ATC180425: Report of the Portfolio Committee on Mineral Resources on the Annual Performance Plan and Budget Vote 29 of the Department of Mineral Resources for the 2018/ 2019 Financial Year, dated 25 April 2018

Mineral Resources and Energy

Report of the Portfolio Committee on Mineral Resources on the Annual Performance Plan and Budget Vote 29 of the Department of Mineral Resources for the 2018/ 2019 Financial Year, dated 25 April 2018
 

The Portfolio Committee on Mineral Resources, having considered the 2018/2019 Annual Performance Plan (APP) and Budget Vote 29: Mineral Resources (during the period 18 – 19 April 2018), reports as follows:

 

1. Introduction

 

The Department of Mineral Resources (DMR), as an institution, had a good year in 2017. It

received a clean audit report from the Auditor General and achieved 82 per cent of its performance goals. On the other hand, the South African mining industry, in the words of Mining Weekly, a leading trade journal “has had a tumultuous time”1. This is “because of the controversial Reviewed Draft Broad-Based Black Economic Empowerment Charter for the South African Mining and Minerals Industry, also known as Mining Charter III, which, amid lingering political uncertainty, led to low investor confidence and continuing breaches of trust between government and industry, resulting in declining constructive engagement”.

 

It is, perhaps, a weakness in monitoring systems that allows a national department to appear

as a ‘model portfolio’ while the sector for which it is responsible is in significant disarray.

On the face of things, Budget 2018, brings no significant changes to indicate government’s

appreciation of the priority that needs to be accorded now to the development of the mineral

and petroleum sector. That is the conclusion one must draw from the figures, from ‘following

the money’.

 

The purpose of Vote 29: Mineral Resources is to:

• “Promote and regulate the minerals and mining sector for transformation, growth, and

             development”; and to

 

• “Ensure that all South Africans derive sustainable benefits from the country’s mineral

            wealth.”

 

The Budget was tabled on 21 February 2018 and the Annual Performance Plan (APP) of the

DMR, which provides specific performance targets for 2018/19, was tabled on 08 March 2018.  The mining industry, and the economy as a whole, is in a poor state. The Treasury highlighted that “Policy uncertainty hinders investment in the mining sector.”

“Despite improved performance in 2017, mining remains under pressure due to high operating costs and persistent policy uncertainty related to the Mining Charter and the Mineral and Petroleum Resources Development Amendment Bill. The amendment bill was sent back to Parliament in January 2015 and its status has not been resolved.

 

The Mining Charter, approved by Cabinet and gazetted in June 2017, has contributed to policy uncertainty. Both the charter and the outstanding amendment bill leave mining, oil and gas companies unable to accurately assess the expected return on their investments”.

 

According to the Fraser Institute’s Mining Investment Attractiveness Index, South Africa ranked 48th out of 91 jurisdictions in 2017.6 The country is currently ranked 4th in Africa. In

terms of mining policy, across 15 countries surveyed in Africa, South Africa ranks 13th. Only

Zimbabwe and the Democratic Republic of Congo (DRC) have less favourable mining policy

environments than South Africa.

Treasury notes that “real fixed investment in mining has been stagnant since 2008.” This

echoes a concern of the Chamber of Mines that “in the decade between 2007 and 2017 a

downward trajectory is evident in the industry’s fixed investment activity”.

Because of lower investment and policy uncertainty, South African mining has

underperformed compared to countries such as Chile, China, Canada, Australia and Russia.

Treasury identifies two priorities for the DMR in 2018:

• Eliminating policy uncertainty to catalyse investment
• Immediate measures to establish policy certainty in key areas to rebuild trust and

create an enabling environment for investment.

 

The revival and promotion of the mining sector is crucial if South Africa is to reduce

unemployment, poverty and inequality.

Even in the face of an inadequate budget allocation, the DMR has scope to improve its policy

and implementation practices.

2.Overview of the 2017/18 financial year

 

The DMR had an available budget of R1.8 billion in 2017/18.9 This represented a nominal

increase of R118 million, or 7 per cent, compared with 2016/17. Most of the increase, however,

was R86-million which was appropriated through Vote 29 to fund the Petroleum Agency of SA

(PASA), the national regulator of the oil and gas sector.

 

The 2017/18 Annual Report of the Department, covering the full financial year ending 31

March 2018, will be available at the end of September 2018. The third quarter expenditure

report shows that at the end of December 2017 the DMR had spent 77.3 per cent of its

available budget. This compares with 76.3 per cent at the same point of the previous year.

The DMR has a record of managing its budget very well and spending exactly 100 per cent,

or very slightly less, by the end of each financial year.

Transfers and Subsidies accounted for R896.8 million of the available budget and, of this

amount, the Department had transferred by December 2017, R722.4 million, or 81 per cent,

mainly to public corporations and private enterprises and departmental agencies and

accounts. By December 2017, the Department had spent R 652.8 million, or 74 per cent, of

the remaining budget, the majority of which was used on compensation of employees and

goods and services.11

 

Spending from the Mineral Policy and Promotion Programme was lower than projected, by

R50.3 million. This was because payment for membership fees for the African Diamond

Producing Countries was delayed and planned Mining Charter and the Shale gas advocacy

events were halted. The advocacy events were halted pending finalisation of the court case

brought by industry on the Charter which was due be heard in February 2018.

 

The APP for 2017/1813 identified as legislative policy objectives for the year:

a) Review the Mineral and Petroleum Resources Development Act, No. 28 of 2002

(MPRDA) (including its regulations) – this will follow the conclusion of the MPRDA Bill,

which was expected by June 2017.

b) Legislative establishment of the Mining Company of South Africa (MinCo) as the state owned

mining company. The African Exploration Mining and Finance Corporation

(AEFMC) Bill was published for public comment in January 201615 and will be tabled

in Parliament during the 2017/2018 financial year.

c) The amendment bill to the Mine Health and Safety Act, No. 29 of 1996 (MHSA)

(including its regulations) will be “processed and finalised” by the fourth quarter of

2017/18.

 

None of these have yet been completed. All were previously planned for completion in the

APP of 2016/17.

 

The key strategic priority of Vote 29, as emphasised in the 2017 State of the Nation Address,

was to finalise changes to the legislation and regulations for minerals and petroleum that have

been delayed since 2010. In addition, the DMR had to implement the policy of transformation

in the mining sector, particularly by setting performance targets for right holders for the period

after 2014.

 

Neither of these key objectives was achieved. The amendments to the mining legislation

remained in Parliament, with the National Council of Provinces, because of a decision of the

DMR to introduce complex additional changes to the Bill that was passed by Parliament in

2014. The third iteration of the Mining Charter was gazetted, but immediately challenged by

stakeholders in a series of court cases.

 

The National Treasury has not acted on the recommendations of the Portfolio Committee on

Mineral Resources (PCMR) that were forwarded to it in the 2017 Budgetary Review and

Recommendation Report (BRRR), related to Vote 29, the budget of the DMR.

 

These included a recommendation that the Council for Geoscience (CGS) should be better

funded to support prospecting and exploration for new reserves. The PCMR stated:

 

“The CGS has motivated for a ten year programme of geological mapping. This is

essential for promoting mineral prospecting and also for planning national infrastructure and food and water security. The cost is R20-billion over 10 years and an additional R1.8-billion over the Medium Term Expenditure Framework (MTEF)”.

 

In addition, the Committee said: “The DMR has indicated that it cannot fulfil its mandate if the

current cuts implemented by National Treasury continue. Treasury should ensure that DMR

has the financial resources available to carry out its wide and essential responsibilities as the

custodian of the nation’s mineral resources for present and future generations.”

 

The mining industry more than pays its way. Company Income Tax (CIT) from mines exceeds

R16-billion a year19 and royalty payments to government in 2018/19 are expected to be R8-

billion. Mining contributes R24-billion a year directly to government revenue, yet the annual

budget of the DMR is less than R2-billion. This is a sector that is critical for 27 per cent of export earnings, for energy (from coal beneficiated locally) and for hundreds of thousands of jobs.

