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Meeting reportMINERALS AND ENERGY PORTFOLIO COMMITTEE
07 November 2007
MINTEK & COUNCIL FOR GEOSCIENCE ANNUAL REPORTS 2006/7
Chairperson: Mr E N Mthethwa (ANC)
Documents handed out:
Minerals Technology Development Institute (Mintek) Presentation
Minerals Technology Development Institute (Mintek) Annual Report [available at www.mintek.co.za]
Council for Geoscience (CGS) Presentation [Part 1][Part 2]
Council for Geoscience CGS) Annual Report 2006/07 [available shortly at www.geoscience.org.za]
Audio recording of meeting
The Committee received delegations from the Minerals Technology Development Institute (Mintek) and from the Council for Geoscience (CGS) to hear briefings on these entities' annual reports for 2006/2007.
Mintek emphasised a 'balanced scorecard approach' in its reporting, which the Committee commended. The organization had received an unqualified audit opinion, but had sustained a fraudulent loss of R2.7 mentioned under Matters of Emphasis. Mintek attributed the loss to staffing insufficiencies. The report reflected Mintek's major concern at its very high professional staff turnover. Due to the advanced technological work performed by Mintek, it was difficult to achieve a higher black economic empowerment procurement spending level.
The Council for Geological Sciences had also had difficulties in achieving black economic empowerment objectives, because it had no choice but to import much of the specialised equipment that it needed for its work. Such equipment typically could be obtained only through importers who had no black economic empowerment capacity. However, the Council was confident that it had done exceptionally well, under the circumstances, in terms of compliance; it was most gratifying that the Council had received no remarks from the Auditor-General under matters of emphasis. The Council had almost completed the mapping of the whole of South Africa, a substantial achievement in a country of South Africa’s size. The Council had made good progress in education and training; it obligated scientific staff members to study further, for which it provided support, as a condition of keeping their jobs. The Council sought to retain senior scientists and co-opted retired scientists to assist in training and mentoring younger professionals. Despite progress in transformation, recruitment was still a problem. Nationally, South Africa had exhausted its supply of available scientists and was having to recruit from abroad. Major challenges including expedited the geological scientific surveys to attract investment in the mining sector, and replacing aging equipment. The Committee also commended the Council on its mode of reporting.
Members commended efforts and achievements in terms of transformation, but criticized Mintek for not dealing more extensively in the presentation with the Auditor-General’s report. Concern was expressed at Mintek’s decrease in the output of scientific documents. The Council for Geological Sciences was criticized for not achieving its targets in terms of M Sc and Ph D candidates. The Committee was very interested in the Council’s progress in seismology, a relatively new science, but shared its caution in making predictions on the likelihood of future seismic events.
In its responses, the Council for Geological Sciences said that research candidates were expected to align their thesis topics with corporate objectives and it was pleased that it was succeeding in encouraging women to enter the field of engineering. The Council did not want its young scientists to rest on their laurels. South Africa was relatively poor in its availability of scientists, and there was a need to increase the number of Ph D holders tenfold.
The National Union of Mineworkers, which had been scheduled to brief the Committee on accidents and fatalities in mines, was rescheduled to appear before the Committee the following week.
The Chairperson welcomed the delegation and members and said that the Committee would firstly hear the Minerals Technology Development Institute (Mintek) Presentation, and then quickly hear the Minerals Technology Development Institute (Mintek) Presentation. Thereafter, the Committee would put questions to the delegations and discuss the presentations with them together.
Minerals Technology Development Institute (Mintek) presentation
Mr Abiel Mngomezula, Chief Executive Officer (CEO) and President, Mintek, thanked the Chairperson and Members for their welcome and for the opportunity to meet with the Committee to present the 2006/2007 Annual Report. Mr Mngomezula said that he had recently moved from the Department of Minerals and Energy to take up his post at Mintek and had been in office for only 66 days.
Mr Mngomezula said that, since Members had already received copies of the Report, and to avoid repetition, he would highlight just a few matters from the Report.
He began with the organisational structure of Mintek on 31 March 2007 and introduced his accompanying delegation.
