DMRE on its response to Covid-19, including regulations thereof; with Minister
26 May 2020
The Minister and the Department of Mineral Resource and Energy (DMRE) presented to the joint committee on the challenges faced by the mining industry since the COVID-19 lockdown was announced. The Minister gave an outline of the number of confirmed positive cases in the industry and how the issues were being addressed by mining companies and the DMRE. It was clear that mining companies were doing multiple screenings of mine workers, but not conducting enough tests. The reopening of the mining industry was an initiative to prevent job losses. The Department said that there were currently no diesel shortages, but admitted that stocks were low.
Members expressed concern on the timing of the reopening of mines. They asked how screening and testing would be implemented properly without increasing the number of positive cases. The DMRE’s ability to take advantage of producing Personal Protective Equipment (PPE), and support given to entities, was questioned. How many of the strategic fuel fund (SFF) tanks had been rented out to international oil traders, what were the economic benefits, and how many tanks remained in South Africa? Would the demand for minerals decrease because of the impact of COVID-19?
Chairperson Modise said that Level 3 of the lockdown was under way, and would allow mining industries to operate at 100%. The purpose of the meeting was to indicate the readiness of the mining industry and how the spread of COVID-19 would be contained and minimised in the industry.
Department of Mineral Resources and Energy (DMRE)
Mr Gwede Mantashe, Minister of Mineral Resources and Energy, said that the responses to COVID-19 included the need for economic recovery and the general issues that should be addressed. The DMRE had previously raised concerns to the Cabinet that mineworkers were not being tested and that mines would be reopened in phases so that health systems, such as sanitising and social distancing, could be implemented. The DMRE had also raised concerns that there should be compulsory screening and testing of mineworkers. Unannounced visits had been made to the mines, and it had been found that screening was effectively being implemented, but testing was limited. Mines had been encouraged to begin testing intensively.
During the oversight visits, 90 positive cases had been recorded in Marula, 31 in the Dwarsfontein mine, and 154 in the Mponeng mine.
The Minister said COVID-19 was expected to reduce global growth, which was projected to be worse than ever. South Africa’s economic growth would be less than 1% in the current year. The reasons for the decline included poor education outcomes and a low, labour intensive economy. The national analysis discussions were about departments normalising activities and developing a strategy for growth. The contribution of mining had increased over the past few years, and would continue growing.
Adv Thabo Mokoena, Director-General: DMRE, highlighted the challenges of COVID-19 in the mining industry and some of the results from the lockdown, the challenges with electricity demand and load-shedding, and the measures that had been adopted by the DMRE to resolve the issues. He also outlined the oil price and the challenges on the global fuel industry, and the possible impact on South Africa, and the effect on the mining sector, especially small operators who had had challenges before COVID-19. Various projects had been implemented to address the issues.
He referred to the implementation of different initiatives that had been developed to assist the different aspects of the industry to reduce the impact of COVID-19, as well as the long-term interventions of the DMRE. The oil industry contribution to the economy would increase jobs.
Mr M Mahlaule (ANC) asked whether there was a strategy in place to keep employees at work instead of retrenching, since there was an estimated decrease in jobs because of delayed and cancelled projects. He also asked if there had been internal discussions with the Department of Health to collaborate with State-Owned Enterprises (SOEs) to produce personal protective equipment (PPE), what measures the DMRE had taken against mines with positive cases.
Mr K Mileham (DA) stressed Mr Mahlaule’s point on retaining employees instead of retrenching, and added that screening and testing at mines should be intensified. On the transmission of COVID-19 in mines, he asked if the number of infections had increased within the workforce, or if they had come from outside the mines. Who was responsible for tracing infected workers? He was concerned about fuel stocks and the shortage of diesel nationwide, and asked what measures were being taken to resolve the issue. He asked which downstream assets were being procured, who would be responsible for managing the assets, and whether there was competence in the DMRE to manage them.
