ATC131101: The Budgetary Review and Recommendation Report of the Portfolio Committee on Mineral Resources dated 29 October 2013

THE BUDGETARY REVIEW AND RECOMMENDATION REPORT OF THE PORTFOLIO COMMITTEE ON MINERAL RESOURCES DATED 29 OCTOBER 2013

The Portfolio Committee on Mineral Resources, having assessed the service delivery performance of the Department of Mineral Resources, reports as follows:

1. Introduction

1.1. Mandate of Committee

In terms of the Constitution of the Republic of South Africa, Act 108 of 1996 (the Constitution), Portfolio Committees have a mandate to legislate, conduct oversight over the Executive and facilitate public participation. The Portfolio Committee on Mineral Resources mandate is governed by Parliament’s mission and vision statements; the rules of Parliament and its Constitutional obligations. The mission of the Portfolio Committee is to contribute to the realisation of a developmental state and ensure effective Service Delivery through discharging its responsibility as a Portfolio Committee of Parliament. Its vision includes enhancing and developing the capacity of Committee Members in the exercise of effective oversight over the Executive Authority. One of the Committee’s core objectives is to oversee, scrutinise and influence the action of the Executive and its agencies. This implies holding the Executive and related entities accountable through oversight of objectives of its programmes, scrutinising its budget and expenditure (annually), and recommending through Parliament actions it should take in order to attain its strategic goals and contribute to service delivery.

1.2. The Mandate of the Department

The mandate of the Department of Mineral Resources (DMR) is to “promote and regulate the minerals and mining sector for transformation, growth, development and ensure that all South Africans derive sustainable benefits from the country’s mineral wealth.”

The Department of Mineral Resources (the Department) is the primary Government institution responsible for formulating and implementing policy on mining. It reports to and advises the Minister of Mineral Resources (the Minister) who, in conjunction with the Cabinet, takes final responsibility for Government policy. The Department is headed by the Director-General responsible for ensuring the exploration, development, processing, utilisation and management of South Africa’s mineral resources.

The legislative mandate of the Department is to ensure transformation, economic growth, health, safety and sustainability of the minerals and mining sector. Its vision is to promote investment in the mineral sector and through regulation ensure a healthier, safer and equitably transformed mineral sector by 2014, and also be a leader in the transformation of South Africa through economic growth and sustainable development by 2025. Its mission includes promoting and regulating the Minerals and mining sector for transformation, growth and development. It further ensures that all South Africans derive sustainable benefit from the country’s mineral wealth.

The following are State Owned Entities reporting to the Department of Mineral Resources and their purpose is to provide related services in support of the Department’s mandate through funded and non-funded statutory bodies and organisations:

·         Council for Mineral Technology and Research (Mintek);

·         Council for Geoscience (CGS);

·         The Mine Health and Safety Council (MHSC);

·         The South African Diamond and Precious Metals Regulator (SADPMR); and

·         The State Diamond Trader (SDT)

1.3. Purpose of the BRR Report

Section 77(3) of the Constitution stipulates that an Act of Parliament must provide for a procedure to amend money bills before Parliament. This constitutional provision gave birth to the Money Bills Amendment Procedure and Related Matters Act, No. 9 of 2009, which sets out the process that allows Parliament to make recommendations to the Minister of Finance to amend the budget of a national department.

Section 5 of the Money Bills Amendment Procedures and Related Matters Act, No 9 of 2009 (the Act), states that the National Assembly, through its Committees, must annually assess the performance of each national department with reference to the following:

·         The medium term estimates of expenditure of each national department, its strategic priorities and measurable objectives, as tabled in the National Assembly with the national budget;

·         Prevailing strategic plans;

·         The expenditure report relating to such department published by the National Treasury in terms of section 32 reports of the Public Finance Management Act, No 1 of 1999 (PFMA), as amended in 2009;

·         The financial statements and annual report of such department;

·         The report of the Committee on Public Accounts relating to the department; and

·         Any other information requested by or presented to a House or Parliament.

Committees must submit the Budgetary Review and Recommendation Report (BRRR) annually to the National Assembly. The BRRR assesses the effectiveness and efficiency of a department’s use and forward allocation of available resources and may include recommendation on the use of resources in the medium term.

Committees must submit the BRRR after the adoption of the budget and before the adoption of the reports on the Medium Term Budget Policy Statement (MTBPS) by the respective Houses in November of each year.

The Money Bills Amendment Procedure and Related Matters Act therefore makes it obligatory for Parliament to assess the Department’s budgetary needs and shortfalls vis-à-vis the Department’s operational efficiency and performance. This is done taking into consideration the fact that the Department has oversight responsibilities over five entities.

1.4. Method followed by the Committee in writing the BRR Report

The Committee has scrutinised and interrogated all available documents as outlined in Section 5 of the Act. The Committee has assessed the performance of the Department in the 2012/13 financial year, as well as performance in the first quarter and second quarter of the 2013/14 financial year where information was available. In complying  with section 5 (2) of the Money Bills Amendment Procedure  and Related Matters Act, Act No 9 of 2009, the Portfolio Committee on Mineral Resources held a meeting on the 2012/2013 Annual Report of the Department of Mineral Resources on 16 October 2013. The office of the Auditor General was also invited to give input during the budget review and recommendation report process 16 October 2013. The Financial and Fiscal Commission (FFC) also gave an input on 09 October 2013. Moreover, the Committee undertook oversight visits to KwaZulu Natal and Free State in 2012 and to the Eastern Cape form from 26 January to 01 February 2013 to assess the extent of compliance with minerals legislation.

The Committee, in undertaking this process used a number of source documents, including the 2010-2014 Strategic Plan of the DMR, Annual Performance Plans, Annual Reports, Financial Statements, 2012 and 2013 Estimates of the National Expenditure (ENE), briefings by the Department and its entities during the course of the year, as well as the State of the Nation Address. In addition the Committee has taken note of reports from the Department of Performance Monitoring and Evaluation in the Presidency, the Financial and Fiscal Commission, the SA Human Rights Commission and comments submitted to the DMR and the Committee on the Minerals and Petroleum Development Amendment Bill. The Committee also used the Constitution as its basis.

1.5. Outline of the contents of the Report.

The outline of the report following the Committee’s review of the work of the Department for the 2013 Budget Review Recommendation is as follows:

·         An overview and analysis of the Department’s strategic priorities and measurable objectives;

·         An assessment of the overall financial performance for 2012/13 and first quarter 2013/14;

·         An assessment of the overall service delivery performance for 2012/13 and first quarter 2013/14;

·         Consideration of the Auditor-General’s findings in relation to the Department;

·         Consideration of oversight reports and other engagements held with the Department;

·         Consideration of the Financial Fiscal Commission submissions;

·         Committee observations on overall performance of the Department; and

·         Recommendations.

2. Overview of the key relevant policy focus areas

Mining is a growing sector with a 65 per cent increase in the number of mines since 2004 and a 15 per cent increase in employment over the same period.  The minerals sector is a key contributor to the South African economy because of the half million workers it employs directly and because of the minerals used in value chains from energy to manufacturing. It is also responsible for more than half of South Africa’s earnings from exports and is critical to the ability of the economy to earn foreign exchange and reduce the trade deficit. The good stewardship of the DMR over the minerals sector is of exceptional importance to the future of the country.

