ATC141030: Budgetary Review and Recommendation Report of the Portfolio Committee on Mineral Resources, dated 24 October 2014

Mineral Resources and Energy

THE BUDGETARY REVIEW AND RECOMMENDATION REPORT OF THE PORTFOLIO COMMITTEE ON MINERAL RESOURCES, DATED 24 OCTOBER 2014

The Portfolio Committee on Mineral Resources, having considered the performance and submission to National Treasury for the medium term period 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, 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, and its five entities

The Department

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

The mining sector has shown a 71 per cent increase in the number of mines since 2004 and a 12 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 Council for Geoscience

The Council for Geoscience (CGS) is one of South Africa’s eight main science councils. Reporting to the Minister for Mineral Resources, the CGS lends support to the mandate of the Department of Mineral Resources (DMR) through the development and maintenance of the national geosciences knowledge infrastructure both on land and beneath the oceans surrounding South African territory.

Mintek

The Council for Mineral Technology Research (MINTEK), also a science council, is mandated to provide research, development and technology that foster the development of businesses in the mineral and mineral products industries.

Mine Health and Safety Council

The Mine Health and Safety Council (MHSC) provides a research and advisory function to the minister in terms of mine health and safety, as well as promoting a culture of health and safety in the mining industry.

State Diamond Trader

The State Diamond Trader (SDT) promotes equitable access to, and beneficiation of, diamond resources, addresses distortions in the diamond industry and corrects historical market failures to develop and grow South Africa’s diamond cutting and polishing industry.

South African Diamond and Precious Metals Regulator

The South African Diamond and Precious Metals Regulator (SADPMR) regulates the diamond, platinum and gold sectors.

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 (the Act), 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 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 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 2013/14 financial year, as well as performance in the first quarter and second quarter of the 2014/15 financial year where information was available. The Portfolio Committee on Mineral Resources held a meeting on the 2013/2014 Annual Report of the Department of Mineral Resources on 15 October 2014, which was addressed by the Director-General and the senior leadership of the DMR. The office of the Auditor General accepted two invitations to give input during the budget review and recommendation report process. The Financial and Fiscal Commission (FFC) also addressed the Committee on the performance of the DMR and provided an analysis of the challenges facing the mining sector in South Africa at present. Moreover, the Committee undertook an oversight visit to Gauteng Province from 25 -26 September 2014 to look at the areas of illegal mining and understand the extent of Acid Mine Drainage in the Witwatersrand area.

The Committee, in undertaking this process used a number of source documents, including the 2014-2019 Strategic Plan of the DMR, Annual Performance Plans, Annual Reports, Financial Statements, 2013 and 2014 Estimates of the National Expenditure (ENE), briefings by the Department and its entities during the course of the year, as well as the two State of the Nation Addresses. 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.

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

· An assessment of the overall financial performance for 2013/14 and first half of 2014/15;

· An assessment of the overall service delivery performance for 2013/14 and first half of 2014/15;

· 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

Following the 2014 General Election, President Zuma appointed Adv N. Ramatlhodi, MP as the Minister of Mineral Resources.

2.1 Delivery Agreement targets for 2013/14 and 2014/15

DMR outcomes are linked to national outcomes as follows:

Table 2.1: Departmental and 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: Decent employment through inclusive economic growth

Efficient, effective and development-oriented Department

Outcome 12: An efficient, effective and development-oriented public service and an empowered, fair and inclusive citizenship.

Targets in place include the following:

Table 2.2: Selected DMR Performance indicators and their links to National outcomes

Indicator

Programme

Outcome

2013/14 Actual

2013/14 Targets

Percent achieved in 2013/14

Targets 2014/15

Number of occupational health and safety inspections and mine audits conducted per year

Promotion of Mine Safety and Health

Outcome 4: Decent employment through inclusive economic growth

9 446

8 396

113%

8 396

Number of mining rights granted to historically disadvantaged South Africans per year

Mineral Regulation

Outcome 4: Decent employment through inclusive economic growth

192

200

96%

200

Number of industry workshops on compliance issues per year

Mineral Regulation

Outcome 4: Decent employment through inclusive economic growth

9

9

100%

9

Number of mining charter inspections per year (now SLP inspections)

Mineral Regulation

Outcome 4: Decent employment through inclusive economic growth

285

210

136%

250

Number of environment inspections per year

Mineral Regulation

Outcome 10: Environmental assets and natural resources that are valued, protected and continually enhanced

1 868

1 700

110%

1 700

Number of publications per year

Mineral Policy and Promotion

Outcome 4: Decent employment through inclusive economic growth

13

11

118%

13

Number of policies developed or reviewed per year

Mineral Policy and Promotion

Outcome 4: Decent employment through inclusive economic growth

2

2

100%

3

Number of derelict and ownerless mines rehabilitated per year

Mineral Policy and Promotion

Outcome 10: Environmental assets and natural resources that are valued, protected and continually enhanced

28

30

93%

50

Number of sustainable SMMEs supported (new and established) per year

Mineral Policy and Promotion

Outcome 4: Decent employment through inclusive economic growth

81

67

121%

67

The DMR delivery agreement indicators above showed overwhelmingly positive achievement in 2013/14. Seven of nine indicators were 100 per cent or more, two targets were missed, but even here performance exceeded 90 per cent of the set targets.

2.2: Summary of key impacts on Mineral Resources policy contained in the National Development Plan

The National Development Plan (NDP) suggests that the policy priority for the mineral sector is to address the “central constraints” that could derail growth and development in 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; and skills gaps.”

The NDP is a national plan which will require contributions and commitments from all stakeholders for it to be successful.

The following proposals to grow investment, outputs, exports and employment in the minerals cluster are listed in the NDP:

  • Address the major constraints impeding accelerated growth and development of the mining sector in South Africa. The main interventions include:
    • ensuring certainty in respect of property rights;
    • ensuring a predictable, competitive and stable mining regulatory framework by passing amendments to the Minerals and Petroleum Resource Development Act (2002);
    • securing , reliable electricity supply; and
    • securing , reliable rail services, potentially enabling private participation.
  • Develop, deepen and enhance linkages with other sections of the economy. This includes linkages with:
    • both manufacturers of inputs (capital goods and consumables) and suppliers of mining-related services; and
    • downstream producers, especially for platinum-group metals and chrome ore. In this regard, an export tax could be considered.
  • Provide focused research and development support to enable improved extraction methods that lengthen mine life. This includes:
    • better energy efficiency and less water intensity; and
    • alternative uses of South Africa's extracted minerals, especially platinum-group metals, titanium and others that have potential for application in new energy systems and machinery.
  • Identify opportunities to increase regional involvement and benefit in the whole minerals cluster. This could include encouraging the establishment and development of alternative providers of partially processed intermediate inputs in other countries in the region.
  • Ensure active engagement on, and resolution to, issues raised through the Mining Industry Growth and Development Task Team process (MIGDETT).
  • Improve alignment of mining charter requirements to ensure effectiveness in local communities.