 

Industry experts agree that the SA mining sector has fallen behind in technology, research and development and in exploration. The huge mineral wealth of the country has to be developed now for the future. As the custodian of the nation’s mineral wealth it is the responsibility of the state to ensure that this is done. The DMR spends its budget allocation in line with all the rules, following the APP. It gets a clean audit. But the budget is too limited to

support to the duty of care owed by a custodian.

 

 

3.Policy Priorities for 2018/19 AND ALIGNMENT WITH NATIONAL, REGIONAL, CONTINENTAL AND GLOBAL DEVELOPMENT AGENDAS (NDP, NINE POINT PLAN, SADC-RIDMP, AGENDA 2063 & SDGS)

 

In the 2018 State of the Nation Address on 16 February 2018, President Cyril Ramaphosa

outlined several policy priorities for the mining sector in order “to grow the sector, attract new

investment create jobs and set the industry on a new path of transformation and sustainability.”

The priorities embodied the following:

• To work with mining companies, unions and communities;
• To ensure that Mining Charter three is an effective instrument to sustainably transform

the face of mining in South Africa by engaging all stakeholders on the Mining Charter;

• To resolve the current impasse between Government and the industry through a

genuine partnership to build trust and a shared vision;

• To accelerate transformation and grow the mining sector.
• To process the Mineral and Petroleum Development Amendment Bill during the first

quarter of 2018. The Bill, once enacted into law, will entrench existing regulatory

certainty, provide for security of tenure and advance the socio-economic interests of

all South Africans.

• To ensure that mine accidents are dramatically reduced by working with mining

companies together with all stakeholders.

 

President Ramaphosa stated: “We will … deal decisively with companies that resist transformation.”

 

In order to deal with companies that resist transformation, it is necessary to know the names

of these companies and to understand where they have fallen short in promoting transformation.

 

The Mining Charter is the primary instrument by which government implements its policy of

transformation in the mining sector.

 

At a meeting on Wednesday, 05 August 2015, the DMR made a presentation on the Mining

Charter 2015 audit. The minutes of the meeting recorded that the DMR “said a number of

mining companies have not met the required 2014 target of implementation of the Mining

Charter. Mineworkers and communities remained the least beneficiaries from empowerment

transactions.”

 

The Portfolio Committee formally resolved that the DMR “should submit a report with the

number of mining companies who have not met the targets and specify the names of mines and which targets are not met.” The purpose of the request was to assess the scope and nature of non-compliance with the Mining Charter by the holders of mining rights. The information has never been received, almost three years later, despite several reminders and repeated requests from the Chairperson and the Committee to the DMR and its leadership.

 

It is well known that the Mineral and Petroleum Resources Development Act, No. 28 of 2002

(MPRDA) abolished mineral rights and their private ownership and made the State the custodian of South Africa’s mineral wealth for the benefit of all South Africans.  All the established mining companies had to apply to convert their rights to mine into so-called “new order” mining rights. These applications were granted by the State because the mines committed to apply the terms of the Mining Charter. It is not sufficient for the DMR to state that “a number of mining companies have not met the required 2014 target of implementation of the Mining Charter”. DMR must name the names so that the decisive action promised in the SONA can be implemented.

 

Mining in South Africa has a terrible, tainted past – but the mining industry is now based on

our mineral resources that belong to the national as a whole. As the President stated in SONA

2018:

 

“Mining is another area that has massive unrealised potential for growth and job creation is mining. We need to see mining as a sunrise industry.”

But that sun has to rise on an industry that is transformed so that benefits are shared with all

stakeholders – investors, workers, mining-affected communities and the nation as a whole.

 

The PCMR could call on the DMR to list names of the mining companies which have not met the required standards and to set out the areas in which these companies have failed to carry out their commitments under the Mining Charter between 2004 and 2014.

 

This is a necessary precursor to the development of the new Mining Charter for the next ten years.

 

Parliament has provided the instruments for transformation in the Mine Health and Safety Act,

No. 29 of 1996 (MHSA) and the Mineral and Petroleum Resources Development Act, No. 28

of 2002 (MPRDA), which are the main legislative measures supported by Vote 29.

 

The DMR’s policies and strategies are aligned to the National Development Plan, but the

implementation of critical aspects of the Plan – such as an improved regulatory environment have been long delayed, despite the financial support given under Vote 29 (Vote 32 in previous years).

The DMR’s priorities for 2018/19 are directed by the 2014/19 Strategic Plan that was presented to Parliament in 2014 and, specifically, by the Annual Performance Plan 2018/19.

 

In the Nine Point Plan, the DMR is listed as the lead department for Operation Phakisa in mining (including aspects of the Oceans Economy Phakisa).

 

The Southern African Development Community (SADC) Regional Infrastructure Development

Master Plan (RIDMP) was adopted by SADC Heads of State and Government in August

2012.  While improved infrastructure in the region will be positive for the growth of the mining

sector, the projects adopted cover six specific sectors: energy, tourism, transport, ICT,

meteorology and water. The SADC-RIDMP is therefore not relevant for Vote 29.

 

Agenda 2063, is a fifty-year strategy for the continent that was set in motion following the 50th

anniversary of the African Union (AU) in 2013. South Africa contributed to the formulation of

Agenda 2063, so the strategy is already aligned with South Africa’s development goals.

 

Aspirations expressed in the strategy are consistent with the mandate of the DMR and the

purposes of Vote 29. These include inclusive growth and sustainable development, good

governance, democracy, respect for human rights, justice and the rule of law.

 

In September 2015, the member states of the United Nations (UN) agreed on a set of 17

Sustainable Development Goals (SDGs), which represent the global agenda for equitable,

socially inclusive, and environmentally sustainable economic development until 2030. Mining

companies have the potential to become leading partners in achieving the SDGs.

 

Vote 29 supports long-standing policies of the DMR, expressed in the MPRDA, the MHSA and

the Mining Charter, to ensure that there is equitable access to the benefits of mining and that

these should extend beyond the life of the mine itself, so that the mining industry has a positive

impact on the natural environment and social capital. Under the new environmental laws for

mining, directly implemented with funds from Vote 29, mining companies are required to

improve environmental stewardship. Through the Social and Labour Plans approved and

monitored by the DMR, mining companies are required to consult with communities on mine

impacts and to boost the local economy through providing jobs and purchasing South African

stores, capital goods and services. Mining companies that fail to follow the law in these

respects may put their operations at risk in the short and long term. It can be argued that Vote

29 is not merely consistent with the SDGs—it actively requires the mining, oil and gas sectors

to contribute to many of the SDGs.

4.Budget Analysis

 

Table 1: Vote 29: Mineral Resources

Programme	Budget				Nominal Rand change		Nominal % change	Real % change
R million	2017/18	2018/19	2019/20	2020/21	2017/18-2018/19		2017/18-2018/19
Administration	339.9	327.0	345.5	365.7	- 12.9		-3.80 per cent	-8.82 per cent
Promotion of Mine Safety and Health	194.1	205.0	219.3	235.6	10.9		5.61 per cent	0.10 per cent
Mineral Regulation	379.3	393.6	415.4	444.1	14.3		3.78 per cent	-1.63 per cent
Mineral Policy and Promotion	866.1	965.0	1 035.9	1 094.3	98.9		11.42 per cent	5.61 per cent
TOTAL	1 779.4	1 890.7	2 016.0	2 139.7	111.2		6.25 per cent	0.71 per cent

Source: National Treasury (2018a) Vote 29: Mineral Resources 2018

 

It is the task of the DMR to help South Africa to harness its mineral wealth for development.

The budget of the Department is comparatively small, barely 0.2 per cent of the total

appropriation by vote in 2018/19, but its role in wisely applying laws and fostering the

contributions of several state agencies is critical for the growth of the minerals and petroleum

sector, which is experiencing the most adverse economic climate since the 1990’s.