The strategic goals outlined in the Department’s 2011-2014 Strategic Plan remain the same, i.e. there has been no policy shift in the 2012/13 APP and 2013/14 APP. The strategic goals of the Department as contained in its Strategic Plan 2011-2014 are as follows:

• promote the sustainable use and management of resources, contribute to skills development, and create meaningful and sustainable jobs
• provide a framework for managing health and safety risks, enforcing compliance and promoting best practice in the mining sector
• redress past imbalances through broader participation in the minerals sector by: directly intervening in communities; and increasing black economic empowerment and the participation of small, medium and micro enterprises (SMMEs) as well as women, youth and the disabled
• contribute to the reduction of the adverse environmental impacts of mining
• promote and facilitate an increase in mining activity and in value added to mineral resources extracted
• attract, develop and retain appropriate skills and ensure the optimal use of resources by implementing risk management strategies and promoting sound corporate governance.

The President’s reference point for the 2013 State of the Nation address was the National Development Plan (NDP). The NDP suggests that the policy priority for the mineral sector is to address the central constraints on the growth of the sector. These are named as uncertainty in the regulatory framework and property rights, electricity shortages and prices, infrastructure weaknesses; especially in heavy haul rail services, ports and water including skills gaps.

The National Development Plan proposes that the sector could expand by 3 to 4 per cent per year to 2020, creating a further 100 000 jobs, and that 300 000 direct and indirect jobs could be generated by 2030. The interventions recommended by the plan include ensuring a stable regulatory framework, conducting research on improving energy and water efficient extraction methods, developing links with supplier industries and downstream producers, identifying resource based products for manufacture to improve beneficiation, and improving the alignment of the mining charter requirements to stimulate development in local communities.

These issues all find mention within the Annual Performance Plan of the Department for 2013/14, which also emphasises the important issues of mine health and safety, which are not specifically mentioned in the NDP as a priority.

The 2013 Budget refers directly to the NDP and, in particular, repeats very optimistic NDP projections for employment growth based on the minerals cluster. It states that 300 000 direct and indirect jobs could be generated by 2030 from the mining industry. This prospect will depend upon resolving the current serious labour relations challenges facing the sector. The imperative of bringing stability to the mining sector from an industrial relations perspective was highlighted by the President in the 2013 State of the Nation Address and also emphasised by the Financial and Fiscal Commission in their 2013 presentation to the Committee.

Delivery Agreement 10: Environmental Assets & Natural Resources, Sub-output 3.4: Management of environmental impacts from mining and related activities anticipated that an integrated and coordinated regulatory system for environmental management of mining would be in place by June 2012. This has been delayed, but is now on track, following the Inter-Departmental Project Implementation Committee (IPIC) process, which has involved the DMR and the departments of Water Affairs and Environmental Affairs. This will come into effect after the amendment of the relevant legislation, which is presently under way.

DMR outcomes as linked to national outcomes:

Departmental Outcomes

National Outcomes

Increased investment in the minerals and mining sector	Linked to National Outcome 4: Decent employment through inclusive economic growth
Improved health and safety conditions in the mining sector	Not directly linked to a National Outcome
Equitable and sustainable benefit from mineral resources	Linked to National Outcomes 4: Decent employment through inclusive economic growth 7: Vibrant, equitable, sustainable rural communities & 10: Environmental assets and natural resources that are well protected and continually enhanced
Transformed minerals sector	Linked to National Outcome 4

The Department indicated that it will continue to develop the strategy for sustainable growth and meaningful transformation of South Africa’s mining industry. This will include the amendment of the regulatory framework to clarify the Mineral and Petroleum Resources Development Act (2002) and the Mine Health and Safety Act (1996), as promoted by the plan. The department will also continue to contribute to the national industrialisation programme through the beneficiation strategy and its key implementation plan, and the determination of mining and beneficiation infrastructure.

3. SUMMARY OF PREVIOUS KEY COMMITTEE RECOMMENDATIONS

3.1. 2012/13 BRRR recommendations

The Committee having assessed and reviewed the performance of the Department in the 2012 Budgetary Review and Recommendation Process made the following recommendations:

BRRR 2012 Recommendations

Progress & Challenges in 2013

·         The Department of Mineral Resources should fast-track the filling of vacant posts, especially the funded vacancies.	·         Minimal progress – recommendation needs to be repeated
·         The Department of Mineral Resources should create a recruitment and retention strategy for its staff members.	·          Minimal progress – recommendation needs to be repeated
·         The Department of Mineral Resources should fast-track the implementation of the talent management strategy to reverse the tide of staff-turnover.	·          Minimal progress – recommendation needs to be repeated
·         The Department of Mineral Resources should give quarterly reports of financial performance to ensure speedy observation of deviations and to prevent regression of audit outcomes.	·          Progress reported by the Auditor –General in the presentation to the Committee. There are quarterly meetings with the Department – but the Department nevertheless received a qualified audit report for 2012/13.
·         The Department of Mineral Resources should build capacity to ensure the enforcement of compliance requirements.	·         Uneven progress. Material non-compliance with the MPRDA (Section 28 (a), (b) and (c) was reported by the Auditor General for the first time in 2012/13
·         The Department of Mineral Resources should address the issues raised by the Auditor General in his 2011/12 financial year report and present to Parliament action plan thereof with specific timeframes.	·          An action plan was drawn up, and presented to Parliament in aspects of the Annual Performance Plan 2013/14.
·         The Department of Mineral Resources should consider a downward adjustment for the Payment of Capital Assets in order to mitigate a possible over expenditure on Transfers and Subsidies.	·          There was no over expenditure on Transfers and Subsidies.
·         The Department of Mineral Resources should fast-track the quantification of government liability with regard to the Rehabilitation of Derelict and Ownerless Mines.	·         Achieved - the estimated cost of rehabilitation is R41 billion. The Department has a plan to address ownerless and derelict mines and mine dumps. 13 mines were rehabilitated in 2012/3 (one more than the target). But many thousands of mine sites are affected.
·         The Department of Mineral Resources should ensure that inspections of projects that impact upon vulnerable groups are conducted.	·          181 “social and labour plan inspections (SLP)” were completed in 2012/13. This is fewer than in 2011/12, but in excess of the revised performance target of 160.
·         The Department of Mineral Resources should develop a much clearer score card used for compliance to the Mining Charter in order to prevent the confusion within the mining industry	·          No changes have been proposed to the Mining Charter score card.

3.2. 2013/14 Budget Vote Recommendations

The Committee having considered the Annual Performance Plan and the Budget of the Department of Mineral resources for the 2013/14 financial year made the following recommendations:

·         Clarify their performance targets against other measures such comparison with particular years and in relation to specific issues.

·         The Department should forward to the Committee the percentage of applications where the statutory obligations were met and how many were still outstanding.

·         The Department need to review the service delivery planned outputs; the outputs should be linked to the core policy sub-programmes.

·         Improve alignment of the service delivery planned targets to the strategic outcomes.

·         Link the service delivery outputs of the public entities to the department strategic outcomes, track resources allocated to the public entities (transfers and subsidies represent 45 per cent of the Department’s allocated funds).

·         Need to establish monitoring and evaluation oversight and planning capability over the public entities to improve sector performance.

·         The Department should send a detailed report of rehabilitation of mines with aligned approved budget accounted for in the same report by end of June.

·         The Department should send a detailed report of vacancy rate and how capacity will be improved in regional offices throughout the country by end of June.

4. Overview and assessment of financial performance

4.1.       Overview of Vote Allocations and Spending Trends (2009/10 to 2015/16)

Table 1: Budget Allocation Trends

This section provides an overview of spending trends for the period 2009/10 to 2015/16, an assessment of financial performance for 2012/13 and financial performance for the first quarter of 2013/14.

