Department Budget: briefing

Meeting report

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MINERALS AND ENERGY AD HOC COMMITTEE
9 June 2004
DEPARTMENT BUDGET: BRIEFING

Chairperson: Mr M Goniwe (ANC)

The following documents are available:
Mine Health and Safety
Department of Minerals and Energy Presentation

SUMMARY
With the Minister and Deputy Minister in attendance, the Department of Minerals and Energy (DME) presented its budget overview. The four main Directorates of the Department (Administration, Mine Health and Safety, Mineral Development, Nuclear and Electricity and Hydrocarbons and Energy Planning) briefed the Committee on their achievements, strategic objectives, budgets and main challenges for the coming financial year.

Committee Members focussed on the Department's success or failure with poverty alleviation, its electrification programme, job creation and Black Economic Empowerment and accidents and fatalities in the mining sector.

The Minister assured Members that the Department would meet the challenges set for it by the President in his February 2004 State of the Nation Address.

MINUTES
Dr. Rod Crompton, Deputy Director-General: Hydrocarbons, told the Committee that the Department had an abundant supply of information and that the Committee should guide them on how in-depth they should present this information. He then proceeded to go through the presentation (see document)

Discussion
Mr C Kekana (ANC) said that although Dr. Crompton had stated that South Africa needed more electricity, he had heard that South Africa had an overabundance of energy sources. He asked Dr. Crompton to explain the discrepancy. He also wanted to know if the Department was considering solar, nuclear, coal or hydro power.

Dr. Crompton replied that although South Africa had a large supply of coal, it still needed to convert the coal into electricity. They had also been working on a new tender system that invited bids for power generation. He confirmed that existing power systems would not be enough to handle the expected energy needs of South Africa.

Mr. W D Spies (FFP) asked when the effective implementation date for the Mineral and Petroleum Resources Development Act (MPRDA) was. He heard it had been 1 May 2004.

Mr. Abe Mngomezulu from the Department said that the Act had been implemented on 1 May. They did not anticipate any problems.

A member asked about the recruitment and retention of staff with the DME.

The Department replied that they were trying to develop a recruitment strategy. This included solidifying specific career paths for various government-related professions. There was a movement towards developing talent at lower levels for movement into senior management.

The Chairperson asked the Department to elaborate on the budget as it related to Nepad. He also wanted them to discuss specific programmes that promoted the Nepad and Black Economic Empowerment (BEE) initiatives. He wanted to know what monitoring systems existed to evaluate the success of the Department with regards to BEE. He asked the Department to explain the extent to which their programmes would contribute to poverty alleviation and job creation. The Chairperson also wanted to know how many jobs the Department planned on creating through its initiatives. Finally, the Chairperson asked how they planned on measuring the outcomes.

Dr. Crompton said that everyone agreed that Nepad was very important. In regards to monitoring BEE, every year independent auditors were hired to evaluate the extent to which equity had increased in a particular sector.

The Chairperson asked how BEE could be used to deal with the demographics of poverty. He said that BEE initiatives usually took place in Gauteng; however, it was important to target KwaZulu-Natal (KZN) and Limpopo Province. He also asked how they could ensure that BEE was actually contributing to poverty alleviation as opposed to benefiting only a few.

Mr. T R Mofokeng (ANC) asked the Department for their specific opinions on the budget. He wanted to know what changes they would make to it if it were up to them.

Dr. Crompton said that they were not happy with the budget. He said that every year the Department asked for more resources, but that it never received them. For example, it had not received more money for the Renewable Energy Project, though it had requested it many times. He said that it might be difficult to meet the President's challenge for electrification without additional resources. Also, in order to shorten the target date for full electrification from twelve years to eight years, the Department would need more money.

Mr. Kekana wanted to know how many new mines were going to black enterprises. He expressed concern over the monopoly in the mining industry.

Ms. N F Mathibela (ANC), also expressed concern that BEE initiatives were only occurring in Gauteng.