 

The budget of the DMR for the 2018/19 financial year is R1.9-billion. This represents a nominal

increase of R111.2-million over the previous year, but in real terms, when inflation is taken

into account, the allocation represents a marginal 0.71 per cent increase in the value of the

resources available to the Department, compared with the previous year. This is part of the

implementation of the government plan, first announced by the Minister of Finance in the

Budget Speech in 2016 to moderate government expenditure to compensate for the continued

weak performance of the SA economy.

 

There has been no structural change from the pattern of past DMR budgets. Half (47.1 per

cent) goes to current payments, half (52.3 per cent) to transfers (mainly to the CGS and

Mintek), with a negligible proportion going to capital expenditure.

 

The compensation of employees makes up 33 per cent of the total budget and goods and

services 14 per cent. These proportions are not significantly different from 2017/18.

The weighting of the programmes as a percentage of the total Vote allocation is indicated in

Figure 1, below, for 2017/18 and 2018/19, with the percentage changes in the size of the

‘slices’ indicated next to each programme name:

 

[This shows a small shift away from Administration and a small shift towards Mineral Policy

and Promotion in the share which each of four programmes has in the total budget for the Department. The reason is mainly the funds allocated under the economic competitiveness

and support package in 2018/19 to CGS (R90-million) and Mintek (R70-million).]

 

Figure 1: Vote 29: Comparison of the split of the Mineral Resources budget between Programmes

Source: Calculated by the Research Unit from National Treasury (2018a).

 

4.1Programme Analysis

 

4.1.1Programme 1: Administration

 

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

 

Table 2: Programme 1 - Administration

Sub-Programme	Budget		Nominal Increase / Decrease in 2018/19	Real Increase / Decrease in 2018/19	Real Percent change in 2018/19
R million	2017/18	2018/19
Ministry	28.1	27.3	-  0.8	-2.76 per cent	-7.83 per cent
Corporate Services	145.1	125.2	-  19.9	-13.72 per cent	-18.22 per cent
Department Management	21.8	30.1	8.3	38.00 per cent	30.80 per cent
Financial Administration	97.6	96.8	-  0.8	-0.85 per cent	-6.02 per cent
Internal Audit	14.5	12.9	-  1.6	-11.07 per cent	-15.71 per cent
Office Accommodation	32.9	34.8	1.9	5.80 per cent	0.28 per cent
TOTAL	339.9	327.0	-  12.9	-3.80 per cent	-8.82 per cent

Source: National Treasury Vote 29: Mineral Resources 2018

 

Overall, there is a 13 per cent real decrease in the budget allocation for Administration, with R13-million less being spent on this function compared with 2017/18. This is due to lower expenditure on operating leases.

 

Administration: Over the medium term, to 2020/21, compensation of employees will grow by 6.0 per cent on average each year. Due to the reduction in the amounts budgeted for operating leases and travel & subsistence, there will be a -4.6 per cent, cut in the value of goods and services over the MTEF. There were 377 funded posts in Administration in the 2017 budget, 355 of which were filled by the end of 2017/18. The number of employees is planned to fall further, to 327 by 2020/21, so the salary bill will fall by -2.7 per cent each year.

 

4.1.2Programme 2: Mine Health and Safety

 

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

 

Table 3: Programme 2 - Mine Health and Safety

Sub-Programme	Budget		Nominal Increase / Decrease in 2018/19	Real Increase / Decrease in 2018/19	Real Percent change in 2018/19 R million
R million	2017/18	2018/19
Governance Policy and Oversight	47.1	59.8	12.7	26.96 per cent	20.34 per cent
Mine Health and Safety Regions	140.9	140.5	-  0.4	-0.32 per cent	-5.51 per cent
Mine Health and Safety Council	6.2	4.8	-  1.4	-22.05 per cent	-26.12 per cent
TOTAL	194.1	205.0	10.9	5.61 per cent	0.10 per cent

Source: National Treasury Vote 29: Mineral Resources 2018

 

Overall, there the budget allocation for Mine Health and Safety has maintained the real level of the previous year, after real declines of 6 per cent in 2016/17 and 2017/18.

 

Mine Health and Safety: Over the medium term, to 2020/21, compensation of employees will grow by 7.3 per cent on average each year. This needs to be compared against the 5.4 per cent provision for the growth in goods and services. This is due to an increased pace of expenditure on travel and subsistence, but one that is below the 5.5 per cent anticipated increase in prices over the period. The number of employees for mine health and safety is set to decrease. There were 278 out of 303 posts filled in Programme 2 by the end of 2017/18. The number of employees is planned to fall to 271 by 2019/20, but the salary bill will grow by 7.3 per cent each year, partly because learner inspectors have been moved to higher salary grades.

 

Eight thousand health and safety inspections and 396 audits are to be commissioned in 2018/19, the same number as in the previous year. The Mine Health and Safety Council (MHSC) will be supported by a transfer from the Department of R4.8-million in 2018/19, rising to R5.4-m in 2020/21. The MHSC budget is supported mainly by levy income from the mines and the Council has a significant accumulated surplus.

 

4.1.3Programme 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 sustainable development”.

 

This represents a change from 2016/17, when the stated purpose of the programme included “environmental compliance”[1]. New environmental compliance responsibilities were transferred from the Department of Environmental Affairs to the DMR in December 2014, with the introduction of the One Environmental System for Mining. These responsibilities still remain in place and the DMR has trained a cohort of Environmental Mineral Resource Inspectors (EMRIs) in the new regulations which the DMR environmental inspectorate has to enforce.

 

 

 

Table 4: Programme 3 - Mineral Regulation

Sub-Programme	Budget		Nominal Increase / Decrease in 2018/19	Real Increase / Decrease in 2018/19	Real Percent change in 2018/19 R million
R million	2017/18	2018/19
Mineral Regulation and Administration	199.2	206.8	7.6	3.83 per cent	-1.59 per cent
Management Mineral Regulation	27.1	29.2	2.2	8.06 per cent	2.43 per cent
SA Diamond & Precious Metals Regulator	65.9	59.1	-  6.8	-10.26 per cent	-14.94 per cent
Petroleum Agency South Africa (PASA)	87.1	98.4	11.3	12.97 per cent	7.08 per cent
TOTAL	379.3	393.6	14.3	3.78 per cent	-1.63 per cent

Source: National Treasury Vote 29: Mineral Resources 2018

 

Overall, there is a -1.6 per cent real decrease in the budget allocation for Mineral Regulation in 2018/19, compared with the previous year. Significant budget increases, approaching R90-million a year, which began in 2017/18 are explained by the need for government to fund the operations of the PASA – the regulator of the oil and gas sector – after its reserves of funding were exhausted. Transfers to PASA from the budget of the DMR are R50-m less than the R150-m per year previously anticipated in the MTEF, following Cabinet-approved deductions.

 

Mineral Regulation: Over the medium term, to 2020/21, compensation of employees will grow by 6.7 per cent on average each year. This needs to be compared against the 6.3 per cent, provision for the growth in goods and services. The number of employees is set to fall from 386 to 361 in 2018/19, a level that will be maintained in the MTEF period. (The number of employees for Mineral Regulation was previously planned to rise to 415 by 2018/19).

 

Despite the declared intention of the DMR to “protect and enhance our environmental assets” and to ensure compliance with environmental legislation, the Department has reduced the number of environmental verification inspections in its performance targets. In 2015/16, the annual number was reduced by a quarter, to its present level of 1,275 from 1,700. This target was itself reduced from 1,856 in 2014/15. The reduction in the performance measure was said to be due to the “budgetary constraints”. The DMR became fully responsible to implement national environmental standards in the mining sector from December 2014.

