2006/7 MTEF Strategic Plan: Department briefing

Meeting report

MINERALS & ENERGY PORTFOLIO COMMITTEE AND SELECT COMMITTEE ON ECONOMIC AFFAIRS
16 May 2006
2006/7 MTEF STRATEGIC PLAN: DEPARTMENT BRIEFING

Chairpersons: Ms N Ntwanambi (ANC) and Mr E Mthethwa (ANC)

Documents handed out:
DME presentation
Mine Health and Safety Strategic Plan

SUMMARY
The Department of Minerals and Energy provided a briefing on its medium-term strategic plan. Highlights of the past financial year were provided. Restructuring of the Department and support of small Black-owned enterprises were key aspects of the strategy. Improved performance monitoring would be implemented. Empowerment deals would receive attention. Capacity-building would be promoted. Certain policy developments would be introduced. Detail was presented on the 2006/7department budget. Public entities would be monitored to ensure compliance with legislation.

Members asked numerous questions including the introduction of a seventh Regional Electricity Distributor, the need for higher safety standards on mines, the frequency of mine inspections, compliance with existing environmental legislation, progress on gender programmes, the status of the nuclear programme, the need to fill core vacancies, transformation within the mining industry, fronting for mining rights and mine rehabilitation.

MINUTES
Department of Minerals and Energy presentation
Adv S Nogxina (Director-General) provided an overview of the past financial year and strategic plans for the 2006/7 Medium Term Expenditure Framework (MTEF). Various structures would be aligned to key objectives to ensure implementation. Black Economic Empowerment (BEE) deals and business ventures would receive particular attention. The strategy would align with the Accelerated Shared Growth Initiative of South Africa (ASGISA). Certain policy developments in mining and energy were explained. Pending legislation were outlined and key components of the budget discussed. The Department would engage in vigorous monitoring of public entities.

Discussion
Mr Mthethwa raised a serious concern around the introduction of a seventh Regional Electricity Distributor (RED) despite agreement that only six would be established. The Cabinet had issued an instruction to assess the viability of the additional RED. An investigation was needed to identify the origins of the seventh RED.

Ms Ntwanambi asked what progress had been achieved in adjusting mining operations to instil higher safety and operational standards. She asked whether enough Inspectors existed to ascertain standards at mines and the frequency of inspections. The target for mine safety had to be achieved. Clarity was sought on progress with regard to gender and youth programmes.

Mr G Morgan (DA) asked how the objectives of the Department would align with Environmental Impact Assessment (EIA) regulations. He asked whether the Department would be subject to the Environmental Inspectorate and whether an amendment to the Mineral and Petroleum Resources Development Act was required. Mine rehabilitation was essential and adequate funds were needed to facilitate progress.

Ms M Temba (ANC) asked whether a structure was in place to promote gender empowerment.

Ms N Mathibela (ANC) referred to recent electricity provision targets declared by the President and asked whether such objectives were feasible. The current rate of provision was such that ambitious targets would be difficult to achieve. She asked whether an electricity provision budget of 10% was sufficient.

Mr J Combrinck (ANC) sought clarity on the relationship between the Departments of Justice and Minerals and Energy as many compensation cases were in limbo. He questioned the R55 million rollover in the face of continued electricity needs.

Prof I Mohamed (ANC) asked whether sites for nuclear waste disposal were being identified and sought clarity on the status of the Pebble Bed Modular Reactor (PBMR). The size of transfer payments to Eskom had to be elucidated. A low allocation for energy-related matters could produce problems in the future.

Mr S Louw (ANC) asked whether a timeframe was in place to fill departmental vacancies. Key positions had to be filled urgently. The Department had to monitor companies to ensure compliance with regulations. Firm legislation was needed to prevent fronting of BEE companies.

Mr C Kekana (ANC) stated that the economy still had to undergo significant transformation to allow for increased Black ownership. Clarity was sought on transformation in the mining sector. Economic transformation was a prerequisite to reduced poverty and crime.

Adv Nogxina declared that the key objective of government policy was to deracialise the mining industry. Mineral resources should be used for the benefit of all. Numerous relevant pieces of legislation had been formulated in recent times and the challenge now was to implement rules and regulations in an effective manner. BEE companies and consortiums were undermining the equity legislation by participating in fronting activities and other fraudulent activities. Acquired rights by BEE groups tended to be sold back to the established company after a short period of time. The number of BEE entrants into the mining sector tended to reduce over time. Fronting had to be addressed by appropriate legislation. False declarations should be perceived as a criminal act. The Mining Charter had been forged in a spirit of deracialisation and a return to the original purpose was required. Applications for licences were assessed against a particular scorecard. An initial BEE share majority tended to be reversed over time. BEE shares would be returned to the established company if financial repayments were not made within a certain period.

