Impact of SONA; Licensing regimes for both minerals and energy: briefing by Department of Mineral Resources and Energy

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Mineral Resources and Energy

24 February 2021
Chairperson: Mr S Luzipo (ANC)
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Meeting Summary

President Cyril Ramaphosa: 2021 State of the Nation Address (SONA)

In a virtual meeting, the Department of Mineral Resources and Energy briefed the Committee on its responses to the President’s announcements at the State of the Nation Address, as well as features of the licensing regimes for minerals and petroleum.

The Department would soon announce the successful bidders for 2 000 megawatts of emergency power, would be aiming to reduce the timelines for license applications by 50%, and would be amending Schedule 2 of the Electricity Regulation Act. Members felt that the Department should be finding ways to assist Small, Medium, and Micro Enterprises meet the requirements to make successful bids for electricity provision.

There were significant challenges with the mineral licensing regime in particular, which the Department felt the need to share with the Committee for reasons of transparency. There is an ongoing backlog of licensing applications, with the Mpumalanga office experiencing a severe backlog. Further, there have been issues of poor leadership in the regional offices. This, in addition to delays caused by the COVID-19 pandemic, problems with the South African Mineral Resources Administrative Database and other factors, resulted in many application processes stalling. Consequence management to deal with officials who acted contrary to their mandates had often not been effective.

The Members were extremely disappointed and frustrated with the presentations on the licensing regimes. They said that the presentations offered minimal useful information on application data. They asked specifically for a racial and gendered breakdown of the good transformative work being reported by the Department, so that the Committee could understand who exactly received licenses. They were adamant that detailed explanations should be given to the Committee for why there was a severe backlog, why there were still leadership issues, why the administrative database has not been fixed or replaced, and what the Department intended to do about implementing better consequence management.

The Chairperson asked how the Department could claim that the South African Mineral Resources Administrative Database was functional? If it could not be improved, what other system could be used as an alternative? At what point was there an intervention?. The meeting felt that, due to time constraints, the Members’ questions could not be adequately answered. The Committee resolved to meet again on 3 March to receive a more detailed and focussed briefing by the Department on the select issues that were not responded to.

Meeting report

The Chairperson welcomed all to the meeting and asked for apologies. Apologies were given for the Minister, as well as for Mr S Kula (ANC) and Mr K Mileham (DA), both of whom would join the meeting late. The Chairperson indicated that the meeting would focus on how the State of the Nation Address (SONA) pronouncements would impact the operations of the Department of Mineral Resources and Energy (DMRE), and include briefings by the Department on the petroleum and mineral licensing regimes. The issues raised in the meeting with regards to the DMRE’s budget and whether it would be capable of implementing initiatives would be affected by the Budget Speech.

Adv Thabo Mokoena, Director-General (DG), DMRE, noted that there would be two presentations. The first would briefly deal with the impact of the SONA on the activities of the DMRE. Mr Lucas Mulaudzi, Chief Director: Renewable Energy, DMRE, took the Committee through the first presentation.

Presentation: Impact of SONA
The President’s address focused on the Covid-19 pandemic, accelerating economic recovery, looking into Eskom’s plans to increase generation capacity, and fighting corruption. The presentation highlighted the DMRE’s response to these issues.

The DMRE collaborated with various stakeholders to mitigate and manage the pandemic. The Minister continuously engaged with the mining sector to ensure compliance with Covid-19 regulations, and recently met with the Minerals Council of South Africa to discuss plans for the vaccine rollout. The Department engaged stakeholders, including the Chief Executive Officers (CEOs) of mining companies on their strategic interventions on Covid-19.

Accelerating economic recovery: The Department will engage with the mining sector with the aim of increasing mining exploration activity in South Africa to reach 3% of global exploration expenditure. The Department will also reduce timeframes for mining licenses by 50%.

Eskom and increasing generation capacity: The Department will soon announce the successful bids for 2 000 megawatts of emergency power. 28 bids were received by 22 December 2020 with over 5 000 megawatts of capacity on offer. Evaluation is currently ongoing.

Government will soon initiate the procurement of 11 800 megawatts of power from renewable energy, natural gas, battery storage and coal in line with the Integrated Resource Plan (IRP) 2019. In the coming weeks, the DMRE will issue requests for proposals for 2 600 megawatts of wind and solar energy. Schedule 2 of the Electricity Regulation Act (ERA) will be amended in the next three months to increase the licensing threshold for the embedded generation. The DMRE initiated the procurement of power from projects that could deliver electricity into the grid within three to 12 months from the approval date.