Ms. Nkuli Pityana replied that the procurement division of the Department found it difficult to monitor the progress of BEE initiatives. The Department asked companies to register with a database. Based on this data, they believed 61% of the enterprises were BEE-related. She said that the policy was there, but better implementation was needed.

Ms. Nellie Magubane said that a large chunk of the budget went to electrification. She went on to say that the Department had spent a lot of time analysing questions such as "What is a job?" and "How many hours does one need to work to qualify as a full-time employee"? They had received feedback that the Department was making a large impact on people's lives. She said they faced a major challenge because in order to improve the quality of life for people they needed more financial resources. They were also researching alternate energy sources to coal. She then said that they had thought of re-using coal or liquefying natural gas.

Ms. Magubane commented that it was difficult to retain highly technical staff such as engineers and geophysicists, because as soon as they joined the government they almost immediately were offered a higher salary elsewhere.

Mr. Kekane told the Department that it had not presented enough facts on job creation.

Ms. Magubane replied that between nine and ten thousand jobs were created a year in the electrification industry. She said she would provide the Committee with more facts at a later stage.

Mr E J Lucas (IFP) suggested that the Committee dedicate a day to finding ways to create sustainable job opportunities.

Mr C Morkel (DA) asked Ms. Magubane which area of focus she referred to when she spoke about "critical skills" (engineers, physicists, technologists. He recalled the maintenance shut down at PetroSA in Mossel Bay last year and said that it had been difficult to establish the truth. There had been accusations that PetroSA's affirmative action programme had resulted in them losing certain technical and critical skills. Mr. Morkel wanted to know where there were skills shortages. Furthermore, Mr. Morkel commented that the Department had not focused enough on growth. For example, he asked whether they had assessed available resources to determine the potential for finding more crude oil or natural gas. He suggested that South Africa encourage oil and gas explorers to explore in deeper waters. Finally, Mr. Morkel noted that to attract more foreign investors, South Africa needed to mitigate risks to investment.

The Department commented that since 1986 there had been a sharp decrease in employment but that in the last three years there had only been a slight increase. One person said that they needed to increase expenditure on exploration because that would lead to greater investment. Also, it was important to manage the depletion rate; if they oversupplied the market prices would go down. He also said that government needed to encourage companies to engage in beneficiation.

Mine Health and Safety Presentation
Mr Pieter Botha (Deputy Chief Inspector of Mines) delivered the presentation on Mine Health and Safety.

Discussion
Mr. Kekana said that a proper analysis of mining fatalities was needed. For example, the Department should state that a certain number of people had been killed in the last five years, but that this number would improve by X% because of specific changes the Department had implemented. He wanted more measurable targets from the DME.

A member stated that the Committee had put the Department under pressure; however, he wanted them to know that the Committee wanted to build partnership so that they could move forward together. He raised some concern that the Department had spoken about reducing fatalities by X%. He said that one death was one too many and they needed to implement specific reform. In the coal-mining sector, he said, fatalities increased in 2001. He asked if they had a program to ensure that these numbers would go back down. With regards to vacancies within the Department, the member asked why these spots had not been filled when the unemployment rate was as high as 40%.

Mr Lucas told the Department that they should be focusing on prevention of fatalities, not compensation issues.

Mr. Botha gave the following statistics for both fatalities and injuries in 1990 and 2003:

Mr. Botha said that the Department had stopped more mines working in more sections than ever before. They met with inspectors once every three months to find out about working conditions. He also spoke about employee retention issues. Soon after workers had accepted offers with the Department, they often left because they received higher offers from the mines. Mines paid bonuses that the government could not match. He said the government had to be proactive to reduce the high turn-over in the civil service. Many employees from previously disadvantaged communities went to work in mines.

Minister Phumzile Mlambo-Ngcuka, who was in attendance at the hearings, said that the industry needed to have aggressive recruitment policies. She said that without a strong Inspectorate everyone suffered. Moreover, it was human nature for people to look for greener pastures so the Department needed to find solutions for this problem.

The Deputy Minister, Mr Lulu Xingwana, said that the Department had achieved a lot between 1993 and 2003. In some cases, fatalities had decreased fifty to seventy percent.

