Department of Mineral Resources Annual Report 2008/9
Statement by the Director-General, Adv Sandile Nogxina
14 October 2009

INTRODUCTION
Chairperson of the Portfolio Committee, Honourable members, thank you for the opportunity to present to you the Department's Annual Report for 2008/ 09.
This Annual Report affords us the opportunity to account on the performance of the Department pertaining to its mandate and its contributions towards a better life in relation to governments overarching objectives. Moreover, the Annual Report gives effect to the imperatives of accountability and transparency, values that are enshrined in our Constitution, the supreme law and repository of the norms of the nation.
The global financial crisis dating to 2008 radically slowed down economies and in many cases caused recessions, mining companies are experiencing varying levels of difficulty, with some retrenching employees while others have either closed down or been put under administration.

The Mining Industry Growth, Development and Employment Task Team (MIGDETT) was set up to mitigate the severity of the crisis in the mining industry, and continues with interventions that can be applied over the medium to long term. This has already yielded some positive results, including containing the levels of cumulative retrenchments to below 35 000, contrary to early forecasts of more than 100 000 during the early part of the crisis. MIGDETT was also able to influence deferment of the Royalty Bill, obtain stakeholder support for the beneficiation strategy, initiate the development of a Mining Development Agency and it sought a commitment from companies to the mining regulatory compliance in its entirety. This intervention has also strengthened relationships among all stakeholders in working together to address the challenge as a collective.

The department is continuing with the assessment of the Mining Charter that began in the last financial year. Significant progress has been made towards quantifying the charter's impact. The Charter gives effect to transformation objectives in the mining industry, as a result of the proclamation of the MPRDA. The provisions to review the Charter are based on agreement among all stakeholders.
The Beneficiation strategy was launched on the 31st of March 2009 after approval was granted by Cabinet for the strategy to be circulated for broader consultation. The launch was used to inform stakeholders about the strategy and seek their inputs. Once all comments are received, they will be incorporated into the strategy, the Beneficiation Strategy Task Team will re-convene to prepare for a Cabinet Memo seeking final Cabinet approval for the strategy to be adopted as a policy position for the country.

The role of small-scale mining in the community is critical as it entails community upliftment, job creation and poverty alleviation, albeit varying levels of success have been attained to date by the Department. We are therefore currently developing a new approach to maximise the impact of small-scale mining, with particular focus on community development.

The past year has marked a shift in how health and safety is dealt with at mines. The public and workers have 
focussed the attention of all involved with mining on health and safety issues. The industry has recorded a welcome 28% improvement in fatality levels and reduction in injuries at work. The Presidential Audit into health and safety at mines has highlighted the need for mine operators to improve compliance with legal requirements, the need to develop enabling frameworks for prosecution of negligent operators and the building of enforcement capacity.

The Mine Health and Safety Inspectorate completed the Presidential Audit during the year under review and will work hard to realise the implementation of the outcomes of the Tripartite Leadership Summit on health and safety at mines and the recommendations from the Presidential Audit Report. All stakeholders in the sector will be encouraged to continue to work together to improve health and safety performance of mines.

FINANCIAL PERFORMANCE
The figures are inclusive of programmes that belong to the Department of Energy 
Budget performance remained within target 
The department has maintained an under spending level below 4% in the past four years.
Under spending is mainly attributable to the following factors: Delays in finalising projects at year end leading to roll over of budgets, Vacancies within certain branches, Delays in transfers due to contractual issues (lNEP and EDSM programmes)

The department received yet another unqualified audit report (4th year in a row)

All the state owned entities reporting to the minister of Mineral Resources managed to obtain clean audit reports for the year under review. Whilst the achievements are commendable there were some instances of non compliance noted by the Auditor General and the compliance function of the department is and will be making quarterly follow ups to ensure that action plans are put in place to ensure that these instances are addressed and do not recur in future.

Corporate Services
In 2007/8, the PPC that the Department presents its annual performance report using the balanced scorecard approach. As the department, we experienced a great challenge in presenting outcome-based results from output-based plans. We therefore, decided that this year (2008/9) we will take the initiative and adopt the balanced scorecard approach at the strategic planning stage. Based on this approach, the Department's Strategy Mapping highlights an integrated planning process that starts from our strategy - what we want our Department to be, what our customers (both external and internal) expect from us, what internal processes are required to support our objective(s), how to make the department an employer of choice, and how best we can achieve on our plans within our limited financial resources. As this was our first year of the implementation of the BSC, our overall plan did not highlight the long term desired outcomes, as these will only become apparent in the years to come.

