Status of Mining Rehabilitation Fund; Cadastral system and licensing backlog; Regional Offices Investigation; with Minister

Meeting report

Mr J Lorimer (DA) referred to the investigation by the Department of Mineral Resources and Energy (DMRE) into the backlog of licensing applications. As the Committee had an oversight role, the failure of the Department to supply the internal reports was unacceptable. He called for an explanation for the failure to provide the report.

Mr Gwede Mantashe, Minister of Mineral Resources and Energy, responded that there might be a need for a discussion on the separation of powers, and what that meant in practical terms. He was okay with the fact that Mr Lorimer did not accept the reasons that had been given.

The Chairperson sought to clarify the issue, saying that he understood the Minister's explanation to be that the Department conducted the investigation to prove performance as far as the licensing backlog application was concerned. Therefore the report -- or part of it -- would be contained in the presentation on the cadastral system. It was not necessarily a report that was done for purposes of prosecution.

DRME presentation on Mining Rehabilitation Fund

Adv Mmadikeledi Malebe, Deputy Director-General (DDG): Mineral Regulation, DMRE, said that prior to 2014, there was a parallel allocation process for mining-related activities under the Mineral and Petroleum Resources Development Act (MPRDA), the National Environment Management Act (NEMA) and the National Environment Management Waste Act (NEMWA). However, after 2014, the Ministers responsible for the DMRE and Forestry, Fisheries and Environment (DFFE) had agreed on one environmental system. As a result, all financial provisions were removed from the MPRDA and incorporated into NEMA and its regulations. Following the amendment, it was agreed that the Minister of the DFFE would set the regulation norms and standards, while the Minister of the DMRE would be responsible for licensing, compliance monitoring and enforcement.

In 2022, the DMRE, together with the DFFE, started strengthening the laws on environmental management, including the financial provisions for rehabilitation. As of July 2022, the regulations had been submitted for public consideration. One of the issues up for amendment at the moment was that no method was used to calculate the financial provision, as well as the percentage of the retention of the financial provision after all the rehabilitation was conducted as part of the amendment. The financial provision under NEMA required an applicant to comply with the prescribed financial provisions for the rehabilitation closure and ongoing post-decommission management of all negative environmental impacts before obtaining environmental authorisation relating to mining exploration or prospecting. If any holder of a mine fails to undertake rehabilitation, the Minister of Mineral Resources may, upon such written notice, use all or part of the financial provision contemplated under the Act to rehabilitate or manage the environmental impact in question. Every holder was required to assess their environmental liability annually, and submit the audit to the Minister, who may appoint an independent assessor if he felt the financial provision was inadequate. The financial provision would be maintained and retained even after issuance of the closure of the mine. This requirement was one of the provisions under amendment, as there was no scientific formula to determine what percentage the DMRE could keep for latent defects and any residual environmental impacts. The financial provisions for a mine’s rehabilitation did not form part of a company’s assets, and therefore could not form part of the insolvent estate.

Under the Companies Act, there was a provision for rescuing mining companies. The business rescue process was a necessary legislative mechanism to facilitate the rehabilitation of a mining company in financial distress. This could happen voluntarily through a board resolution, by a court order to begin such proceedings, or in the middle of liquidation proceedings being initiated. She explained that during business rescue proceedings, there could be no legal proceedings except with the written consent of the business rescue practitioner or the court, or through proceedings by a regulatory authority in the execution of its duties after written notification to the business rescue practitioner.

She said there were three ways an applicant or right holder may make financial provision. The first was through financial guarantee registered through a bank; secondly, through a cash deposit into an account administered by the Minister; and thirdly, through contributions to a trust fund that complied with the Income Tax Act.

The NEMWA placed the obligation on the applicant to ensure that a determination was made of the financial provision and that plans were submitted for consideration by the Minister for the Environment, for environmental authorisation. The financial provisions may not be deferred against the assets at the mine closure or mine infrastructure. As at November 2022, the financial provisions held in the form of cash was R3.1 billion, in the form of bank guarantees was R66.9 billion, and those in the trust fund totalled R24.5 billion. She reiterated that the Minister could grant environmental authorisation only after arrangements for financial provision and proof had been provided.