Highlights for the year ended March 2007 were that total income had risen 12% to R320.1 million; the Auditor-General had expressed an unqualified audit opinion on Mintek's annual financial statements; Independence Platinum was funding a three year programme to commercialise ConRoast technology; there had been an increase in service work, uranium, and copper-nickel-cobalt projects in Southern Africa; in the second economy sphere Mintek had established a further eight jewellery workshops to bring the total to 25.
Mr Mngomezula admitted that R2.7 million had been lost in the year under review; the loss had been discovered only as Mintek was closing its books for the year. An independent forensic audit had been initiated. Criminal charges had been laid against two former employees who had made fraudulent payments. Mr Mngomezula attributed the incident to high staff turnover even within the financial department. The Auditor-General had noted the loss under emphasis of matter in his report on Mintek for the year under review (pages 59-61 of Mintek's Annual Report).
The financial summary showed that earmarked funding had increased tremendously to R24.5 million from R9.1 million the previous year.
An unfortunate situation was the upward trend from 9% in 2005/2006 to 13% in 2006/2007 in customer dissatisfaction as indicated in Mintek's customer dissatisfaction index. The main reason for the dissatisfaction was that clients wanted a faster turnaround time for processing mineral sample analysis requests.
In response to the Committee's request, Mintek was emphasising a 'balanced scorecard approach' in its reporting.
Mintek had netted approximately R17.5 million rand from the export of mineral technology. It was approximately an increase of 192%. That for Mr Mngomezula was very exciting because it was a core function of Mintek.
He gave an overview of Mintek's learning and growth perspective. Strategic alliances with other science and technology bodies had increased from five in 2005/2006 to 11 in 2006/2007, while projects with external collaborators had increased from 15 to 23 in the same period. The total number of scientific documents produced over the same period had, however, decreased from 421 to 301; documents per person-year had decreased from 1.01 to 0.97. The number of M Sc and Ph D researchers had increased from 62 to 88 over the same period; postgraduate bursaries had decreased from 53 to 41; undergraduate bursaries had decreased from 38to 37; trainees and interns had decreased from 50 to 44. Mr Mngomezula admitted that more needed to be done. These figures reflected Mintek's major concern that it was losing its more experienced staff; professional staff turnover was very high at 22% in the year under review: currently Mintek was examining the situation.
Mr Mngomezula gave an overview of the working time lost to injuries and the frequency of incidents. The lost time injury frequency rate was 1.7 in 2005/2006 and 1.9 in 2006/2007. There had been no work related fatalities.
As to transformation, Mintek had 40% black researchers and managers in 2006/2007, up from 37% in 2005/2006; 31% woman researchers and managers, down from 35% in 2005/2006, and 1% disabled employees, down from 1.2% in 2005/2006. Because of the advanced technological work performed by Mintek, it was difficult to achieve a higher BEE procurement spending level.
Mr Mngomezula spoke about further about Mintek's bursary scheme, and thanked the Committee.
The Chairperson said that he commended Mintek on its systematic mode of reporting; he said that the same applied to the Council for Geoscience (CGS), whose delegation he then asked to proceed.
Council for Geoscience (CGS) Presentation
Professor Phuti Ngoepe, Chairperson: Council for Geoscience (CGS), thanked the Committee for its welcome and the opportunity to present on its 2006/2007 Annual Report. He introduced CGS's Chief Executive Officer, Mr Thibedi Ramontja.
Mr Thibedi Ramontja said that CGS had undertaken much restructuring in the year under review with the aim of achieving its key objective of the generation of revenue. CGS's target was R140 million, but actually achieved R 207.1 million.
CGS's management had been reconstituted in 2003 and since then there had been an upward trend in all its activities and achievements. Completion rate of scientific projects had increased from around 30% to around 80% since the first half of the decade, which had not been an easy accomplishment. It had involved a great deal of restructuring of the organisation. Since 2004 CGS had grown exponentially, but was not sure if it should maintain such a high growth rate as there was a risk of compromising scientific quality.
The heart of CGS's business was to produce maps, for which the Council had over 36 key clients. CGS had existed for 100 years and map making had been its core activity throughout the century of its existence: in that time it had achieved completion of mapping 98% of the land area of South Africa, and it was hoped within the next three years to complete the mapping of the entire country. This was a big achievement for a country of South Africa's size. It had published 50 maps and other publications in 2006/2007, many more than its target of 30. 36 new clients had been gained in 2006/2007. There had been 144 repeat clients. The percentage of satisfied customers had been 85.7%.