Specific technical skills were required within the Department such as scientists and engineers. An internship programme was in place and a concerted effort would be made to identify qualified individuals. Trained individuals tended to move into the private sector to obtain more lucrative salaries. Higher levels of skills were needed within the public sector. A scarce skills strategy had been introduced to retain crucial skills particularly at the management level. A committed public sector management was vital to drive enhanced service delivery. The Department had to consider the merits of appointing inexperienced individuals that might undermine operating efficiencies. The introduction of an additional RED was an issue that necessitated urgent attention.

Mr Mthethwa concurred that further interaction with the RED process was necessary to understand recent developments.

Adv Nogxina stated that the relationship between Justice and the Department was a complicated issue as a separate legal process prevailed between investigations and inquests following mining-related deaths. Investigations would occur if criminal liability was suspected. Discussions with Justice would take place to consider addressing case backlogs. A Gender desk had been established in the Department that also dealt with youth issues. Various NGOs and other structures had been created to empower women in mining. The mining sector was the first sector to introduce environmental regulations. The rehabilitation of mines was promoted in the early 1990s. The Department of Environmental Affairs and Tourism (DEAT) now controlled environmental impact assessments and rehabilitation programmes. The turnaround process for licencing applications had to improve. Sufficient Inspectors were in place to monitor implementation of regulations and assess mine safety. A study had been commissioned to determine whether mines made use of research material to enhance operations.

Mr Kekana declared that existing gender-related structures were insufficient to adequately promote gender equality. An audit was urgently required to investigate the transformation of the mining industry.

Mr Morgan argued that mine rehabilitation was an important function that had to continue. Detail was sought on existing lines of communication between the Department and offending mines.

Mr N Gamede (ANC) asked whether rehabilitation programmes also included a human aspect as long-term health problems invariably arose from mining activities.

Mr Louw noted the devastating effect caused by mine closures and asked whether the Department had plans to address unemployment. The sustainability of mines had to be encouraged. Progress reports on the liquid fuels industry should be provided to the Committee on a regular basis. Detail was requested on rehabilitation efforts at Meadowlands.

Adv Nogxina admitted that fronting remained a problem and Members should play a role in discouraging the practice through interaction with their respective constituencies. Mining licences should only be issued to those capable of adequately exploiting the available resources. Infighting within BEE consortiums over apportionment of dividends negatively impacted on operational efficiencies. The use of operating funds to finance lavish lifestyles compromised the objectives of the policy. Initial rehabilitation efforts had no human-based focus as hostels and urban migration continued. A social plan was now in place to provide retrenched workers with employment alternatives once existing operations ceased. A licence would only be issued on completion of a social plan. The Department would ensure enforcement of environmental regulations.

Ms D Ntombela (Acting Deputy Director-General: Mineral Regulation) stated that worst polluting mines had been identified and prioritised and tenders would be issued to rehabilitate them. The Department could instruct offending mines to address pollution such as acid drainage. Operations could be suspended if contraventions continued. Stringent punitive processes were in place. The Department would only rehabilitate mine dumps at Meadowlands if the owners had absconded and the mines were declared ownerless.

Mr A Mngomezulu (Deputy Director-General: Mineral Policy and Promotion) stated that the Mining Charter would be reviewed after five years with particular focus on BEE activities. Certain adjustments had occurred during the first two years of implementation. The Department would ensure that equity deal-making was understood in all its manifestations.

Ms Temba asked whether gender-related structures were established in the provinces.

Mr N Hendricks (UIF) proposed that representatives of the Department be placed on the Boards of mining companies to guide the transformation process and assess progress. Clarity was sought on the status of the paraffin industry and whether mine dumps could be reworked.

Mr Gamede asked how the implementation of social plans could be monitored and whether Local Economic Development (LEDs) plans could focus on the resuscitation of mining operations.

Mr Kekana suggested that international standards in skills management be introduced into the South African system to address skills shortages.

Adv Nogxina responded that skills shortages were a historical phenomenon that required specific solutions. Holistic solutions were needed to address deep-seated problems. The positioning of the Department on company Boards was not feasible due to the free-market nature of the economy. The government would encourage the use of mineral resources to achieve empowerment objectives. The BEE process would have to continue. The Department did not control gender-related NGOs but opportunities to participate in equity deals could be provided.

Ms Ntombela stated that companies produced social plans linked to LEDs. Provincial Premiers had been approached to encourage mining companies to contribute to LEDs. Local Government would be involved in the monitoring of social programmes.

Mr Kekana referred to the use of BEE development funds for living expenses by beneficiaries and noted the negative impact of materialism on the empowerment process.

Adv Nogxina stated that the Director responsible for gender issues would brief the Committee in due course. Some intervention into the economy was necessary to address inherited inequalities.

The meeting was adjourned.