To ensure that right holders complied with the laws relating to financial provisions, the Department conducted compliance inspections and audits periodically to verify the adequacy of the financial provisions, which were revised annually. If the holder still fails to rectify the shortfalls identified, they may be liable for a fine not exceeding R10 million, or a prison term not exceeding ten years.

Adv Malebe added that when an applicant applied for the closure of a mine, the DMRE did a compliance inspection jointly with the DFFE. No refunds would be made to the right holders if they owed prospecting fees. The financial provision for the rehabilitation of mines was currently highly regulated to ensure that the state did not inherit a responsibility of rehabilitation when mines were prematurely decommissioned.

DRME presentation on Cadastral System

Ms Hilda Mhlongo, DDG: Corporate Services, DMRE, said that the South African Mineral Resources Administration Database (SAMRAD) was deployed on 18 April 2011 as a new capability to receive applications online so that there was a reduction in physical lodging of mining applications. The current system was divided into four components that included the portal, which was the public-facing system; the cadastral system, which was used by both the applicant and the internal staff; the Harrington Quality Management System (HQMS) workflow, which was an internal facing workflow used for adjudication; and the fourth was the payment gateway that handled collection application fees. The SAMRAD system was used, among others, for online lodging of applications, and the handling and uploading of documents.

She said that the Department went through a process of assessing and diagnosing the system to identify challenges. These included technical, support system and functionality challenges. Having identified them, the Department implemented certain measures to try to address them. The hosting problem had been incrementally corrected, but was not completed. The cadastral system was changed from Buffalo to ESRI mapping software. An integration programme was initiated to replace SAMRAD, and incorporated the MPRDA and other legislation that governed the mining space.

The programme was divided into three projects. The first was the process of remapping the enterprise architecture and governance which was completed; the second was the replacement of the SAMRAD system, which incorporated related statutes and integrated the entire DMR value chain and efficiencies; and the third was the replacement of the information communication (ICT) structure. Some of the measures put in place had proved ineffective in addressing the challenges, so the Department decided to partner with the State Information Technology Agency (SITA), which was mandated to procure certain IT products for government departments. The procurement process was conducted by SITA, who decided to do an audit during the course of the procurement. Based on the audit report findings SITA, after consulting with the Department, decided to cancel the procurement process. Since then, the Department has embarked on a benchmarking exercise to gather insight and learn from other countries that have implemented a similar system, like Namibia.

She said the Department was also running internal processes to ensure the procurement of the new system, including strengthening the capacity to implement the project through a dedicated project office with individuals who had the capacity to implement huge ICT projects. Therefore, they were seeking approval to appoint a contract ICT manager to oversee the project. They were also trying to ensure that by the time they deployed the new system, they had dealt with the backlogs, which they could report had been reduced by 43.5% to date. The Department was also in the process of developing the terms of reference for procuring the new system. It had set a target of the end of November to complete the specifications. It was also aiming to advertise the bid by 15 December. She confirmed that they would involve SITA to establish whether they were allowed to advertise the bid themselves, or whether SITA would advertise the bid and oversee the project.

Regarding the licensing backlogs, Ms Mhlongo said the Department had categorised the data in terms of mining and prospecting rights. In Mpumalanga, there were still 40 outstanding licensing applications and eight outstanding renewal rights.

Currently, the backlog stands at 2 625, which is a 43.5 % reduction from the previous backlog report

Mr Tseliso Maqubela, DDG: Minerals and Petroleum Regulation, DMRE, said that the Department had assessed what was causing the backlog, and had found two reasons. The issues were structural and cultural. The Department had found that the people processing licences were the same ones conducting compliance inspection, which was the structural issue. A measure to remedy the issue had been initiated. The cultural issue was mainly ensuring that everyone involved was doing the right thing, even when supervisors were not watching, and they were institutionalised certain routines in the organisation.

