade after the Mining Charter came into effect, the Department conducted a second assessment. The most salient points of the assessment was that the spirit of the Mining Charter was not fully embraced, and compliance was generally thought of as a means to protect " the social licence to operate ". The majority of mining communities continue to live in abject poverty, despite the State being the custodian of the country's mineral wealth on behalf of the nation.
Transfer pricing results in non-compliance to the Ownership Requirements of the Mining Charter. The goal was 26% Broad-Based Black Economic Empowerment ownership through Unencumbered Net Value equity participation by 1 May 2014. The current ownership structure is a neo-colonialist ownership model that perpetuates ownership of the country’s resources and mines by foreign investor monopoly. Ownership is still unrealised in the majority of Broad Based Black Economic Empowerment transactions because of a lack of profit, that resulted in lack of dividends and non-payment of equity for ownership of the mines, due to transfer pricing.
The Department should have a policy that will put all mining producers under the obligation of securing procurement opportunities for mine workers that are being retrenched. Mining ghost towns exist in the Free State and Northern Cape due to the lack of procurement and beneficiation in those towns during the period the mines produced minerals, and prevented the creation of small businesses and secondary industries.
SA mining companies prefer to procure goods manufactured off shore such as China, instead of promoting goods manufactured in South Africa or in mining towns to contribute towards local economic development.
In the time of renewable energy, fuel cells will be in high demand (see presentation for explanation and diagrams, slides 24, 25,26). These cells can be used to generate and store clean electricity to power buildings, transport, machines and appliances. These cells can be manufactured in SA, and the manufacturers will benefit from tax incentives. The Section 12L Tax Incentive is designed to support Greenfield investments (i.e. new industrial projects that utilise only new and unused manufacturing assets), as well as Brownfield investments (i.e. expansions or upgrades of existing industrial projects). The new incentive offers support for both capital investment and training. The incentive offers R900 million in the case of a Greenfield project with a preferred status, R550 million in the case of any other Greenfield project, R550 million in the case of any Brownfield project with a preferred status, R350 million in the case of any other Brownfield project.
SA has a Special Economic Zone (SEZ) program. A SEZ is a geographical region that has economic and other laws that are more free-market-oriented than a country's typical or national laws. The SEZ Act commenced in February 2016 and several SEZs have been designated with tax incentives. Special economic zones can be a catalyst for Mining Charter compliance and achieving the NDP.
There are clauses in the MPRDA that the Minister can use as punitive measures to penalise stakeholders that are in breach of the legislation. The Minister may cancel or suspend any reconnaissance permission, prospecting right, mining right, mining permit or retention permit if the holder is in contravention of the Act. What it boils down to is that the Minister has powers to shut down mining operators who refuse to comply with the MPRDA.
An integrated mining development partnership with local, provincial and national government, as well as producers, labour, rural communities, business and various other stakeholders is needed. The objective would be to create a sustainable mining economy in the rural areas, where mining production takes place, in a model that will sustain and develop the mining areas, rather than creating ghost towns.
The example of an integrated resource development model has been implemented in the Eastern Limb of the Bushveld Igneous Complex since 2002. An updated progress report is available, which highlights some of the challenges faced by the stakeholders operating within the region, and demonstrates that this model represents a viable option for government in the future.
The presentation mentioned a number of mining companies involved in Rural Upliftment Partnership Models through Producers Forums, including Chromex Mining and Akanani Mining.
All South Africans should be committed to a economic and investment strategy and model that will ensure the economic sustainability of the country and the people of South Africa. The strategy and attitude should be “South Africa first!”
Mr K Mileham (DA) had a problem with the definition of junior miners as defined by SAMDA and the Department. In his understanding junior miners, as the rest of the world understood it, were companies which had the sole purpose of exploration.
Ms Radebe replied that when SAMDA created the junior mining chamber, it approached the Mineral and Energy Policy Centre for the mining industry to research the definition for junior mining and the Centre came up with this definition of junior mining. It also provided guidance on the structure of SAMDA.
Mr Mileham said Ms Radebe said SAMDA represented junior miners. If there was non-compliance amongst junior miners, what was SAMDA doing to ensure compliance? Why was the MPRDA not implemented by junior miners?
Mr Mileham said the presenter stated that just under 3% of listed companies complied with the 26% of the MPRDA. What percentage of junior miners complied? He asked what percentage of mines were owned by historically disadvantaged people in the SAMDA constituency and in the broader sense.