These issues, including the need to “support and implement the Special Presidential Package on distressed mining towns”, all find mention within the Strategic Plan of the Department for 2014/19. The strategic plan also emphasises the important issues of mine health and safety, which are not specifically mentioned in the NDP as a priority.

The 2014 DMR 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: “The national development plan suggests that that there is significant unrealised opportunity in South Africa’s mining sector and that the country’s global market dominance in mineral deposits offers an opportunity for growth of 3 per cent to 4 per cent a year, as well as the creation of 300 000 additional jobs.”

  • This prospect will depend upon resolving the ongoing serious labour and economic problems that are placing short term constraints on the progress of the mining sector . On the one hand there is a need to secure more rapid and peaceful resolution of labour disputes and to build consensus on the future development of the mining sector. On the other hand structural changes are made more difficult by the weakening of gold, platinum, coal and iron ore prices since 2011. The imperative of bringing stability to the mining sector from an industrial relations perspective was highlighted FFC in their 2014 presentation to the Committee where they stated that the impact of the mining strikes on growth inflation and investment are a key sector challenge. This was also a strong theme within the 2013 and 2014 Medium Term Budget Policy Statements (MTBPS) and within the two State of the Nation addresses in 2014.

3. SUMMARY OF PREVIOUS KEY COMMITTEE RECOMMENDATIONS

3.1. 2013/14 BRRR recommendations and responses

The Committee made the following recommendations to the Department in the 2013 Budgetary Review and Recommendation Report:

BRRR 2013 Recommendations

Response by the Department

· Should fast-track the filling of vacant posts, especially the funded vacancies.

· In progress

· Should create a recruitment and retention strategy for its staff members.

· In progress

· Should fast-track the implementation of the talent management strategy to reverse the tide of staff-turnover.

· In progress

· 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

· No specific response

· Should build capacity to ensure the enforcement of compliance requirements, particularly with Section 28 of the MPRDA.

· Problem cleared in 2013/14 audit

· 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.

· Improved overall audit performance in 2013/14, with most issues attended to successfully

· Should review the indicators that are used to measure performance with regard to projects that impact upon vulnerable groups.

· No specific response

· 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 specific response

· 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.

· Largely accomplished – DMR on track for a clean audit in 2014/15

· 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

· Apparently achieved in 2013/14

· 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

· No specific response

· 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.

· There is progress as the department is overcoming the matter.

· Should develop strategies to ensure that there is an elevated focus on increasing HDSA minerals industry awareness in its industry workshops

· No specific response

· Should follow up on developments of the integrated financial management systems to help align licensing processing effectively with developments of the MPRDA

· This remains an area of challenge

· Should improve on its training and development programmes to ensure appropriately targeted skills development in both employees of the industry and surrounding mining communities.

· No specific response

· Should conduct oversight to the offices of the Department of Mineral Resources to get an understanding of the licensing system.

· The new Committee has not yet had time to conduct such an oversight

Response by Minister of Finance

In response to the recommendation that the Department should build capacity to ensure the enforcement of compliance requirements, particularly with Section 28 of MPRDA, the Minister of Finance stated that: “ The National Treasury will work with the department to address the organisational structure, enforcement, compliance and monitoring of mines function.”

The National Treasury supported the recommendation that the DMR should ensure alignment between its Strategic Plan, Annual Performance Plan and Annual Reports and stated that it would help the Department finalise its strategic plan. The National Treasury proposed that the department report to the committee on its progress in this area.

3.2. 2014/15 Budget Vote Recommendations

The Committee made the following recommendations for the 2014/15 financial year, after considering the Annual Performance Plan and the Budget of the Department of Mineral Resources:

· As most entities are conducting research, the committee recommends that research should be centralised, or at least centrally co-ordinated, so that full value may be gained from government financial support for research to strengthen the mining sector. The establishment of Centre for Excellence to deal with the entire research work should be considered;

· The National Treasury should increase the budget of the department so that more inspectors (in particular health and safety inspectors) be employed to ensure effective and efficient compliance with the mining legislation and regulations of the sector;

· The process being undertaken by the inter-ministerial task team on Social Labour Plans (SLPs) should be speedily driven to ensure the maximum participation by all role players.

· Compliance conditions for mining licenses should be an audit requirement that is reported upon by the auditors of mining companies;

· The Department should strengthen the systems that enforce compliance which includes amongst other things harsher measures in relation to revoking of licences;

· Urgent attention should be given to the ability of the Council for Geoscience to fund both the requirements of the 2010 Geoscience Amendment Act and the additional responsibilities that may be given to the Council if/when the MPRDA Amendment Bill is signed into law;

· A platform should be created whereby critical issues are discussed, for an example a stakeholder discussion forum that includes Salga in how mining companies can best link SLPs and IDPs to effectively serve our communities in mining areas; and

· The mechanisms being used by the Department to monitor compliance with the Mining Charter are not sufficient. The process of monitoring must be begun now, not only after the deadline expires in December 2014. This should also take into consideration the role of the Committee in overseeing this function of the Department.

4. Overview and assessment of financial performance

4.1. Overview of Vote allocation and spending (2010/11 to 2015/16)

Vote 32: Mineral Resources

Programme

2010/11

2011/12

2012/13

2013/14

2014/15

2015/16

R '000

Audited

Audited

Audited

Main

Adjusted

Revised

Main

Estimates

1. Administration

226.7

257.6

295.2

271.5

282.3

310.1

284.2

296.8

2. Promotion of Mine Safety and Health

137.1

141.3

140.7

163.7

163.7

154.0

168.0

177.7

3. Mineral Regulation

188.6

184.4

191.3

222.7

211.9

205.5

231.4

245.2

4. Mineral Policy and Promotion

442.3

446.2

546.2

735.9

735.9

724.2

787.8

879.5

TOTAL

994.7

1 029.4

1 173.6

1 393.8

1 393.8

1 393.8

1 471.4

1 599.2

4.2. Financial performance 2013/14

The audited financial statements for 2013/14 were tabled in Parliament together with the Annual Report of the DMR for the 2013/14 year, on 23 September 2014.

The Department of Mineral Resources had an available appropriation of R1.4 billion in 2013/14 which represented a nominal increase of R218.3 million, or 18.6 per cent, from 2012/13. At the end of March 2014, the DMR had spent 99.5 per cent of its available budget. This compares with 99.8 per cent at the end of the previous year.

Transfers and Subsidies accounted for R692.7 million of the available budget and of this amount the Department transferred R688.5 million, or 99.4 per cent, mainly to public corporations and private enterprises and departmental agencies and accounts. This means the Department had an available budget of R701.1 million for operations. Of this, the Department spent R698.7 million, or 99.7 per cent, the majority of which was used on compensation of employees and goods and services.