The Department did not believe that the licensing threshold was the bottleneck for generation for own use. The bottlenecks included the wheeling of power through the grid and re-opening of existing supply contracts by Eskom. The changing of the threshold must be accompanied by the necessary frameworks and could be achieved within three months.

State-owned Enterprises (SOEs): The President announced that the mandates of all SOEs are being re-evaluated to ensure they are self-sustainable. Hence, the Minister approved the establishment of a single governance structure for the current South African Nuclear Energy Corporation (NECSA) group from March 2020. In May 2020, the Minister had approved the planned merger of the South African Gas Development Company (iGAS), Strategic Fuel Fund (SFF) and the Petroleum Oil and Gas Corporation of South Africa (PetroSA) into a single entity forming the nucleus of an integrated National Oil Champion. Significant progress in key areas have been achieved for this project over the past three and a half months. These milestones include engagements with key stakeholders, completing a comprehensive baseline assessment, and detailing the financial implications, funding, and transitional plans.

(See the presentation slides attached for more detailed information)

Discussion

The Chairperson asked if the Members had any points to raise regarding the first presentation.

Mr M Wolmarans (ANC) welcomed the presentation and appreciated the fact that there seems to be an alignment of the SONA announcements and the vision, initiatives, and operations of the DMRE.

Ms V Malinga (ANC) said that she was worried that Eskom, in its current state, was not ready to deal with the plan to make the 2 000 megawatts of power available to be added to the grid. She asked for clarity on that point. She thought that Adv Mokoena or the Chairperson would start the meeting by sending condolences for the miners in Vanderbijlpark who recently passed away.

Ms P Madokwe (EFF) had three questions. First, on the announcements of the successful bids - many Small, Medium, and Micro Enterprises (SMMEs) are unable to meet the requirements for these bids. Was the DMRE doing anything to enable these SMMEs to satisfy these requirements? This was important as SMMEs are generally disadvantaged and will be further disadvantaged by a lack of power. What was the plan for integrating SMMEs into municipal Integrated Development Plans (IDPs)?  Second, what amendments did the DMRE make to regulations to allow municipalities to access electricity? Third, with Eskom providing almost 95% of South African electricity, and coal generation going against the current conversation regarding climate change, the presentation made no mention of clean coal initiatives. What are the proportions of power generated from coal versus renewable energy? On the issue of wind generation, most of the electricity produced was going to waste as the peak wind generation time was at 01:00 or 02:00 and people do not use the power then. There was also a lack of storage facilities for the power produced. Were these things, especially the increasing of storage facilities to hold power produced by renewable energy, being considered for the initiatives being planned?

The Chairperson said that he was unaware of the incident at Vanderbijlpark. He asked Adv Mokoena if the proposed merger of the three oil entities would be expanded to include other entities that had overlapping operations as there was a need for those entities to work in harmony rather than in conflict. He thought that a Memorandum of Co-operation could suffice for this purpose.

Responses
Adv Mokoena allocated the questions to his team of Deputy Director-Generals (DDGs).

Mr Jacob Mbele, DDG: Electricity, DMRE, confirmed that Eskom was ready to take the 2 000 megawatts that was procured. As part of the procurement process, the DMRE engaged Eskom extensively. Eskom had to obtain board approval of its capability to receive the power before the Request for Proposals (RFPs) was issued to the market. Once the power is procured, Eskom will fully participate in the process.

On the bids, the DMRE put in place provisions to ensure increased participation from SMMEs, particularly those run by members of previously disadvantaged groups. There is a requirement that 49% of the project ownership must be local South African and 30% of that must be designated to previously disadvantaged or black participants. Thus, companies are forced to assist black owned SMMEs. There have also been projects consisting of engagement sessions explaining parts of the programme and various requirements.

On the ERA amendment, municipalities and organs of state in the energy sector, have always legally been allowed to participate in the procurement or generation of new capacity of power. The amendment provided clarity on the requirements municipalities had to meet when requesting a section 34 determination from the Minister. In the past some requests were not clear, or, because of a lack of capacity, the proposals were detrimental to the municipalities. Thus, the DMRE allowed for fair and transparent assessments of the applications for power to municipalities. This process was not new; the DMRE piggy-backed on old initiatives of Public-Private Partnerships (PPPs). When an organ of state enters into an agreement with a private entity, National Treasury requires that certain criteria be met. This was why the ERA was amended.