Mr M Nxumalo (IFP) congratulated Ms Hadebe for being elected as the Pan African Parliament Goodwill Ambassador. He said the presentation was insightful. It armed the Committee for future discussions and decisions on plans of action. He asked for clarity on the ownership within SAMDA and what the 51% and 26% meant as well as what free market meant within this context.
Mr Temane replied that he thinks the Member misunderstood the slide that spoke about 3% compliance and membership. SAMDA had a mixed bag of members. Some were black-owned and on their own and some had stakes in the major companies. As part of companies where the majority partner was not compliant, the minority partner, which would be the SAMDA member, will also not be compliant. The black-owned companies were compliant in terms of employment equity. All companies, whether small or big, had to adhere to the mining, labour and environmental laws of the country.
Mr Temane added that the mentioned 3% black ownership on the JSE was actually less than 3%. He took Exxarro as an example. It was common knowledge that after the initial 10 year walk-in period, the 51% black ownership fell to 30% and currently it was around 12%. In terms of transformation, the country was worse off than it had been before.
When major companies want to disinvest, they do not sell to independent black people. They sell to the usual suspects, the empowered entrenched companies who dominate the industry. Foreign companies invest in SA, make their money and run. "Once empowered, always empowered" the saying goes. The major companies listed on the JSE rebel against the BEE requirement, because they say they are publicly listed and can sell their shares to whomever they want. They say they cannot be restricted to have to sell to black buyers, but these listed companies have to comply with BEE laws because the minerals belong to the people, and they could lose their listing.
Mr Mileham felt that transfer pricing had to be raised with the Finance Standing Committee directly because SARS had said that transfer pricing was very difficult to prove. SARS needed stronger investigative powers.
Mr S Kula (ANC) said transfer pricing was corruption on a grand scale. It distorted the value of commodities and was an impediment to economic growth and development. He asked how SAMDA recommended it should be dealt with.
Ms Radebe replied that transfer pricing had to be looked at as an obstacle to transformation. SAMDA had a foreign company as a partner which did not pay tax in SA, and SAMDA said it would not become party to agreeing with transfer pricing. Ms Radebe refused to sign the audited financial statements of a foreign company with which she partnered. She was then called a delinquent partner. She brought it to Parliament and transfer pricing was looked into. She refuses to become a partner in foreign listed companies. In order for her to become a partner, the primary listing has to be in SA and the secondary listing could be anywhere in the world. She cited examples where she lived those principles and she insisted on practicing what she preaches. If she or a family member was to be a partner in a company which had a primary listing elsewhere in the world, it would send the message out to the world that they did not have confidence in their own country, therefore it was important to be committed to an economic, political and social agenda to uplift SA. One had to be loyal to one’s country and the rest will follow. One could make money - it had to be done the right way.
Mr Temane replied that Mr Mileham said that SARS had said that transfer pricing was difficult to prove. Mr Temane begged to differ. An agreement was signed with the previous President Zuma and Pravin Gordhan was the Minister of Finance. The President asked the Finance Minister to investigate what SAMDA was saying. Ten companies were investigated of which five were in the mining sector. SARS recuperated R5.4 billion within 4 to 5 months of which 70% came from the five mining companies. If this was possible, how much more money could be recovered? SAMDA wanted this investigative process to be rolled out on a larger scale to recover more money. The Presidency was not interested and the issue was put to rest. This Committee received that report from SARS. Transfer pricing is not difficult to prove. Transfer pricing is not illegal. The problem lies with base erosion and profit shifting, but the money can be recovered.
Mr Temane stated that this was his personal view and not SAMDA’s. He felt that there was no appetite in government to put an end to transfer pricing, because if there was, it would have been done.
Mr Temane had advice on transfer pricing. All invoicing of the exports had to be done in SA. A commodity could not be sold from SA for $38 per unit while the agreed international price is $600 per unit.
Ms Radebe added that transfer pricing was a SARS and Treasury function. Unfortunately SAMDA had never been invited by the Finance Committee to do a presentation on transfer pricing.
Ms Radebe joked that she had to become EFF on the issue of transfer pricing, because the EFF was hawkish on this issue. Floyd Shivambu did his master thesis on the subject. Judge Dennis Davis was looking into transfer pricing, so something is happening.
