Department Strategic Plan and Budget: briefing

Meeting report

ECONOMIC AND FOREIGN AFFAIRS SELECT COMMITTEE
2 June 2004
Department strategic plan and budget: briefing

Acting Chairperson: Ms P Themba (ANC)

Documents handed out:
Department of Minerals and Energy presentation

SUMMARY
The Committee was briefed by the Department of Minerals and Energy and its five branches - the Mine Health and Safety Inspectorate (MHSI), the Mineral Development Programme, Electricity and Nuclear Energy, Hydrocarbons and Energy Planning, and Support Services. In the presentation, the Department as a whole outlined its objectives, its mandate, its strategic objectives, structure, achievements, and challenges. This was followed by a similar outline by each of the sub-departments. Important objectives that were outlined by the Department included meeting employment equity objectives, developing an Independent Power Producer (IPP), developing nuclear energy, making mining safer, developing cleaner fuels, and developing skills. Committee Members' questions centered on issues such as employment equity, mining safety, the rehabilitation of communities around declining mines, and gender equity.

MINUTES
Overview of Department
Mr T Maqubela, Chief Director: Nuclear Energy, introduced the delegation and apologised on behalf of the Minister, Deputy Minister, and Director General were could not attend.

The delegation was introduced as:
Mr L Aphane, Acting Deputy Director General: Electricity and Nuclear;
Ms N Pityana, Chief Financial Officer;
Mr G Mnguni, Chief Director: Management Services;
Mr M Zondi, Deputy Chief Inspector of Mines;
Ms D Ntombela, Acting Deputy Director General: Mineral Development;
Mr H Gumede, Acting Deputy Director General: Electricity and Nuclear;
Ms T Zungu, Chief Compliance Officer;
Mr T Kumbeku, Chief Economic Officer;

Mr T Maqubela gave an overview of the key objectives, mandates, strategic objectives, structures, budget, achievements, and key challenges that were faced by the Department as a whole.The major objectives listed were poverty alleviation, job creation, economic growth, and Black Economic Empowerment (BEE).

The Department's mandate was described as the transformation of the sector to make it sustainable, safe, equitable, and globally competitive. The development of sound administrative measure and systems were emphasised, as these would enable the Department to reach its objectives. It was noted that the Department employed 900 people and that this number would be increased. The five branches of the Department were then listed. The Department's overall budget was given as R2bn, 50 percent of which would be geared toward the delivery of electricity.

The Department's major achievements since 1994 were then listed - namely, the various Acts and White Papers that have thus far been promulgated. The Minerals and Petroleum Resources Development Act was listed as the most important of these as its impact had been the most profound. It was then noted that the Department would be looking to accelerate various key issues such as internal transformation, the integrated National Electrification Programme, free basic electricity, skills development programmes, as well as the Revised broad-based Socio-Economic Empowerment and Liquid Fuels Charter.

Key challenges faced by the Department were listed as the achievement of nationwide access to electricity within the next 8 years, the recruitment and retention of technical personnel across the Department's various sectors, the monitoring of international currency movements and crude oil prices. The integration of electrical networks in the Southern African region as well as job creation through the electrification programme were also listed as important challenges.

Mine Health and Safety Inspectorate (MHSI)
Mr Zondi, Deputy Chief Inspector of Mines, stated that the purpose of the Inspectorate was to improve the quality of life of those employed in the industry. He outlined the subdivisions within the MHSI, and listed strategic objectives - namely, the achievement of best practice and high standards as required by the Mine Health and Safety Act. He also noted that various accident investigations would be carried out, remedial steps taken, and fines given to offenders in terms of the Act. He then outlined how the mining industry was performing in relation to the Act through various graphs and tables and noted that there were overall slight improvements in terms of the number of fatalities and illnesses resulting from the exposure of workers to gasses and silicates. He stated, however, that fatalities and illnesses as a result of exposure had increased in the platinum sector, but attributed this to the enormous growth that the sector had undergone in the last few years. It was announced that the next Mine Health and Safety summit would be held in 2006 and that various newsletters and newsflashes would, in the meanwhile, be distributed amongst workers to improve Health and Safety (HS).

Mr Zondi noted that Wits University and PMA were assisting MHSI in developing a training programme for engineers and inspectors and noted that a training project was already underway. He then listed the Committees and Councils that were developing, implementing and maintaining effective policy and legislation within the MHSI and listed the four Committees that were assisting the Mining Qualification Authority, noting that 39 providers had been accredited so far under the Education & Training Quality Assurance Committee and that 228 annual training reports had been approved last year alone under the auspices of the Sector Skills Plan Committee. He also noted that over 1000 apprenticeships and 800 trainees were listed with the Learnership Committee.