 

4.1.4Programme 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: Programme 4 - Mineral Policy and Promotion

Sub-Programme	Budget		Nominal Increase / Decrease in 2018/19	Real Increase / Decrease in 2018/19	Real Percent change in 2018/19 R million
R million	2017/18	2018/19
Management	31.5	22.3	-  9.2	-29.19 per cent	-32.88 per cent
Mineral Policy	20.0	20.0	0.0	0.11 per cent	-5.11 per cent
Mineral Promotion and International Coordination	47.8	71.8	24.0	50.11 per cent	42.28 per cent
Assistance to Mines	0.0	5.9	5.9
Council for Geoscience	367.0	386.3	19.3	5.26 per cent	-0.22 per cent
Mintek	367.3	420.4	53.1	14.46 per cent	8.49 per cent
Economic Advisory Services	4.5	4.5	0.0	-0.24 per cent	-5.44 per cent
Mine Environmental Management	28.1	33.9	5.8	20.70 per cent	14.41 per cent
TOTAL	866.1	965.0	98.9	11.42 per cent	5.61 per cent

Source: National Treasury Vote 29: Mineral Resources 2018

 

Overall, there is a 5.6 per cent real increase in the budget allocation for Mineral Policy and Promotion in 2018/19, compared with the previous year.

 

Mineral Policy and Promotion: Over the medium term, to 2020/21, compensation of employees will grow by 6.4 per cent on average each year. This needs to be compared against the 1.0 per cent, provision for the growth in goods and services. The number of employees, which was previously planned to stay constant at 112 up to 2018/19, will now be reduced to 104, from the figure of 112 employees at the end of March 2018.

 

The largest operational budget changes for Mineral Policy and Promotion relate to the sub-programmes that deal with promotion and environmental management

 

A 50 per cent (R24-m) increase is proposed in the Mineral Promotion and International Coordination sub programme which “promotes mineral development and advises on trends in the mining industry to attract additional investment”. It produces “publications, participates in mining conferences, and supports the implementation of national mineral beneficiation initiatives.”  The 2018/19 increase come on top of the in 58 per cent (R28-m) annual increase that was effected in 2017/18. Expenditure will rise from R47.8-m in 2017/18 to R82-m by 2020/21.

 

A major increase in budgeted expenditure on Mine Environmental Management came into effect in 2016/17. This includes rehabilitation for derelict and ownerless mines and providing advice on mine closure. The amounts increased from less than R10-m before 2015/16 to almost R40-m up to 2020/21. It is noteworthy that this budgetary increase was accompanied by a reduction from 50 to 45 in the number of derelict and ownerless mines that will be rehabilitated every year.  The reduced target came into effect in 2016/17, just as expenditure expanded, and continues at this lower level through the MTEF period.

 

 

 

New support for CGS, but not for Mintek

 

Mineral Policy and Promotion is the largest programme of the DMR, absorbing 51 per cent of its budget. Some 85 per cent of the programme budget consists of transfers to Mintek and the CGS, two national science councils that are funded through Vote 29. The base allocation to Mintek will barely grow in absolute terms over the next three years. On the other hand, the base allocation to CGS for operational expenditure will grow substantially – from R332-million in 2017/18 to R481-m in 2020/21.  Once off payments will be made to both entities in 2018/19 under the economic competitiveness and support package. Mintek will receive R70-m (for equipment and facilities; research and development; efficiency projects) and CGS will receive R90m (for digital information system; buildings; equipment and facilities). This is in addition to standing annual contributions to capital spending of about R60-m a year for Mintek and R40-m a year for CGS.

 

Information in the electronic publications on Vote 29 state that Cabinet has approved additional allocations for CGS of “R188 million in 2019/20 and R198.3 million in 2020/21 through the economic competitiveness and support package for improvements to the Council’s digital information systems, geoscientific equipment and infrastructure; and to improve the quality of the council’s analytical and research work on concrete geopolymers, groundwater vulnerability, acid mine water, petro physical properties of rocks and soil, and whole rock geochemistry”. The council expects to increase the number of digital maps produced per year from 40 in 2017/18 to 150 in 2020/21, at an estimated cost of R386 million over the medium term.

 

Whether the scale of this welcome investment is large enough to make up for the neglect of the CGS in past budgets, and to drive forward support for prospecting and exploration, is not clear and merits further enquiry from CGS leadership.

 

1. Briefing by Auditor General of SA       

 

The Auditor General’s office presented an interim review of the final draft 2018-19 Annual Performance Plan (APP) for the Department of Mineral Resource. The applicable laws and regulations are used as the framework for managing programme performance information (FMPPI and the framework for strategic plans and annual performance plans (FSAPP), issued by the National Treasury and Treasury Regulations (TR), 2005 issued in terms of the Public Finance Management Act (PFMA).

 

The role of AGSA in the review of final draft 2018-19 APP:

 

• Understand the overall planning process, i.e. was the final draft APP (after DPME review) prepared in accordance with the FSPAPP and were planning timeframes adhered to?
• Assess the measurability and relevance (excl. consistency and presentation) of the indicators and targets planned for each selected programmes in the final draft APP (against the requirements of the FSPAPP and FMPPI)
•  Measurability: Performance measures/indicator are well defined and verifiable and targets are specific, measurable and time bound.
• Relevance: Performance measures/indicators relate logically and directly to an aspect of the department’s mandate and the realisation of strategic goals and objectives.

• Report findings to management with the expectation that the findings will be addressed. These finding will not have an impact on the 2017-18 audit conclusion

 

It was indicated that a good performance indicator should be well defined, verifiable and relevant

 

The AGSA has reviewed Mine Health and Safety, Mineral Regulation and Mineral Policy and Promotion programmes and made the following findings which were communicated to Management.

 

1. The following indicators/measures did not have technical indicator description (not include in Annexure E of the draft APP) (repeat finding)

• Programme 3: Mineral Regulation: Percentage adherence to prescribed timeframes and percentage of evaluated work programmes relative to rights issued considering the elements of sustainable development. In reporting to the status it was indicated that Management subsequently included the technical indicator description to the draft APP.

1. The following indicators/measures were included in Annexure E but not in Part B: Programme and sub programme plans of the APP.

• Programme 3: Mineral Regulation: Percentage of environmental authorisation granted within the prescribed timeframe and percentage of complaint renewed prospecting rights. It was reported that the Management subsequently removed the indicators/measures from Annexure E on the basis that they were erroneously included and that they were dropped from the APP at the strategic planning session held on 16 to 17 November 2017.

1. The titles of the following indicators/measures in Part B: Programme and sub programme plans of the APP is not consistent with the titles in the Annexure E: Technical measure description

• Programme 3: Mineral Regulation: Percentage of approved SLPs published and number of mine environmental management tools developed. It was reported that Management subsequently updated Annexure E and made the indicator/measure titles consistent with Part B of the APP

1. The following findings relate to the accuracy of the method of calculation/analysis in Annexure E:

 

4.1  The method of analysis (calculation) documented in the technical measure description (Annexure E) for the following indicators/measures is incorrect:

 

No.	Measure	Method of Analysis
Programme 2: Mine Health and Safety
1.	Percentage of Administration of Government Certificate of Competency (GCC) exams policy	(Number of procedures in the model not properly implemented divided by the total number of procedures in the model for Certificate of Competency )x100
2..	Percentage Adherence to existing SLAs	Number of Agreement not properly implemented divided by the total number Agreements entered into ) x100

 

1. The method of calculation in the technical measure description (Annexure E) for the following indicators/measures has been documented incorrectly. The correct calculation should be the number of complaints attended divided by total number of complaints received x 100

 

 

 

No	Measure	Method of Calculating
Programme 3: Mineral Regulation
1.	Percentage of complaints received versus inspected.	Number of complaints received divide by number of complaints attended to x 100
2.	Percentage Adherence to existing SLAs	Number of Agreement not properly implemented divided by the total number Agreements entered into ) x100

 

4.3   The method of calculation in the technical measure descriptions (Annexure E) for the following indicator/measure includes subtracting the total number of complaints referred/closed, which is not related to the measure title:

 

 

 

 

No.	Measure	Method of calculating
Programme 3: Mineral Regulation
1.	Percentage of statutory notices/orders issued to remedy inadequate financial provision	Total number of inspection conducted divide by a number of statutory notices and directives issued minus the total number of complaints referred/closed x 100

 

It was reported that Management subsequently corrected the method of calculation in the draft APP.