Mr Mileham asked what SAMDA’s take was on mineral rights administration. The presentation touched briefly on exploration and said that it was dying. In his opinion one of the challenges was a very bureaucratic system. He knew about a prospective miner who has had a two-year long battle with the Department.
Mr M Wolmarans (ANC) asked for SAMDA’s opinion on the licensing environment and how it affected SAMDA. He asked what affected new mining in rural areas. What effect will expropriation without compensation have on new mining in rural areas?
Mr Temane replied that in 2008 there was an attempt to create a one-stop-shop for mining licences. It never worked. Minister Shabangu suspended it for nine months to do an audit of exactly who owns what and other relevant information. The audit was done at the expense of millions of rand to government. The truth is that report had never been made public because it exposed the rot in terms of transformation in this country. This Committee has to ask the Department for that report.
Mr D Mthenjane (EFF) said that SAMDA’s presentation made a lot of sense. The minerals belonged to the people of SA and the government was merely the custodian. SAMDA had been coming to Committee meetings for years, but government has failed SAMDA, but it would not happen again. The problem was capitalism. Foreign companies will never benefit the people of SA. Price fixing was serious, but the government was not taking it seriously.
Mr Temane replied that he was not going to argue about capitalism. In his opinion the Mining Charter said everything that needed to be said about the matter.
Mr Mthenjane said in the previous day's meeting with the unions, when nationalisation was discussed, it was said that companies will leave SA if confronted with nationalisation. He said the companies will not leave as they need SA more than SA needed them. When mines are nationalised, transfer pricing will end. A state bank has to be set up. When companies want to invest in SA, an agreement is made with the company and the government sharing in the profits.
Mr Mthenjane asked SAMDA what the state of safety was in its mines, if workers were remunerated correctly, if workers had dignified living conditions, if workers were re-skilled to work outside the mine when the mine closed. He asked how many people were employed by SAMDA companies in SA.
Mr Kula wanted to understand how SAMDA’s business practice model was fundamentally different from those of other companies with regards to communities and empowerment schemes.
Mr Temane explained that in 2003 he took four black miners at one of his SAMDA partner mines who had 20 years of experience and supported them through a process to gain their blasting licences, because without it they could not become shift bosses. They attained their licences and he immediately promoted two of them to become shift bosses. Two of the white shift bosses resigned because they could not accept being on the same level as black shift bosses. SAMDA applied the principle of equal pay for equal work.
Ms Radebe replied that every year the employers and unions met and agreed on what workers will be paid during the coming period and the companies applied those decisions.
Ms Radebe said SAMDA assisted all junior producers, white, black or poor. There were few black producers. She said that it was a wrong impression that all white producers were bad. She explained how SAMDA and the Department had assisted a white-owned company to access a coal terminal at Richard’s Bay harbour to export its coal by enhancing the port’s capacity by 91 million tons. This was how SAMDA assisted junior mining companies.
Mr Kula said the presentation mentioned ghost towns and informal settlements and their association with mining, but did not elaborate much. These places were breeding grounds for many social ills like teenage pregnancy and unemployment. What does SAMDA suggest as a solution to these problems for residents of these places to live dignified lives.
Ms Radebe replied that the MPRDA states that the Minister must create a Minerals and Mining Development Board consisting of industry leaders, chamber of commerce, government departments and organised labour. With the first board that was created, the country was very blessed, because the industry leaders that were on the board were very unique. Unfortunately many of them had left, but fortunately Roger Baxter from the Minerals Council, who has a wealth of experience and SAMDA was still there. What SAMDA would like to see was that the board be functional and strong. There had been ministers who never constituted the board because they did not want to be confronted with the questions that SAMDA was asking at the board meetings. SAMDA wanted the Department to give it the ownership profile and started asking question to learn who owned what. SAMDA did not know that some people in the department might be compromised. It just wanted to know if companies were compliant. The minister got rid of some board members. In the MPDRA Amendment Bill, SAMDA suggested that the minister should not appoint the board. Parliament should look at how other boards of government-owned businesses are appointed. If the board functions well, then parliamentarians, together with business and labour will then look at elements of the mining charter and how it should be implemented. When the first board existed, it made sure that each subcommittee was responsible for an element of the charter, so there was a charter element of beneficiation, and an expert on beneficiation was then deployed to that subcommittee. The board had a financial expert and it started looking at the possibility of a resources bank for mining. If agriculture could have the Landbank, why could there not be a bank for mining.