He requested feedback on the processes of the retail motor industry (RMI) since it was issued on the procurement process for emergency energy. He also highlighted that the National Energy Regulator of South Africa (NERSA’s) determinations in section 34 did not align with the interventions that were announced at the State of the Nation Address (SONA), and asked about the progress of the amendment of the two Energy Regulation Acts. He also asked if there were plans for a further amendment in the increase of megawatts in the licensing of the new generation. He also wanted feedback on the South African Diamond and Precious Metals Regulator (SADPMR) on not being allowed any diamond exports.
Ms N Hlonyana (EFF) asked for about the progress of the report on the prototype test kits, and asked if the sanitisers used in mines were up to standard with the stipulated health conditions. She also asked if all mines were complying with the Code of Practice.
Ms W Ngwenya (ANC, Gauteng) asked about the classification of the Gas Amendment Bill and the Upstream Petroleum Bill with the Constitution, and how much funding had been allocated for small-scale mining to assist in restarting mine operations. Did mining companies have plans to reduce the loss of jobs during COVID-19, and did the government have plans to sustain small companies that had since closed because of CPVID-19?
Chairperson Modise asked if companies had plans in place to assist mine workers with transportation.
Ms V Malinga (ANC) applauded the DMRE on doing the unannounced visits to mines. She asked if the quarantine facilities at mines were only for mineworkers, or if the extended community could use the facilities. On the issue of decreased oil prices, she asked if the DMRE had plans to ensure that there was enough oil at a low price.
Mr D Mthenjane (EFF) thanked the Department for the presentation, but pointed out that the presentation had some contradictions compared to the last one, where the Department had stressed that the DMRE should try and minimise the spread of COVID-19, and that mines should not be reopened, especially since not all mines were essential. He expressed concern that mines would be allowed to reopen even after the DMRE oversight visit observations, and commented that mines were not doing enough screening and testing. He wanted to know how mines would be opened systematically. He said that the presentation was supposed to outline the DMRE’s plans instead of repeating information from what had been presented by entities, and asked how the DMRE would respond if COVID-19 positive cases multiplied in mines because of reopening.
The Minister referred to allowing companies to operate without retrenching, and explained that during the lockdown four companies had lost demand for their products, and some had cash flow problems. The companies were encouraged not to retrench, despite the issues and no retrenchments had taken place. Retrenchments had also been discouraged because trade unions could not operate fully because of the lockdown regulations.
On the origins of infection in the mines, the Minister said that some cases were from other countries and provinces. All epicenter mines were encouraged to quarantine workers to minimise the spread of the infection. Limited trade was implemented for surplus megawatts of any entity that produced more than 10 megawatts’ self-generation, because entities with surpluses always wanted to trade the surplus.
The Minister highlighted that only two mines had been closed since COVID-19, and that the PPE donations had been made by entities to communities. It was not the DMRE’s responsibility to buy PPEs. The closing of mines would result in job losses, so closing the industry was not a sustainable solution. Instead, adapting to COVID-19 was encouraged in all communities. He added that the entities that presented to Parliament were part of the DMRE, and were implementing tools of the Department.
Mr David Msiza, Chief Inspector of Mines: DMRE, said that the mines had been requested to screen and test, and that the high number of positive cases was as a result of mines screening but not testing workers. Discussions were being held on the disaster management regulations with mines, and that testing should comply with the regulations. The DMRE was working with the Department of Health to ensure proper contact tracing. Mines had been following and complying with the Department of Health’s guidelines.
He added that mines were requested to have quarantine facilities for positive cases, and the gazette guidelines aimed to encourage the mining sector to work with local authorities to assist communities.
Ms Ntokozo Ngcwabe, DDG: Mineral Policy and Promotions: DMRE, said the Gas Amendment Bill had been classified as section 75, and would not have any provincial implications but the Upstream amendment bill had been classified as section 76, and would require provincial consultations. The DMRE was still waiting for feedback from the State Law Advisor on the pre-certification of the bill. Consultations with stakeholders had been ongoing and intense. Some non-governmental organizations (NGOs) had raised concerns that communities had been excluded from the consultation process because of the COVID-19 regulations. She saidthat no one had been excluded from the consultation process, and that community consultation would resume after the lockdown.