On coal, climate change, and clean coal initiatives, the DMRE indicated in the IRP that all new coal bids would have to be for cleaner coal technologies. In the IRP, targets were set for emissions from coal production, with it initially increasing, then reaching a plateau, and then finally declining as cleaner technologies are used. This was in line with South Africa’s contribution for the Paris agreement. The DMRE had been approached by companies for coal resources to be used with new technologies. The DMRE is hoping that when a tender is issued for the coal power in the IRP, these companies will come forward with proposals.

On the proportions of the various technologies used for power generation, the IRP projected that if the energy level was maintained and new capacity is introduced as planned, 43% capacity will be from coal in 2030, and about 30% capacity will be from renewable energy. But, looking at consumption, coal will still contribute about 60% of the energy generation and renewable energy will contribute about 23% to 25%.

On wind generation and the capacity to store the power that is produced, the DMRE had taken all these issues of potential power wasting and improved storage in account. As per the IRP, the current infrastructure allowed for some pump storage where water will be pumped up the hill [to a storage dam] when demand is low and pumped down to generate electricity when demand is high. There are plans for increasing the storage capacity.

Mr Tseliso Maqubela, DDG: Petroleum and Petroleum Products Regulation, DMRE, noted that Mr Mbele had addressed the issues on coal and thus he had nothing to add.

Adv Mokoena welcomed the comment from Mr Wolmarans, and asked Mr Msiza to answer Ms Malinga’s question. On the issue of coal, the Council for Geoscience (CGS) had been working on cleaner coal technologies. A detailed report could be given to the Committee at the right time. On the matter of the various entities working together, these entities operated to ensure that the DMRE could respond to any challenges and to compliment the work of the Government in general. Work was being done at an entity under NECSA, and other entities had been working to produce sanitizers to fight Covid-19. There were a lot of initiatives which could be presented at a later stage, as was done with Mintek.

Mr David Msiza, Chief Inspector of Mines, DMRE, indicated that there was an accident that happened on 17 February at the ArcelorMittal plant in Vanderbijlpark which resulted in the death of three workers. The DMRE had to continue to be vigilant on health and safety matters, not only in mines, but also in plants. The Minister had engaged with stakeholders to be vigilant in this regard.

Follow-up discussion
Mr T Langa (EFF) asked for clarity on the petroleum side as it was reflected in the presentation that the DMRE had started process of merging iGas, SFF and PetroSA. PetroSA was an SOE that Government had rescued many times. What would the implications of this merger be? The DMRE had to be aware that the Engen Refinery had resolved to shutting down its operations and converting to a depot to import fuel from abroad for resale. In this process about 700 jobs would be lost. He noted that Engen had already started with its section 189 consultations [in terms of the Labour Relations Act].

Mr Langa was interrupted by Ms Malinga who asked for order to be called as Mr Langa was referring to matters that the DMRE had not presented.

The Chairperson noted that the DMRE had spoken on the issue of reviewing state entities and the activities of these entities which impacted the oil and gas industry. Insofar as this was the case, Mr Langa was still in order.

Mr Langa continued to say that he was aware that the demand for fuel had always exceeded the supply in South Africa. What were the DMRE’s plans or interventions if entities such as Engen stopped operating as a refinery and began to operate only as a depot? Surely other entities would begin to follow suit as they are profit-making companies. Had this been looked into by the DMRE and what will they do?

The Chairperson asked Adv Mokoena to respond. He noted that the DMRE will still brief the Committee at a later date on the specifics regarding the process of the merger and its implications.

Adv Mokoena welcomed the question from Mr Langa. He said the merger process was moving in the right direction. A full presentation on that programme would be given at a later date. He explained that the DMRE had a plan for this sort of issue and continued to engage with these entities. On the question relating to section 189, the executive management of Engen made a commitment to the DMRE that there would be no adverse impact on jobs as a result of repurposing the site as a depot. The CEO of Engen had made this assurance. But this process would continue to be looked at.