With the board organised as described, it really made strides. Ms Radebe remarked that the mining industry does disagree as an industry, but loyal South Africans should not create the impression that the country is going astray. This is not a black-against-white struggle. Many white-owned companies are compliant or make serious efforts to be.
Mr Temane noted that in Joburg itself, no mining is taking place anymore, yet it is a thriving city. To answer the question on how towns should survive post-mining, copy the example of Joburg. Programmes should be put in place. The Royal Bafokeng was another case in point. Bursaries should be available to young people to study and equip themselves with skills that are in demand. It is strange that most diamond mines are in the Northern Cape, but Joburg is still the country’s economic hub.
Mr Wolmarans welcomed the insightful SAMDA presentation which explained the problem clearly. They had been coming to committee meetings for decades. The presentation alluded to the progressive laws that had been passed by Parliament, but lamented the lack of implementation. This was the gist of the presentation.
Mr M Mahlaule (ANC) welcomed the fact that the presentation was made by a woman and a younger person. No one who was invited to the committee to present should feel unappreciated. The presentation was of a high quality and had a lot in common with the Preamble to the Constitution.
Mr Nxumalo said that the fact that the raw materials are sourced in SA, but the end product has to be imported from another country does not make any sense. He made a commitment to follow up on this trend. If more end products could be manufactured here it will create much-needed jobs.
Mr Kula asked how beneficiation could be fast-tracked.
Mr J Bilankula (ANC) said the presentation raised two matters. Firstly, the lack of transformation still in the industry after 25 years of democratic rule, and secondly, the lack of implementation of the NDP. How could the Committee assist?
Mr Wolmarans asked why there was no implementation. Were parliamentarians and ministers reluctant to implement? Would implementation have economic effects that these parties were fearing? The country was worse off, because of the worrisome situation where only 2000 entities were left in the beneficiation environment. When dealing with ministers and legislation this had to be taken into account.
Mr Mahlaule said SAMDA should provide a list of those entities which refuse to transform. This Committee had only five years during which to effect change. It had to set targets and work in a structured way, because it wanted this administration to be recognised as the one which transformed the industry. SAMDA had to be bold about what it wanted from the Committee. He was pleased that the presentation avoided blaming government for failures. The new minister, who has worked in the trade union movement, would assist in moving the process forward.
Ms Radebe replied that SAMDA owns 26% participation. The Charter states that 26% is the minimum, but SAMDA can own more. What makes it difficult was that, when you have a BEE company, it has to be broad-based. It is very important to be the company who is going to make changes, because the majority company own more than 70%. This makes it difficult to implement the prescripts of the Mining Charter, as the minority partner gets outvoted on matters of implementation. She had been expelled from a partnership for refusing to sign off on amendments to the shareholders’ agreement that she felt was detrimental to the interests of South Africans. She did not go and report the company to the department but the company had to get permission from the minister and the department to expel her, because these companies had to report on any changes to their equity participation. When the company subsequently met with DMR and had to explain the reason for Ms Radebe’s absence, the DMR informed the company that what Ms Radebe had insisted on was the implementation of the MPRDA, and that she was correct. Ms Radebe stated that sometimes it was black people who resisted transformation by telling her: ”This is my white person. Leave him alone!” She refuted the idea that this was a black-white struggle, because she recounted that it was white mine managers who sneaked her underground in mines during the apartheid years when it was illegal for women to go underground in mines. (She attributed her success in getting white Afrikaner mine managers to cooperate with her, to her proficiency in Afrikaans).
Ms Radebe said it would take time to explain where exactly the problems are, but the MPRDA existed and the first step towards implementation was for SAMDA to come to the Committee and the Minister. She reminded the Committee of the real powers it had, because even ministers had to come and account to the Committee if called to do so. She urged the Committee to use its powers. She did not imply that the ministers were always wrong, but the law had to be implemented. If necessary, a joint committee had to be set up, like Joan Fubbs, previous Chairperson of the Committee on Trade and Industry, did. She set up a joint committee consisting of the DTI, the DMR and the Treasury to resolve blockages which worked against the implementation of the MPRDA.
Mr Nxumalo asked how SAMDA balanced safety measurements with production within SAMDA companies. He understood that there were laws to be adhered to and that it sometimes happens that safety practitioners shut down operations for safety reasons. What would SAMDA like to see changed within this context?
