ATC140711: Report of the Portfolio Committee on Mineral Resources on the Strategic Plan and Budget Vote 32 of the Department of Mineral Resources for the 2014/2015  Financial Year, dated 11 July 2014

Report of the Portfolio Committee on Mineral Resources on the Strategic Plan and Budget Vote 32 of the Department of Mineral Resources for the 2014/2015 Financial Year, dated 11 July 2014

The Portfolio Committee on Mineral Resources, having considered the Strategic Plan (2014/15) and Budget Vote 32: Mineral Resources, reports as follows:

1. Introduction

The aim 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 Strategic Plan of the Department of Mineral Resources (the Department) and Budget Vote 32 and its entities were referred to the Portfolio Committee on Mineral Resources (the Committee), for consideration and report, on the 04 July 2014. The Committee received briefings from Mintek, the Council for Geoscience, the South African Diamond and Precious Metals Regulator, the State Diamond Trader and the Mine Health and Safety Council on their annual performance plans and budgets allocations on the 02 July 2014. The Department presented its Annual Performance Plan (APP) for 2014/15 on 08 and 09 July 2014.

2. Overview of the 2013/14 financial year

The DMR had an appropriation of R1.4 billion available in 2013/14. This represented a nominal increase of R218.3 million, or 18.6 per cent, compared to 2012/13. The fourth quarter expenditure report shows that the DMR had spent 99.5 per cent of its available budget, R1.387-billion, between April 2013 and March 2014.

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

The 2013 Budgetary Review and Recommendation Report (BRRR) prepared by the Portfolio Committee on Mineral Resources did not highlight any major financial problems with budget allocations but drew attention to numerous performance weaknesses within the Department, which needs to be addressed in this financial year through proper monitoring and reporting systems

In summary, 21 per cent of the total planned performance targets that the DMR set for itself in the 2012/13 financial year were not achieved during the year. Six of the sixteen specific recommendations made by the Committee regarding performance issues in 2013 were repeated from the previous year because they had not been successfully addressed. This therefore further indicates that a proper quarterly monitoring and reporting system needs to be developed so that performance can be tracked effectively within the Department.

The Auditor-General (AGSA) made findings with regards to non-compliance with the principal law that regulates the mining sector, Mineral and Petroleum Development Act 28 of 2002 (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 failure 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 DMR 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 related 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 Committee has raised the issue of capacity within the Department to implement its mandate through mine inspectors and will be monitoring the situation.

The DMR received a qualified audit opinion in 2012/13 because it did 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 was incorrect.

The Portfolio Committee motivated that the DMR should secure the advice and assistance of the Department of Performance Monitoring and Evaluation (DPME) in the Presidency for the evaluation of the Mining Charter after it reaches its 2014 performance milestone. As a result of the Department not being able to adequately monitor and report on performance indicators, implementation of the legislative and regulatory mandate, as reported by the ASGA, the Committee will develop a monitoring and reporting framework to ensure that progress on the issues raised by the AGSA can be tracked for interventions as required.

2.1 Policy Priorities for 2014/15

The DMR’s priorities for 2014/15 are set out in the 2014/15 Strategic Plan and Annual Performance Plan, which was tabled in Parliament 4 July 2014. At the highest level, the priority is to align the activities of the Department with the National Development Plan (NDP).

In the February 2014 State of the Nation Address (SONA), the President described the NDP as the country’s socio-economic blueprint and one of the landmark achievements of the fourth administration. “ The President further highlighted the importance of the mining industry within the economy and the responsibility of the sector to ensure that the socio-economic conditions of the backbone of the sector are conducive in our democracy. The key themes emerging from the SONA included:

Ensuring the implementation of the Framework Agreement for Sustainable Mining, which was entered into by labour, business and government in 2013. The implementation of the undertaking to provide basic services and adequate housing facilities and to revitalize the mining towns in several provinces are also key priorities in the sector. The exploration of shale gas to supplement the country’s energy security is also a policy imperative and will be closely monitored by the Committee. These issues are not clearly allocated within the budget and APP of the Department and a proper expenditure plan needs to be presented to address these government priorities.