Table 1: Budget Allocation Trends (2009/10 to 2015/16)

	Audited Outcomes			Main	Adjusted	Audited Actual	Medium Term Estimates
Programmes	2009/10	2010/11	2011/12	2012/13	2012/13	2012/13	2013/14	2014/15	2015/16
Administration	159.3	226.7	257.6	238.9	257.3	295.2	271.5	276.7	289.9
Promotion of Mine Safety and Health	132	137.1	141.3	154.5	150.6	140.7	163.7	171.4	179.8
Mineral Regulation	179.5	188.6	184.4	180.1	187.8	191.3	222.7	234.8	249.1
Mineral Policy and Promotion	382.9	442.3	446.2	595.6	579.9	546.2	735.9	808.4	900.5
Total	853.8	994.7	1029.4	1169.1	1175.5	1 173.6	1 393.80	1 491.30	1 619.30

Source: DMR and National Treasury

Between 2008/09 and 2011/12, expenditure increased from R768.3 million to R1 billion, at an average annual rate of 10.6 per cent, due to the split of the Department of Minerals and Energy into two departments, which resulted in the need for more administrative staff. Consequently, over the same period, expenditure on compensation of employees increased from R231 million to R380.4 million, at an average annual rate of 18.1 per cent. Expenditure on goods and services increased from R158.6 million to R208.4 million, at an average annual rate of 9.5 per cent, to provide for the increased staff. Transfer payments, particularly to public corporations and private enterprises, grew from R366.9 million to R438 million between 2008/09 and 2011/12, at an average annual rate of 6 per cent, mainly due to inflation related adjustments and allocations for infrastructure projects.

The spending focus over the medium term will be on implementing the beneficiation strategy, reviewing the implementation of the mining charter, and rehabilitating derelict and ownerless mines to ensure that the country’s mineral wealth contributes to socioeconomic imperatives, including job creation, technology development, economic diversification and transformation. The department plans to rehabilitate 120 derelict and ownerless mines at a cost of R327.6 million over the medium term.

Transfers to the Council for Geoscience and the Council for Mineral Technology over the medium term constitute 46.1 per cent of the total budget. The former receives R882 million and the latter R926 million over this period. Expenditure on goods and services over the MTEF period is expected to increase in line with the number of mining sites scheduled to undergo rehabilitation. Transfer payments to departmental agencies and accounts increased significantly in 2012/13, due to an additional allocation provided for the economic competitiveness and support package.

4.2.       Financial Performance 2012/13

Table 2: Comparison of the Original, Adjusted and Final Appropriation and Audited Outcome for the Department of Mineral Resources 2012/13

	Original		Adjusted			Final Appropriation 2012/13			Actual Outcomes Spent 2012/13
Programme	R '000	Percent shares	R '000	Percent shares	Change in amounts from Original	R '000	Percent shares	Change in amounts from Original	R '000	% Spent of Final Appropriation
Administration	238 929	20%	257 259	22%	7.70%	295 254	25%	23.60%	295 254	100%
Promotion of Mine Safety and Health	154 472	13%	150 618	13%	-2.50%	141 511	12%	-8.40%	140 715	99.4%
Mineral Regulation	180 098	15%	187 786	16%	4.30%	191 609	16%	6.40%	191 395	99.9%
Mineral Policy and Promotion	595 563	51%	579 870	49%	-2.60%	547 159	47%	-8.10%	546 278	99.8%
TOTAL	1 169 062	100%	1 175 533	100%	0.60%	1 175 533	100%	0.60%	1 173 642	99.8%

The main appropriation received by the Department was adjusted upwards to R1.176 billion from R1.169 billion. This was a negligible change – of half of one per cent of the original appropriation. The budget was, however, restructured to a greater extent by virements and shifts of funds, all within the allowed limits. The effect of this was to move resources towards Programme 1 Administration and Programme 3 Mineral Regulation, and away from Programme 2 Promotion of Mine Safety and Health and Programme 4 Mineral Policy and Promotion.

When the budget structure is reviewed over the full financial year, using the results from the annual financial statements, it can be seen that the share of Programme 1 Administration rose to 25 per cent from a planned level of 20 per cent over the year. The 2013/14 budget anticipates reversing this situation.

The reasons for these shifts of funds towards Programme 1 Administration were initially increased compensation of employees for subprogramme 1 (Ministry) R1.0million and subprogramme 4 (Internal Audit) and R1.5million for the Financial Administration subprogramme. Programme 3 Mineral Regulation was adjusted upwards because of an increase in personnel remuneration and R611 000 for Departmental agencies and accounts. Interpretation of the significance of the shifts seen towards Programmes 1 and 3 is obscured by the fact that the Department shifted funds in both programmes due to the funds having been incorrectly classified in the 2012 Estimates of National Expenditure (ENE).

The lower budget figures for Programme 2 Promotion of Mine Safety and Health were explained by R6.0million declared as a savings. The budget for Programme 4 Mineral Policy and Promotion, which is by far the largest programme of the DMR, was decreased by R15.693 million to a total adjusted appropriation of R579.87 million, “mainly a result of defrayed funds to other divisions to the amount of R21.512 million.” The main reason for these movements was said to be due to underperforming of certain projects. Most of the movements had been approved by National Treasury.

Given these observations, it is envisaged that the Committee should request the Department to explain factors that have contributed to underperforming of certain projects and the plans in place to address those challenges.

Total expenditure for the previous 2011/12 financial year was R1.029 billion or 99.1 per cent of the adjusted appropriation. At the end of the first six months of the 2012/13 financial year the expenditure for the Department was R641.517 million or 54.6 per cent of the adjusted budget. In comparison, mid-year expenditure for the 2011/12 financial year was R519.091 million, or 50.0 per cent of the 2011/12 adjusted appropriation. This means that expenditure in the first six months has increased by R122.426 million or 23.6 per cent compared to the same period of the 2011/12 financial year. The increase in expenditure compared to the previous financial year (2011/12) was due to salary adjustments and payments for computer equipment.

With regards to the Administration programme, it had a total budget allocation of R292.3 million and disbursed 100 percent of the budget allocation. An additional amount of R38 million was allocated to the programme through virement to cater for higher than anticipated expenditure on goods and services in respect of operating leases.

With regards to Programme 2, the programme disbursed R140.7 million which represents 99.93 percent of its total budget allocation of R141.5 million. The under-spending of R796 000 is attributable to the high vacancy rate within the programme. The programme’s budget is personnel driven and, due to high vacancy rate, an amount of R9.1 million was allocated to other programmes to cover for over expenditure as part of virement.

Programme 3: Mineral Regulation spent R191.4 million (99.94 percent) of the total budget allocation of R191.6 million. The programme received an additional allocation of R3.8 millions through virement to cater for higher than anticipated expenditure. The variance is attributable to delays in receiving invoices from suppliers of goods and services.

Programme 4: Mineral Policy and Promotion disbursed R546.3 million which represents 99.84 percent of its total budget allocation of R547.2 million. The under-spending is attributable to some posts that were vacant during the financial year. An amount of R32.7 million was allocated to other programmes through virement to cater for higher than anticipated expenditure in Programmes 1 and 3. The saving was as a result of the Assistance to Mines allocation which is dependent on the applications the Department receives from qualifying mines and no applications were received during the financial year.

4.3.       Financial Performance for First Quarter 2013/14

The budget of the Department of Mineral Resources for the 2013/14 financial year is R1.394 billion. This represents an increase of R218 million over the previous year, a real increase close to 12 per cent when inflation is taken into account. There has been no significant change with the pattern of past budgets. 54 per cent goes to current payments, 45 per cent to transfers (mainly to the Council for Geoscience and Mintek), with a negligible proportion going to capital expenditure. The compensation of employees makes up 31.2 per cent of the total budget, with goods and services at 22.4 per cent and travel and subsistence at just above 5.3per cent.