He then outlined the MHS Council and the Safety in Mines Research Committee (SIMRAC), noting that the objective of SIMRAC was to improve the skills and profile of ownership of companies doing research for the MHSI. He then outlined MRAC and MOHAC and noted that HIV/Aids was a major focus area that had been covered by the April 2003 Tripartite Mining Summit. He stated that a shortage of engineers and the impact of illegal mining were the major challenges faced by the MHSI.

Mineral Development programme
Ms Ntombela, Acting Deputy Director General of this programme, listed the purposes and objectives of the Mineral Development Programme, outlined the organization of her branch and listed strategic objectives. She then delineated the effective management of mineral resources, noting that the implementation of Growth and Development Summit (GDS) Initiatives, environmental management, sustainability, and the rehabilitation of derelict mines and their surrounding communities were important issues that the branch would be addressing. She stated that local, international, and entrepreneurial investment opportunities would be promoted, that promotional materials would be made available to the public, and that the minerals database would be maintained and expanded. She also noted that the beneficiation of mineral commodities would be enhanced and that her branch intended to create more jobs. The promulgation, enactment, endorsement, and establishment of various acts, charters and boards were listed as major achievements and the launch of the African Mining Partnership was named as a success. Challenges facing the Mineral Development Programme were cataloged as the finalisation of legislation, the recruitment and retention of expertise, as well as addressing environmental responsibilities in respect of ownerless and derelict mines.

Discussion
Mr D Makona (ANC) asked how the situation regarding mining incidents and fatalities could be improved and also asked what steps would be taken to ensure that BEE contractors adhered to mining safety regulations and avoided accidents?

Mr D Gamede (ANC) asked how the shortage of engineers and inspectors would be addressed and asked what was happening with mining of the Ingonyama trust land in Kwazulu-Natal?

Mr C Van Rooyen (ANC) asked when all the desired outputs, strategic plans, and outstanding legislation would be completed or achieved. He also asked how the Department was dealing with health and equity issues as well as with issues pertaining to skills shortages. He further asked how small-scale mining could be made sustainable and asked Mr Zondi to make a comparison between different mines in terms of performance ratings.

Mr Maqubela admitted that in terms of objectives there were areas where the Department had not progressed as much as it had liked. He noted that the Department would be focusing on completing processes aimed at restructuring - particularly that of the electricity sector. He also stated that the Department was busy factoring in lessons learnt from the recent energy blackouts in the United States of America and stated that the process of completing outstanding legislation was being fast-tracked.

Mr Zondi admitted that MHSI had much work still to do, but maintained that his branch had achieved many of its objectives and outputs during the last year. He then asked Mr Mnguni, to further address some of the issues raised.

Mr Mnguni stated that the Department was focused on addressing HIV/Aids and gender equity issues and was formulating a HIV/Aids masterplan for overall implementation. He averred that the Department was committed to addressing issues of skills shortages and had identified sectors that needed assistance and further development. He stated that the Department had a number of programmes in place and had recently produced four graduates - an engineer and three IT specialists - and noted that a further 6 graduates were expected to qualify later this year in areas such as chemical engineering. He asserted that the Department aimed to recruit 10 Matriculants per year for its graduate programmes.

Mr Zondi admitted that a few mines were not performing very well, but stated that others were outperforming. He claimed that all mines would be pushed but stated that different companies and BEE contractors worked under different systems, which made it difficult to give comparative ratings. He noted that the Department was not happy with the overall performance of its mines, but stated that various ten-year targets had been set, such as a fifty percent improvement target for the gold sector. Mr Zondi noted that he did not have any specific information available in terms of administrative fines levied at various mines, but stated that a list would be made available. He then stated that his branch intended to employ graduates and train them as full-time inspectors and engineers.

Ms Ntombela noted that the situation regarding mining incidents and fatalities would be addressed and said that mining contractors would be required to comply with MHS regulations when they applied for mining licenses. She also stated that the Department would give contractors ample assistance to help them reach compliance. She stated that the Department had various mechanisms in place to help regulate compliance with the charter, such as annual assessment reports and information sessions.

Regarding the Ingonyama Trust land, she stated that the major obstacles to mining the land were the payment of royalties to various tribal authorities who were squabbling amongst one another. She stated, however, that in five year's time, the state would become the official guardian of the land and that this obstacle would then be overcome.

She then noted that there were various problems in terms of environmental liabilities and rehabilitation funds, but stated that rehabilitation had only become an issue in 1991 and that there was a huge backlog. She claimed, however, that various mechanisms and strategies were in place to deal with rehabilitation issues.