Mr Ramontja showed a map illustrating CGS's geochemical survey programme in which CGS analyzed soil samples. It was the aim to cover the whole of South Africa. Contrary to what many people had said, South Africa had not been over-explored – there was still much to be done. CGS's techniques were bearing results.
CGS was conducting an ambitious programme of aerial surveys at high resolution. It would take from ten to 16 years to complete the surveys. CGS had approached the National Treasury for increased funding for this project that CGS wished to expedite. CGS was giving priority to areas where there were likely to be the best chances of discovering mineral deposits. Mozambique and Namibia were also involved in the programme.
During the year under review, the CGS continued to play a strategic role in the generation of geoscience knowledge in the Southern African Development Community (SADC) and on the African continent. The compilation of a seamless geological map for the SADC countries was expected to be completed in 2008. This would contribute considerably in terms of minerals and ground-water exploration.
A collaborative geological programme had also been initiated between the CGS and the Geological Surveys of Botswana and Namibia. The programme involved the correlation of the Karoo rocks across the common boarders, which could have important economic implications for the countries concerned, as those rocks held a variety of minerals such as coal and industrial minerals and had the potential for ground water resources.
In addition, the CGS was collaborating with other geoscience institutions through the African Mining Partnership, which was a ministerial forum of African mining ministers.
The CGS also contributed to the establishment of the Organisation of African Geological Surveys in order to foster partnership amongst geoscience organisations.
CGS was co-operating, through the Ministry of Foreign Affairs which was contributing funding, with other countries such as Lesotho, where CGS was analysing soil samples; GCS was also working in Mauritania, Ghana, Madagascar, and Morocco. CGS considered that as an African organisation it was its duty to help other African countries, and was keen to co-operate with the Ministry of Foreign Affairs to that end.
CGS was responsible for managing South Africa's national seismic network. This monitored all the earthquakes that took place in the country. This also showed the areas especially at risk for earthquakes. Gauteng and North West's risks were basically related to the mines. Monitoring was on a 24 hours a day basis. Information collected enabled CGS to produce risk assessments for the various areas of South Africa and forecast the likely damage and casualties if an earthquake were to take place. The Western Cape was a high-risk area for earthquakes from natural causes; by contrast the Eastern Cape was a low risk area.
Mr Ramontja said that CGS 'battled' with regard to black economic empowerment (BEE) issues, because it had no choice but to import much of the specialised equipment that it needed for its work. Such equipment, for example a drill ordered from Germany, typically could be obtained only through importers who had no BEE capacity. However, Mr Ramontja thought that CGS had done exceptionally well, under the circumstances, in terms of compliance; it was most gratifying that CGS had received no remarks from the Auditor-General under matters of emphasis (page 10-11 of the Annual Report).
With regard to achieving CGS's world class people's perspective (page 21 of the Annual Report), turnover of scientists was a major problem, for every month geologists resigned to take up more lucrative positions in the mining corporations. This was especially so when the price of gold and platinum rose. Such price rises were good for South Africa as a whole, but presented difficulties for an organisation such as CGS.
For a scientific institution, collaboration with outside organisations was very important. Publications with external collaborators were very important. CGS had won international awards.
In terms of education and training, CGS had made good progress. The number of staff enrolled as students for masters degrees in science and for doctoral degrees was relatively low at 33. To encourage staff members to study, CGS had imposed a policy requiring newly hired scientific staff members to complete a master's degree within five years or search for another job. It was the belief of CGS that if somebody wanted to be a scientist, the first thing that he or she should do was to begin studying for an M Sc degree. Thereafter he or she should proceed to study for a Ph D degree. Unless scientific staff set themselves a target of life-long study, they could never expect to develop themselves and fulfill their potential. Therefore CGS felt obliged to push them to study and moreover provide them with the necessary opportunities to do so.
CGS was dismayed that the staff satisfaction level was 53.8%, whereas its target was 70%: CGS was 'working on it', Mr Ramontja said.
CGS had reduced the disparity between black employment and employment of whites to a ratio of 52% blacks and 48% whites, an improvement from 2004 when the ratio had been 36% blacks and 64% whites.
However, there remained a challenge at the senior staff level. Nationally, there was a critical problem in that South Africa had exhausted its supply of available scientists and was having to recruit from abroad.