Table 3: First Quarter Expenditure Performance 2013/14

Programme	Budget	Actual Expenditure	April to June % Spent
('000)
Administration	271.5	80.1	29.6%
Promotion of Mine Safety and Health	163.7	38.1	24.5%
Mineral Regulation	222.7	38.7	21.8%
Mineral Policy and Promotion	735.9	17.4	11.1%
Totals	1 393.80	175.1	22.9%

Source: National Treasury 2013

With regard to operational expenditure in the first quarter of the 2013/2014 financial year, the DMR spent R175.1 million of its R763.8million main appropriation (22.9 per cent) in the April 2013 to June 2013 period. This compares with 23.6 per cent at the same point in the previous financial year, when R153.3million of R650.4million had been spent. In both years, the DMR had, by the end of the first quarter, spent slightly more of its annual budget in relative terms than all 36 national departments measured together.

Comparative under spending is visible only in Programme 4: Mineral Policy and Promotion, where 11.1 per cent of the available budget (R17.4million of R156.9million) was spent in the first quarter. There has been an absolute increase in expenditure compared to the same period in the previous financial year due to an increase in the number of mine environmental inspections resulting from amendments in the current legislation but less than half of the amount available for this programme was spent in the period allowed.

The department has spent R396.6 million to the end of the first quarter, whilst having projected to spend R411.5 million in the first quarter, leaving a lag of R14.9 million at this point in the year. This is mainly due to a delay in the advertising of posts for mine health and safety inspections and delays in finalising the memorandum of understanding between the service provider for the rehabilitation of derelict and ownerless of mines project. The lag is expected to be resolved during the course of the year and does not represent an issue for the department.

4.4.       2013/14 MTEF Financial Allocations

Table 4: 2014 Medium Term Expenditure Framework Budget Trends

Programme	Budget
R million	2012/13	2013/14	2014/15	2015/16
Administration	295.3	271.5	276.7	289.9
Promotion of Mine Safety and Health	141.5	163.7	171.4	179.8
Mineral Regulation	191.6	222.7	234.8	249.1
Mineral Policy and Promotion	547.2	735.9	808.4	900.5
TOTAL	1 175.50	1 393.80	1 491.30	1 619.30
Administration	25%	19%	19%	18%
Promotion of Mine Safety and Health	12%	12%	11%	11%
Mineral Regulation	16%	16%	16%	15%
Mineral Policy and Promotion	47%	53%	54%	56%
TOTAL	100%	100%	100%	100%

Source: National Treasury

The Department of Mineral Resources’ primary task is to help South Africa to harness its mineral wealth for development. Its budget is comparatively small, barely 0.2 per cent of the total appropriation by vote in 2013/14, but its role in effectively applying laws and fostering the contributions of several state agencies is critical for the growth of the minerals and mining sector. Mining is a business that, in the best of circumstances, is characterised by fierce competition and the uncertainties of commodity markets. The Department of Mineral Resources has to find the best way to retain current investors and attract new investors, at the same time as it is concerned with health and safety on the mines, how real value is created from South Africa’s rich mineral heritage and how the benefits are shared.

The largest share of the Department’s budget allocation is towards Mineral Policy and Promotion at 53 per cent share of the budget in 2013/14 and increases to 56 per cent in 2015/16. The spending focus over the medium term will be on rehabilitating derelict and ownerless mines, conducting research for amendments to the Precious Metals Act (2005) and the Diamonds Act (2005), drafting policies, organising consultations with stakeholders, and attending parliamentary hearings. Allocations over this period provide for the rehabilitation of 120 sites, as well as for hosting the intercessional and plenary meetings of the Kimberley Process Certification Scheme in 2013/14 at an estimated cost of R30 million.

The budget share for Mineral Regulation is at 16 per cent in the 2013/14 financial year and decreases slightly to 15 per cent in 2015/16. The spending focus over the medium term will be on implementing the revised mining charter, administering prospecting and mining rights, and carrying out licensing and compliance in terms of the Mineral and Petroleum Resources Development Act (2002). Over the medium term, R563 million is allocated for processing and issuing 650 mining rights, and conducting 27 industry workshops, 760 mining charter inspections and 5 100 environmental inspections.

The budget share for the Promotion of Mine Safety and Health is at 12 per cent in the 2013/14 financial year and decreases slightly to 11 per cent in 2015/16. The spending focus over the medium term will be on enabling inspectors to conduct inspections, audits and investigations, which accounts for the significant spending on compensation of employees, and travel and subsistence over the period. Spending on travel and subsistence allows inspectors to monitor compliance with the Mine Health and Safety Act (1996) and related legislation through audits, inspections, investigations and examining matters likely to impact on the health and safety of mine employees and surrounding communities. The programme will also focus on skills development, which includes training courses for inspectors at the

The budget share for the Administration is at 19 per cent in the 2013/14 financial year and decreases slightly to 18 per cent in 2015/16. The spending focus over the medium term will be on training and staff development in the Corporate Services subprogramme in order to attract and retain skilled workers, especially in the mine inspection directorates. The spending focus will also be on compensation of employees, which increases over the medium term due to additional funding provided for improved conditions of service. It is critical to note that although budget for Administration is declining overall as a share of the total budget which demonstrates to some extent the focus by the Department on service delivery programmes.

4.5.       Findings of the Financial and Fiscal Commission on the DMR budget

The Financial and Fiscal Commission (FFC) analysed the expenditure performance of the DME over the period 2006/7 to 2014/15.  Transfers and subsidies comprise the largest share of the Departmental budget over this period, at just under 50 per cent. The FFC remarked that compensation of employees was the highest growing item, with large increases in employee costs before 2012/13. The Department had to reduce the transfers and subsidies it paid to accommodate these increases. Staff costs made up 34 per cent of the total budget, compared with an average across national departments of 31 per cent. The FFC noted that a real decline in the value of transfers and subsidies (mainly to Mintek and the Council for Geoscience) was anticipated in the future. Since 2006, administration had been the fastest growing programme at 12 per cent in nominal terms.

In contrast to the Department, most of the entities and agencies for which the Department was responsible were performing well financially. Most obtained unqualified audits in both 2011/12 and 2012/13, their finances were sound, expenditures were efficient and effective and they were meeting goals and objectives.. The Mine Health and Safety Council and the South African Diamond and Precious Metals Regulator both received financially unqualified audits with findings in 2011/12, which related to non-compliance with laws and regulations. The Council for Minerals Technology, the Council for Geoscience and the State Diamond Trader all received clean, unqualified audits with no findings in both periods.

The FFC judged that the Department was playing an effective monitoring role in entities and agencies, but it raised as a major concern the fact that “the good financial performance of entities and agencies outshines (the) department itself.” The DMR received a qualified audit for its first audit, in the 2010/11 financial year. Qualifications were on aspects of the financial statements (current assets, liabilities, revenue and unauthorised, irregular, fruitless and wasteful expenditure) as well as on compliance with laws and regulations. The 2011/12 audit of the DMR was unqualified, with findings, but the 2012/13 audit is qualified again. The FFC stated that its recommendations are not binding and that it is for Parliament to examine whether government has taken account of the issues raised.

4.6.       Report of the Auditor General of South Africa

The Department of Mineral Resources received a qualified audit opinion for the 2012/13 financial year. The basis for the qualified audit opinion was that the Department does not have an adequate system to manage and value receivables for departmental revenue. The outstanding balance relating to prospecting fees and royalties as generated by the system in place is incorrect. Consequently, the balance for receivables for departmental revenue and provisions as disclosed in the financial statements is misstated by R151.194 million. The misstated amount was in was R110.629 million in 20111/12.