During the year under review, we started a process of reviewing the structural relationship between line function and the support services (this includes the CFO's office and corporate services). This process
looked at the alignment of support services to line function/branch strategies and the support services' capacity to deliver and respond to the growth experienced within line function. The process further looked at the positioning of one of the critical elements of the support function, the human resource function. One of the challenges highlighted by this exercise was capacity. To implement the recommendations of the review, we started a process of reviewing support structures. This process has to date been linked to the split process.

Honourable members, at this stage I would like to briefly take you through the progress on the split of the Department of Minerals and Energy. With the President's announcement of the restructuring of government in May 2009, an inter-departmental task team lead by the DPSA, Presidency and National Treasury was formed. This team known as the NMOS - National Macro Organisation of State (project) is further represented by 6 affected departments. Interdepartmental meetings have been held since end of July where government-wide
plans and timeframes are set. DME is one of the departments on the NMOS. Although the split of the Department of Minerals and Energy can be considered as less complicated and probably quicker to implement, the process cannot be done outside the overall NMOS processes and timeframes. Our progress towards the finalisation of the split is highly dependent on the overall progress on government timeframes.

Summary of DME progress to date

1. APPROVAL OF INTERIM AND END-STATE - Ministers have approved the interim-phase (up to 31 March 2010) where the hosting department and DG will be in DMR, and the end-state will be two independent departments with their own support services and managing their own regional offices. Work over the past months has been on implementing these two phases.

2. The 9 DEPARTMENTAL WORK STREAMS as determined by the NMOS have been formed and reports presented to the NMOS's monthly meetings. Departmental work streams teams include:- organizational scoping and review, infrastructure and assets, labour, ICT, finance and budget, change management and communication, HR audit, legal and policy.

3. SCOPING - has been completed. This is the determination and analysis of functions to be split, assessment of current business support operations and process mapping, HR capacity, and development of a business case on the split options.

4. STRATEGIC PLANNING for the department was held from 19 to 21 August. Until the revised budget figures for the remainder of the 2009/10 financial year and the new budget for the DMR has been approved through National Treasury, the final costing of our strategy for the 2010/11 MTEF will have to wait.

5. DESIGN OF DEPARTMENTAL STRUCTURES - the DOE structure has been completed and approved by the Minister and the DMR organisational structure is ready for discussion with senior management, Director General and the Minister for final approval. This is to be completed by the end of next week. This process includes the compiling of functional lists and functional charts for the two departments and the drafting of the
to-be structures

6. The due date for the submission of organisational structures to the Minister of Public Service and Administration for his DETERMINATION is end October as per the NMOS timeframes. The department will meet this deadline.

7. FINANCE - provision of funds and the timing thereof will be advised by National Treasury. The Department has submitted a request for the mid-term appropriation and the results are expected around November.

8. JOB PROFILING AND JOB EVALUATIONS - the process has commenced. The process will go as far as determining job levels and remuneration thereof.

9. MATCHING AND PLACING - current staff will be matched and placed within the new structures at their current levels taking into account their compatibility. Agreement has been reached between the employee representatives and the employer on the format and operation of the matching and placing committee.

10. VACANCIES - after all current staff members have been placed, the process of advertising vacant posts and interviewing will commence. Current staff members who wish to apply for promotions will also participate in this process.

In conclusion, as of 1 April 2010, DME will cease to exist and the Department of Energy and the Department of Mineral Resources will be two independent organizations. Understandably, capacitating for both departments will have to be staggered, depending on the availability of funds and the time taken to go through the advertising and placement process.

Governance and Audit Reports
The department has designed the system of internal control to provide cost effective assurance that the department's goals will be economically, effectively, and efficiently achieved.
In line with the PFMA, the International Standards for the Professional Practice of Internal Auditing issued by the Institute and Internal Auditors, and the King" Report on Corporate Governance requirements, Internal Audit provided the Audit Committee and management with assurance that the internal controls are appropriate and effective. This was achieved by means of the Risk Management process review, governance review as well as the identification of corrective actions and suggested enhancements to the controls and processes. From the various reports of the Internal Auditors, the Audit Report on the Annual Financial Statements, and the management report of the Auditor-General, it was noted that no matters were reported that indicate any material deficiencies in the system of internal control or any deviations therefrom. The Audit Committee also reviewed the activities of Risk Management within the department and was satisfied with the content and quality of monthly and quarterly reports prepared and issued by the Accounting Officer during the year under review.

Accordingly, we can report that the system of internal control over financial reporting for the period under review was adequate, effective, and efficient.

The Audit Committee reviewed the quarterly reports of internal auditors to ensure the internal audit activity's effectiveness. The Committee was satisfied that the internal audit function is operating effectively and that it has addressed the risks pertinent to the department in its audits.

The Auditor general has indicated that the financial statements present fairly, in all material respects, the financial position of the Department for the year under review.

BRANCH PRESENTATIONS