Mr Maqubela said that discussions between the DMRE and Engen were ongoing. Globally, most of the oil companies were offloading carbon-intensive assets. For example, Shell was looking at closing 8 refineries globally. In South Africa, the option of offloading instead of closing down was being looked into. This was driven by these companies’ determination to have zero carbon emissions by 2040 or 2050. The DMRE was focussed on security of supply at all costs, thus should the eventuality of these refineries closing occur, the country will still have a fuel supply. He said that a fuller explanation could be given when required.

The Chairperson requested Adv Mokoena to do work regarding Engen, recognising that the first difficulty was how private companies operated in comparison to SOEs. He said that the DMRE had to remain aware of the developments taking place regarding fuel supply.

Presentation: Petroleum licensing regime
Adv Mokoena said that the licensing regime presentation was divided into a petroleum presentation and a minerals presentation. He explained that the National Energy Regulator of South Africa (NERSA) was not incorporated into the presentation, thus, the issues relating to NERSA would be spoken to. The DMRE had requested one of the executives of NERSA to be in the meeting.

Mr Maqubela said that Mr Teboho Sethosa, Chief Director, DMRE would discuss the petroleum licensing process, and he would discuss the mineral licensing process. He noted that the combined Mineral and Petroleum Regulation branch was formed in October 2020 and was tasked with licensing, compliance monitoring and enforcement. The mineral and petroleum sectors were challenging environments. He said that the DMRE must make some admissions before beginning the presentation. The DMRE was generally on top of everything for petroleum regulation, but not for mineral regulation. There was a huge obstacle that the DMRE must overcome in terms of mineral regulation. It was recognised that generally everyone wanted a wholesale [petroleum] license, and those parties used consultants so as to meet the requirements for receiving a wholesale license. The problem was that there were too many wholesale licenses, and as such very few succeeded in the market.

Mr Sethosa explained that there was a backlog of licensing due to the period of about four months in 2020 where operations had ceased [due to COVID-19].

Process of analysing and evaluating applications: Applications for petroleum licenses could be done either by walk-in or by post. Applications could either be returned or accepted. If the application was accepted it was evaluated and then the license will either be declined, and party can appeal or accept the decision, or approved in 90 days. Where the land to be used as the site was traditional land, instead of requiring a certified copy of the Title Deed, the applicant could provide a document expressing the Chieftain’s granting of permission for the land to be used, and where the land was municipal land, an applicant could provide a document from the relevant municipality granting the applicant the right to use the land.

Conditions for manufacturing, wholesale, site and retail license: Manufacturing licenses are regulated by regulation 11 of the Petroleum Amendment Act No 58, 2003. Wholesale, site and retail licenses are also regulated by the Act and must satisfy similar conditions.

Statistical indicators from 2012 to 2020: Six conversion licenses and 15 new to industry licenses were issued for manufacturing. The 15 new to industry licenses were issued to entities that are now converting old tyres or heavy plastic into fuel. These were small operations. 229 conversion and 2 523 new to industry licenses were issued for wholesale. Very few of the wholesale licenses are active in the market, which was a very worrying trend. 4 190 conversion and 886 new to industry licenses were issued for site and retail. Of the 4 190, many of the site and retail licenses were in existence before promulgation of the Amendment Act. There were eight licenses issued to manufacturers, and four of them are Historically Disadvantaged South Africans (HDSA) compliant. There were 2 258 licenses issued to wholesalers, of which 2 081 were HDSA compliant. There were 1 410 licenses issued for retail and 1 138 of those were HDSA compliant. There was a total of 3 656 licenses issued between 2012 and 2020, of which 3 203 were HDSA compliant, meaning there was 87.13% compliance. Between 2012 and 2020, 2 948 licenses were refused, 225 were withdrawn and 48 were cancelled. 183 new applications were in progress pending more information before they could be processed. 449 applications were in progress with outstanding information. 658 applications were assigned, and decisions will soon be made on if they will be approved or rejected.

(See the presentation for more detailed information)

Presentation: mineral licensing regime
Mr Maqubela explained that he would discuss the application process as regulated in terms of the Mineral and Petroleum Resources Development Act (MPRDA) and the National Environmental Management Act (NEMA). There were four types of applications, namely: prospecting rights; mining rights; mining permits; and borrow-pit authorisations.

Applications for prospecting rights must be made in terms of section 16(1) of the MPRDA. Regional Managers must accept the application in terms of section 16(2) of the MPRDA. [Note that acceptance under the law does not imply approval]. If the application does not comply with the requirements of section 16(1), the Regional Manager must notify the applicant within 14 days of this decision. If the application complies with the requirements, the Regional Manager must, within 14 days of acceptance, inform the applicant to submit the requisite Environmental Report. This timeline applies for all application types.