She stated that the transformation process was also an issue as a result of a paradigm-shift that had occurred since 1994. She noted that there were BEE companies to incorporate as well as new responsibilities toward rural communities. She stated that small-scale mining presented a few problems, but noted that a programme was underway to educate small-scale miners on MHS and environmental and sustainability issues. She noted that organisations such as Mintek and the Council for Geoscience were working to provide small-scale miners with expertise.

Mr Van Rooyen then asked for details on the various administrative fines that Mr Zondi had referred to. He expressed concern that not enough was being done to deal with the issue of mines that were in decline in the Free State, noting that although a Summit to address the issue would be held in 2006, it would come too late for many of the mines and the communities that were affiliated to them. He asked if the Summit could be moved forward. He also expressed concern that huge amounts of salt-water were being pumped out of facilities such as Oryx in the Free State, causing severe environmental pollution and inquired as to what steps were being taken by the Department to combat this.

Mr Mkono asked what steps were being taken to deal with illegal mining operations and asked what mining industries were operational in the Eastern Cape. He also complained that the presentation document that had been handed out to the Committee was exceedingly difficult to read.

Mr Zungu stated that the presentation would be made available in electronic format and said that details of administrative fines would be made available to Mr Van Rooyen. He then stated that most instances of illegal mining occurred when persons posing as official mine-employees infiltrated mines and mined unused areas of those mines. He stated that it was a security problem and averred that steps would be taken to deal with the situation.

In terms of Mr Mkono's question regarding mining in the Eastern Cape, Mr Zungu noted that the Koega quarry near Port Elizabeth was active in supplying materials to the harbour and stated that there were many quarries and cement manufacturing facilities active in the Eastern Cape, supplying work to over 6000 people.

Ms Ntombela stated that the Department was addressing issues pertaining to declining mines in the Free State and was actively engaging with the various employers and communities in the area. She stated that there was new legislation that required all mines to address issues pertaining to the rehabilitation of communities and noted that the Summit would be addressing these questions in retrospect in seeing how the process of rehabilitation could be moved onto a faster track in future. She then stated that a progress report would be written up and handed to Mr Van Rooyen.

She admitted that salt-water pollution was a problem but noted that the Department had a mechanism in place to deal with situations such as these - namely, that a polluting mine would be required to close until such time that measures had been drawn up to deal with the pollution problem. She then stated that she would ask the regional office to submit a report on the salt-water pollution problem to Mr Van Rooyen.

Regarding the question of illegal mining raised by Mr Mkono, she noted that illegal miners were making use of very primitive equipment and were active mostly in the gold, coal, and diamond sectors. She admitted, however, that it was exceedingly difficult to deal with the problem of illegal mining due to a severe lack of funding.

Electricity and Nuclear Energy
Mr Aphane, the Acting Deputy Director General of Electricity and Nuclear Energy, outlined the mandates, objectives and challenges facing his branch and noted that a key issue was security. He emphasized the importance of nuclear energy and the Pebble-Bed technology and noted that the development of the Cape Metro area would need to take Koeberg into account. He also stated that issues pertaining to nuclear waste management would need to be addressed and noted that a greater public understanding of nuclear energy issues was needed. He stated that major objectives were equitable electrical rates and tariffs.

He averred that by 2007, South Africa would have run out of peak electrical capacity, meaning that during peak times the demand for electricity would exceed current capacity. He noted that this was one of the reasons behind the $3bn investment in an Independent Power Producer (IPP) that was independent of Eskom. He stated that nuclear energy would play an important role in the IPP. He also stated that a revamped regulatory framework was needed that would cover electricity, gas, and pipelines under a single regulatory umbrella.

In terms of a multi-market model (MMM), he noted that an independent transmission network was needed as well as a platform for electrical trading. He stated that the Eskom power-pool would be used as a basis for the development of the MMM. He noted that the policy of providing free basic electricity would be updated to accommodate the provision of electricity to people falling outside of the current grid-system.

He then noted that a major objective was the achievement of nationwide access to electricity, but conceded that a mix of grid and renewable technologies would be a more likely solution. He stated the Department would be working to detect priority areas for electrification in terms of government focus areas.

He noted that R2.5bn was need to address infrastructure backlogs and stated that in KwaZulu-Natal over 2400 schools formed part of this backlog. He averred that a pilot project was underway in the Free State to grow the electrical network. He stated that the network would first have to be grown before more households could be connected.

Hydrocarbons and Energy Planning
Mr Gumede, Acting Deputy Director General of Hydrocarbons, stated that the strategic objectives of Hydrocarbons centered around the provision of modern technologies to poor households that did not have access to electricity. He noted that a large number of households in certain areas continued to use low-grade coal and that the Department would be working to bring more efficient technologies to these households. He stated that the renewable energy market had undergone a transformation in recent years, with a new emphasis placed on finding cleaner fuels for vehicles and averred that the Department would be finalising a new octane structure for cleaner fuels in South Africa within the next year.