The NDP includes substantial commentary on the mining sector and lists the following proposals to grow investment, outputs, exports and employment in the minerals cluster:

· Address the major constraints impeding accelerated growth and development of the mining sector in South Africa. The main interventions include:

o ensure certainty in respect of property rights;

o ensure a predictable, competitive and stable mining regulatory framework by passing amendments to the Minerals and Petroleum Resource Development Act (2002) to;

o secure, reliable electricity supply; and

o secure, reliable rail services, potentially enabling private participation.

· Develop, deepen and enhance linkages with other sections of the economy. This includes linkages with:

o both manufacturers of inputs (capital goods and consumables) and suppliers of mining-related services; and

o 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

o better energy efficiency and less water intensity; and

o 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 all find mention within the expenditure plans outlined in the 2014 Budget for Vote 32: Mineral Resources, which also includes important issues of mine health and safety, which are not specifically mentioned in the NDP as a priority. A draft bill to amend the Mine Health and Safety Act, No. 29 of 1996, as amended (MHSA) was published in November 2013.

2.2 Departmental Strategic and Annual Performance Plan 2014/15

2.2.1 Overview by the Minister

The Minister of Mineral Resources, Adv N Ramatlhodi gave a political overview on the strategic plan of the department. He appreciated the opportunity given by the committee and was looking forward to work together. He indicated that Mineral Resources plays a “critical contributory role” in ensuring that all South Africans gain sustainable benefits from the country’s mineral wealth. The Ministry and the department commits to building on the foundation of the past 20 years of a democratic government by decisively prioritising the challenges facing the industry to ensure than an enabling investment environment in the minerals and petroleum sectors continues to be supported. Some of the challenges relate to instability in the mining industry due to labour related matters, which have recently been settled amongst stakeholders. The firm foundation for a sustainable mining industry requires a robust investment environment that continuously addresses emerging impediments such as infrastructure limitations, skills shortages and investments in exploration. He indicated that these constraints will be addressed through policy and regulatory interventions such as the infrastructure development programme of government, skills development programmes and research and development programmes.

The Minister indicated that the DMR in collaboration with other departments and institutions will continue to promote mineral value addition (beneficiation) to strengthen the interface between extractive industries and national socio-economic developmental objectives as outlined in the NDP and contribute towards decent employment, inclusive growth and industrilialisation of South Africa. As part of creating sustainable, decent jobs, government will during the current administration expedite the exploration of shale gas in a responsible manner. The potential of shale gas in term of providing the country with a diverse energy mix and better security of supply is immense and it also presents the realistic opportunity to assist the country in achieving lower carbon emissions and ensure that the department maintains competiveness in the global area.

The Minister indicated that in the quest to drive radical socio economic transformation, monitoring and enforcement of compliance with the Mining Charter, which will be reviewed during this financial year, will be intensified. Set targets around improving housing and living conditions in particular the conversion of single sex hostels into family units by 2014 will remain non-negotiable. The department will continue to promote mining that takes into consideration the need to protect the environment. In this regard the department will work with other organs of state in implementing environmental regulations to mitigate negative environmental impacts, as well as pursuing the continuous rehabilitation and closure of derelict and ownerless mines in line with environmental best practice.

The Minister further indicated that in addressing the fragmented licensing process, the Departments of Mineral Resources, Water Affairs and Environmental Affairs will during this administration, implement modalities for integrating timeframes and processes of environmental, water use and mining licenses. The process of environmental, prospecting, mining and water use license authorisations will be processed in parallel rather than sequentially and within stipulated timeframes. The amendments to the National Environmental Management Act have been processed and the integrated system will be implemented.

The members inquired about the changes that can be expected in the Mineral and Petroleum Resource Development Amendment Bill as the Minister has indicated in the media that it might be returned to Parliament for further deliberations.

The Minister responded that the Bill is with the President who will make a decision on whether to sign it or return it to Parliament based on constitutional matters. An inter-ministerial committee has been established to review the Bill and to consider, amongst other issues, the oil and gas and beneficiation provisions of the Bill.