When considering operational expenditure, the DMR was closer to the target of 100 per cent of budget spent than 31 of the 38 other national departments.

There was a minor difference from the pattern of past budgets through the year 2013/14, following budget adjustments. The balance of expenditure between current payments and transfers is now exactly even. In the past, expenditures were slightly more weighted to current payments (55 per cent) compared to 45 per cent to transfers (mainly to the Council for Geoscience and MINTEK).

Main appropriation, virements and shifts

The Adjusted Estimates of National Expenditure (AENE) for 2013/14 for Vote 32, tabled in October 2013, did not propose any adjustment in the main appropriation of R1.393 billion for the DMR and the virements and shifts were minimal.

The DMR received a main appropriation of R1.393 billion for the 2013/14 financial year, which was not changed during the adjustment budget process.

No roll-overs were requested. There were no items of unforeseeable expenditure and no declared unspent funds or other adjustments. Table 4.5.1 shows the changes in the programme allocations:

Table 4.5.1: Roll-overs, Unforeseeable/unavoidable, Virements/shifts, declared savings and other adjustments

Programme R'000

Main Appro-priation

Roll-overs

Unforeseeable /unavoidable

Virements and shifts

Declared unspent funds

Other adjust-ments

Adjusted appro-priation

1. Administration

271 459

-

-

10 821

-

-

282 280

2. Promotion of Mine Safety and Health

163 731

-

-

-

-

-

163 731

3. Mineral Regulation

222 729

-

-

(10 821)

-

-

211 908

4. Mineral Policy and Promotion

735 930

-

-

-

-

-

735 930

Total

1 393 849

-

-

-

-

-

1 393 849

Source: National Treasury

In terms of virements and shifts the following was observed:

· A total of R10.821 million was defrayed from Programme 3 Mineral Regulation to Programme 1 (Administration):

o Programme 1 was allocated R10.821 million in virements. R8.571 million was allocated to Corporate Services and R2.250 million to the Ministry

· Within Programme 2 Mine Health and Safety: R578 000 was shifted, within goods and services, to pay for operating leases and advertising from travel and subsistence.

· Within Programme 3. Mineral Regulation, R13.145 million was shifted from travel and subsistence and computer services to the compensation of employees responsible for implementation of the National Environmental Management Act (NEMA). This is a DMR responsibility that has recently been clarified in a joint agreement with the Department of Environmental Affairs and which has legislative authority in the amendment act to the MPRDA brought into force in June 2013 and in the planned amendments to legislation currently before Parliament. Treasury approval was obtained for this shift.

· Within Programme 4 Mineral Policy and Promotion, R50-million was transferred to Mintek from mine environmental management. This accords with Mintek’s role in research and action for the project to rehabilitate derelict and ownerless mines. In addition, R18 million for assistance to mines (which is dependent upon applications) has been shifted to the Council for Geoscience (R6 million for the Witwatersrand water ingress project) and to Mineral Policy (R12 million for mining charter assessments and for the Kimberley Process certification scheme). All the shifts were approved by the Treasury.

4.3. Report of the Auditor General of South Africa

The Auditor General of South African appeared before the Committee on 15 October 2014. The DMR financial statements received an unqualified audit opinion in 2013/14. This indicates that the Department has successfully dealt with the concerns and criticisms raised in the qualified audit opinion in the previous financial year.

The Auditor General indicated that while there had been material misstatements in the reported performance information and financial statements that were submitted for auditing, these were all subsequently corrected by management.

While none of the entities within the DMR portfolio obtained a clean audit in 2013/14 – breaking the pattern of previous years – the Auditor General told the Committee that this was an achievable goal for the 2014/15 financial year. There were findings attached to the audit opinions on all the entities, but all were unqualified and action plans were being implemented in all cases to address the problems. A very positive relationship was reported between the AG and all of the entities during the consideration of the annual reports.

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

Mr Khumalo, the Acting Chairperson of the Financial and Fiscal Commission (FFC) briefed the Committee on 17 September 2014. The FFC analysed the budgeted expenditure of the DME over the period 2006/7 to 2014/15. Grants and subsidies comprise the largest item within the Departmental budget over this period, at just under 50 per cent The FFC noted that to give effect to baseline reductions, transfers and subsidies (to Mintek and the Council for Geoscience) were cut by R40-million over the MTEF.

All of the five entities and agencies for which the Department was responsible were performing well financially. All obtained unqualified audits in 2011/12, 2012/13 and 2013/14, their finances were sound, expenditures were efficient and effective and they were meeting goals and objectives.

The FFC judged that the Department was “playing an effective monitoring role over entities and agencies” It highlighted two Departmental challenges: Maintaining mine health and safety, and attraction and retention of key staff. The FFC referred to “high levels of staff being poached by the private sector at salary levels that government cannot compete with” and noted that this problems was especially severe with respect to inspectors and mineral economists.

4.5 Financial performance 2014/15

Expenditure trends for the first six months of the 2014/15 financial year

Expenditure as at 30 th September 2014 amounted to R832 million or 56.4 per cent of the adjusted appropriation.

The 2014/15 mid-year expenditure rate of 56.4 per cent is similar to the 2013/14 mid-year expenditure rate of 53.5 per cent of the adjusted appropriation. This represents a year-on-year increase of 11.7 per cent in the Department’s expenditure. The increased expenditure in 2014/15 compared to 2013/14 was mainly due to the filling of vacant posts and to make provision for annual inflation.

The percentage of the adjusted appropriation which had been spent by September 2013 by each of the programmes was within reasonable limits, ranging between 49.2 per cent and 60.5 per cent.

4.6 2015/16 MTEF financial allocations

Summary of funding submissions to National Treasury for the 2015/16 MTEF.

· The National Treasury should increase the budget of the department

o so that more inspectors (particularly those with specialist skills) be employed to ensure effective and efficient compliance with the mining legislation and regulations of the sector. Improved inspection is essential also to the promotion of transformation.

o so that the integration of DMR databases can be accomplished to ensure transparency in the applications for and granting of licenses. This will also allow better monitoring and enforcement of compliance and increase the confidence of investors in the sector in the quality and fairness of regulation.

· Urgent attention should be given to the ability of the Council for Geoscience to fund both the requirements of the 2010 Geoscience Amendment Act and the additional responsibilities that may be given to the Council if/when the MPRDA Amendment Bill is signed into law. The CGS has made representations to the Treasury in this regard. (The annual amounts are R 115-million and R 156 million respectively for the MTEF period of three years.)

· The future growth of the mining sector is dependent upon continued mineral exploration. A substantial national investment in geological mapping, of the order of R1-billion, is needed to provide the knowledge base to attract exploration companies (and to assist the State Owned Mining Company in its exploration endeavours).