The Department’s 2012/13 Annual Report shows that irregular expenditure incurred amounted to R24.513 million and is awaiting condonation. The AGSA’s report states that an investigation had been conducted by the department into irregular expenditure incurred during the prior year. The investigation had been completed and the matter had been handed over to the relevant authorities for further actions to be considered.

The Auditor General added some 16 comments about weaknesses in the financial and administrative management of the department, several of which were repeated from 2011/12. The AG recommended that management must ensure that information submitted for auditing is reviewed by the responsible officials prior to submission for audit purpose.

5. Overview and assessment of service delivery performance

5.1. In year performance 2012/13

The mid-year progress assessment of the DMR from the 2012 budget adjustment process raised concerns that the pace of achieving the set targets was below fifty per cent and that the Department was at risk of not attaining its performance targets. The same pattern had been observed in the 2010/11 and 2011/12 financial years, where target performance had ultimately been satisfactory in most cases, if not fully realised in all. Several of the initial performance targets had in fact been reviewed, and some were adjusted, in the Annual Performance Plan 2012/3.

Some of the key aspects of performance observed mid-year 2012/13 include:

• The number of occupational health and safety inspections and mine audits conducted had initial target of 10 100, while at the end of the first six months 4 487 had been achieved. This was slightly less than the achievement rate at the same time in 2011, which was 4 489. In the previous financial year the projections were revised to 8 396, following underperformance by the Department by mid-year in 2010/11.
• The Department projected that the number of mining rights granted to historical disadvantaged South Africans per year would be 90. At the end of the first six months of 2012/13 the Department reported an achievement of 47 which was in line with the expectations.
• Twelve derelict and ownerless mines were projected for rehabilitation each year, however at the end of the first six months the programme had only achieved 2, which is less than 50 per cent of the annual target. This programme did not perform well in the 2011/12 financial year so the concern was understandable. In fact the DMR reached a total of 13 for the year, overachieving on the target..
• The Department underperformed on the number of environmental inspections targeted per year as stated in the 2011-2014 Strategic Plan, which was 1 800 inspections per year. The Department had achieved only 775, which was less than the second quarter benchmark of 50 per cent. The target had been reduced to 1 500 in the 2012/13 Annual Performance Plan. The DMR actually achieved a total of 1 751 inspections, well above the revised target and close to the initial target.
• The Department was behind in its projections for the number of industry workshops on compliance issues, which was targeted for 27 per year in the 2011-2014 Strategic Plan. The Department had only conducted 11 at the end of the first six months. The 2012/13 Annual Performance Plan reduced the target to 9 per year though the Department ended the year with 25 workshops and recorded an over achievement of 16.

5.2. Overall performance and achievements for 2012/13

Key achievements of the DMR for the 2012/13 financial year include:

·         Achievement of 79 per cent of its performance targets, i.e. 126 out of 160 set targets. This is an improvement from the previous financial year, when 72 per cent of targets were achieved (107 out of 149).

·         Participation in the “Framework Agreement for a Sustainable Mining Industry” which was led by the Deputy President in the wake of unequalled labour instability across the mining sector, including unprocedural strike action and the tragic deaths at Marikana.

·         The long anticipated draft bill to amend the Mineral and Petroleum Resources Development Act (2002) (MPRDA) was gazetted for comment in December 2012 after Cabinet approval.

·         Streamlining licensing processes in respect of mining and the environment. Working jointly with the Departments of Environmental Affairs and Water Affairs, this process will allow licensing to be finalised in parallel rather than sequentially.

·         The publication of the report of an Interdepartmental Task Team on hydraulic fracturing and the establishment of a committee that will prepare a strict regulatory framework to govern shale gas exploration and production.

·         A beneficiation framework has been completed incorporating the five specific value chains identified in the 2011 minerals beneficiation strategy.

·         421 health and safety audits were conducted in 2012/13, these are fewer than the 473 audits completed the previous year, but the target set of 396 audits was exceeded in both years.

·         2 431 new jobs were verified to have been created in mining in the 2012/13 period. While this was less than the 7 000 targeted in the Annual Performance Plan, the creation of new jobs signals a degree of dynamism that is unexpected in the light of the economic distress in the sector generally. This target of the “Verified number of jobs created through mining” is a better measure of industry health than the previous, more speculative, measure of “Number of potential jobs created through issuing of new mining rights”, but neither are really measures of the performance of the Department.

·         Over 8 800 applications have successfully been lodged on the online mineral resources administration system (SAMRAD) which processes mining licence applications. Launched in April 2011 the system has had to deal with anticipated teething problems. SAMRAD will be integrated with the DMR revenue management system in future, to improve financial management.

·         181 “social and labour plan inspections (SLP)” were completed in 2012/13, compared with 259 “Mining Charter inspections (SLP and BEE)” in 2011/12. The difference in the measure for monitoring and enforcing compliance with the Mining Charter is not explained, nor is the reduction in the targeted number of inspections from the 180 in the Strategic Plan to 160 in the Annual Report. In any event, the annual target was exceeded, whichever target is used (assuming that the SLP inspection also covered the other Mining Charter issues implied in the Strategic Plan).

·         35 publications were produced by the Department in 2012/13, compared with 12 in the previous financial year.

5.3. Programme Performance

The DMR specified 160 performance targets by which to assess the performance of the Department in the 2012/13 Annual Report. Of the total number of 160 targets planned for the year, 34 targets were not achieved during the year under review. This represents 21% of total planned targets that were not achieved during the year under review.  An analysis was made of the 34 measures that were not achieved (or which were partially achieved) and it was determined that the majority of the measures that were not achieved in 2012/13 were also not achieved in 2011/12.

Table 5: Summary of 2012/13 Service Delivery Performance

Programme	Number of Performance Indicators	No determination (evidence awaited)	Achieved	Not Achieved (including 11 Partially Achieved)	Measures not achieved in 2012/13 ALSO not achieved in 2011/12	Per Cent of Targets not achieved in 2011/12 and 2012/13
Administration	67 (100%)	0%	52 (78%)	15 (22%)	10	67%
Promotion of Mine Safety and Health	35 (100%)	2 (6%)	25 (71%)	8 (23%)	6	75%
Mineral Regulation	32 (100%)	0%	23 (72%)	9 (28%)	3	33%
Mineral Policy and Promotion	26 (100%)	2 (8%)	22 (85%)	2 (8%)	2	100%
Total all Programmes 2012/13	160 (100%)	126 (79%)		34 (21%)	21	62%

Source: DMR 2013

Overall, the Department’s attainment of a 79 per cent achievement rate for performance targets is to be commended. When the filter of non achievement in both 2011/12 and 2012/13 is applied to the indicators, the worst performing area relates to the objective in Strategic Goal 5, which is to attract, develop and retain appropriate skills. All four programmes of the Department did not attain the target for improved numbers in terms of identified employment equity categories. A number of programmes noted that the challenge was in attracting Indian and Coloured professionals.

The staff turnover targets were not met in Corporate Services, the Mine Health and Safety Inspectorate and the Mineral Regulation branches in both periods, while financial administration achieved the target in 2012/13 because it had been lowered from 5 per cent to 2 per cent. Average staff turnover across the department in 2012/13 was 7.5 per cent, an improvement on the 9.9 per cent turnover rate in 2011/12. The main reasons why personnel were leaving the department were resignation (44 per cent) and transfers (31 per cent).  Of concern are the above-average turnover rates seen in two areas – Senior Management Service (17 per cent) and Safety, Health and Quality inspectors where 19 out of a complement of 156 left the department (12 per cent). 20 inspectors (13 per cent) were lost to the department the previous year. The high turnover of inspectors with scarce mining-related skills and valuable departmental experience is a long standing problem which is noted in annual reports’ commentaries on the Mine Health and Safety Inspectorate and on departmental performance.