2.2.2 Financial Administration

The CFO, Ms R I Singo indicated that financial administration is a sub-programme under Programme 1: Administration of the Department’s Strategic Plan. The purpose of this programme is to enable the Department of Mineral Resources to deliver on its mandate by providing strategic management and administrative support to the Ministry and the department . The d epartmental expenditure increased from R853.845 million in 2009/10 to R1.174 billion in 2012/13. The budget for the 2013/14 financial year was R1.394 billion and is expected to increase by an average annual growth rate of 6.7% to R1.66 billion in 2016/17. The increase is attributed to increased funding for rehabilitation of derelict and ownerless mines and the specialised technical skills required for the implementation of the National Environmental Management Act.

The CFO reported that the administration budget for 2013/14 was R310 million and was expected to increase at an average growth of 1.5% to R314.5 million in 2016/17. The spending focus over the MTEF period is staff development initiatives, including programmes to attract skills in the mining inspectorate. The department is working together with Mining Qualifications Authority (MQA). It was further reported that the department is focusing on the ICT services and recruitment expenses.

On Programme 2: Promotion of Mine Safety and Health, the budget for 2013/14 financial is expected to increase at an average growth rate of 5.5 % to R188.9 million in 2016/17. The spending focus over the MTEF is to ensure compliance with the Mine Health and Safety Act (1996) by conducting inspections, audits, inquiries and investigation and to further enhance the capacity to conduct inspections.

On Programme 3: Mineral Regulation, the budget for 2013/14 financial year was R154 million and is expected to increase at an average growth rate of 9.2 % to 260 million in 2016/17. The spending focus over the MTEF period is to improve the process of issuing mining right and permits and increase on compensation of employees and related goods and services for the implementation of National Environmental Management Act (1998).

On programme 4: Mineral Policy and Promotion, the budget for 2013/14 was R724.2 million and is expected to increase at an average growth of 8.3% to R900.6 million in 2016/17. The spending focus over the MTEF period is to promote the mineral sector, to strengthen the regulatory framework that governs both the mining and petroleum sectors, and to assisting SMME’s to promote mineral development.

2.3 Budget Analysis

The mandate of the Department of Mineral Resources is to promote 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 2014/15, but its role in wisely applying laws and fostering the contributions of several state agencies is critical for the growth of the minerals and mining sector.

Table 1: Budget allocations per prgramme over the MTEF for Vote 32: Mineral Resources

Programme	Budget				Nominal Rand change		Nominal % change	Real % change
R million	2013/14	2014/15	2015/16	2016/17	2013/14-2014/15		2013/14-2014/15
Administration	282.3	284.2	296.8	314.5	1.9		0.67 per cent	-5.20 per cent
Promotion of Mine Safety and Health	163.7	168.0	177.7	188.9	4.3		2.63 per cent	-3.36 per cent
Mineral Regulation	211.9	231.4	245.2	260.0	19.5		9.20 per cent	2.83 per cent
Mineral Policy and Promotion	735.9	787.8	879.5	900.6	51.9		7.05 per cent	0.80 per cent
TOTAL	1 393.8	1 471.4	1 599.2	1 664.0	77.6		5.57 per cent	-0.60 per cent

Source: (National Treasury) Vote 32: Mineral Resources 2014

The budget of the Department of Mineral Resources for the 2014/15 financial year is approximately R1.5-billion. This represents an increase of R78-million over the previous year, but in real terms, when inflation is taken into account, this represents a 0.60 percent decline in the value of the resources available to the Department, compared with the previous year. Vote 32 is one of seventeen votes (out of a total of 38) where the 2014/15 medium term expenditure estimate is not expected to keep pace with the 6.2 per cent forecast rate of inflation. This is a concern for the Committee since the Department has a commitment to implement the Mining Charter, Framework Agreement for Sustainable Mining, Social and Labour Plans, Beneficiation implementation framework policy, Revitalization of Mining Towns and derelict and ownerless mines.

There has been no structural change from the pattern of past budgets. Half (50.5 per cent) goes to current payments, half (48.8 per cent) to transfers (mainly to the Council for Geoscience and MINTEK), with a negligible proportion going to capital expenditure. Of particular concern to the committee is the decrease in allocation to the Council of Geosciences, since this is the research arm of the Departments, specifically around coming up with innovative interventions to address Acid Mine Drainage.