· State liability for the environmental harm caused by mining operations in the past exceeds R40-billion across the country. Present resources allocated towards the rehabilitation of hazardous mine sites, acid mine drainage and research on these issues are clearly inadequate

4.7 Concluding comments on financial performance

The financial performance of the DMR and its entities over the 2013/14 financial year has been entirely uncontroversial. Unqualified audit reports were achieved in all cases and there is a real possibility of clean audits across the portfolio in 2014/15.

5 Overview and assessment of service delivery performance

5.1 Overall performance and achievements for 2013/14

The achievements of the DMR for the 2013/14 financial year, include:

· The Department achieved 77 per cent of its performance targets, i.e. 127 out of 166 set targets. This is similar to the previous financial year, when 79 per cent of targets were achieved i.e. 126 out of 160;

· The Department continued its participation in the “Framework Agreement for a Sustainable Mining Industry” which was led by the Deputy President in the wake of labour instability across the mining sector;

· The bill to amend MPRDA was passed by Parliament in March 201;

· Draft technical regulations for hydraulic fracturing were published for public comment;

· A draft bill to amend the MHSA was published for public comment;

· Streamlined licensing processes in respect of mining and the environment have been developed, jointly with the Departments of Environmental Affairs and Water Affairs. This process will allow licensing to be finalised in parallel rather than sequentially and move towards the goal issuing licenses within 300 days;

· The electronic mining application and licensing system, SAMRAD has been enhanced to improve service delivery. This will also allow better management of the balance between mining, agriculture, conservation and urban development;

· South Africa assumed the role of Chair of the Kimberley Process Certification Scheme (KPCS) for 2013. The KPCS celebrated its tenth year of operation, ensuring the better control of so-called “blood diamonds”;

· Important progress was made in improving the record of fatalities, injuries and occupational diseases on the mines. The fatality rate in 2013 was 17 per cent less than the previous year. For the first time ever, mine fatalities fell below the figure of 100 for the year 2013;

· The DMR collaborated successfully with the Department of Higher Education (DHET) and the Mining Qualifications Authority (MQA) to improve skills of youth and mineworkers;

· Through the MQA, 50 graduates have been placed at various mines as part of a learner inspector programme. This is to increase capacity in the Mine Health and Safety Inspectorate (MHSI);

· Former mineworkers have been assisted by the establishment of One Stop Service Centres at public health facilities through a DMR collaboration with the Departments of Health and Labour. Two initial sites have been established at Mthatha in the Eastern Cape and at Carletonville in Gauteng. Additional sites will be established at Kuruman in the Northern Cape and at Burgersfort in Limpopo;

· The Florida Lake Canal was completed as part of a mechanism to control acid mine drainage (AMD) in Gauteng. The Council for Geoscience and Mintek continue to undertake research and development related to AMD, which is a problem across the country;

· A detailed implementation framework has been developed with the relevant departments within the Economic Sector and Employment Cluster too give effect to the Mineral Beneficiation Strategy which was adopted by government as policy in 2011;

· 13 publications were produced by the Department in 2013/14. This is more than the 10 promised in the Annual Performance Plan, but considerably fewer than the 35 produced in the previous financial year. However, unlike in previous years, the 2013/14 and 2012/13 Annual Report have not included a list of these “Departmental Publications and Key Documents”;

· 9 446 health and safety inspections were conducted in 2013/14, compared with 8 632 the previous year and an annual target of 8 000. Arising out of these inspections, 1 074 instructions were issued in terms of Section 54 of the MHSA and 2 390 in terms of Section 55. These actions were taken in terms of enforcement guidelines to protect the health and safety of mineworkers against unsafe conditions, practices or acts. 9 Administrative fines imposed during the year to the same purpose;

· 473 health and safety audits were conducted in 2013/14, the same as the number of audits completed in the previous year. The target set of 396 audits was exceeded in both years;

· 5 206 new jobs were verified to have been created through the Social and Labour Plans which every mine has to implement. The Department, however, has no control over the number of people that are employed by a right-holder or the number and timing of jobs that arise from expenditure on Social and Labour Plans;

· 285 social and labour plan (SLP) inspections were completed in 2013/14, compared with 181 in the previous year; and

· There were also 1 868 inspections conducted of mine Environmental Management Plans/programmes compared with a target of 1 700 and a figure of 1 751 in the previous year.

5.2 Programme Performance

The DMR Annual Performance Plan specified 166 measures by which to assess the performance of the Department in the 2013/14 period. 77 per cent of the measures were achieved. This is a similar result, overall, to the previous year, in which 79 per cent of 160 measures were achieved. This level of achievement for performance targets is better than most government departments.

Table 3.1: Summary of 2013/14 Performance Measures

Programme

Total count of measures per programme

Achieved

Not achieved (including 20 Partially Achieved)

Achievement comparison with 2012/13

1

Administration

66 (100%)

51 (77%)

15 (23%)

78%

2

Promotion of Mine Safety and Health

36 (100%)

29 (81%)

7 (19%)

77%

3

Mineral Regulation

34 (100%)

26 (76%)

8 (24%)

72%

4

Mineral Policy and Promotion

30 (100%)

21 (70%)

9 (30%)

92%

Total all Programmes 2013/14

166 (100%)

127 (77%)

39 (23%)

79%

An analysis was made of the 39 measures that were not achieved (or which were partially achieved) and it was determined that several of the measures that were not achieved in 2013/14 (30 per cent) were also not achieved in 2012/13. This allows some general comment on trends to identify where there are continuing gaps across programmes in the performance of the department.

When the filter of non-achievement in both 2013/14 and 2012/13 is applied to the indicators, the worst performing area relates to the objective in Strategic Goal 5, to Attract, develop and retain appropriate skills . Every one of the programmes failed to match the measure for “Improved numbers in terms of identified employment equity categories”. Several of the branches noted that the challenge was “to attract Indians and Coloureds”. Explicit numerical targets were, for the first time, included in the APP for 2013/14 for Coloureds; Indians; People with disabilities; Women and Women in senior management. While posts were advertised, “they failed to attract people from all categories”. Reporting against the segmented targets is not provided in the Annual Report, but the numbers in Employment Equity (EE) categories failed to meet the set targets, except for Mineral Regulation, where EE categories occupied 11 more than the 236 posts targeted, but where the balance between categories was not realized.

A second area of non-achievement relates to the 5 per cent target set for a reduction in staff turnover.