Mr Temane replied that the laws and regulations on safety in the workplace were valid for all players in the industry. It was the law of the land. All players had to adhere, whether major mining companies or junior companies.
Due to time constraints, it was decided that questions should be raised after the next three presentations.
South African Petroleum Industry Association (SAPIA)
Mr Avhapfani Tsifularo, SAPIA executive director, and his team presented. The liquid fuels industry supports the strategic national objectives of the country by providing security of supply that is sustainable, comes from diverse energy sources and is environmentally sound. It works with stakeholders to develop a stable, predictable policy framework. SAPIA’s strategic agenda includes seven strategic initiatives: refining sustainability, combatting climate change, the industry’s impact on health, safety, security and the environment, fuel price regulation, security of supply, transformation, advocacy and communication.
SAPIA refines sustainability by engaging with the Department on Clean Fuels 2 implementation and fiscal support, monitoring developments with regards to IMO 2020 (Marpol Annex VI) and monitoring its own impact on climate change, waste management, water and air quality. SAPIA contributes to climate change mitigation by making inputs into climate change policy and regulations, by institutionalising reporting with SAPIA member companies and by monitoring developments on the National Energy Efficiency Strategy. Initiative 3 is to reduce risk in the areas of health, safety, security and the environment. It seeks to improve oil spill response capability, improve road safety and adopts security related best practice. It regulates the fuel price and monitors the developments in the Customs and Excise Act and Carbon Tax implementation. It identifies new emerging risks impacting security of supply and engages the Department to ensure a reliable supply. SAPIA is developing and gazetting sector codes for transformation and runs value add development programmes within the industry. Initiative 7 is the development and execution of an advocacy and communication strategy.
South Africa has a highly developed and regulated liquid fuels sector which makes a 8.5% contribution to the economy. More than 27 billion litres of liquid fuels are sold per year, which represents 18% of SA’s primary energy needs. During 2019-2024 R155 billion is going to be invested in this industry, including the Clean Fuels II investment. In 2017 this industry contributed R123 billion to the national fiscus.
The total number of people employed directly and indirectly by this sector is 750 000, and the sector supports institutions of higher learning which train the engineers and technicians for the high level of technical proficiency needed in the sector.
The SA fuels market is mature, with flat to declining sales. SA imports between 5 and 8.5 billion litres per annum and is a net importer of fuel. The market is shifting to cleaner fuels driven by the need to combat climate change and preserve the environment. By 2025, over 50% of cars will be Euro V+ vehicles. Significant investments are required to upgrade refineries to meet Clean Fuels 2.
SA’s petrol consumption is flat to declining. It net imports generally less than 5% of its needs. This is a reflection of poor economic performance. SA’s diesel consumption is flat. There is significant potential for growth as diesel consumption correlates strongly to GDP growth. SA is a net importer of Liquid Petroleum Gas (LPG). It is used for cooking and heating spaces. It is clean burning and there is potential for market growth. With regards to paraffin, jet fuel and black oils (fuel oil and bitumen), SA is self-sufficient. The International Maritime Organisation (IMO) decided in 2016 to apply a sulphur cap on bunker fuels of 0.5% effective 1 January 2020. This signifies a fundamental change in the industry.
For clean fuels development, South Africa is caught in a Catch 22 situation. It needs cleaner fuel, but it cannot afford it. Government has to accelerate the development of a suitable fiscal arrangement to facilitate these investments by existing refiners. The alternative to no fiscal framework is that South Africa will stagnate behind the rest of the world in fuel quality with resultant negative impacts on health and air quality.
Investment for cleaner fuels has the potential to create over 140 000 job opportunities and boost economic growth by 3%. Security of supply is a policy objective of government but has not been implemented. It has the potential to diversify ownership and increase participation. Biofuels implementation is government policy but has not been implemented. Meeting 2% biofuels penetration can generate 25 000 sustainable jobs.
Liquid petroleum gas promotes an environmentally friendly solution to energy supply and diversifies the energy mix and can provide significant employment.
SAPIA would like a dedicated session with the Committee to explore policy and investment potential on cleaner fuels, strategic stocks and biofuels. It offered to host the Committee at its facilities for an information and dialogue session to explore how the two entities can collaborate to enhance transformation and to effect beneficial national impacts. SAPIA looks forward to sharing information and relevant research with the Committee to contribute to evidence-based policy making and implementation.