The compensation of employees makes up 32 per cent of the total budget, with goods and services at 18 per cent and travel and subsistence at five per cent.

The weighting of the programmes as a percentage of the total vote allocation is indicated in Figure 1, below, for 2013/14 and 2014/15. The percentage changes in the size of the ‘slices’ are indicated next to each programme name. These are all very small increments. For example, Administration absorbed 20 per cent of the budget in 2013/14 and will account for 19 per cent of the budget in 2014/5. This represents a decline of 0.94 per cent. The graphic shows that there are no significant changes in the share which each of the four programmes has in the total budget for the Department and in real terms after factoring inflation there is actually a decrease in the allocations. Only Programme 3: Mineral Regulation, indicates a 2.83% increase in the budget allocation.

Figure 1 : Vote 32: Comparison of the split of the Mineral Resources budget between Programmes

Source: (National Treasury) Vote 32: Mineral Resources 2014

2.4 Programme Analysis

The strategic plan of the Department outlines in detail the objectives, measures, Medium Term Expenditure Framework targets and initiatives of the four departmental programmes, namely;

· Programme 1: Administration;

· Programme 2: Promotion of Mine Safety and Health;

· Programme 3: Mineral Regulation; and

· Programme 4: Mineral Policy and Promotion.

2.4.1 Programme 1: Administration

The purpose of the Administration Programme is to “provide strategic support and management services to the Ministry and the Department”.

Table 2: Budget allocations per sub-programme in Programme 1: Administration

Sub-Programme	Budget		Nominal Increase / Decrease in 2014/15	Nominal Percent change in 2014/15	Real Percent change in 2014/15
R million	2013/14	2014/15
Ministry	22.8	24.2	1.4	6.14 per cent	-0.06 per cent
Corporate Services	120.1	106.5	- 13.6	-11.32 per cent	-16.50 per cent
Department Management	19.7	19.5	- 0.2	-1.02 per cent	-6.79 per cent
Financial Administration	79.3	92.3	13.0	16.39 per cent	9.60 per cent
Internal Audit	13.5	13.2	- 0.3	-2.22 per cent	-7.93 per cent
Office Accommodation	26.8	28.4	1.6	5.97 per cent	-0.22 per cent
TOTAL	282.2	284.2	2.0	0.7 per cent	-5.17 per cent

Source: (National Treasury) Vote 32: Mineral Resources 2014

Overall, there is a 5 per cent real decrease in the budget allocation for Administration. The net R2-million increase will not be enough to make up for the eroding effects of inflation. The differences in the percentage increases between sub-programmes are minor and can be explained by the need for quality IT services for the Department in the Financial Administration sub-programme. Corporate services expenditure was increased markedly in 2012/13 in order to attract and retain skilled workers, especially in the mine inspection directorates and by adjustments in the staff complement in other sub-programmes. Despite the 2014/15 fall in corporate services expenditure, real expenditure is still above 2011/12 levels.

2.4.2 Programme 2: Mine Health and Safety

The purpose of the Mine Health and Safety programme is to safeguard the health and safety of the mine workers and people affected by mining activities.

Table 3: Budget allocations per sub-programme in Programme 2: Promotion of Mine Safety and Health

Sub-programme	Budget		Nominal Increase / Decrease in 2014/15	Nominal Percent change in 2014/15	Real Percent change in 2014/15 2013/14
R million	2013/14	2014/15
Governance Policy and Oversight	49.8	50.2	0.4	0.80 per cent	-5.08 per cent
Mine Health and Safety Regions	113.9	117.8	3.9	3.42 per cent	-2.61 per cent
TOTAL	163.7	168.0	4.3	2.6 per cent	-3.36 per cent

Source: (National Treasury) Vote 32: Mineral Resources 2013

Overall, there is a small, approximately 3 per cent, real decrease in the budget for the promotion of mine safety and health. The differences in the percentage increases between sub-programmes are minor. Eight thousand health and safety inspections and 396 audits are to be commissioned in 2014/15, the same number as in 2013/14. The goals of the programme are supported by an additional R70-million annual contribution to the Mine Health and Safety Council (MHSC). This is used to fund “research projects whose outcomes can sustain and improve health and safety performance in the mining industry in order to significantly reduce fatalities, injuries, and occupational diseases”. It is noteworthy that both Programme 2 and the MHSC anticipate holding expenditure on mine health and safety below the expected rate of inflation in the period to 2016/17, while the performance indicators stay at the same levels. This means that the DMR and the MHSC anticipate productivity increases as they will be doing the same work with reduced resources.