Recruitment was therefore a very great problem. However, a positive note was that for the first time in the CGS's century of existence, it now had more black employees (52%) than whites (48%). 'I think that we're getting there', he said. The percentage of women employees had risen to 43%, while male employees had decreased to 57%.
Major challenges were to expedite the geological scientific surveys to attract investment in the mining sector, and replacing aging equipment. Moreover, it was a great challenge to retain senior scientific staff in order to train and mentor the younger staff members joining the organisation.
CGS sought to attract and retain scientists and develop young scientists. It was recruiting retired scientists to train its younger scientists and had established a field training school in Limpopo for that purpose. This training school was almost like a university within CGS.
Mr Ramontja thanked the Committee and offered Members the opportunity to examine a small display of a sample of the CGS's numerous scientific publications.
Advocate H C Schmidt (DA) said that his only criticism of CGS's report was that it had not achieved its targets for staff members with M Sc or Ph D degrees.
He expressed concern about Mintek's figures that showed a dramatic decrease in the output of scientific documents. Also bursaries had decreased. He asked if Mr Mngomezula could provide an explanation for the high turnover and staff losses at Mintek.
Ms N F Mathibela (ANC) warmly congratulated Mr Ramontja on CGS's achievements and especially on its turnaround and transformation. In the past one had seen a preponderance of white staff who were retiring or nearing the age of retirement. However, she wished that a way could be found to assist CGS to retain staff.
She said that she would like to learn more about Mintek's unqualified Auditor-General's report and the reasons fro the matters of emphasis.
Mr C T Molefe (ANC) also commented on Mintek's Auditor-General's report. The figures for the proportions of black and white employees did not indicate the levels of the employees concerned. He also asked about persons with disabilities. Further, he asked about the relationship with the tertiary institutions, and if Mintek and CGS were making efforts to bond with the tertiary institutions in order to match the head-hunting endeavours of the mining corporations.
Mr C D Kekana (ANC) said that that it was important to pay due attention to the audit report.
The Chairperson requested Mintek to align its perspectives and objectives with its financial reporting, with particular reference to the income, expenditure and surplus pages. He asked about the impact of Mintek on the rural and urban areas, and on the designated groups. It was important to make communities aware of Mintek.
He asked what plans Mintek had to increase the level of trainees; further, he asked what informed Mintek's numbers for the M Sc and Ph D targets, about the causes of work related fatalities at Mintek, and about BEE procurement at Mintek.
He asked Mr Ramontja about CGS's seismic risk models. He had the same question for CGS as for Mintek on targets for BEE. However, he asked why it was projected as a major challenge for human resources. CGS's account differed fundamentally from that of Mintek on the same subject. That did not make sense.
Mr Louis Makhlala (ANC) said that Mintek’s presentation had covered most of the relevant topics. However, with regard to the Audit Report (page 59-61 of the Annual Report), the presentation covered only the fraudulent financial loss. It was important that the other issues such as creditors reconciliation not performed and material non compliances were explained fully so that the same situation would not repeat itself the following year. He wanted to know what had been done so that situation would not repeat itself. Moreover, he wanted to know why it had happened.
Mr Abiel Mngomezula said that Mintek conducted exit interviews. The normal reason that employees gave for their resignations was the desire for higher salaries. As a state institution it was difficult for Mintek to compete with the major corporations in the private sector. However, government paid less than what Mintek paid. Yet employees were not resigning from the government service to join Mintek. Further explanations must be sought. Suggestions boxes had been instituted, and these were resulting in some feedback from staff as to possible causative factors for the staff turnover.
He said that Mr Jacques Fourie, Head of Internal Audit, Mintek, would explain more about the Auditor-General's report. However, it was important to look at the matter in context. Mintek had received a very bad report the previous year. In his presentation, Mr Mngomezula had highlighted the matters of emphasis. He could assure the Committee that Mintek had problems but that it had instituted corrective measures.
He would ask Dr Roger Paul, General Manager for Technology, Mintek, to answer the question on injuries.
The Chairperson asked what were the some of the underlying factors causing staff resignations.
Mr Mngomezula said that these included unsatisfactory relationships with supervisors. He was accepting responsibility because he was the CEO of the institution, but he did not know that full background because he had not been in office throughout the period under review.