The major obstacle that must be overcome had to do with the timeframe for acceptance or rejection. Each province has an office headed by a Regional Manager. The Regional Manager is assisted by specialists in mine economics, environmental management, mineral laws, and staff who oversee the social and labour plans. For each application, the Regional Manager must be assisted by the specialists in order to reach a decision.

Mining rights follow the same process and are regulated under section 22 of the MPRDA. Mining permits also follow the same process in terms of section 27 of the MPRDA. Mining permits are applied for by someone who believes that they can mine in an area of five hectares within two years, whereas mining rights can be granted for 30 years and have no area restrictions.

Borrow-pit authorisations are an issue close to local government. They are dealt with under section 27 of the MPRDA. Borrow-pits are excavations done in order to assist in the construction of roads. They are not major processes, but they are an economic activity that must be managed, as there is the potential for environmental damage to be done after excavation. The borrowing of gravel or other resources for construction can delay road infrastructure. The branch must position itself to facilitate these activities efficiently.

Prospecting and mining time frames: The timelines of 14 days for the acceptance or rejection of the applications are prescribed in law. There have been many public complaints that the timelines are not kept. This issue has been exacerbated in the last year as a result of the three- or four-month period where operations had ceased. These timelines are based on certain assumptions, including the Regional Mining Development and Environmental Committee (RMDEC) objection process. This structure oversees appeals, and if there are objections or there is an appeal the application process comes to a halt and the timeline will be exceeded.

Number of Applications per province: Mpumalanga had the most total applications. There have been 818 mining rights, 10 766 prospecting rights, 15 247 mining permits, 106 cessions as per section 11 of the MPRDA, and 347 renewals issued in the province.

Backlog applications per province: Mpumalanga had experienced backlogs on 34 mining rights, 1 001 prospecting rights, 551 mining permits, 32 cessions as per section 11 of the MPRDA, and 68 renewals. These backlogs indicate that Mpumalanga is a problem region.

Challenges: There were delays with the application process due to section 12 of the MPRDA and the Promotion of Access to Justice Act (PAJA). The objection processes that occur under RMDEC were not easy to convene due to lockdown. There were issues in the application process regarding the timelines on the parts of both the Regional Managers as well as the applicants. Another aspect delaying the application process was limited resources. The DMRE must ensure that every Regional Manager has the necessary resources to make sure their offices operate effectively. There was an ongoing legal dispute with a printing supplier that adversely affected operations.

The issue of critical vacant posts is significant. These posts must be filled. The DMRE had a difficult 12 months, because before the merger of the two departments was concluded there was the view that the filing of vacancies should not be accelerated. The idea was to fill those positions with people already working for the departments who had the requisite skills rather than look for external replacements. There have been situations of continuous acting, and by 31 March 2021 all critical vacancies must be filled. This process was underway. A significant region was KwaZulu-Natal, where the recruitment process was underway. In Mpumalanga, the disciplinary action against an official of that office was still ongoing and hence there would be a leadership vacuum while the decision was pending.

There was a myriad of appeals. Some of these appeals appeared frivolous. While an appeal is ongoing no operational activity can take place, which negatively impacts the economy. There have been instances where mining companies cannot mine as a result of an ongoing appeal. The DMRE must determine what to do with these frivolous appeals.

The DMRE intended to deal with the issues of the South African Mineral Resources Administration System (SAMRAD). The leadership problem was a culture issue which had to be changed. SAMRAD was often offline. The DMRE must ensure that SAMRAD was always online. Better consequence management had to be implemented. The Covid-19 pandemic had an impact on this. Essentially, administration must be improved as record keeping in the DMRE was lacking.

Recommendations: Mr Maqubela said resources and labour must be equitably allocated to regional offices based on the volume of work, the capacity of the workforce, and the speed with which activities were completed. It was noted that many of the staff members were highly qualified but lack exposure to the industry. Thus, whilst the skill level of staff may not be a large issue, practical exposure was, and this was an issue that must be worked on.

The Chief Directorate had been assigned to work on reducing the timelines by 50%. This work was currently underway. It remained necessary to develop SAMRAD. The structure of the regional offices and whether they were able to respond to challenges would be reviewed.