Meeting staff turnover targets defeated Corporate Services and the Mine Health and Safety Programme in both periods. The average s taff turnover across the department in 2013/14 was 8.5 per cent. This is a slight deterioration from the figure of 7.5 per cent in 2012/13 but still shows an improvement on the 9.9 per cent turnover rate in 2011/12. The main reasons why staff are leaving the department are transfers out (41 per cent compared with 31 per cent in the previous year). Resignations, which were the dominant reason for leaving in the previous year, fell from 44 per cent to 26 per cent. The above-average turnover rates seen in the previous year for Senior Management and Safety, health and quality inspectors show a marked improvement with low turnover rates in 2013/14 of 2 per cent and 3 per cent respectively. The high turnover of inspectors with scarce mining-related skills and valuable departmental experience has been a long standing problem.

The third area which stands out in this analysis is filling vacancies , also a component of Strategic Goal 5. Mine Health and Safety was the only programme to meet the target in 2013/14.

These Human Resource (HR) issues are truly cross-cutting, but they reflect on the Corporate Services branch which is responsible, across the department, for putting in place the levers that will allow the Department’s other branches to be more successful in meeting the human resource goals. The measures for performance on Strategic Goal 5 have been significantly adjusted in the 2014/15 APP. The target for the improved vacancy rate will be a reasonable 10 per cent (compared with a 2013/14 figure of 15 per cent and figures of 13 per cent and 15 per cent in 2012/13 and 2011/12 respectively). The detailed employment equity targets have been replaced by a vague measure of the “number of affirmative action measures implemented”. The EE profile of the Department will still be reported upon. It is nevertheless interesting that meeting specific EE targets is no longer to be a key performance area for the Department.

Corporate governance indicators were overhauled and re-specified for all branches in 2012/13 and, the department recorded a perfect achievement record for all programmes, using the new set of indicators. Performance in 2013/14, however has not been satisfactory. The new measures (which are continued as indicators for the 2014/19 Strategic Plan) judge whether the agreed-upon management action plans arising out of the internal and external audit processes have been fully implemented or not and whether risk management plans have been implemented. Appropriately, the target for achievement is 100 per cent.

Percentage of agreed management plans implemented

Target 2013/14

Corporate Services

Financial Admin

Mine Health & Safety

Mineral Regulation

Mineral promotion

Risk management

76%

93%

100%

100%

94%

External Audit

100%

69%

100%

100%

100%

Internal Audit

50%

100%

33%

33%

50%

The results here show that all parts of the DMR are failing successfully to implement the full programme of management interventions which have been identified as necessary by the monitoring and evaluation systems. The aggregated performance measure of 77 per cent achievement of performance measures, by itself, is satisfactory. But sustained improvement on this result is surely dependent upon full application of the action plans, without exception.

5.2.1 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 and management services to the Ministry and the DMR. The DMR achieved 77 per cent of the performance measures set for Programme 1 (51 measures achieved out of 66).

37 environmental management positions were created and filled during the financial year to capacitate the DMR to implement the National Environmental Management Act and other national environmental legislation in the mining sector.

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, and again for 2013/14. The previous measure on the percentage reduction in licensing costs was not met in 2012/13 or in 2011/12 “due to delay in integration of Application Systems ”. This was to be finalised in 2013/14, but there is no clear reflection on this outstanding issue in the 2013/14 annual report.

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 18 out of an initial intake of 21 students ”are progressing well with their studies”, and it organises women’s day events focusing on women working in mines as workers, managers, professionals and mine owners. In addition, amendments adopted by Parliament in the MPRD Amendment Bill 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 sexual harassment and even assault at work, particularly underground, where woman miners have been murdered.

The 2013/14 Annual report acknowledges with concern that “the number of reported incidents of women being sexually harassed and treated inhumanely by fellow workers underground has increased”

The DMR has been engaged in developing a “ Women in Mining Strategy ” since at least 2011. This was a target in the Strategic Plan for 2011/14 and in the Annual Performance Plans for 2011/12, 2012/13 and 2013/14. Yet the Women in Mining Strategy has not been produced, despite postponing completion dates four times. It was reflected in the Annual Performance Plan for 2013/14 for completion in the final quarter of the financial year, but this performance measure was not achieved. While it is omitted from the APP for 2014/15, the DMR has now promised the Women in Mining Strategy “by 31 March 2015”. The Department was “Still in the process of consultation” and “also had to align to the amended MPRDA”.

There is an expectation that the Department’s strategy will be finalised as now promised and that it will deal appropriately with the need for women mineworkers to have “a safe and dignified working environment.”

5.2.2. Programme 2: Mine Health and Safety Promotion

The purpose of the Promotion of Mine Safety and Health programme is “to safeguard the health and safety of the mine employees and people affected by mining conditions.”

The DMR achieved 81 per cent of the performance measures set for Programme 2 (29 out of 36).

Welcome improvements in the safety record in the mining industry are recorded in the DMR Annual Report and in the report of the Mine Health and Safety Inspectorate (MHSI). Fatalities due to mine accidents, while continuing to be a matter of great concern, have fallen in each of the last three years, in both absolute and relative terms. Reportable injury rates declined by 5 per cent on average in the year of 2013, but remain high in the deep mine areas, Rustenburg, Gauteng, Klerksdorp and Free State – although there were increases in injuries in both absolute and relative terms only in Rustenburg.

The performance target of a 20 per cent reduction in dangerous occurrences was not achieved in 2011/2, 2012/3 or 2013/14. While the fact of non-achievement is recorded correctly, the matrix entry indicates a 15 per cent reduction in 2013/14 when in fact there was a 1.5 per cent increase. The variance should therefore be negative 21.5, not negative 18.5. The same recording error was made in this indicator in the previous year.

While the turnover rate for Safety, health and quality inspectors is now at a low level, well below the Department’s average, the vacancy rate in this critical category (the largest by number in the DMR) remains (with 49 vacant posts), at 18.5 per cent, above the 14.7 per cent average.

The DMR is taking steps to address the skill and capacity problem in collaboration with the Mining Qualifications Authority (MQA) through the award of bursaries and a learner inspector program that has recruited 50 candidates. The Inspectorate has reported that the vacancy problem is due to government salary packages for inspectors being lower than in the private sector.

5.2.3 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 76 per cent (26 out of 34) of the performance measures set for Programme 3.Although not referred to in the Annual Report, the Mineral Regulation branch avoided repeated censure from the Auditor General for failing to ensure that holders of mining rights and permits submit regular reports on their activities. This is an important recovery of performance as these reports allow monitoring of mines’ compliance with the Mining Charter.

The extent of state liability for the environmental consequences of mining remains an area of extreme concern. The Mineral Regulation branch has ensured that every single environmental management plan that was approved during the year considered issues of sustainable development. This may prevent state liability in these cases in the future, but it remains the case that many old mines do not have reserve funds that are adequate to meet their environmental rehabilitation responsibilities. Here the burden of a destroyed environment falls on local communities and the state. While the branch issued closure certificates only in cases where the regulatory framework has been complied with, mine closure still presents a major problem. A speaker at the recent mine closure conference stated that the court-driven process of liquidating a mining company did not appear to take into account the effect on closure obligations, transfer of risks and liabilities and provision for rehabilitation”. The liquidation process of the Blyvooruitzicht gold mine once owned by DRDGold was used to illustrate the weaknesses in the present system, which allows mining companies – even those not in liquidation – to “dodge” their closure obligations.