The challenge with Mpumalanga was that there were many licence applications for mining permits, which took a lot of time to process. Of the 200-odd licenses that the Department had processed in the last year and a half, 70% had resulted in refusals. Some of the challenges included the financial capacity of some applicants, or people applying where there was already an existing right. The 14-day turnaround for responding to applications remained a challenge for the Department, and it was an area that they were trying to focus on. He admitted that they were not on top of that issue, particularly in provinces where there were a lot of applications.

They had also introduced a measure whereby they send audit teams whenever they receive a complaint from members of the public. The audit committee was displeased with the Department, as it felt that they were overburdening the internal audit team, but they had no choice but to involve an independent structure of the organisation to make sure that people were doing the right thing all the time.

Discussion on Mineral Rehabilitation Fund

Ms P Madokwe (EFF) asked whether the Department had an updated database of licensed mines in relation to their contribution to the funds that was expected of them. If licence holders were defaulting, what was the percentage and what intervention was the Department implementing?

She asked what informed the statutory cap on the fines imposed on right holders in the event that they were found to have violated the statute, and what happened in the event that the damage done exceeded the amount of R10 million as a maximum amount. In terms of closure and the rehabilitation of mines, the biggest issue was mines that existed before the legislation which had no plan in place to deal with the requirements, due to budget constraints. She expected the report to speak to the plan to ensure the rehabilitation and closure of mines that were there before the legislation. There was a current challenge with illegal mining happening in mines that had been abandoned or were due for closure or rehabilitation, which the Department did not seem to have any plans to address.

On visiting Mpumalanga, the Committee noticed a huge illegal mining activity, which community members said they had reported earlier on. She questioned what the Department's role was in ensuring rehabilitation of the effects of illegal mining which had perhaps been reported earlier, but it had not acted on time, as communities were currently suffering.

Mr Lorimer referred to business rescue practitioners and their potential to hinder the enforcement of regulations. He asked how often business rescue practitioners had blocked the DRME from getting regulatory orders enforced. Had the DRME even had to get court orders to enforce regulations, and were there ways to streamline the process?

Mr V Malinga(ANC) asked how it was possible that a Department could require consent from a business rescue practitioner to get the financial provisions. She wondered how a court of law could force the practitioner to pay that financial provision. She did not see an indication from the presentation that illegal mining was happening in mines that were under care and maintenance

DMRE's response

Adv Malebe confirmed that the Department had a database that contained the names of the licensed mines and their owners, as well as the financial provision they had made. If there was no compliance, the Department would begin the process of compliance management so they could remedy the shortfall.

On the cap on fines of R10 million, the DFFE was responsible for regulation while the DRME implemented. The amount resulted from both departments negotiating and consulting widely after considering all the factors. Operating mines also conducted concurrent rehabilitation, which would reduce the amount of financial provision and liability.

She said old mines fell under the category of derelict and ownerless mines. There was currently a total of 6 000 that the Department was currently rehabilitating. The money coming from National Treasury was not enough to cover the liability, based on the data that the Department held. It was working with the National Treasury on increasing the allocation for the closure of old and derelict mines.

Regarding the illegal mining activity happening in Mpumalanga, she said they first tried to find the mine's original owner and check whether the activity being conducted fells under the listed activity in the area. If it did not, they would charge the owner with dereliction, and would implement the closure process for derelict and ownerless mines,

Adv Malebe said the DRME was yet to encounter a situation where the business rescue process hindered them from enforcing the financial provision requirement, necessitating going to court for orders. In most cases, the process resulted in the business being saved. However, if necessary, the Department would approach the courts for orders to allow them to obtain the financial provision from the business rescue practitioner. If such orders were obtained, the practitioner was required to abide by them.

On illegal mining happening at mines under care and maintenance, she said that such mines had to continue paying financial provisions because they had not applied for closure, or been granted closure.

Mr David Msiza, Acting Director-General, DMRE, said that their approach to derelict and ownerless mines was to first deal with those high-risk mines, and would work with other stakeholders to close those mines. The Department had also been promoting legitimate mining in ownerless and derelict mines by first informing people about the legal process of mining. They had also encouraged companies that had been mining to remove their dumps and outcrops. This was a collaborative effort, where they continued to work together with law enforcement agencies, the Department of Home Affairs (DHA), and other departments and stakeholders. Dealing with illegal mining was a continuous process.