He stated that the Department was committed to redressing past imbalances and that a project was underway to increase the participation of the previously disadvantaged in the Department's procurement process. He noted that the Hydrocarbons branch was committed to providing energy to communities that were not connected to the electrical grid.

He stated that various gas-trade initiatives were under way and noted that the new gas pipeline from Mozambique had recently been officially opened. Mr Gumede averred that the Hydrocarbons branch would be formulating plans for research and the collection of data and would be giving direction to a secure and workable energy plan over the course of the next few years. He also noted that the passing of a single energy regulator bill was of utmost importance.

Support Services
Ms Pityana, Chief Financial Officer, stated that her presentation would be brief as the Committee was running out of time and the issues covered by her presentation had already been largely addressed by the other speakers. She stated that more money would be made available to Public Entities such as Mintek and the Council for Geoscience. She also noted that training and staff retention programmes would be focus areas as the skill-sets that the Department needed were in short supply.

Discussion
Mr Mokono asked what the Department planned to do about frequent power outages in the rural areas. He also asked what impact renewable energies were expected to have.

Mr Gamede asked what plans there were to electrify squatter camps. He also asked Mr Aphane to clarify what he had meant when he said that in a few years electrical demand would exceed supply. He then asked what steps were being taken in terms of employment equity.

Ms S Cheng (DA) asked what steps were being taken to counter power outages in Gauteng.

Mr Van Rooyen asked whether the Department thought the Enron debacle was relevant to the South African situation. He then asked how the Regional Electricity Distributors (Reds) would be funded when they came into operation. He also asked whether the Kudu gas fields would serve as a model for future gas supply.

Mr Gamede asked what research initiatives were being taken in terms of alternative energy and fuels.

The Chairperson then asked for more information on gender equity programmes and noted that very little follow-up work seemed to be occurring in this area.

Ms Pityana noted that regional offices within the Department were dealing with gender equity issues but acknowledged that more work would need to be undertaken to address gender equity issues, particularly in rural communities. She stated that nuclear energy presented an exciting new area for gender equity and that more jobs in the burgeoning nuclear sector would be made available to women as nuclear energy had heretofore been a typically male-dominated field.

Mr Mnguni stated that a strategy was in place in terms of employment equity and noted that a joint employment equity and skills development committee was tackling this issue with a target set for 2005.

Mr Gumede stated that the Kudu Gas field has informed the thinking of the Department and that a gas commission was managing the issue. In terms of renewable energies he noted that the Department was running a program to develop a new type of diesel fuel and stated that there were a number of research projects concerned with the bringing of energy to low income households. He stated that renewable energies currently included solar-power, wind-power, and mini-grids powered by diesel or gas. He averred that the renewable energy target of the Department was 10,000 gigawatts by 2012.

Mr Aphane noted that the Enron issue was not applicable to the South African situation simply because the United States' energy sector was liberalised whereas South Africa's was state-run. He noted that the Independent Power Producer will eventually have a three to ten percent stake and that it would be a question of relocating resources. He noted that it would be necessary to replace many existing power stations by 2020 - a task that would require billions of Rands. He stated that it would be practically impossible for the government to raise this money on its own. He averred that the Department had studied the Enron situation as well as the spate of recent power-outages in the United States and was working to ensure that these mistakes would not be repeated in South Africa. He noted that the National Integrated Resource plan was working towards solving South Africa's expected energy supply problems.

In terms of renewables, he stated that a new bio-gas made from sugar cane was being tested by the CSIR for implementation in rural areas. He stated that the Reds were being formed, amongst other things, to tackle the issue of power outages. He noted, however, that it was not actually the prerogative of the Department to repair grids as municipalities, who get over 90 percent of their revenues from electricity, were failing to pump money back into their communities by maintaining power grids.

He stated that equity played a central role in decisions taken by the Department and that it was working on issues pertaining to rural and impoverished urban areas. He noted, however, that it was a competition for limited resources and that key nodal points on grids would retain preference. He stated that funding was simply not enough to meet everyone's demands. He noted that the Department had a comprehensive rural and urban connection program but would have to work in conjunction with municipalities on this issue. He also stated that the funding of Reds was an intricate process and noted that the Department was working with economies of scale in relation to funding, meaning that each Red would need to be largely self-funded.

Ms Ntombela responded to the question of gender equity by noting that each province had its own chairperson who was expected to communicate with the various women and women's organizations in that province. She stated, however, that resources were a serious problem and acknowledged that other vehicles would need to be established to assist women. She stated that reaching out to rural communities was difficult and admitted that the Department had experienced various teething problems on the gender issue.

The meeting was adjourned.