The petroleum regulation branch has a system called the Petroleum Products Licensing System (PPLS) which was homegrown and had been added to incrementally. The system can send an SMS costing 16 cents to applicants to inform them of their application status. This was a system that could be implemented in the mineral regulation branch. There was also a shift to a paperless system between the national and regional offices for petroleum regulation. This was something that would be developed for mineral regulation.

Mr Maqubela admitted that the DMRE was confronted with many challenges, most of all the application backlog, but assured the Chairperson that the DMRE was developing a plan to deal with these issues.

Adv Mokoena noted that the presentation by NERSA should have been presented at the beginning of the meeting as NERSA was currently busy with public consultations. Thus, NERSA could not present on licensing to the Committee at this instance. He apologised for this.

The Chairperson said that whether NERSA was there or not, they were not going to present. The procedure was simple. Members had to receive documents at least 24 hours before the meeting commenced and they did not. He noted that there were personnel issues that had been overlooked in the presentations and questions on those issues must be responded to in detail. He noted that Mr V Zungula (ATM) had left the meeting to attend a sitting of the Portfolio Committee on Small Business Development. He welcomed Mr Mileham to the meeting.

Discussion
Mr M Mahlaule (ANC) noted that, as per the application process, Regional Managers had to notify applicants within 14 days. He said this was generally not happening. Applicants generally complied with the requirements but received no timeous response. Non-compliance was mostly on the part of the regional offices. He understood that there may be challenges, but these must be confronted and dealt with. This could not continue. There were officials who take applications from one step in the process to another without notifying the applicant. Further, there were officials who submitted different applications for the same site which complicated the process. He understood that there would be disputes and problems, but he wanted the Members to be told how many disputes there were and how would they be resolved. Management had to have implemented dispute resolution. These offices could not have endless problems, there must be way to end it. If they cannot be resolved, the legal team must come in to help. One thing that cannot and should not be done is the setting aside of applications that may have issues, in order to deal with those without issues. These problems must be resolved. Mr Mahlaule said he had requested that the backlog of applications be looked at urgently because he was concerned about Mpumalanga, Limpopo, and KwaZulu-Natal. He noted that the presentation indicated that the North West and the Northern Cape also had problems but failed to highlight the problems of KwaZulu-Natal.

In KwaZulu-Natal, there were issues of race between Black, Indian, and Coloured applicants. He challenged Mr Maqubela to check the race of each party involved in the applications that were backlogged or rejected, and to identify the reasons for their rejection. He made this challenge because there had been reports of discrimination against black people for these applications. There is also an issue with transformation. He asked for a racial and gendered breakdown of the good transformative work being reported by Mr Maqubela, so that the Committee could understand who exactly received the licenses.

Mr J Lorimer (DA) said he had a number of questions. He began by saying that the presentation data on the number of applications per province was useful, but not that useful because it covered such a long period. The Members need to know how many of these applications had been granted. How many of them were currently functional and compliant? How many of them had been relinquished by the holder or removed from the holder? How many were accepted but were neither granted nor refused?  The presentation indicated the number of backlogged applications, but did not do so in enough detail. He asked how many of these had not been processed or dealt with by the DMRE. How many were backlogged due to the applicants dragging their feet or being unable to find financing? There seemed to be no date on when granted applications prescribe, so if applicants did drag their feet it appeared that they could sit on those rights and prevent other parties from applying for that right. Was this a problem? If it was a problem, what can be done? If the DMRE did not think it was a problem, why was that the case?