Minister Mantashe said the Department did not have a plan for illegal mining. It could not plan for criminal activity, as this was not within the scope of the Department. What had been tabled before the Committee was that each year, the DMRE received about R140 million that covered about 40 holings per annum, and they were trying to stick to that as much as possible. Mines under care and maintenance were not derelict or ownerless mines, so a contribution to the financial provision fund was required.

The Chairperson commented that there were systems in place to rehabilitate mines. The only issue that may arise might be intervening in situations beyond the Department's responsibility, which lay with the legislative authorities.

Discussion on cadastral system

Mr Lorimer asked what data cleansing meant -- whether it referred to dealing with the double granting of rights, and whether any provinces had such issues regarding granting rights. Regarding the 43.5% of the licensing backlog that had been dealt with, he asked if there was a proper breakdown or approximate numbers of how many applications had been granted or refused. Were those companies still around to take up mining activities in cases where they had been granted?

Ms Madokwe said that the Department should realise that the issue of licences would always be a duty they would be seized with, and the challenges surrounding the cadastral system had been ongoing for years. The Department’s response to being questioned about the cadastral system had always been that they were working on it. She asked why the Department had not considered procuring the cadastral system internally, instead of outsourcing.

She asked what consequences outside of the culture shift and introducing monitoring tools the Department had put in place to deal with the licensing backlog. Had any of the employees implicated been subjected to disciplinary measures, including recouping the financial losses that might have occurred due to the employees' negligence? If employees' conduct was found to have involved some criminal or corrupt elements, had they been referred to the relevant state organs?

DMRE's response

Ms Mhlongo responded that the cadastral system could be procured internally, but unfortunately, there was the State Information Technology Agency Act, in terms of which SITA was mandated to procure certain services for government departments. Although SITA may procure certain services for them, some officials were seconded to work on the project alongside SITA, because they better understood the environment. There were certain ICT services whose procurement was dedicated to SITA, and what they looked at was the procurement price threshold. If the procurement exceeded a certain price threshold, it could not be procured by the Department and was therefore handled by SITA.

Mr Maqubela said the Department had sent teams from the head office to check whether the data was loaded onto SAMRAD, as there was a culture of not loading data. The team from headquarters had been assisting regional offices in loading data, particularly the coordinates and polygons, to ensure they were correct. They were 70% up to date and should be finished with the data loading before the end of the calendar year.

He said they had not done a complete breakdown of the backlog, but this could be provided. In the last two quarters, there had been 311 refusals and 168 had been granted prospecting rights. They could provide the breakdown in writing if given the opportunity before the end of the week. Double granting remained an issue, and the provinces affected were mainly the big ones with a lot of mining activity, such as the North West, Northern Cape, Mpumalanga and Limpopo.

On consequence management concerning the licensing backlog, he said the biggest issue was the culture issue, which they were turning around and had focused on. The Department did not have any active cases to recommend to law enforcement.

Minister Mantashe said that it was unfortunate that Ms Madokwe saw illegal mining as a fault of the Department, because the perpetrators of illegal mining were foreigners who walked across the borders with weapons, with the goal of stealing precious metals. It was incorrect for Members of the Committee to conclude that the licensing backlog was the cause of illegal mining.

Mr Lorimer asked whether the information provided regarding the status of the licensing backlog included licensing permits.

Mr Maqubela said those statistics did not include mining permits. This was deliberate, because the vast majority of mining permits gave a distorted picture.

Minister’s closing remarks

Minister Mantashe said that one of the things that encouraged the Department to come before the Portfolio Committee was the opportunity to have constructive discussions, where it was able to draw lessons from the questions asked. In his opinion, the statistics on the licensing backlog did include the breakdown being sought, including the mining permits.

Adoption of Minutes

The Committee adopted the minutes of their meetings held on 1 and 4 November.

The meeting was adjourned.