The Department indicated that the inability to attract and retain key staff such as Inspectors and Mineral Economists remains a significant challenge. In addition, there was a high staff turnover within the finance divisions including the resignation of the Chief Financial Officer. These added additional challenges to the Department as proper financial management is core to service delivery. Furthermore, the Department reported that budget constraint has impeded the appointment key personnel to enforce compliance.

The second area of concern is the filling of vacancies, also a component of Strategic Goal 5. Lower targets were set in all branches except for Mine Health and Safety in 2012/13, but Financial Administration and Mineral Regulation both missed the target in 2012/13. The lower targets were successfully met by Corporate Services and the Mineral Policy and Promotion programme.

The Human Resource issues are truly cross-cutting though they reflect more prominently on the Corporate Services branch which is responsible for putting in place the levers that will allow the Department’s other branches to be more successful in meeting their human resource development goals.

With regards to reducing irregular expenditure, the objective to manage costs effectively was successful only in the Mineral Policy and Promotion branch. Here the concerning comment is in the Financial Administration branch where the failure to meet the 2012/13 target was due to a lack of understanding of policies and procedures. The Mineral Policy and Promotion branch, together with Corporate Services both missed the performance target for maximising the utilisation of resources in 2011/12 and in 2012/13. The performance indicator covers a percentage reduction in the number of assets disposed of prior to the end of their lifespan. The other branches achieved the target of maximising the utilisation of resources.

The Turnaround time for processing applications was a challenge for the Mine Health and Safety Inspectorate and the Mineral Regulation branch for 2011/12 and 2012/13.  The Mineral Regulation branch lowered its target from 100 to 70 in 2012/13, but still missed the revised target.

The lack of significant improvement in turnaround times for the processing of applications was due to delays related to the application of the Principles of Administrative Justice in order to allow applicants to remedy shortcomings in their applications before a decision is taken. Applicants know what the compliance requirements are before applying and the process of promoting administrative justice will be strictly adhered to.

The Department indicated a significant service delivery improvement is expected as a result of the inter-departmental work that is currently in progress to bring NEMA and Water Use Licensing into one single co-ordinated process with the same decision making timeframes. MPRDA amendments will also enhance stability in areas of contestation and as a result contribute to improved turnaround times.

With regards to the critical area of stakeholder engagement, the Committee is of the view that the Department needs to be more effective in reaching out to all affected parties as it formulates and implements minerals policy. The lack of through consultation on the amendments to the MPRDA, particularly amongst mining communities, was strongly raised in the comments made to the Portfolio Committee during the public hearings held in September 2013. This important component of law-making does not appear to be catered for in the performance indicators for the Mineral Policy and Promotion branch. Corporate Services, where imbizos and consultations are referred to, reflects an overachievement in the number of public participation programmes. In the case of the Mineral Regulation branch the lack of enforcement of compliance with Section 28 of the MPRDA is criticised by the Auditor General, while the indicators reflect over achievement in the number of legal compliance inspections in both 2011/12 and 2012/13.

Corporate governance performance indicators have been overhauled and re-specified for all branches. In 2011/12 all branches failed on some of the previous performance indicators and the majority were not achieved. In 2012/13, the department recorded a perfect achievement record for all sub programmes when using the new set of indicators.

5.3.1. Programme 1: Administration (Corporate Services and Financial Administration)

The purpose of this programme is to enable the Department to deliver on its mandate by providing strategic support management services and administrative support to the Ministry and the DMR.

The DMR achieved 78 per cent of the performance measures set for Programme 1 (52 out of 67).

The performance measures for the alignment of ICT systems to business objectives were changed in 2012/3, following the approval of the master system plan. The measure on the percentage reduction in licensing costs was not met in 2012/13 or in the previous year because of a delay in the integration of Application Systems. This will be finalised in 2013/14.

The Annual Report describes a wide range of efforts to increase the number of women in the mining sector, which is traditionally biased towards the employment of men. The department has programmes to ensure that girl learners pursue technical studies related to mining, a girl learner programme where 21 students were mentored by the Chief Directorate for Special Projects and Outreach. The Chief Directorate organises women’s day events focusing on women working in mines as workers, managers, professionals and mine owners. In addition, amendments proposed to the MPRDA seek to raise the employment of women in the mining sector from the current level of 10 per cent to over 50 per cent, reflecting the demographics of women in South Africa. Yet there remain concerns that women are often not safe from harassment and even assault at work, particularly underground, where a woman miner was murdered.

The DMR has been engaged in developing a “Women in Mining Strategy” since at least 2011. This was a target in the Strategic Plan and in the Annual Performance Plans for 2011/12 and 2012/13. Yet the Women in Mining Strategy has not been produced, despite revising completion dates four times. It now appears again in the Annual Performance Plan for 2013/14 for completion in the final quarter.

5.3.2 Programme 2: Mine Health and Safety Inspectorate

The purpose of the Promotion of Mine Safety and Health programme is to ensure the safe mining of minerals under healthy working conditions.

The DMR achieved 77 per cent of the performance measures set for Programme 2 (27 out of 35).

Welcome improvements in the safety record in the mining industry are recorded in the 2012/13 Annual Report. Fatalities due to mine accidents, while continuing to be a matter of great concern, have fallen in each of the last two years, in both absolute and relative terms. Reportable injury rates have held constant on average, and been at low levels or on the decline in all regions except for Gauteng and Rustenburg – where there were increases in injuries in both absolute and relative terms.

The performance target of a 20 per cent reduction in dangerous occurrences was not achieved in either 2011/2 or 2012/3. There were 325 dangerous occurrences in the 2011/ 2012 compared with 340 in 2012/ 2013. The reason for non performance was due to an increase of dangerous occurrences reported by gold and coal mines. The Department indicated that more investigations and audits are to be conducted on the causes of these dangerous occurrences focusing on gold and coal mines. The outcome of these investigations will then assist in coming up with strategies to minimize these dangerous occurrences.

There were 3 173 injuries in 2011/ 2012 compared with 3 319 in 2012/2013. The reason for non-attainment of performance targets is as a result of sharp increases in injuries caused by general types of injuries and shortage of staff. Similar to the target of reducing the number of dangerous occurrences, the Department indicated that more investigations and audits are to be conducted on the causes of these dangerous occurrences focusing on gold and coal mines. The outcome of these investigations will then assist in coming up with strategies to minimize these dangerous occurrences.

5.3.3.    Programme 3: Mineral Regulation

The purpose of the Mineral Regulation Programme is to regulate the minerals and mining sector to promote economic development, employment and ensure transformation and environmental compliance.

The DMR achieved 72 per cent of the performance measures set for Programme 3 (23 out of 32).

The Auditor-General (AGSA) made findings with regards to non-compliance with the MPRDA. The AGSA found that mining rights holders did not submit prescribed monthly returns to the Director-General as required by Section 28(2)(a) of the Mineral and Petroleum Development Act (MPRDA). Mining rights holders did not submit audited financial statements and annual reports to the Director-General as required by section 28(2)(b)(c) of the MPRDA.  Furthermore, compliance with the above sections of the Act was not enforced as required by section 93 of the MPRDA.