 

1. The means of verification for the following indicators was not specific:

 

1. The means of verification in the technical measure description (Annexure E) for the following indicators/measures has been stated as reports. The measure definition does not indicate which reports are being referred to: therefore, the measure is not specific:

 

No.	Measure title	Means of verification
Programme 4: Mineral Policy and Promotion
1.	Number of Mine Environmental Management too developed	Reports

 

1. The means of verification in the technical measure description (Annexure E) for the following indicators/measures has been stated as reports. As the measure is referring to development of Minerals and Petroleum Investment Promotion Strategy, the means of verifications should be a strategy documents or similar

 

No.	Measure title	Means of verification
Programme 4: Mineral Policy and Promotion
1.	Development of Minerals and Petroleum Investment Promotion Strategy	Reports

 

It was reported that Management subsequently updated the means of verification to be specific and relevant to the indicator/measure.

 

1. The means of verification in the technical measure description (Annexure E) for the following indicators/measure has been stated as either a list or reports. A list of number inspections conducted or a list of number of audits conducted cannot serve as primary source data. The list (which is a secondary source) should rather accompany the reports which are the primary source (list of inspections and inspection reports):

 

No.	Measure title	Means of verification
Programme 2: Mine Health and Safety
1.	Number of inspections conducted	List of number of inspections conducted per region or inspections report
2.	Number of audits conducted, individual audits included	List of number of audits conducted per regions or Audit reports

It was reported that Management subsequently updated the means of verification to make it specific and to ensure that it refers to primary source data.

 

These are the key considerations when AGSA was reviewing the APP

• Is there a clear link between a strategic objectives and each programme
• Logical link between mandate/legislation/strategic objectives actions and the indicators and targets?
• Does APP include all indicators (incl. MTSF) relating to core function arising from mandate?
• Are performance targets specified for each performance indicator?
• Quarterly targets included for indicators that need to be reported quarterly?
• Is each performance indicator well defined, verifiable and relevant?
• Is there a technical indicator description for each indicator?
• Is each performance target specific, measurable and time bound?
• Clear and reliable baseline information used for each target? Overall alignment between the budget and APP evident and clear?

 

1. Briefing by Researcher

 

The Researcher, Dr. Nicol presented the 2018/19 Annual Performance Plan of the Department of Mineral Resources. The reference points were DMR APP, DMR strategic plan 2014/19, 2018 budget book from the National Treasury, Portfolio Committee on Mineral Resources BRRR 2017. The contents included the BRRR 2017 and the APP and Budget 2018, progress with legislation and policy, performance issues in the budget and contributions to national revenue from mining as shown in the budget review.

 

Dr. Nicol highlighted the recommendations which the National Treasury and the Department did not act upon in the BRRR 2017. The Committee recommended that substantial investment in the Council for Geoscience mapping and research programmes. (extra 386.3 granted, about 1/3 of CGS request). But Treasury did respond to the BRRR, in a document tabled on 05 April 2018 where it indicated that the Council for Geoscience received an allocation of R1.3 billion over the 2018 MTEF (259.3 million in 2018/19, R494.7 million in 2019/20 and R521.9million in 20/21) mainly towards the operations of the entity. Cabinet has approved an additional allocation of R90 million through the Economic Competitiveness and support package in 2018/19 for the council’s digital information system, building, equipment and facilities that are aimed at improving the services and quality of analytical and research work offered by the entity. Additionally, the department will be transferring R1 million in 2017/18, R1 million in 2018/19 and R1 million in 2019/20 through the Expanded Public Works Programme for the rehabilitation of derelict and ownerless mines.

 

The department did not act upon the following recommendations:

• ‘The development of an annual report for the new Environmental Mineral Resource Inspectorate (EMRI)
• Appropriate performance measures that reflect on the role of the SA Mineral Resource Administrative Database (SAMRAD).
• The finalisation and implementation of the Women in Mining Strategy.

 

Dr Nicol outlined the progress in implementing legislation and policy for mineral resources from October 2017 – March 2018. There has been a clear lack of progress in developing coal policy, beneficiation and consequences for mining due to the passing of Spatial Land Use Management Act (SPLUMA). Furthermore, two new bills which are amendments to Mine health and safety and Minco Bill to Parliament were promised to be tabled in 2017/18 and nothing is reflected in the 2018/19 APP regarding the above mentioned bills.

 

With regards to performance measures for the DMR, on the Administration programme, there were two measures revised and one dropped. On Promotion of Mine Safety and Health, one measure was added. On Mineral Policy and Promotion, one new measure, one superseded and several targets were adjusted.

 

Dr Nicol indicated that the number of mines rose by 8% but inspections fell by 16% which raises a big concern.  The target set in the DMR strategic Plan 2014/19 for number of Environmental Compliance Inspection vs number of mines was not met. The target was reduced by quarter in the APPs due to “cost constraints”.

 

Since July 2017, the DMR has tried to ensure that “100 per cent of approved Social and Labour Plans” are accessible to the public. Modalities are still being attended to. The following errors and inconsistencies in the 2018/19 APPs of the DMR entities and the 2018 ENE were noted. The Coal policy, due for completion in 2015/16 was deferred to 2016/17 and is still not published. Unachieved performance targets in one year are regularly dropped from inclusion in the next. Once a target is set, it should not be retired – or delayed without a full explanation.

 

The DMR has convinced the Committee (but not Treasury) that it is underfunded in at least three respects:

• Council for Geosciences (mandate under the Act and R20 billion needed for mapping)
• Environmental inspectorate (new responsibilities have not come with adequate resources) (9% increase in the number of operating mines since 2014 – 1637 t 1786
• SAMRAD (the DMR lacks the funds for a world class database on the identity of right holders and where rights have been granted.

 

This expenditure is needed because of the role of the DMR as the custodian of the mineral wealth.

 

1. Departmental Strategic and Annual Performance Plan 2017/18

 

The DG, Adv. T Mokoena tendered apology for the Minister and the Deputy Minister. He gave a presentation outline

 

The DG presented the department structure overview. He outlined the APP and applicable principles as follows:

 

• Management Involvement – APP was developed by management of the department under the guidance of the Executive Authority.
• Realistic Targeting – the adopted performance targets accurately reflect what the DMR will endeavour to achieve given the available human and financial resource and the prevailing operating conditions.
• Alignment – the APP remains in line with the tabled 2014-2019 Strategic Plan
• National Outcomes- the department continue to aim to achieve its strategic objective that are aligned to the National Outcomes.
• Strategic Goals – the department continue to aim to achieve its strategic goals:
•  
•  
•  
•  
• Focused and Consistent strategy aimed at delivering organisational Vision and Mandate

 

The DG indicated that the department followed a roadmap towards delivering a quality assured 2018/19 Annual Performance Plan. The APP first draft was submitted to the DPME by 31 August 2017. The second draft was submitted to the DMR Internal Audit and DPME again on 30 November 2017. Then submitted to Auditor General for review on 31 January 2018. On 28 February 2018, DMR management team had engagement with both DPME/AG to facilitate input on the final draft. The draft APP was then tabled to Parliament on 08 March 2018.

 

The DG reported the following milestones that have been achieved post the tabling of the 2018/19 Annual Performance Plan

 

• Mining Charter Engagement with Social Partners (17-18 March 2018)
• Ongoing Mining Charter consultations with relevant stakeholders
• Artisanal and Small Scale Mining Bill in research phase

 

The DG reported on the audited Performance Overview, where the department received a clean audit report.