On the issue of funding for small scale mining, she said the current R23 million available would be used to assist miners. Applications would be assessed, and the Industrial Development Corporation (IDC) would be instructed to release funds upon approval. Plans were in place to assist small companies that had been affected by COVID-19, and mining companies had also been encouraged to use the R500 billion stimulus package, because there was limited availability of funds from the DMRE.
Mr Jacob Mbele, Chief Director: Electricity, DMRE, said the proposals on emergency power pitched to the DMRE required long-term power agreements and short-term power supply agreements. Programmes had been divided into two sections. The procurement processes allowed for direct procurement, which had been forwarded to Eskom. The independent power producers’ (IPP’s) office was working on an initiative to provide additional capacity to the 128- megawatt grid.
Referring to emergency power, he said that one of the biggest milestones for the DMRE was the agreement with NERSA on section 34 that had been issued by the Minister. The documentation on the procurement of the 2 000 megawatts was a joint project by the DMRE and NERSA, and should be available within a month.
A DMRE representative said that there were currently no diesel shortages, but admitted that stocks were low. There had been a decrease in the demand when the Level 4 of lockdown was announced, and all refineries had been shut down. An initiative had been implemented to supply enough diesel, and some refineries had started producing diesel, with two import vessels having docked in the country. The oil price had increased, but the low fuel prices had impacted the economy.
Another DMRE representative said that MinTek and Pelchem were supported by the DMRE, and were required to comply with the law. The issue of diamond exports had been noted, and the SADPMR chief executive officer (CEO) had been made aware and was addressing it. He added that mineworkers were usually from areas surrounding the mines, and entities had been requested to address COVID-19 challenges on behalf of the DMRE.
Ms C Phillips (DA) asked whether the timelines in the presentation reflected the expected start of the projects, or when they were expected to be completed. She also requested feasibility studies on the projects. She asked how the DMRE was planning to reduce the costs. She applauded the DMRE’s suggestion of the Platinum Coin, and asked if the coin was going to be exempt from VAT. She also asked which specific minerals were going to be explored by the DMRE in the four proposed projects.
Mr M Wolmarans (ANC) acknowledged the work of the DMRE, and indicated that the issues in the presentation were clear. On the production and manufacturing of masks and sanitisers, he enquired if the DMRE was taking advantage of the opportunity, especially during COVID-19. He also asked if the DMRE had enough financial and capacity resources to store at low prices.
Mr S Kula (ANC) said that the gradual reopening of the economy would increase the demand for PPE, and asked how the DMRE was positioning its entities to benefit from the high demand. How would it ensure the improvement of testing at mines by mining companies? How many of the strategic fuel fund (SFF) tanks had been rented out to international oil traders, what were the economic benefits, and how many tanks remained in South Africa? On the high demand for crude oil, he suggested that instead of renting out tanks for international traders, the oil could have been stored in the South Africa. He added that the DMRE’s motivation for a trading agency was long overdue.
Minister Mantashe referred to the input costs, and said the input cost operations were broad, and that mining companies had to be understood fully. He said that mindsets and resistance to change in the mining industry were causing the challenges.
Mr Tseliso Maqubela, Deputy Director-General: Petroleum and Petroleum Products Regulation, DMRE, said that the SFF had to create a balance between purchases and what traders were allowed to store. Four million barrels of storage were available, meaning more money was required to purchase the available barrels in dollars. When the storage was rented, income was generated in dollars, and the income was beneficial because it was used to replenish stocks.
Adv Mokoena said that the mass production of products by MinTek and Pelchem should be marketed, and that the DMRE was supporting the entities. He said the specific minerals explored included rare earth elements, fluorspar and phosphate.
Minister Mantashe added that some of the combinations of minerals that would be explored would be discovered along the way. The manufacture and production of PPE would be intensified so that products were not imported, and to preserve small sector producers.