The inability of the Department to ensure compliance with clauses of the MPRDA relates directly to the ability of the department to monitor the transformation of the industry. Under section 28 of the MPRDA, the department is expected to ensure that holders of mining rights and permits submit reports required under the Mining Charter and the Social and Labour Plan provisions of the Act and its regulations. Holders are expected to report to the DMR, inter alia, on how they are contributing to the socio-economic development of the areas in which they are operating and on how they are expanding opportunities for historically disadvantaged persons, including women, in the mining sector. The Auditor General found that the department has failed to enforce compliance with the Act, as required by Section 93.

The Department planned to facilitate the creation of 7 000 jobs in mining but only 2 431 jobs were created.  This was largely due to the economic distress in the industry which resulted in large scale retrenchment. However, the Department will be looking into addressing distress in the chrome and platinum sectors through MIGDETT.

With regards to monitoring the percentage of procurement budgets spent on HDSAs in terms of the requirements of the mining charter, the Department does not yet have a tool to measures this procurement expenditure of minerals companies though it will procure the tool in 2013/14.

The Committee is concerned about the validity of the performance indicators used by the Mineral Regulation programme in 2012/13 which yielded a 100 per cent achievement rate for the objective of monitoring and enforcing compliance.

5.3.4.    Programme 4: Mineral Policy and Promotion

The purpose of the Mineral Policy and Promotion programme is to develop relevant mineral policies that promote South Africa’s mining and minerals industries to attract investment.

The DMR achieved 92 per cent of the performance measures set for Programme 4 (24 out of 26).

Mineral Policy and Promotion is the fastest growing programme over the 2013 MTEF. It absorbs over half of the budget of the DMR and includes transfers to Mintek and the Council for Geoscience. The Programme encompasses the DMR’s strategies to address the huge problems caused by ownerless and derelict mines and mine dumps. The estimated cost to government of rehabilitation is a staggering R41-billion.

The promulgation and commencement of the Mineral and Petroleum Resources Development Act (MPRDA), 2002 (Act 28 of 2002) has met challenges in its implementation which have presented an opportunity for review and resultant amendments.

Following the gazetting of the Draft Mineral and Petroleum Resources Development Amendment Bill in December 2012, the Department received 80 written submissions from stakeholders and interested and affected parties. The issues raised by stakeholders from the submissions received and the workshops held in March 2013 centred mostly on areas around definitions, the repeal of the first come first served principle, trading in shares and transfer of rights, the environmental provisions, the dissolution of the designated agency, Ministerial discretion on mineral beneficiation and State free carried interest, the revised sanctions and the concept of associated minerals. Subsequent to the consultation sessions held, the Department revised the draft Bill and stated that it had incorporated public comments without compromising the objects of the Bill.

The main objective of the proposed amendments is to improve the current construct of MPRDA, which will advance the efficacy of the legislation in achieving the primary object of creating a mining and minerals regime that conforms to regulatory best practice During the 2012 financial year, the Minister gave a directive that the Department consult with tripartite stakeholders (Organized Labour and Organized Business) on the proposed amendments in all regional tripartite forums in the country. Weaknesses and shortcomings in the Amendment Act were identified and deliberations from these workshops were used to improve on the draft proposed amendments.

Following the review of the Mining Charter of 2004 which is subject to a 10 year review timeframe, the Department of Mineral Resources embarked on a process of reviewing and amending the 2004 Charter to strengthen and sharpen its efficacy in driving transformation and competitiveness in the mining sector. The implementation of the mining charter was given a ten year window to effect transformation. In view of this window period the Department conducted a baseline assessment of compliance by the mining industry with the Mining Charter and produced a preliminary report in 2009. A second assessment report which is due by 2014 has to be produced as a continuation of the initial assessment to ensure that the Department quantifies the compliance levels over this ten year window period. The current eruptions of socio-economic challenges brought about by communities living close to mining operations has necessitated that the Department conduct an urgent review of levels of compliance with the Mining Charter.

5.3.5.    Human Resource Management

The Department had 1,246 posts on its approved establishment with 1,086 posts filled thus a vacancy rate of 12.8 per cent. The Department managed to reduce the number of repeat audit findings in terms of Human Resource Management.  The vacancy rate was reduced from 13% to 12% in the financial year. The Human Resource unit managed to develop five (5) new policies and review four (4) existing policies. All the internal bursary applicants (84) were granted bursaries. 11 internal bursary holders completed their studies. 40 graduates were enrolled for internship programmes.

From the accord that the Department has signed with the Mining Qualifications Authority (MQA), the MQA will fund 55 bursaries from 2011/2012 financial year for a period of 4 years. Two students have completed their studies. The Department managed to finalise 75 per cent of misconduct and grievance cases. The Department conducted a workshop on the Code of Conduct in all regional offices. With regard to job evaluation, the Department managed to conduct job evaluations of 280 positions of which 183 were confirmed as a result of the implementation of Resolution 1 of 2012. 11 Job Evaluation Panel members were trained and new Panel members were appointed.

The Department reported that budget constraints were impeding the filling of posts on the approved organisation structure. A significant number of posts on the Department’s approved establishment remained vacant after several attempts to secure funding from National Treasury. The high cost of training and the inability to retain staff (especially Inspectors: Mine Health and Safety) has in the past few years resulted in a substantial loss of human capital investment. High levels of staff being “poached” by the industry for salaries far in excess of what government can afford were identified as challenges which could hamper service delivery.

5.4. Other service delivery performance findings

5.4.1. The DMR is now compliant with section 32 of PAIA

The Promotion of Access to Information Act (PAIA), Act 2 of 2000, was intended to set standards for transparency and accountability that would enable citizens to access records from government and business. The South African Human Rights Commission (SAHRC) found in its 2011/12 annual report that while there is an increase in requests for information from the public, “government’s readiness to meet the demand for information remains consistently low”. In 2012/13, SAHRC reiterated that “Overall, the state of compliance with the PAIA remains dismal in the public sector.” Section 32 of PAIA places an obligation on public bodies to make annual submissions to the Commission on PAIA requests. Most  national departments were compliant with section 32 in the 2011/12 and 2012/13 financial years. The DMR was numbered with the 13 national departments which did not comply in 2011/12, but the Department became compliant in 2012/13. It reported that it had received 510 requests for information. Of these, 182 were granted in full and 325 were refused in full by relying on the provisions of the Act. Three internal appeals were lodged with the Department and all of these were refused. While listed as non-compliant with section 14 of PAIA (which requires a manual of how to access information to be available, updated annually), the DMR posted the 2012 manual on its website in April 2013.

5.4.2     DPME evaluation of the 2009 Independent Impact Assessment of the Mining Charter

In 2012, the Department of Performance Monitoring and Evaluation (DPME) in the Presidency applied a quality assessment tool to the DMR’s 2009 evaluation report of the Mining Charter. This used the DPME’s national evaluation standards and required a score of 3 points for an evaluation to be regarded as being of adequate quality for reliable use. The Mining Charter Impact Assessment report scored 2.86, joining 12 other government-funded evaluations from a total of 83 which failed to get the requisite score of 3. Questions on the quality and reliability of this independent assessment, which was commissioned by the DMR, were frequently raised during the public hearings on the Mining Charter in 2011. Nevertheless, the flawed impact assessment report has continued to be used by the DMR as the basis for public statements on the Mining Charter and possibly as a basis for policy decisions. The Portfolio Committee has motivated that the DMR should secure the advice and assistance of the DPME for the evaluation of the Mining Charter after it reaches its 2014 performance milestone.