 

 

The 2018/19 situational 2018/19 analysis was presented as follows:

 

Performance Delivery Environment	Organizational Environment
Global Growth is firming as per the June 2017 Global Economic Prospects released by the World Bank	The department has embarked on a restructuring process which also involve business process mapping exercise
Government 14-Point plan aimed at invigorating the economy has mining as one of the key pillars	There will be effort with speed to recruit, develop and retain qualified and diverse workforce
Fixed Capital Formation in mining has been on the increase under MPRDAA, from R18 billion 2004 to R93 billion in 2016 (Source: SA ResBank)	Budget cuts have negatively impacted on operations and in response the DMR will be re-organising and multi-skilling staff and job rotating
GDP contribution was 7.9 % in 2016, a slight decrease from 8% in 2015	Regulatory uncertainty – Finalisation of MPRD Amendment  and review of Mining Charter
Mining Fatalities, Injuries and Occupational Disease on a downward trend	Illegal Mining – fast track the rehabilitation of D&O mines and ensure that these sites don’t become prone to illegal mining activities
Focus on transparent administration aimed at empowering historically disadvantaged South Africans and especially women in terms of the MPRDA
Revitalisation of Distressed Mining Communities and Labour sending areas aimed at addressing social economic challenges in mining districts
STRATEGIC GOALS
Increased investment in the mineral, mining and petroleum sectors Transformed minerals sector Equitable and sustainable benefit from mineral resources Efficient, effective and development- oriented Department

 

The DG outlined the expenditure trends. He gave an opportunity to the DDGs to present their programs which the researcher has alluded to in his analysis.

 

The DG assured the committee of the 2018/19 APP responsiveness to 2018 SONA. He indicated that the department has since ensured that the approved and tabled 2018/19 Annual Performance Plan brings to life the commitments of the State President as outlined below:

 

1. Resolve the Mining Charter impasse

• On the 17 and 18th march 2018, the Minister met with representatives of organised business and organised labour and engaged on finalisation of the Mining Charter (2017) issues of growth and competitiveness of the industry. Two task teams were established, one to engage on the Mining Charter and transformation issues, and the other one to engage on growth and competitiveness of the industry. The department was currently in engagement with communities and other relevant stakeholders
• The department has started engaging meaningfully with all mining industry stakeholders to find progressive solutions as mining is the bedrock for the South African Economy which can contribute towards Transformation, Job creation, Economic Growth
• The department will continue to support the implementation of the Framework Agreement for a sustainable mining industry
• Transformation remain central to a drive towards the programme of empowering historically disadvantaged South Africans, in a quest to normalise society, implementation of the mining charter was a necessary tool to transform the industry
• They department has already started with consultation with communities and stakeholders in the mining industry and conducting industry workshops across the country aimed at finalising the Mining Charter.
• The MPRDA is reported to be currently undergoing a Parliament process and the department remained committed in the provision of support to ensure finalisation of the MPRD Amendment Bill during 2018/19 financial year.

 

1. Contribute to Economic Growth through Mining

• The Mining Charter will make provision for contribution and support for the development of SMMEs including the development of women owned SMMEs; employment equity and transformation targets
• The department assured that the review process takes into account the delicate balance between business interests, community and labour interest.

 

 

 

1. Promote Mining Investment in South Africa

Mining Licence Applications

The DMR will continue to:

• Ensure that there is strict adherence to applications processing turnaround times
• Accelerate processing of section 11 and 102 applications thus attracting new investment and creating jobs
• Facilitate diamond trade, issue licenses to enable diamond and precious metals trade through the SADPMR

 

MAPPING

The department will be implementing an integrated multidisciplinary Geoscience Mapping Programme aimed at generating information intended to secure sector growth through exploration and targeting new job creating investments. The programme will be covering the following themes:

• Minerals and Energy resources
• Geohazards (e.g. Mine Seismicity)
• Environment (Legacy, air, surface and ground water and regolith)

 

Diamond Industry

• Through the State Diamond Trader (SDT), the department will be increasing security of supply of suitable rough diamonds to clients for beneficiation
• The SDT will be investigating other forms of funding aimed at supporting its mandate of making rough diamonds available to a broader client base
• Attraction of new entrants to the beneficiation of rough diamond for non-jewellery applications
• The SDT will work with the Gauteng Industrial Development Zone (GIDZ) and SEDA Platinum incubator to setup an “Equipment Hub” aimed at supporting new entrants to the industry with access to infrastructure

 

 

 

Alternative Applications

 

                  The DMR will through Mintek ensure that it promotes alternative mineral beneficiation
                   projects like:

• PGM catalyst to be used in the hydrogen fuel
• Metal – based HIV diagnostics test kits
• Allow development for jewellery application and prevention of corrosion

 

1. Promote Sustainable Mining

 

The DMR will continue to ensure sustainable mining through:

 

• Ensuring that there is development of technologies aimed at improving mining efficiency and processes through research work at Mintek. During the upcoming year focus will be on provision of Gold, PGM and Base Metal Expertise, water efficient Mineral processes, Mine Site Rehabilitation, Mine Dumps treatment, underground ore processing, solid waste treatment and metal recovery and mine affected effluent treatment
• The department has already begun the work of reviving social dialogues in the sector and committed to continued engagement of social partners
• Two work streams have been established with government, organised labour and organised business focusing on Transformation and investment and growth

 

1. Continue to transform the mining Industry through transparent implementation of legislation (MPRDA)
2.  

• Through the SDT, the department will ensure that new entities venture into new beneficiation channels like non-jewellery beneficiation of rough diamonds thus resulting in sector transformation
• The SDT will work with the Gauteng Industrial Development Zone (GIDZ) and SEDA platinum incubator to set-up an Equipment Hub” aimed at supporting new entrants to the industry with access to infrastructure and beneficiation critical equipment
• Through Mintek, the department will promote the mineral-based economies of rural and marginalised communities through technical assistance and skills development. The training projects will include: Small Scale Mining, Glass and Waste recycling and Reprocessing, Jewellery design and Manufacturing Potter Design and Manufacturing
• Through Mintek, the department will conduct training of young black female engineers and scientist.
• Hosting of Mining Industry workshops at Mintek
• Host the DST non-aligned and other countries training programme

 

Compliance

 

• Through the SADPMR, improve participation of the historically disadvantaged individuals by training, conduct inspections and audits to verify transformation commitment of licenses as per Broad Based Socio Economic Empowerment Charter.

 

1. Promote Health and Safety across mining sector

 

• With regards to health and safety, there has been meetings with the CEOs of poor performing mining companies
• Ensure that fatalities and injuries are reduced by 20% per annum
• MHSI branch to conduct a total of 396 planned audits
• MHSI branch to conduct a total of 8 000 planned inspections
• Convene 40 regional Tripartite Forums (RFT)
• Convene a Health and Safety Summit during November 2018.

 

8.    Briefing by Mine Health and Safety Council (MHSC)

 

The Acting Chairperson of the board, Mr M Zondi welcomed and opportunity to present and introduced his team. Mr T Dube, the CEO outlined the contents of the presentation, which were MHSC history and Journey to Zero Harm, MHSC Alignment to National Initiatives, MHSC Mandate, Vision, Mission and Goals, MHSC Operating Structure, MHSC Strategic Objectives and Summit Milestones, Approved Budget and Conclusion.

Mr Dube outlined the MHSC alignment with National Initiatives which are the National Development Plan (Chapter 9, 10 and 13) and State of the Nation Address (SONA) and the Nine Point Plan to Ignite Economic Growth.

With regards to elimination of fatalities and Injuries, it was indicated that every mining company must have a target of Zero Fatalities. Up to December 2016, the target was a 20% reduction in Serious Injuries per year. From January 2017, there was a target of 20% reduction in Lost Time Injuries (LTI) per year. With regards to elimination of noise induced hearing loss, it was indicated that by December 2024, the total operational or process noise emitted by any equipment must not exceed a sound pressure level of 107 dB (A). With regards to Standard Threshold Shift (STS) for individuals, it was indicated that by December 2016, no employee’s (STS) will exceed 25dB from the baseline.

With regards to elimination of lung diseases, by 2024, 95% of Exposure Measurement Results will be below milestone levels of coal dust, crystalline silica and platinum respirable particulate dust. Using present diagnostic techniques, no new cases of occupational diseases: silicosis and pneumoconiosis will be reported. The “Guideline for the compilation of a mandatory code of practice for an occupational health programme on persona exposure to airborne pollutants ‘has been promulgated. Awareness workshops to assist the industry on the requirements of the Guideline will be completed by the end of the 2nd quarter of 2018/19 financial year.