Mr Lorimer complained that there was a complete lack of transparency throughout the entire licensing process, which may allow corruption to flourish. It would be useful if the DMRE could publish details of all granted rights and permits on its website every quarter. Was this possible? This should have been simple enough if SAMRAD was functioning. Why did it take so long to process the renewal of a prospecting right? All of the work was done on the initial application, so it should merely be an administrative process. Yet, there were some companies that had been waiting for seven to ten years to receive a renewal of their prospecting right. Was this being monitored? Figures had been given for how much exploration funding there was. How did the DMRE keep track of exploration funding? Did the DMRE publish these figures anywhere? Where an applicant had not spent their exploration funding, did the DMRE cancel the applicants prospecting right? How many prospecting rights had the DMRE cancelled in the last few years?  He noted that the Minister took over operations two years ago, yet the presentation indicated that there were still leadership issues. Was this the Minister’s fault or was it the DMRE’s fault? It was clear that there was an issue in the Mpumalanga office. This was well typified by DMRE losing in court in late 2020 when defending a mining permit on the Bosmanspoort farm. The permit was issued without the farmer’s knowledge and there was an error regarding the land to be used for mining. It appeared that there was no inspection, and if there was an inspection, it was incompetent. How many other cases like this were there?  It seemed that Adv Mokoena accepted that the Mpumalanga office was dysfunctional. What was the DMRE going to do about this office and by when? This had been going on for a while. Did the DMRE think there was a problem with the way in which the license was issued for the Bosmanspoort mining permit and was the DMRE going to take action against the issuing official? Why was there limited consequence management? What was the problem? Was the DMRE dysfunctional or was it limited in the action it could take by the Labour Relations Act (LRA)? If the issue was limitation by the LRA, had the DMRE engaged with the Department of Labour? If not, why not? Mr Lorimer said he did not buy the “tools of trade” problems. He noted that the DMRE had a year to sort this out. Were there issues only with the availability of printers, or also laptops? Was there a connectivity issue? Much of the DMRE’s work should be capable of being done at home. He asked for an explanation on why these problems had not been resolved.

Mr Lorimer said he had asked questions of SAMRAD for eight years and that for the first five years he was told that SAMRAD was functional. It was not functional. Yet, the presentation indicated that SAMRAD will be developed further. Three years ago, the DMRE admitted SAMRAD was broken, but now money would be pumped into the system to fix it. He said that it amazed him that as ordinary person he could see with his eyes who holds mining or prospecting rights for land in Mozambique or Kenya, but that could not be done in South Africa. Would SAMRAD be fixed or scrapped? Was there a budget to fix it? Would SAMRAD be replaced by a functional and transparent system? By when would the process be complete?

Mr Wolmarans said that he also had a few questions. On the petroleum process, there were four slides in the presentation (24 to 27) relating to statistics. He requested that the Members be given a provincial breakdown of those numbers. In relation to the transformation agenda for the petroleum process, were the instances of big companies being unable to have their licenses renewed the result of problems on the part of the DMRE or the executive management of those companies?

He said there were various issues with the mining license regime, particularly the vacant critical posts as highlighted by the presentation. It was likely that these posts had been budgeted for. It was explained that when the departments merged the executive decision was taken not hire new staff but to fill these positions with existing staff. The filling of these posts was taking long and did not seem capable of being expedited. He said that the lack of personnel was the reason for the backlog of applications, lengthy appeals, and lengthy disputes. Instead of trying to fill these posts from within the DMRE, why did the DMRE not go and procure new qualified personnel? What was the DMRE’s plan for this? The presentation showed that there were processes being delayed or not being taken up. He asked if the Members could be provided with a breakdown of provincial cases to see which regional office had the biggest personnel issues. What did it cost the DMRE, or the country, to deal with internal disciplinary cases? Was there any ongoing litigation? If there was, could the Members be provided with this information to see which offices required the most assistance?

Ms Malinga expressed her disappointment at the presentation. She wanted to discuss the challenges of the DMRE. She noted that the DMRE had people who were not doing their work, but disciplinary processes against them had been delayed. She asked why this was the case?  The presentation mentioned the challenge of working from home due to Covid-19. She asked if there were no timelines that the employees had to adhere to while working from home. What was the consequence if someone was not completing their work on time? Why was there limited consequence management? Why pay people who did not do their work? She acknowledged that at least Adv Mokoena was becoming more aware of the issues with the Mpumalanga office. But she said this should have happened a long time ago as the Mpumalanga Regional Manager was ineffective. She asked why there was an issue of tools of trade. Were there no resources in the two departments prior to the merger? She believed that the indication of a lack of resources was a rush job and that there were actually resources available. She felt that they were doing a terrible job as supervisors. If the regional offices were not functioning, then surely the head office was not functioning? Unless action was truly taken the Members would continue to receive such reports. The presentation mentioned that there were a lot of inactive wholesalers. Why was this the case? What did the DMRE intend to do? On SAMRAD, everyone now had resources, and the DMRE had a cell-phone allowance, so why could the personnel not use their phones to upload the necessary data. The DMRE had a legal team, yet no action had been taken against people who did not work properly. This needs to be checked out. Why had the vacant posts not been filled after a year?