6. COMMITTEES Observations and responseS

The Portfolio Committee of Mineral Resources having assessed the performance of the Department of Minerals Resources made the following findings and observations:

·                     The Committee welcomes the improvement in the performance against targets which was 79 per cent in the 2012/13 financial year compared to 72 per cent in the 2011/12 financial year.

·                     The principal basis for the 2012/13 qualified audit opinion was that the Department does not have an adequate system to manage and value receivables for departmental revenue.

·                     The Committee is concerned that a number of performance targets outlined in the 2011-2014 Strategic Plan have been revised downwards in subsequent Annual Performance Plans. The revision of targets should be thoroughly explained in Annual Performance Plans under the sections assessing the performance environment.

·                     The Committee views stakeholder engagement as critical in ensuring that the Department’s Programme of Action resonates with the realities of communities in the minerals sector. The Department needs to be more effective in reaching out to all affected parties as it formulates and implements minerals policy.

·                     The Committee notes with concern the extended delay in the finalisation of the Women in Mining Strategy. Ensuring the participation of women in the minerals sector is a critical objective of transformation in the minerals sector and should be prioritised.

·                     The Committee welcomes efforts geared at streamlining licensing processes in respect of mining and the environment and the partnerships with the Departments of Environmental Affairs and Water Affairs. This will allow the licensing process to be finalised in parallel rather than sequentially.

·                     The Committee views the current upsurge in socio-economic discord which is particularly concentrated on those communities living close to mining operations necessitates that the Department conduct an urgent review of levels of compliance with the Mining Charter.

·                     Less than half of planned job creation targets within the minerals sector were attained. This shows that growth in the minerals industry remains sluggish and all avenues should be explored on improving growth and investment in the sector.

·                     While fatalities in mining have declined in the past two years, the number of dangerous occurrences increased in the 2012/13 financial year to 340 compared with 325 in 2011/12. Because more dangerous occurrences were reported by gold and coal mines, investigations and audits need to focus on these mines.

·                     The Department still faces challenges in ensuring improvements in the levels of compliance by companies in the minerals sector with the Minerals and Petroleum Resources Development Act

·                     The Department still faces challenges in attracting and retaining skilled professionals especially in the Inspectors: Mine Health and Safety programme.

·                     The Committee notes with concern that there have been fewer applications for mineral rights and permits from Historically Disadvantaged Individuals.

7. Summary of reporting requests

Reporting matter

Action required

Timeframe

·                    Report on compliance (number of mines, etc) with MPRDA for 2011 and 2012.	·         Written report/Briefing	·      At next quarterly meeting in January – March 2014
·                    Audit Action Plan.	·         Written report/Briefing	·           At next quarterly meeting in January – March 2014
·                    Under section 28 (b) of the MPRDA every holder of a mining right/permit has to submit an audited annual financial report or financial statements. Can the DMR let the Committee know how many of the operating mines submitted such a report in 2011 and in 2012 and how many did not comply with the law in each year?	·         Written Report. There are over 1 500 operating mines in South Africa. This information would assist in understanding the extent of the compliance problem which the Auditor General remarked upon.	·           15 December 2013
Quarterly reports to the Committee indicating progress with the implementation of the action plan towards a clean audit for 2013/14 and going forward	·         Written Report.	·         Quarterly
·         Quantification of government liability with regard to the Rehabilitation of Derelict and Ownerless Mines	• Report (already completed)	·           01 November 2013
An integrated progress report to the Committee with regard to a long term plan for the rehabilitation of derelict and ownerless mines. (Including the roles of Mintek and the Council for Geoscience and other partners).	• Briefing	·           Meeting in January – March 2014

8. Recommendations

The Committee recommends that the Department of Mineral Resources:

BRRR 2013 Recommendations

Motivation for inclusion

Time Frame for DMR response

·         Should fast-track the filling of vacant posts, especially the funded vacancies.	· Minimal progress - recommendation repeated from 2012	· Next Quarter - 2014
·         Should create a recruitment and retention strategy for its staff members.	· Minimal progress - recommendation repeated form 2012	· Next Quarter - 2014
·         Should fast-track the implementation of the talent management strategy to reverse the tide of staff-turnover.	· Minimal progress - recommendation repeated from 2012	· Next Quarter - 2014
·         Should give quarterly reports to the Committee indicating progress with the implementation of the action plan towards a clean audit for 2013/14 and going forward	· Modified from 2012 recommendation, following the qualified audit report in 2012/13. These reports should be sent, irrespective of whether they are accompanied by a presentation at  a Committee meeting	· Next Quarter - 2014
·         Should build capacity to ensure the enforcement of compliance requirements, particularly with Section 28 of the MPRDA.	· Material non-compliance with the MPRDA (Section 28 (a), (b) and (c) was reported by the Auditor General for the first time in 2012/13	· February 2014
·         Should address the issues raised by the Auditor General in his 2012/13 financial year report and present to Parliament action plan thereof with specific timeframes.	· Modified from 2012 recommendation	· Next Quarter - 2014
·         Should review the indicators that are used to measure performance with regard to projects that impact upon vulnerable groups.	· Performance indicators indicated over-achievement at the same time that the Auditor General found that a material proportion of mining companies were not reporting on the extent of compliance with social and labour plans	· Next Quarter - 2014
·         Should develop a much clearer score card used for compliance to the Mining Charter in order to prevent the confusion within the mining industry	· Repeated from 2012. No changes have been proposed to the Mining Charter score card. Issues of vagueness were raised by the Committee in its 2013 report on the Mining Charter public hearings.	· Next Quarter -2014
·         The Department of Mineral Resources should develop an audit improvement plan to address all issues raised by the external and internal audit authorities in the 2012/13 financial year.	· The Auditor General believes that a clean audit is within the capacity of the Department.	· February 2014
·         Should  develop and implement systems to improve and enhance the quality of its performance information so that it adheres to guidelines contained in the Framework for Managing Performance Information Policy Guideline	· Indicators should be monitored in a consistent matter over time, with reference to comparable benchmarks.	· Next Quarter-  2014
·         Should  consult with National Treasury and the Department of Performance Monitoring and Evaluation on mechanisms to ensure  alignment between its Strategic Plan, Annual Performance Plans and Annual Reports	· The Department can benefit from the experience of the DPME and Treasury to improve consistency within its planning instruments.	· Next Quarter - 2014
·         Should develop and implement mechanisms to enhance its stakeholder engagement programme and ensure that it effectively reaches out to communities in the process of formulating and implementing minerals industry policies and regulations.	· This has been a point of concern raised during public hearings and oversight visits to mining areas.	· Next Quarter - 2014
·         Should develop strategies to ensure that there is an elevated focus on increasing HDSA minerals industry awareness in its industry workshops	· Transformation still lags behind despite a decade of the Mining Charter.	· Next Quarter – 2014
·         Should follow up on developments of the integrated financial management systems to  help align licensing processing effectively with developments of the MPRDA	· Failing systems continue to have a negative impact on license processing	· Next Quarter – 2014
·         Should improve on its training and development programmes to ensure appropriately targeted skills development in both employees of the industry and surrounding mining communities.	· There is a need for an investigation into the MQA regards the training programmes and skills development within the industry as well as mining communities.  There needs to be improved implementation of learnership, internships and bursaries.	· Next Quarter – 2014
·         Should conduct oversight to the offices of the Department of Mineral Resources to get an understanding of the licensing system.	· The SAMRAD system is critical to the management of the licensing process	· Next Quarter – 2014

9. Appreciation

The Committee, having engaged with the Department, the Auditor- General of South Africa and the Financial Fiscal Commission on the performance of the Department for the 2013 Budget Review Recommendation process, appreciated the inputs received and hereby submits this report.

Report to be considered.