Mr Dube reported that MHSC has completed the integration and simplifying of the compensation system and rehabilitation of mine workers injured on duty.

With regards to reduction and prevention of TB, HIV and AIDS, it was reported that there has been a roll- out of the “Guideline for the compilation of a mandatory code of practice fo the implementation of the integrated policy on HIV/AIDS, TB and Occupational lung diseases”.  The guideline seeks to enable the employer at every mine to compile a COP that would assist the employer to manage HIV, TB and Occupational Lung Diseases within the mine workplace. Implementation of Memorandum of Understanding with the Chamber of Mines on adoption of the Masoyise iTB and MHSC leading to improved awareness and outcomes in B and HIV management.  Other collaborations include: DoH (Department of Health), SABCOHA (South African Business Coalition on Health and Aids), FPD (Foundation for Professional Development), Aurum local community organisations and government etc.

The aim of promotional campaign in 2018/19 was to encourage employees and communities to know their TB, HIV and other lifestyle diseases for better management and care. The guidelines for Tuberculosis Preventive Therapy among people living with HIV an Silicosis in South African (IPT Policy and DOH ART Guideline to be promoted at forums such as AIDS Conferences, RFT meeting and events such as World TB Day.

With regards to the culture transformation framework (CTF) promoted by the Council, it was indicated that by December 2020 there will be 100% implementation of the six pillars. During the Summit held on the 17 - 18 November 2016, stakeholders recommitted themselves to the agreed 2014 milestones and further committed to the implementation of the following initiatives:

• Promotion of Tripartite Visible Felt Leadership
• Mining Principals Engagement/Meetings
• Improvements Communications
• Addressing Trust Deficit
• Supervisor and Employee Empowerment and
• Annual Mining Companies Health and Safety Days.

Mr Dube outlined the special MHSC projects as follows:

• Women in Mining (WIM)-  campaigns to promote awareness on OHS and security issues relating WIM are being undertaken across the county through the Regional Tripartite Forums (RFTs) across the country.
• Dissemination of booklets, guidelines and promotion material on PPE for WIM and material for the prevention of sexual harassment
• Men pledging to end sexual harassment against WIM
• The development of an illustrative handbook to create awareness on Health, Safety and Security challenges impacting WIM in the SAMI is envisaged to be completed in the first quarter of the 2018/19 financial year
• A WIM workshop is scheduled to take place in Gauteng in the 2nd quarter of the 2018/19 financial year.

Mr Dube reported that MHSC and MOSH Learning Hub (an initiative of the Chamber of Mines) has signed an MOU and an implementation plan that is aimed at promoting and strengthening collaboration in the identification, dissemination, adoption and promotion of leading or best practices following areas:

• Elimination of falls of ground accidents
• Elimination of transport and machinery accidents
• Elimination of occupation lung diseases
• Elimination of noise induced hearing loss
• Promote the implementation of the CTF focussing on human factors, organisational factors, leadership, communication etc.
• Eliminate other OHS (Occupational Health and Safety) risks in the SA mining industry.

The CFO presented the approved budget overview for 2018/19. The income received amounted to R 124 883 810 (mainly from levies from mines, the DMR contributes R4 803.00-million annually from its budget). The CFO indicated that the majority of Expenditure related to Centre for Excellent OHS research. There was no surplus recorded for 2018/19. The CFO outlined the use of Surplus Funding as follows:

• Surplus funds expected to be depleted by 2021
• Based on approved medium term budget (2019-2021)
• Surplus Funds to be utilised as follows:

 

Acquisition of MHSC Building and Research laboratory
Centre of Excellence – Mine Occupational Health and Safety Research Projects	R7 m
Upgrading of Mine Occupational Health and Safety Research Facilities
The expansion of the South African nation Seismograph Network (SANSN) into the Bushveld Complex

 

Mr Dube concluded that it is important that all stakeholders continue to live the theme “every mine worker returns from work unharmed every day, striving for Zero Harm”. Increased participation of tripartite forums, professional mining associations, mining companies and other stakeholders is paramount. Commitment of all stakeholders is critical to ensure that MHSC strategic objectives including 2014 milestones are achieved, including the 2016 Summit pledge.

 

1. Briefing by Council for Geoscience (CGS)

 

The Chairperson of the Board (CGS) Dr. M H Mathe opened the presentation by introducing his team and four PhD graduates, who have been funded the Council, he further informed the Committee about the success of the entity in drilling boreholes, (165 metres underground) that produces three million litres of water per month in Beaufort West, in February 2018 which went a long way in addressing water shortage in the area. The Committee was reminded that the CGS has consistently obtained unqualified audit for the past 16 years, furthermore the Council was encouraged by the recovery of the mineral prices, as this will assist the entity to intensify its multidisciplinary approach to its geological mapping programme, while at the same time contributing to diversifying the energy mix of the country.

 

The Chairperson further committed the Board to the following initiatives:

• Investigating shale gas and geothermal technology
• Applying artificial intelligence principles to geological science problems
• Pursue geo-environmental studies and assess uranium deposits
• Upgrading of laboratory services
• Pursue collaborative partnerships

 

The CEO, Mr. M Mabuza introduced the mission and vision of the entity and proceeded to emphasize that it is important to always align the vision of the entity with National imperatives, namely the National Development Plan (NDP) and the Medium Term Strategic Framework (MTSF). The Committee was informed about the Geoscience Mapping programme, which aims to map the country at a scale of 1:50 000. Noting that countries (Australia, Canada and Namibia), that have been successful in mapping their countries to the equivalent level of resolution, account for about 40% of exploration activity.

 

Mr Mabuza also informed the Committee that the Council is also targeting poverty nodes around the country with an aim of transforming such areas using geo-physical solutions. Furthermore, the Department of Science and Technology will second a PhD graduate to assist the CGS in applying artificial intelligence to geoscience solutions

The following two programmes were presented to the Committee:

Carbon Capture storage, focusing on the Zululand basin which has a potential of storing carbon

Preliminary geothermal map of the country

 

The CFO presented the finances by outlining the budget for 2017/18 – 2020/21. He presented the revenue analysis and expenditure for 2017/18 to 2020/21.

 

CGS has faced the following funding challenges:

• Additional requisite funding of R20 billion is sought for the multi-disciplinary and integrated mapping programme
• An amount of R1.82 billion was requested for the MTEF period 2018/19 -2020/21
• A total of R386m is allocated for the MTEF period
• It is difficult to plan, employ the requisite capacity and deliver expediently when funding is not guaranteed

 

With regards to financial outlook, it was reported that:

• Liquidity Ratio is 2:1. This means that the CGS is able to meet its financial obligations
• A steady balance sheet position is maintained with total assets of R613m
• Income generation expected to be R414m. This includes baseline Allocation, Ring-fenced MTEF projects and Revenue from collaborations
• The CGS has over 15 years consistently been obtaining unqualified audit opinions from the AG and it is now aiming to obtain clean audit opinion hence forth
• The CGS is in good financial standing in the short term
• Ring-fenced funding is short- term and does not allow for permanent appointment of personnel
• An amount of R386 million has been allocated for the new MTEF project from 2019/20 to 2020/21 which does not form part of the baseline
• An increase in the baseline allocation is required in order to plans for the long term

1. Briefing by Mintek

Ms K McClain, the Board Member introduced her delegation, and brought to the attention of the Committee the fact that Mintek has recently won two awards (Best public sector company and Best Community Empowerment programs), she handed over to the Acting Chief Executive Officer (CEO)

 

The Acting CEO, Mr D Msiza proceeded to present strategy 2030, adding that it is also aligned to the NDP, State of the Nation Address and the DMR strategic plan. The strategy has four key pillars namely

• Beneficiation
• Re-innovation
• Transformation
• Business Strategy

Mr Msiza expressed relief that mineral prices are stabilizing; it was becoming clear that the industry is emerging from the downturn. This will assist the entity to better finance its scope of work, which entails mining, processing, refining and manufacturing. Mr Msiza reported that about 1060 projects were underway in 2017, this bold well for Mintek whose commercial income is a function of exploration pipeline activity. The CEO stressed that better economic prospects does not imply that state funded work will be ignored as it forms a core part of the entity’s mandate.