The Mineral Regulation branch is adding to its capacity related to environmental inspections of mines in order to regulate mines in accordance with the National Environmental Management Act.

With regards to licences, 687 out of 921 licence applications (75 per cent) were processed in line with the prescribed timeframes in 2013/14. 571 out of 800 rights to minerals (71 per cent) were registered within the prescribed timeframes. The target is 70 per cent in both cases.

5.2.4 Programme 4: Mineral Policy and Promotion

The purpose of the Mineral Policy and Promotion programme is to “formulate mineral related policies and promote the mining and minerals industry of South Africa to make it attractive to investors.”

The DMR achieved 70 per cent of the performance measures set for Programme 4 (21 out of 30).

Mineral Policy and Promotion is the largest programme of the 2014 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 R41billion.

The Mineral Policy and Promotion programme is also responsible for the assessment of the Mining Charter. In 2013/14, the DMR paid the consultant company “Moloto Solutions” R5.7-million “to assess compliance with the Broad Based Socio-economic Charter for the mining industry” The findings of the report will be released during the 2014/5 financial year.

5.3 Oversight Visit to Gauteng

The Committee conducted an oversight visit in Gauteng in August 2014, to assess the areas where illegal mining is taking place and to understand the practical measures that are in place and to form a view on whether the resources currently voted to deal with AMD are sufficient. An oversight covered the area where the problem of AMD is most acute (along with the Olifants River basin in the East).

The Committee found that there is an evident of lack of capacity and resources in dealing with illegal mining at present. All parties said the problem is worse than in 2009, when the PC last considered the issue. The Committee was very impressed by the knowledge, dedication and professionalism of all the officials, security and mine staff they interacted with. The issue of legislation to combat illegal mining is quite critical. There should be careful consideration of creating legislation in silos where separate laws do not allow a cross-cutting issue to be addressed. Most of illegal miners are foreign citizens and they enter the country illegally. The Committee found out that there were more than 700 people underground in these holes who are illegally mining. Police officials are not sure how to take statements when these illegal miners get arrested. On the issue of acid mine drainage, the Council for Geoscience and Mintek have done a lot of work in dealing with AMD and Derelict and Ownerless mines. More funding is needed especially in CGS for ageing infrastructure.

While the Committee was in Gauteng, they visited the House of Traditional Leaders and found out that there should be more engagements with traditional leaders especially with the offices that issue mining licenses and the Committee. As the Mining Charter reaches its ten year milestone, it would assist if the NHTL would undertake to contribute to the process of evaluation.

The Committee made the following recommendations:

· The Department of Home Affairs needs to tighten immigration laws to prevent foreign illegal miners from being in the country.

· There should be a workshop of police officials on how to take statements with regards to illegal mining.

· There should be more engagements between the NHTL and the DMR regional offices issuing mining licenses.

· The Department of Mineral Resources should increase the funding for CGS in order to carry out its mandate and implement Geoscience Amendment Act.

5.4 Other service delivery performance findings

5.4.1 The DMR is now compliant with PAIA and now grants most requests for information .

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) is responsible for monitoring the implementation of PAIA in the public sector. It has reported that overall “compliance of public bodies does not reflect commitment to PAIA ”. Section 32 of PAIA places an obligation on public bodies to make annual submissions to the Commission on how they have responded to PAIA requests. The DMR became compliant with PAIA in 2012/13.

The DMR received the largest volume of requests under PAIA of all national departments, with the notable exception of the South African Police Service (which received over 20 000 requests). In 2013/14 the DMR reported that it had received 686 (2012/13: 510) requests for information. Of these, 509 (2012/13: 182) were granted in full and 71 (2012/13: 325) were refused in full by relying on the provisions of the Act. There was one application made to court on grounds that an internal appeal was dismissed by the DMR failing to give notice of its decision (section 77(3). 6 internal appeals (one of which was still pending at year end) were lodged on account of a deemed refusal by the DMR. 27 other requests were pending at 31 March 2014. [The SAHRC report does not give information on the status of the balance of 79 reports that were neither granted nor refused nor pending.] 74 per cent of requests were granted in full in 2013/14, compared with 36 per cent in the previous year. The greatly improved performance of the DMR is not commented upon by the SAHRC. The DMR is now formally listed by the SAHRC as 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 Performance issues illustrated in the comments on the MPRDA Bill

On 5 August 2013, the Parliamentary Portfolio Committee on Mineral Resources (National Assembly) invited interested individuals and organisations to submit written comments on the Mineral and Petroleum Resources Development Amendment Bill [B15-2013]. Public hearings on the Bill were held in Parliament on 11 th , 12 th , 13 th and 18 th September 2013.

Many of the concerns that were raised reflected directly on key performance/service delivery issues related to the DMR. Stakeholders expressed dissatisfaction about many aspects of the performance and service delivery of the DMR.

Three issues are highlighted below:

Issue 1. The DMR performs poorly in providing access to information

At a formal level, this is judged by the responses by the DMR to requests for information made under PAIA. The Centre for Environmental Rights (CER) found that it was “still very difficult to access records, even where a decision has been made to grant access” and the DMR’s response rate to requests remained at 19 per cent, the same level as in their 2010-11 assessment (when it was rated as “certainly the worst-performing department”). The DMR is also tardy in processing appeals. As at the end of 2012, “the DMR had not made a decision on one of the twenty appeals submitted (by CER) against refusals under PAIA since 2010.”

Less formally, the DMR may be judged by reports on its responsiveness in providing information to mining communities, their representatives and to Non-Profit Organisations who work with people affected by mining to challenge mining and environmental decisions.

The Mining and Environmental Justice Community Network (MEJCON) told the PC that their member communities are denied copies of Social and Labour Plans (SLPs) by the DMR. They said that m ines report on their own compliance and communities cannot be sure what the mining company’s obligations are. MEJCON proposed that c communities be provided with the necessary information to enable them to assist the Department in monitoring compliance and to engage with the mining company, as necessary, in regard to their obligations in the SLP. Poor monitoring of compliance with SLPs and limited enforcement by the DMR has meant that many communities do not see the benefits promised in those plans. DMR needs to significantly increase its compliance monitoring capacity over SLPs.