2.4.3 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.

Table 4: Budget allocations per sub-programme in Programme 3: Mineral Regulation

Sub-programmes	Budget		Nominal Increase / Decrease in 2014/15	Nominal Percent change in 2014/15	Real Percent change in 2014/15
R million	2013/14	2014/15
Mineral Regulation and Administration	144.5	154.5	10.0	6.92 per cent	0.68 per cent
Management Mineral Regulation	22.6	29.0	6.4	28.32 per cent	20.83 per cent
South African Diamond and Precious Metal Regulator	44.8	47.8	3.0	6.70 per cent	0.47 per cent
TOTAL	211.9	231.3	19.4	9.2 per cent	2.78 per cent

Source: (National Treasury) Vote 32: Mineral Resources 2014

There is a small approximately 3 per cent real increase in the budget allocation for Mineral Regulation programme. Expenditure in the Management Mineral Regulation sub-programme is planned to increase well above the rate of inflation. This sub-programme provides overall management of the programme. And expenditure is planned to increase because of the new responsibilities transferred from the Department of Environmental Affairs in 2013/14. There has been a major re-balancing of functions (between budgets) which has introduced a discontinuity that make it impossible to compare present trends with those of previous years.

There is no significant change in the budget for the South African Diamond and Precious Metal Regulator sub-programme, where the 2013/14 increase just accounts for the effects of inflation.

2.4.4 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.

Table 5: Budget allocations per sub-programme in Programme 3: Mineral Regulation

Sub-programme	Budget		Nominal Increase / Decrease in 2014/15	Nominal Percent change in 2014/15	Real Percent change in 2014/15
R million	2013/14	2014/15
Management	13.9	14.3	0.4	2.88 per cent	-3.13 per cent
Mineral Policy	28.8	17.9	- 10.9	-37.85 per cent	-41.48 per cent
Mineral Promotion	44.3	59.7	15.4	34.76 per cent	26.90 per cent
Assistance to Mines	0.0	19.1	19.1
Council for Geoscience	271.2	287.8	16.6	6.12 per cent	-0.07 per cent
Council for Mineral Technology	341.5	338.5	- 3.0	-0.88 per cent	-6.67 per cent
Economic Advisory Services	4.6	4.4	- 0.2	-4.35 per cent	-9.93 per cent
Mine Environmental Management	31.7	46.0	14.3	45.11 per cent	36.64 per cent
TOTAL	735.9	787.8	51.9	7.1 per cent	0.80 per cent

Source: (National Treasury) Vote 32: Mineral Resources 2014

The Mineral Policy and Promotion programme receives 54 per cent of the budget allocation for Vote 32. This proportion is planned to increase over the period of the Medium Term Expenditure Framework (MTEF) as the major increase in the budget for the Mine Environmental Management sub-programme, introduced in 2013/14, is carried into the future. While there is no real increase in the budget for the programme in 2014/15, it does maintain the real level set in 2013/14, when the real increase was of the order of 20 per cent.

The most notable structural change in the budget for Vote 32 over the past two years and in the MTEF period has been the increase in the proportion of the Mineral Policy and Promotion programme budget that is allocated to Mine Environmental Management. This increases from 1 per cent to 11 per cent between 2012/13 and 2016/17. The target for the number of derelict and ownerless mines that are rehabilitated per year has been adjusted upwards in 2013/14 from a previous target of 40 to 50. This figure will be maintained in the long term. The R117-million expenditure on the Mine Environmental Management sub-programme for 2016/17, is combined with research and implementation allocations to MINTEK and the Council for Geoscience. The scale of the state’s liability for the environmental harm from the mining sector is enormous. The Council for Geoscience told the Portfolio Committee that at least six thousand old mines are the responsibility of the State. The liability to the State has been estimated at R40-billion. The DMR, working with MINTEK and the Council for Geoscience, has a policy of prioritising rehabilitation work to deal with the most severe problems for human safety first. However, at the present planned rate of progress the historic environmental problems from mining will still persist for many decades. This situation places a pressure on the DMR to ensure that present environmental laws related to mining are properly monitored and enforced so that the problems do not get still bigger.