 

Work is being pursued with respect to catalysis, technology metals, water and mine affluent processing, waste and tailings treatment. Furthermore, work on Platinum Group Metals (PGM)will focus on fuel extending cells as opposed to auto catalyst technology. Furthermore, the entity will continue to market its services extensively through engaging other stakeholders, and maintaining presence in investment, technology and commodity conferences.

 

With regards to Skills Development Programmes, Mintek plan to fund 60 under and post graduates’ students from 2018/19 to 2020/21 financial year.  Regarding other educational initiatives, the entity plans to train 120, 140 and 140 students during 2018/19, 2019/20 and 2020/21 financial year respectively, on work integrated learning, artisan programme and community training.

 

Key Interventions for 2018/19

The following three key interventions were identified for the current financial year

• Inculcating a culture of innovation
• Increasing woman representation
• Form industry partnerships to improve mining experience

 

Financial Plan

 

The Chief Financial Officer presented the financial plan of the entity, starting by the statement of financial position, current assets were valued at R 503 million while current liabilities were equal to R 301 million resulting in a net worth of R 202 million. The state grant to the entity excluding VAT for the medium term will be equal R 420,3 million in the current financial year falling to R 369, 9 million in 2019/20 and rising again to reach R 390,3 in 2020/21 financial year. The CFO explained that commercial revenue of the entity has been experiencing steep decline as a result of slow economic activity which has been prevalent, in the local and global economy

 

1. South African Diamond and Precious Metals Regulator (SADPMR)

 

The Chairperson of the Board, Mr Ngqeza introduced his team and indicated the Acting CEO will lead the presentation. Mr. Mbonambi introduced the mandate and the organizational structure of the regulator, which entail trade facilitation, Kimberly Process (KP) implementation, precious metals regulation and the enforcement of section 100 of the MPRDA to ensure transformation of the industry.

 

The SADPMR has a staff complement of 119 (70 females and 49 male) of which 109 are Africans. In presenting the Annual Performance Plan, the CEO listed 5 strategic objectives of the entity which entails;

• Improving competitiveness and job creation in the diamond and precious metals industry
• Transforming the diamond and precious metals sector
• Promoting equitable access to resources for local beneficiation
• Enforcing compliance with the legislative requirements
• Improving organizational capacity for maximum execution

Mr. Mbonambi proceeded to demonstrate how the above strategic objectives are linked to the National Development Plan and NDP focus areas. A reservation was expressed by the CEO on the exemptions in terms of section 74 of the Diamond Act of 1986, as it tends to limit the quantity and quality of diamonds that are available to local diamond beneficiators

 

Financial Plan

 

The Chief Financial Officer presented the financial plan of the entity, transfer payments to the entity were R 59,1, R 62,4 and R 65,8 million for the 2018/19, 2019/20 and 2010/21 financial year respectively. The above transfers will result in surplus of R 3, R 3,2 and R 3,4 million for the corresponding period after the respective expenditure has been incurred.

 

1.  Briefing by State Diamond Trader (SDT)

 

The Board member of the SDT tendered an apology for the Chairperson who could not attend due to other engagements. He handed over to the new CEO, Mr S Mnguni who presented 2018/19 APP and Budget for SDT. In his introductory remarks he said during the review of the strategic environment for 2018/19 and beyond, the board of the SDT made the following observation and challenges to its mandate:

• The conceptualisation of the SDT was premised on the assumption that all rough diamond produced in South Africa can be economically cut and polished locally resulting in the inaccurate conclusions in relation to the funding of the entity and its ability to grow local diamond beneficiation’
• An analysis of rough diamonds purchased in an eighteen (18) months cycle found that only 15% purchased by the entity were desired by clients.

 

The CFO presented the budget of the SDT for 2018/19. The projected sales for the year are recorded at R751 378 905. The Cost of Goods sold were recorded at R720 891 131. The Gross Profit was recorded at R30 487 774. The Earnings before Interest and Tax (EBIT) are projected at R1 152 596 this is after covering the overheads of approximately R29 335 178.

13.   Observations

 

The Committee following its deliberations noted the following concerns: 

 

• The delays to fast-track legislation continue to have a negative impact on the investment climate for mining in South Africa.
• The organograms of many of the entities reflect a lack of demographic representation in senior management. The Committee appreciates the conscious and planned efforts of entities like Mintek and CGS to train new technically-skilled executives from within and to develop previously disadvantaged groups across the employment spectrum.
• As per the findings of the Auditor General, the Committee notes that the DMR performs a great deal better than many other government departments and that its entities are responsible and well-managed. 
• The financial and operating model of the State Diamond Trader is increasingly becoming more unsustainable, as evidenced by the increasing reliance on debt finance, this continue to present a growing financial risk to the entity.
• A number of acting positions within the DMR as well as entities continue to pose stability risk to the department’s ability to effectively fulfil its mandate.
• Clear challenges confront the Mineral Resources Portfolio because of inadequate budget allocations. The Committee require details on what is not being done because of budget limitations and what are corresponding implications for service delivery.
• There is a lack of information on the level of skills available to the mine health and safety inspectorate and whether these are adequate for a wide range of geological and technological challenges associated with mining.
• The DMR should ensure that Social and Labour Plans are published, so as to ensure transparency and easy access for communities to the commitments of respective mining companies.
• Exemptions with regard to section 74 of the Diamond Act (1986) continue to pose challenges to the SADPMR in discharging its transformational mandate
• There is a risk of mandate creep in the SADPMR, which will make it difficult to distinguish the functions of the entity to those of the State Diamond Trader
• Despite improved funding for the CGS, the ratio of baseline to MTEF funding continue to be unfavourable, this will result in the entity losing scientist which it has spent considerable resources training and mentoring, due to its inability to offer job security (long vs short term contracts for PhD graduates)

 

14.        Recommendations

 

Having considered the Strategic Plan, Annual Performance Plans and budget for the Department of Mineral Resources and its entities, the Committee recommends as follows:

 

• DMR should present to the Committee strategies which are outstanding from previous financial year’s commitments namely; Woman in Mining and Coal Strategy etc.
• The DMR should present a plan to the Committee clearly demonstrating how it is going to address the backlog on the MTSF goal of rehabilitation of ownerless and derelict mines.
• The DMR should report to the Committee on their mineral beneficiation strategy and its coordination with other relevant departments, entities and agencies.
• The DMR should present to the Committee the list of all Bills in the pipeline with corresponding timelines to table such Bills in Parliament
• The Minister should revise the APP to formally incorporate key initiatives that are presently excluded, such as Mining Phakisa, Artisanal Mining and Small-Scale Mining Bill and the Vision 2030 mining growth strategy.
• The DMR should provide full information on the training undertaken for its staff with relevant positions as well as respective gender profiles.
• The SDT should conclude a comprehensive (fully costed) financial and operational model review, to come up with a sustainable model that will eliminate reliance on debt financing and applicable proposals to address legislative defects.
• The DMR to communicate and commit to a timeline to substantially reduce acting positions within the department and entities, in order to enhance stability in the organization
• SADPMR to submit concrete proposals to the Committee on the required corrective legislative measures pertaining to Section 74 of the Diamond Act
• SADPMR to take measures that ensure its mandate continue to deal with the regulation of all precious metals, and position itself in a manner that distinguishes it from the SDT.
• The CGS to craft a long term human resource retention strategy, which will ensure that the institution does not lose valuable intellectual capital, necessary for the fulfilment of its mandate

 

15.        Conclusion

 

The Committee thanks the Department and the entities for the in-depth discussions on their Annual Performance Plans and Budget for 2018/19 financial year.

 

 

 

Report to be considered.

 

 

 

 

 

 

 

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