ActionAid South Africa also questioned the fact that SLPs are not made public by the DMR despite the provisions of various acts concerning public information including PAIA and the Promotion of Administrative Justice Act (PAJA), No 3 of 2000. SLPs are “a fundamental part of the compensatory commitment by the mines and which should accrue to the community.” The disadvantage extends to local municipalities which often rely on the companies’ SLPs to promote local economic development. “The fact that local communities are not even aware of what are in these plans contributes to the mistrust that has permeated relations between mines, local municipalities and communities and does not foster social or economic development.”

The Centre for Environmental Rights, citing the Bengwenyama Constitutional Court (CC) judgment in 2011 said that vulnerable rural communities and emerging farmers are usually without the resources to challenge applications for mining or mitigate its impacts. The CC recognised that communities should have necessary information on all that is to be done when mining starts. Yet, the PC was told, the DMR and consultants hired by mining companies refuse to make available even most basic information, such as works programmes and information relating to financial and technical capability. The refusal to give communities access to SLPs means that affected parties cannot comment meaningfully on applications because they have no information and are effectively “blindfolded”. The DMR’s failure to make information available renders even those consultation provisions that are in the MPRDA meaningless. The CER stated that “in most cases DMR and mining companies do not even notify landowners and occupiers when rights have been granted on their own land”, which they described as “a blatant infringement of right to fair administrative action.”

The basic argument from these and other stakeholders who represent mining communities was that the DMR, in practice, does not follow either the statutes or case law in its reluctance to share information with communities on mining applications and SLPs.

The DMR did not respond in the PC meeting afterwards to answer the many allegations made during the public hearings in September 2013 on its reluctance to make information available.

Issue 2: The DMR implements the law in ways that undermine environmental rights

The legislative mandate of the Department of Mineral Resources in terms of section 24 of the Constitution is “to ensure that the nation’s mineral resources are developed in an orderly and ecologically sustainable manner while promoting justifiable social and economic development.”

This provision, which has to be upheld by the laws and the way they are implemented, opens a wide area for debate on what is sustainable and justifiable. The CER submitted a digital video disk (DVD) to the Committee that raised questions about the ways in which the DMR fails to protect communities from the harmful effects of certain mining operations:

· In Hondeklipbaai, an area affected by decades of opencast mining, De Beers applied to the DMR to reduce its rehabilitation obligations and failed to consult the community on the implications of its Social and Labour Plan;

· As Vogelspruitpoort in Belfast, Mpumalanga, Mr Samson Sibanda found that a farm he had bought was polluted by an unrehabilitated abandoned mine. Some of his livestock died. The same company that had been responsible for the damage, Cousins Coal, was attempting to obtain new rights to minerals on the farm from the DMR;

· A community in Wesselton outside Ermelo took more than a year and a court order just to access from the DMR copies of the permits of mines which were operating directly adjacent to houses and causing them to crack; and

· At Bathlabine near Tzaneen in Limpopo, the Blue Platinum Ventures started mining clay outside the area in which they had an approved mining permit, in areas sacred to the community. When the DMR issued a notice to Blue Platinum, it did not instruct the company to rehabilitate the pits closest to the community, despite the encroachment on private land.

Issue 3: The DMR has not made sufficient space for mining communities to comment on the amendments to the MPRDA

The process of amending the MPRDA has been long and complex. In 2011, the Minister accepted contributions from the Mining Growth, Development and Employment Task Team (MIGDETT), consisting of government, business and labour on amendments to the MPRDA. At the same time, the CER wrote to the DMR on behalf of a number of NGOs requesting an opportunity to make inputs into the draft legislation that was being developed. The purpose of the requests was to convey to the DMR the very grave concerns of civil society groups (including, in particular, the mining-affected communities CER represents) in order for these to be accommodated in the draft legislation being developed. Civil society and community groups have no representation on forums such as MIGDETT. The CER made a specific submission to the Portfolio Committee in September 2013 detailing its efforts since 2011 to bring these matters to the attention of the Department and how these efforts had been rejected or ignored. Even drafting and spelling errors that were pointed out remained in the Bill. The thrust of the submission was that the DMR did not consult adequately with communities in framing the draft Bill and continued to ignore comments made after the Draft Bill was gazetted in December 2012.

5.4.3 DEA Green Scorpions refer more complaints to the DMR

The national Department of Environmental Affairs (DEA) publishes an annual report on the incidence of offences under national environmental legislation. This does not cover the environmental compliance and enforcement work being undertaken by other departments, such as Water Affairs or Mineral Resources. However the 2013/14 National Environmental Compliance and Enforcement Report (NECER) reports a doubling (from 14 to 28) of the number of complaints referred to the DMR, because these particular environmental matters are regulated under the MPRDA. Neither the DMR nor the DWA publishes a similar report that deals with the enforcement of their environmental responsibilities. The DMR will retain responsibility for the environmental regulation of mines under the “One Environmental System” for mining which is scheduled to come into operation on 8 December 2014. It has been suggested that the DWA and DMR should demonstrate their commitment to compliance monitoring and enforcement on environmental issues by publishing their own NECER, or providing statistics for a single, comprehensive NECER in future.

5.4.4 DMR identified as one of a few “excelling departments” in the Presidency’s 2013 Management Performance Assessment

The NDP emphasises the importance of building a “capable state” and, since 2011, the Presidency has sponsored the use of a Management Performance Assessment Tool (MPAT) to assess performance against key policy standards in all national and provincial departments. The MPAT provides a comparative survey of the quality of management practices across government, with the results being published in a series of report on the website of the Presidency.

The National Department: Mineral Resources is ranked very highly on management performance indicators compared with other government departments. One of the eight or so “excelling departments”, is the only department singled out as providing an example of “good case studies” in as many as three instances. The DMR’s management practices are rated as superior in

KPA 2: GOVERNANCE & ACCOUNTABILITY “2.6.1 Risk” and “2.4.2 Fraud” and in

KPA 3: HUMAN RESOURCE MANAGEMENT “3.4.2 Disciplinary process”

The overall report quotes an official of the DMR as saying “ We now have an established practice for monitoring progress on actions to be taken to mitigate risks. We receive reports from Champions and collate these for submission. We also engage directly with relevant senior managers on risk areas and progress on actions for which they are responsible for. It’s a live function as we constantly face new risks in our operations.”

The MPAT helps the DMR, and other Departments, to identify where improvement is needed.

6 COMMITTEES Observations and response

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

· 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 – in safety and dignity - is a key objective of transformation in the minerals sector;

· The Committee welcomes efforts spearheaded by the DMR to streamline 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 with concern the continued expressions of socio-economic discord which is particularly concentrated on those communities living close to mining operations. This necessitates that the Department conduct an urgent review of levels of compliance with the Mining Charter;

· The Department still faces challenges in attracting and retaining skilled professionals especially in the Inspectors: Mine Health and Safety programme and other specialised inspection services such as the environment and social and labour plans;

· There is a need to co-ordinate skills training better across the mining industry, making use of institutions such as the Mining Qualifications Authority (MQA);

· The Department and its entities must deal more effectively with employment equity issues – particularly equitable employment of youth, women and people with disabilities;

· There is a need for targeting an improvement in the proportion of raw mineral exports compared to the export of (and local consumption) of beneficiated products that use minerals as inputs.