The approximately 27 per cent real increase in the budget for Mineral Promotion (following a 9 per cent real increase in 2013/14) speaks to taking forward the implementation plans for the beneficiation strategy for the South African minerals industry (which are scheduled for finalisation by March 2014). In this regard, subsidies will be allocated to 221 small scale mining projects. This is part of implementing the mining sector strategy towards a competitive and transformed sector.

The Council for Geoscience and MINTEK are two national science councils that are funded through Vote 32. The transfer of funds to the Council for Geoscience shows no real increase in 2014/15, but this follows a 13 percent real increase in 2013/14. That higher resource level had therefore been maintained. The transfer to MINTEK in 2014/15 is below inflation, with a 7 percent real decrease with reference to the adjusted appropriation for 2013/14. This was, however, 17 per cent above the initial appropriation in the 2013/14 budget. The budget notes that transfers to the Council for Geoscience and MINTEK have each been reduced by R20 million over the medium term to give effect to Cabinet approved baseline reductions. Both entities will generate their own revenue to ensure that service delivery is not compromised. The Committee is concerned about the decrease in budget allocations to the Councils, specifically with regards to the research and development that needs to be conducted on Acid Mine Drainage and the amendments to the MPRDA.

The bulk of MINTEK’s revenue comes from the sale of products, services and contracted research to the private sector. This pattern is changing, with recent higher levels of state funding, so that commercial sales in 2014/15 will account for 54 per cent of revenue (compared with 71 per cent in 2011/12). Increased transfer payments to MINTEK up to 2016/17 will be used for research in water treatment, the rehabilitation of derelict and ownerless mines, the establishment of a precious gemstone facility in Northern Cape, waste and scrap reprocessing, and the building of a pilot plant for rare earth elements. The Council for Geoscience also earns income from commercial activities – with the private sector and international and foreign state entities. This will account for 24 per cent of revenue in 2014/15.

The Council for Geoscience again plans small increases in the numbers of mineral maps, map explanations and mineral related publications published per year as well as the numbers of rural development projects finished the number of regional and African development projects in progress and the number of completed projects with external collaborators.

There is a significant anomaly in the budget commentary on the goals and expenditure plans of the Council for Geoscience which is worth examining in detail. The budget write-up on the Council for Geoscience states:

“The Geoscience Amendment Act (2010) extends the entity’s functions to include the provision of advisory services relating to geohazards and geo-environmental pollution, and to be the custodian of all geoscience information related to the South African mining industry. ... According to its implementation plan, the council will need to recruit at least 56 researchers, professionals, technicians and administrative personnel in order to assist in the amendments of the Geoscience Act (1993) and to provide more stimulus to investment in the mineral sector.”

This directly contradicts the Council’s 2012/13 Annual Report which states that “the necessary funding could not be made available” for the extension of the Council’s role to become the national advisory authority on geohazards (and for other significant issues). The Geoscience Amendment Act, No 16 of 2010) has not come into full operation. The Council has told the Portfolio Committee that it would cost R19-million to meet the costs of the additional activities specified in the Amendment Act and require the appointment of an additional 56 staff members at least.

The budget summary refers to an implementation plan which is not funded in the budget and to legislative provisions that have not been brought into effect because funding has not been available.

3. Briefing by Mintek on strategic plan and budget

Mr Mngomezulu, CEO and President of Mintek outlined the strategic plan for 2014/15. Mintek’s core business is research and development of efficient mineral processing technologies and value added products and services. Mintek upholds good governance, and makes it a point that they comply with the requirements of the Auditor General at the end of the financial year.