He said that the national COVID-19 cases included the confirmed mine cases, and the demand for diamonds had decreased globally.
Mr T Matibe (ANC, Limpopo) said that the demand for minerals may decrease because of the impact of COVID-19, and that illegal mining may also be affected.
Ms Phillips reiterated the question on whether the platinum coin would be exempt from VAT.
Mr Mthenjane expressed concern that the Minister assumed Members were asking questions out of anger, and said they were being asked on behalf of communities. He suggested that the closing of mines should be temporary until after the lockdown.
Ms Malinga applauded the DMRE for assisting small mining companies during the lockdown.
Ms Hlonyana said that the DMRE would be closely monitored to ensure that the rehabilitation fund was not misused, and that it served its purpose.
Mr Mileham asked which downstream assets were going to be procured, and where the funding for the procurement was coming from. On the low demand for diamonds, he stressed that diamonds were not being exported, and asked if the DMRE had a plan of action for the issue. What was the status of the strategic reserves of diesel by refineries and wholesalers? He said that refineries and wholesalers were expected to hold at least 14 days’ supply, and asked if there was compliance by refineries and how much supply was available, as well as the actions that were being taken to access supply.
Mr Mahlaule suggested that mineworkers from COVID-19 epicenters should be screened and tested before going back to communities, not when they returned to work.
A DMRE representative said that there would be shortages if there was no plan of action by the Department, but refineries were back on schedule with production. The strategic stocks policy had been drafted, and it would address crude oil and stocks. The policy document had not been finalised because crude oil and fuel prices were high. He added that the downstream assets would include infrastructure and storage assets.
Another DMRE representative said that reports had been received on illegal mining, and the DMRE was trying to address the issue. Illegal mining hotspots had been identified, and close collaboration with law enforcement agencies had been established.
Mr Lucas Mulaudzi, Chief Director: Renewable Energy, DMRE, said that the timelines were based on two documents -- the five-year strategic plan and the annual performance plan. The timelines were based on project management principles and some projects would be done according to the Medium Term Strategic Framework (MTSF).
A DMRE representative said there was ongoing research and discussions with the National Treasury on the platinum coin. She said that once the interventions and research had been finalised, the decision would be made available. She added that the demand for diamonds had been decreasing because of the trade war between China and the USA, which were the biggest market for diamonds, including Hong Kong. COVID-19 had reduced the already low demand for diamonds. Trading was taking place, but it was limited to producers and not traders, because of the threats to employment for both large scale and small-scale producers.
Chairperson Luzipo said the comprehensive strategy aimed to ensure that health conditions were strengthened in the COVID-19 environment. All economies had to be strengthened, to ensure stability and the creation of jobs. Further discussions on energy security and generation would be held on the effects of COVID-19. Measures should result in a decrease in COVID-19 challenges. Critical issues were the capacity of the DMRE and the status and nature of its operations, as well as the cost implications. A lot of work needed to be done.
Adv Mokoena said the issue of production had been discussed, and no issues were anticipated. The DMRE’s decisions would be systematic, and not all employees were expected to return to work. Mining companies had assured the DMRE that if workers from Southern African Development Community (SADC) regions were screened and showed no symptoms of COVID-19, permits would be issued for them to return to work. Workers would be sanitised and placed in quarantine facilities. He added that the Mponeng mine was not operating, and clear collaboration between entities should exist in order to address COVID-19 challenges. He expressed satisfaction with the questions that had been asked by Members. The DMRE was ready for Level 3, and compliance would be ensured.
Chairperson Modise thanked the DMRE, the Minister and the Director-General for the presentation. She highlighted that there had not been any load-shedding, and asked that the DMRE maintain this situation. Measures should be put in place for expected electricity increases because of the changes in the economy.
Chairperson Luzipo commented that the collaboration of the two committees had proven to be effective, and he hoped that the DMRE and the Minister would work hard on improving the industry.
The meeting was adjourned.