Mr G G Oliphant (ANC) said that the Department had done well in regards to Nepad. He wanted a report on these achievements.

A person from the Department commented that "rehabilitation" processes had been set in motion for women in health and medical fields, asbestos, and other areas with low representation of women. He commented that mineral economics was an important field to train people in.

A Member commented that the privileged people from the Apartheid era were still the ones benefiting from the country's diamond resources.

A person from the Department responded to the Members' request for a detailed plan. He said that the plan submitted following the President's State of the Nation address still needed to be approved. He said that he could only answer non-detail questions since those details had not yet been approved. BEE statistics, he said, were public domain information. These statistics could not be substantiated, however, since the MPRDA had only been effective since 1 May. He said that he had information regarding Nepad; however, he had not known that the Members would have requested this information. With regards to "rehabilitation" for women, he said that they should be trained as managers and owners, not just workers. In one of the directorates in the Department forty people were replaced every three years. He said that the Department should consider improving the quality of a few jobs in order to retain staff. This, however, would require downsizing.

Minister Mlambo-Ngcuka said the Department was undergoing intensive research of every single mineral with regards to beneficiation; however the process had taken too long and the government had wanted an answer by the election date. In the meantime, the Diamonds Act and the Precious Metals Act had been passed. The former tried to make claims to diamond mines more accessible and the latter limited the number of people with access to minerals. If these two Acts did not produce the desired effects before the end of the year, the Department would proceed with a "Beneficiation Act".

Mr. Morkel said that during the elections he had travelled to many townships and had seen hazardous conditions. He wished the Department the best in restructuring the process. He also said that local government was quite a different animal with its own interests. He asked the Department how it planned on providing electricity in a safer manner.

Mr T R Mofokeng (ANC) asked the Department if they had prepared their plan prior to the President's State of the Nation address. If so, he wanted to know if they had co-ordinated with the President's speech. He wanted to know if the country would actually be electrified in eight years (as declared by the President in his speech).

Chairperson Goniwe said that this directive was not optional. He said that is what the government wanted done and the Department should focus on doing it within eight years. He also jokingly said that perhaps that was the first time Mr. Morkel had visited the townships. However, he added, most of the Committee Members were always there. Finally, Chairperson Goniwe said that people in the townships said they did not believe in democracy since they were still poor and still unemployed.

Ms. Magubane said that the fragmentation of the industry caused many infrastructure problems. For example, since local government anticipated that it would be restructured they did not donate the necessary time or resources to building infrastructure. Moreover, people who wanted better infrastructure often moved out of the townships and into the suburbs. She suggested that penalties be imposed if the infrastructure was not being maintained. Another problem in the industry was bureaucracy in all levels of government.

Minister Mlambo-Ngcuka said that she would tell the people of South Africa that the government would electrify the country in eight years. The only obstacle to that goal would be if they did not get the necessary supporting budget. She said the skill, workers, and will were all there. She also said that the Department was always ahead of its target even with a limited budget. Moreover, though some communities had received electricity it did not always improve their quality of life since it had not led to these people starting their own enterprises.

Mr T R Mofokeng thanked the Minister for her commitment and for working at the maximum speed possible to carry out the mandate. He asked the Chairperson how the Ad Hoc Committee could intervene on delivery since it was not a Portfolio Committee. He requested an internal audited statement from the Department.

Ms. Mathibela (ANC) asked if the Department planned on using ordinary or special coal.

Mr. Morkel asked about the costs associated with loss of production due to the maintenance shutdown at PetroSA last year.

Dr. Crompton said that they were using the same coal as before. The Department was now trying to introduce low-smoke coal, but since it would cost more they would need subsidies. He hoped that it would eventually replace ordinary coal but that that would depend on funding. He also said that PetroSA was insured and that he did not know what the costs had been.

The Minister thanked the Committee for its probing questions. She said she knew there were some gaps and the Department would return to the Committee with the necessary facts and statistics.

The Chairperson adjourned the meeting.