Mintek is looking at ways to reduce water and energy usage. With regard to finances, Mintek is well funded, but in recent years an increasing amount of funding is attached to particular projects and it is concerned that the baseline state grant is set to decline over the MTEF period. The CEO mentioned that there will be difficult times for the global mining sector in the two years ahead, even when compared to 2008 recession. Mintek research is typically long term in nature and it needs an adequate baseline grant in order to plan its research and development activities optimally.

Members applauded Mintek as a research company that the country can be proud of and as an entity that contributes to its own funding by the commercial sale of technology both in South Africa and internationally.

4. Briefing by Council for Geoscience on strategic plan and budget

Dr Mathe, non Executive director at CGS introduced the team from the Council and tendered an apology from the CEO who could not be present because he was hospitalised. Dr Graham led the presentation by outlining the strategic objectives. CGS is faced with declining contract revenue, inadequate statutory funding and ageing infrastructure, but it is continuing with transformation, refocusing and aligning the organisation to address South Africans developmental challenges and planning for the implementation of the Geoscience Amendment Act (Act No.16 of 2010).

The number of interns has increased from seven in 2010 to 56 in 2014. The geological field school was initiated in 2005 and is based in Limpopo. GCS is in the process of acquiring accreditation from Mining Qualification Authority (MQA).

Dr Graham indicated that the provisions of legislations that CGS cannot perform its responsibility include its function in identifying geohazards such as on dolomitic land and acting as an effective repository for geological and technical information that is (or is due to be) lodged with the CGS by companies.

Members asked why large areas of the country had white shaded squares on the map, indicating that no geological mapping had been done. They noted that this omission includes many former homeland areas. The CGS said that the whole of SA has geological maps but at a large scale. The mapping project is to produce maps at a smaller scale which is of more use to prospectors. The pace at which this more detailed mapping is undertaken depends on the budget that is available, so it is a gradual process.

5. Briefing by South African Diamond and Precious Metals Regulator

The CEO, Mr Levy Rapoo outlined the background to the establishment of the Regulator. He reported that the diamond industry in South Africa was administered in terms of the Diamond Act, 1986 (Act No 56 of 1986, which established, South African Diamond Board (SADB) as the authority to regulate the diamond industry. In July 2007, the SADPMR was established by section 3 (1) of the Diamond Act, 2005 (At No 29 of 2005) which accounted to the Public Finance Management Act, 1999 (Act No 1 of 1999) in terms of section 3 (2). The CEO reported that the SADPMR is funded by monies appropriated by Parliament. The Regulator was established as a “One-stop Shop” for the issuing of precious metals incense/permits and certificates.

The strategic objectives of the regulator are to improve competitiveness, sustainable development and job creation in the diamond and precious metals industry, to transform the diamond and precious metals sector, to promote equitable access to resources for local beneficiation, to enforce compliance with the legislative requirements and to improve organisational capacity for maximum execution for excellence.

The SADPMR has a staff compliment of 120, of which the majority (80) are women. The regulator required R79 million for all its functions but was allocated R47 million. The regulator is faced with challenges of inadequate budget allocation, declining diamond and precious metals industries, complexities with regards to the beneficiation of precious metals and inadequate access to rough diamonds by beneficiators.

The regulator has commenced with the implementation of the plan by engaging diamond producers to avail rough diamonds for local beneficiators and has already facilitated four tenders for polished diamond at the Diamond Exchange and Export Centre (DECC).

6. Briefing by State Diamond Trader on strategic plan and budget

The Board Chairperson congratulated the Chairperson and the members of the committee on their election to Parliament. She handed over to the CEO, Ms F Zikalala who took the committee through the presentation. The CEO also congratulated the Chairperson and looked forward to a constructive relationship with the committee.

The SDT is eligible by law and proclamation to purchase up to 10 per cent of the run of the mine output from all diamond producers in South Africa. It does not receive any grant from the state, but funds its operations itself, with the aid of working capital loaned by the Industrial Development Corporation (IDC).The CEO mentioned that Jewish people are the mainstay of the diamond industry in South Africa and internationally. In response to questions from members, she explained that because of the nature of the industry, it has proved very challenging to assist black South Africans to enter the sector and to be successful over time.