Mr Clinton Carter-Brown, Head of Energy, CSIR, said the CSIR is a science council classified as a national government business enterprise.
The objectives of the CSIR are, through research and technological innovation, to foster, in the national interest industrial and scientific development, and thereby to contribute to the improvement of the quality of life of the people of the Republic. In practical terms it means the improvement of technical processes and methods to improve industrial production, the promotion and expansion of existing, as well as the establishment of new industries. Its strategic objectives are to conduct research and development, to localise transformative technologies and accelerate their diffusion, and to collaboratively improve the competitiveness of high impact industries to support SA’s re-industrialisation.
The sector cluster within which the CSIR is active are advanced agri- and food production and processing, next-generation health, future production manufacturing, smart mobility, next-generation enterprises and institutions, future production chemicals and mining, defence and security and smart places.
The CSIR has 2344 staff of which 62% is black and 36% female, 320 have PhDs and 586 have a Masters qualification. It holds 19 patents and has a total income of R2 534m.
Looking at challenges and opportunities, the energy industry faces a number of challenges amongst which are: aging and poorly performing infrastructure and too slow a rate of replacement and renewal, ESKOM liquidity, policy uncertainty, not enough variety in the energy mix and a failing municipal distribution business model. Natural resources are finite and that CO2 emissions need to be capped. The initial investment for clean fuels are high and it needs to be well developed before it starts paying off. Since 2007 there has been a 384% increase in retail tariffs for electricity. Since 2014, SA had been steadily adding solar, wind and CSP to the energy mix and Small Scale Embedded Generation (SSEG) is growing (mostly solar PV). The vision for the future is that clean electricity and gas would satisfy most energy needs, while there would still be a role for liquid fossil fuels in transport, shipping and industry, but much reduced from the current one. Underground mining operations will be early adopters of the new integrated energy system and mines will have their own embedded energy plants, as high intensity users of electricity.
Energy transition presents opportunities as SA is well placed and has a competitive advantage compared to many other countries for solar and wind energy potential as well as a large land mass. Global financing is available to enable countries to transition to clean energy systems. Hydrogen is a fuel source of the future and SA is rich in platinum which makes fuel cell manufacturing a real prospect for SA. Waste products have to be recycled to get maximum value. LPG would play a larger role than currently and will support more jobs than currently. Small scale embedded electricity generation will increase and more players will enter the field of electricity supply. Electric cars would make the transport sector less dependent on liquid fossil fuels.
Indicators are that a transformed energy sector would effect a net increase in jobs, be cleaner environmentally, create new industries and cost less.
The CSIR recommends that government compiles a comprehensive integrated energy plan, while restructuring Eskom and the broader energy supply sector, allocate new roles for municipalities in energy generation and supply, commission focussed research into new energy technologies and develop business models for them, including producing surpluses for the export market.
Challenges in the mining industry include that health and safety need to improve, some mining operations are not viable or profitable, skills shortages, expensive mining equipment and mine rehabilitation processes, as well as social issues like the lack of decent, affordable housing and HIV and TB prevalence. These challenges need to be addressed by interventions by all relevant stakeholders. Elements that would assist in addressing these challenges are a functional beneficiation system which really benefits ordinary South Africans, socio-economic upliftment, increased exploration activities within the sector and research and development, to create new products and industries. Safety statistics have not improved since 2016, increasing costs and decreasing productivity.
Opportunities in the mining sector include that SA has vast deposits of mineral wealth and is rated first in the world in chromium, manganese, titanium and gold reserves. South African mining attractiveness improved dramatically since 2017. The Policy Perception Index showed a 21% improvement and South Africa’s Mineral Potential is ranked as 20 out of 91 (Fraser Institute, 2018).
Within the current scenario, the CSIR sees RDI opportunities in the mining sector in the formation of the SAMERDI Strategy. A unified approach to addressing the key challenges to mineral extraction, the SAMERDI strategy was adopted by stakeholders across the mining industry. A true public-private partnership was formed in the establishment of the Mandela Mining Precinct. Its role is to coordinate the implementation of the SAMERDI strategy in partnership with academia, to rebuild mining research and development capability and capacity.
The sector requires support in the form of funding to improve health and safety.