Mr Jacques Fourie, Head of Internal Audit, Mintek, gave a review of the Auditor-General's reports over the previous few years. In the latest report the Auditor-General had given an unqualified opinion, with the fraudulent loss mentioned under matters of emphasis. The other items had been mentioned as 'other matters'.
Mintek had faced a major challenge in converting from the previously used South African Statements of Generally Accepted Accounting Practices (GAAP) the international accounting standards under 'very trying circumstances'. (Page 29 of the Annual Report).
Mr Petrus Fusi, General Manager: Mineral Policy, Mintek, said that the organisation had a well-directed approach to the second economy that perhaps had not been adequately reflected in the figures presented. However, it felt that workshops conduced in isolation were bound to fail, so they had to be integrated into the integrated development framework (IDF). Mintek understood that it should revise its delivery mechanism.
Dr Roger Paul, General Manager for Technology, Mintek, said that he wished to address the issue of safety. He said that laboratory work tended to produce accidents mainly to the hands. Minter's power plant work was completely different. He showed a slide depicting the operation of a three megawatt furnace. Mintek smelted 40 tons of material a day, and worked on a 24 hours per day, seven days per week basis. Safety teams had been constituted to make workers aware of the potential safety hazards associated with each furnace. Mintek was satisfied that it complied with international safety standards. That Mintek had experienced no work related fatalities was something of which they were very proud.
Mr Ramontja said that CGS did give them support. The high level of resignations of senior staff impacted adversely on the output of scientific publications. They were trained for the first two years, with the objective of producing world class scientists. CGS had said that it was important to audit South Africa's reserves of uranium and coal.
Concerning procurement and BEE, CGS often had to procure laboratory equipment from overseas. Many importing agencies were small and specialised and did not have capacity for BEE.
With regard to the categories of people that CGS employed, the organisation found it difficult to provide salaries that were sufficiently attractive. CGS was sponsoring people to attend universities, especially young blacks. It was very difficult to attract and retain young black scientists who readily sought and obtained employment with Anglo-American.
However, it had to be stressed that CGS, while striving to change the demographics of its staff complement, nevertheless still wanted to retain the whites: its aim was to 'expand the cake'. It was especially important to retain whites, and recruit retired whites to train the young new scientists.
Ms M Kola, the Corporate Services Manager, CGS, said that skills in geophysics were scarce. She spoke of the mentoring programme for grade 11 to 12 high school students who were exceptionally promising in mathematics and physics. The aim was to attract them into taking up bursaries from CGS to study at universities and thereafter join CGS. The organisation recognised its staff who achieved M Sc and Ph D degrees at annual award ceremonies. Ph D candidates were expected to align their thesis topics with corporate objectives. CGS was pleased that it was succeeding in encouraging women to enter the field of engineering.
Professor Ngoepe said that CGS did not want its young scientists to rest on their laurels. South Africa was relatively poor in its availability of scientists, and there was a need to increase the number of Ph D holders tenfold.
Dr G Graham, Executive Manager, CGS, said that the seismic maps were mostly used by engineering companies, but also by insurance firms; they were also used by the South African Bureau of Standards for building codes. CGS also had a relationship with the Department of Provincial and Local Government and with the National Disaster Management Centre. The Japanese were working on the same technology. There were economic implications. Following the tsunami in the Indian Ocean, South Africa contributed to the Indian Ocean warning system, from which information was transmitted to the disaster management centre in Pretoria. Seismology was a new science that had its inception in the 1950s, and it was premature at the present time to be over-confident as to the accuracy of predictions regarding possible future seismic events. Rash predictions could cause chaos and throw the science of seismology into disrepute. Seismology was being promoted in schools, including those in the rural areas.
The Chairperson said that he would align himself with Dr Graham's last comment. Seismic science was a young science, and the risk of making false predictions was real. From the point of view of CGS, in terms of improving capacity and capability, this was one area that the Committee should encourage. Also Mintek and CGS should go ahead with the mentorship projects. The Committee was eagerly anticipating the strategic plan that Mr Fusi had mentioned in reviewing the approaches to the second economy. It was important to work together to ensure comprehensive development locally.
The Chairperson thanked Mintek and GCS for their presentations and the Members for their participation.
The meeting was adjourned.