Members questioned whether the ten percent ceiling for the purchase of SA-mined diamonds was sufficient. The SDT responded that this was a policy issue that was set by the law.

7. Briefing by Mine Health and Safety Council

Mr D Msiza, the Chairperson, outlined the mandate of the Council which is to advice the Minister on all occupational health and safety issues in the mining industry relating to legislation, research and promotion; review and develop legislation for recommendation to the Minister; promote health and safety culture in the mining industry; oversee research in relation to the health and safety in the mining industry and liaise with other bodies concerned with health and safety issues. He reported that the most recent annual mine fatality statistics reflected the lowest figures ever. This achievement would inspire the industry in its journey to ‘zero harm’.

The CEO, Mr T Dube reported that the Council intends to have a stakeholder summit in November 2014 on the health and safety issues in mining.

8. Briefing by the Auditor-General’s office

Mr. J van Schalkwyk, Corporate Executive: Audit at the Auditor-General of South Africa stated to the Committee that the DMR and its entities showed a better performance than the norm. More discipline is needed by the Department in dealing with revenue from royalties and prospecting and in legislative compliance but the Department has set a good base from which to improve. The qualified audit opinion that the Department received in 2012/13 was the result of a single area of difficulty. There is a good relationship between the Auditor-General and the Department. Mr van Schalkwyk stated that the DMR and its entities have shown significant progress over time and that the portfolio was close to being totally clean from an audit point of view. He described the DMR as a “well governed, well functioning department.

Members stated that a clean audit is a must and expressed appreciation for the role of the Auditor-General in guiding the committee in its oversight over the Department and its entities.

9. Observations

The Committee, following its deliberations, noted the following concerns:

· The Committee appreciated the attendance of the Minister. The Committee felt that in the future, certain expenditure patterns need to be discussed with the entities, particularly relating to the efficiency of government support for research across the mining sector.

· The Committee noted that the DMR had become compliant wit h the Promotion of Access to Information Act (PAIA), Act 2 of 2000, which sets standards for transparency and accountability that enables citizens to access records from government and business.

· The Committee welcomed efforts geared at streamlining licensing processes in respect of mining and the environment and the partnerships with the Departments of Environmental Affairs and Water and Sanitation. This will allow the licensing process to be finalised in parallel rather than sequentially. These improvements are catered for in the amendments to the MPRDA which were processed by Parliament during 2013/14.

· Members noted that because of inadequate funding, there are provisions of the legislation which the CGS is unable to perform.

· There is a challenge in that the number of inspectors (including health inspectors) is inadequate. This means that the department is only able to inspect a limited sample of mines, and not all mines.

The DG indicated to the committee that there is only 1 inspector per region (province) who is dedicated to assisting mines to develop and comply with the Social and Labour Plans which specify responsibilities related to socio-economic development in the areas where mines are located. The matter has be brought to the attention of the Minister and it has been escalated to the Treasury and the Public Service Commission with a motivation for more funding to recruit the experienced and qualified inspectors needed for these roles..

· The Social Labour Plans (SLP) are often not effectively aligned with the Integrated Development Plans (IDPs) of local municipalities. There was a concern whether the DMR involves the departments of human settlement, water and sanitation and environment affairs in the process of compiling and monitoring the SLPs.

· There is no clear allocation on how money will be utilized for assessing the effectiveness of the Mining Charter as it reaches its 10 year implementation point in December 2014.

The committee questioned whether the department adequately prioritizes the need to improve the living conditions of mine workers. Action is needed now, not only after December 2014, where the past pattern is simply to extend deadlines.

10. Recommendations

The Committee recommends as follows:

• 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 a 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 licenses should be an audit requirement even by private companies.

• The department should strengthen the systems that must assist the process on compliance which include 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.

· The mechanisms being used by the Department to monitor compliance with the Mining Charter are not sufficient. The process of monitoring must begin as soon as possible, not only after the deadline expires in December 2014.

11. Conclusion

Having considered the Annual Performance Plan and Budget Vote of the Department of Mineral Resources, the Committee adopts the report.

Report to be considered.