Minerals Council SA
Roger Baxter, CEO of Minerals Council, and his team presented. Minerals Council represents mining and exploration companies operating in South Africa and, on their behalf, support and promote the South African mining industry. It provides strategic support and advisory input to its members. It acts as a principal advocate to government, to state-owned enterprises, communicating major policies and positions endorsed by its members. Minerals Council represents the industry internationally. In some sectors, we undertake collective bargaining with organised labour on behalf of members.
Minerals Council represents more than 70 large, medium-sized, small and emerging miners, and 3 three associations that collectively represent +200 entities. Our members make up around 90% of South Africa’s mineral production by value.
The Minerals Council has a five-pronged strategic plan. Its slogan is: Making Mining Matter. Strategic Goal 1 is to resuscitate the mining industry. Goal 2 is to create a conducive environment for successful mining. Goal 3 is to rally the Minerals Council and its members to implement a positive contribution model. Goal 4 is to lead by example with regards to transformation, safety, social and environmental imperatives and Goal 5 is to improve continuously.
The economic and transformational potential of mining is significant. SA’s mineral potential, assuming best practice, is ranked by the Fraser Institute as 30 out of 83 mining jurisdictions. SA mining investment could almost double in the next four years, if the country was to return to the top quartile of the most attractive mining investment destinations.
The economic contribution of mining has declined. Mining has fallen from 15% of GDP in 1990 to 7% currently. Real mining GDP is smaller in 2018 than it was in 1994. Mining employment has declined by 56 366 people to 453 543 people in the past five years. The exploration and project pipeline has been weak (only 1% of global total).
While fatalities and mining related lung diseases have been declining steadily since 2007, more needs to be done to live up to the ideal of the Minerals Council to do “Zero Harm”.
The Mineral and Petroleum Resources Development Act (MPRDA) is the principal Act regulating the mining industry. It gave effect to the Mining Charter, which is a policy document. The mining industry supports the Mining Charter 2018 as a tool for transformation. The mining industry supports localisation and will therefore continue to engage Minister Mantashe and his team on the challenges and concerns of the Minerals Council and its members, so that SA mining can grow and transform for the benefit of all stakeholders.
Minerals Council provides thought leadership in ensuring its member companies operate in an environmentally sustainable manner. It promotes maximum compliance to prevailing national and international environmental sustainability laws and standards. It facilitates the adoption and mainstreaming of environmental best practices beyond legal/policy requirements at member companies. It collaborates with government on the development of best practice guidelines on mainstreaming biodiversity consideration in mining operations. It collaborates with AGRI-SA to adopt best practices for mutual coexistence of mining and agriculture. In response to drought as SA is a water scarce country, Minerals Council partnered with the Department of Water and Sanitation to improve water use efficiency in the mining industry, by developing a self-assessment tool for companies.
There are plans underway to create multi-stakeholder engagement forums in several mining jurisdictions to address the many social deficiencies, like unemployment, poverty, lack of economic diversification, housing and a lack of municipal service delivery. Mining companies are joining forces in these efforts and there is a renewed push towards skills development.
Foreign labour is reduced by 8% per year through natural attrition.
Illegal mining is artisanal or mechanised mining without licences. It is a threat to legal mining.
Minerals Council was addressing the legacies of mining by engaging with Compensation for Occupational Injuries and Diseases Act (COIDA) and Occupational Diseases in Mines & Works Act (ODMWA), the Acts which ensures payouts for mining related diseases. It co-governs with the Department of Health on the Medical Bureau for Occupational Disease (MBOD)/Compensation Commissioner for Occupational Diseases (CCOD). It collaborates with retirement funds and government to find beneficiaries of unclaimed benefits. It is also involved in the silicosis settlements and serves on the mine water body.
Minerals Council through its work, is unlocking the potential of mining in SA, managing modernisation, making sure it is people-centred, while improving competitiveness and productivity.
Minerals Council wants to ensure a stable legislative and policy framework for mining to thrive in. There is still work to be done as there are a number of unresolved challenges impacting on mining which include the value added tax (VAT) and tax system, the environmental laws as well as the implementation of carbon tax.
Mines depend on government infrastructure like water and electricity supply, ports and roads. Mines use 30% of Eskom power. Problems with these facilities impact on mining performance.
The Minerals Council’s proposed strategy for a thriving mining industry includes that all stakeholders should have a shared vision of the future of the South African mining industry, ethical leadership and
good governance, policy and regulatory certainty and competitiveness, available, efficient, cost
competitive and reliable infrastructure, improving productivity and competitiveness and creating a Greenfields exploration boom.
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