· 60 per cent of the world’s diamonds are mined in Africa, yet the polishing and cutting and setting of stones is done elsewhere, not on the African continent. There needs to be a continent-wide effort to correct this situation;

· The Department and the entities frequently do not respond promptly with information they have agreed to provide to the Committee, this delays oversight processes and blunts the ability of the Committee to intervene effectively;

· The Council for Geoscience has been prevented from undertaking the full mandate assigned to it by Parliament because of a lack of Resources. This is an issue that needs to be settled on a firm timeline, as the work of the Council in these new areas is critical for the future of exploration and mineral development for the people of South Africa; and

· The Department and most of the entities perform extremely well on the performance measures on financial and service delivery issues, yet the mining sector as a whole is in crisis. The performance measures should be reconsidered so that they incentivise the DMR and its entities to tackle the difficult problems. At present they are recognised for excellent overall performance – but on the basis of some targets that are easy to reach. There is a need for a few “stretch” targets that deal with more challenging issues such as the actual benefits that the people of SA get from mining and the attractiveness of the investment environment for South African mining entrepreneurs.

7 Recommendations

The Portfolio Committee on Mineral Resources recommends that the Minister of Mineral Resources should ensure that his Department and its entities address the following:

BRRR 2014 Recommendations

Motivation for inclusion

Time Frame for DMR response

· Fast-track the creation and filling of vacant posts, especially critical and strategic posts as well as essential service posts.

· The DMR and entities lack human resources despite efforts to recruit.

· Next Quarter - 2015

· Create a recruitment and retention strategy as well as a succession plan for its staff members.

· The DMR and entities lack human resources and need to “grow their own timber”

· Next Quarter - 2015

· Fast-track the implementation of the talent management strategy to reverse the tide of staff-turnover.

· Minimal progress - recommendation repeated from 2012 and 2013

· Next Quarter - 2015

· Attend to the issues raised by the Auditor General in its reports (particularly on issues of supply chain and internal audit) and present to the Committee the action plan with the stipulated timeframes.

· Need for a clean audit in 2014/15 and beyond. The Auditor General believes that a clean audit is within the capacity of the Department.

· Next Quarter - 2015

· 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 and 2013. 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 -2015

· 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.

· Repeated from 2013. This has been a point of concern raised during public hearings and oversight visits to mining areas.

· Next Quarter - 2015

· Develop strategies to ensure that there is an elevated focus on increasing HDSA minerals industry awareness through industry workshops

· Repeated from 2013. Transformation still lags behind despite a decade of the Mining Charter.

· Next Quarter – 2015

· Follow up on developments of the integrated financial management systems to help align licensing processing effectively with developments of the MPRDA

· Repeated from 2013. Weak systems continue to have a negative impact on license processing

· Next Quarter – 2015

· Improve on its training and development programmes to ensure appropriately targeted skills development in both employees of the industry and surrounding mining communities.

· Repeated from 2013. 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 – 2015

· Afford the Committee, when it conducts oversight visit to the Department, access to the full details in respect of the SAMRAD system in order to get a better and experiential understanding of the workings of the licensing system.

· Repeated from 2013. The SAMRAD system is critical to the management of the licensing process

· Next Quarter – 2015

· The Mining Qualifications Authority submits to the Committee a comprehensive report on skills audit in the mining industry, department and its entities

· The lack of co-ordination evident on skills issues

· Next Quarter – 2015

· Develop a strategy for providing access to information including social and labour plans

· To ensure transparency and accessibility

· Next Quarter – 2015

· Take the fight against illegal mining beyond our borders, to Lesotho, Zimbabwe and Mozambique

· This is a major issue that has implications for criminality and immigration control and is a threat to the economy,

· To be discussed with DMR and other Departments

· Facilitate the workshoping or training of senior DMR management on expanding employment of HDSAs

· There is an apparent lack of understanding on this issue – as evidenced by the unevenness of achievement in employment equity

· Next Quarter – 2015

· Develop (in collaboration with communities) the best practice template to help communities to benefit more from mining on community land when they are approached by a mining company. This should include best practice to encourage community ownership in mining projects on communally owned land.

· There is a need for communities to be active participants and to be fully capacitated to interact with mining companies and to get access to mineral resources in their own right

· Next Quarter – 2015

· Strictly adhere to the Committee’s prescribed turnaround times for submission of responses to Committee requests. And further that they drastically shorten the time they take to respond to commitments made before the Committee.

· The Committee is undermined in its ability to undertake effective oversight, when there are long delays in meeting requests for information.

Immediate effect

Summary of recommendations with financial implications

· The National Treasury should increase the budget of the department

o so that more inspectors (particularly those with specialist skills) be employed to ensure effective and efficient compliance with the mining legislation and regulations of the sector. Improved inspection is essential also to the promotion of transformation; and

o so that the integration of DMR databases can be accomplished to ensure transparency in the applications for and granting of licenses. This will also allow better monitoring and enforcement of compliance and increase the confidence of investors in the sector in the quality and fairness of regulation.

· Urgent attention should be given to the ability of the Council for Geoscience to fund both the requirements of the 2010 Geoscience Amendment Act and the additional responsibilities that may be given to the Council if/when the MPRDA Amendment Bill is signed into law. The CGS has made representations to the Treasury in this regard. (The annual amounts are R 115-million and R 156 million respectively for the MTEF period of three years;

· The future growth of the mining sector is dependent upon continued mineral exploration. A substantial national investment in geological mapping, of the order of R1-billion, is needed to provide the knowledge base to attract exploration companies (and to assist the State Owned Mining Company in its exploration endeavours); and

· State liability for the environmental harm caused by mining operations in the past exceeds R40-billion across the country. Present resources allocated towards the rehabilitation of hazardous mine sites, acid mine drainage and research on these issues are clearly inadequate.

8 Appreciation

The time lines for the assembly of the BRRR are very tight. The Committee expressed its appreciation to the Minister, Deputy Minister and the Director General (Including the five entities), the Auditor- General of South Africa and the Financial Fiscal Commission who all participated in the 2014 BRRR process. The Committee appreciated the helpful training and guidelines on the requirements of the Act from Parliament prior to the BRRR process. The Committee also extended its unreserved gratitude to the committee staff which has willingly and voluntarily ensured that the work is done and doing so beyond normal working hours and set an example of how public servants should operate. Lastly, the words of appreciation goes to committee members for their constructive contribution towards the success of the committee.

Report to be considered .

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