The Chairperson noted that Mr Mahlaule’s and Mr Lorimer’s questions may not be answered properly in the meeting due to time constraints and that many of the issues that were raised required a more detailed report from the DMRE. For example, the question was not just whether SAMRAD could be scrapped, but whether that possibility was even being thought of by the DMRE, and what the detailed explanation on the system’s efficiency was.

He asked if the DMRE could return to the Committee to answer questions that could not presently be answered. He noted that there was not even a written response to the letters that were sent. In the report, nothing was said of if there was an investigation, or how far an investigation was taken, into the regional offices, particularly those of Mpumalanga, Limpopo, and the North West, prior to the departmental merger. There was a suspicion that the system was manipulated by those in the DMRE.

On the issue of backlogs, who was the person with so much power so as to ignore the legislation and not deal with applications in 14 days? He stated that he would love it if details would be given on these issues so that accurate recommendations could be given to work on these problems. He asked the Members what they thought about reconvening at a later date to hear and discuss more detailed responses to these issues.

Mr Lorimer said that he would welcome a full session dedicated to the responses to these issues.

The Chairperson recommended that session be held on 3 March. This was approved by the Members.

Responses
Adv Mokoena said that he had noted the critical questions. He asked Mr Maqubela to respond.

Mr Maqubela said that it was not the intention of the DMRE not to be candid. The DMRE had wanted to come to the Committee and admit that there was a problem which required a concerted effort to be dealt with. He said that it was important for the Committee to hold the DMRE accountable.

On bad officials, the DMRE had, in the petroleum sector, removed two officials who acted contrary to their mandates. The one official had taken the DMRE to Labour Court and lost and the other official was in the process of taking the DMRE to Labour Court. Where the DMRE had identified bad officials, they had been dealt with. This principle would be applied in the mineral sector as well.

On the racial breakdown of application numbers, this issue had been considered by the DMRE. The Petroleum Products Act makes mention of historically disadvantaged people, which includes white females. The DMRE must account for all historically disadvantaged groups in the licensing regime. He said that the relevant figures could be brought before the Committee at the required time. On the retail side, the vast majority of beneficiaries of the national transformation programme were Indian South African’s. He noted that that was the reality. The DMRE has had conversations with oil companies on having coloured and black retailers. These companies have said that in next five years, they will use the economically active population wherever possible to renew a retail site. This commitment will assist the DMRE in its transformation agenda.

He said that the DMRE would return with concrete answers and brief the Committee. He made it clear that transparency was a goal of the DMRE, but for this to be the case, the DMRE had complete the process of cleaning up its data.

On labour and consequence management, the main issue was the ongoing dispute in Mpumalanga. He admitted that it was time for the DMRE to get to the bottom of that issue. The DMRE could not afford to have a leadership vacuum there. Thus, the dispute had to be resolved, and a Regional Manager had to be appointed.

He said that the IT system and the tools of trade were areas that Adv Mokoena was seized with. He believed that the DMRE could do with a more stable system, but was mindful of the expenditure involved in replacing the system. He clarified that updating SAMRAD was a choice of words. His view was that personnel firstly had to load information as required by standard operating procedure and the DMRE had realised that personnel were not updating. This issue was exacerbated by the Covid-19 pandemic, and the DMRE was not fully ready to respond to this challenge. The DMRE had been trying to correct issues of network and devices, which had to be responded to.

On oil interactions and a breakdown of the relevant numbers, existing retailers were resisting relinquishing their sites without being paid exorbitant amounts of money. This process of negotiation was being undertaken by the major oil companies. He was aware that there had to be transformation. He indicated that the DMRE was beginning to see demographic changes.

On the departmental merger, there were lots of consultations with organised labour. He said that process was not as smooth as expected, but that was behind the DMRE as of 1 October 2020. He was confident that with the guidance of Adv Mokoena these issues would be resolved.

He did not want to put a timeline on the issue of the backlogged applications. At this stage, the DMRE was analysing which personnel and which components of the process were causing the most delays. He recognised that this was not an open-ended process, but he requested time for the DMRE to return to the Committee with more information on dealing with the backlog.

He apologised to Ms Malinga for presenting the DMRE’s own issues that should have been managed, but he said it was done genuinely and for the purpose of transparency. He assured the Members that the situation would be turned around. He requested that the other issues be responded to in writing.

Adv Mokoena said that the DMRE would deal with the other issues in the next meeting. He confirmed that the process of filling the critical vacant posts had been started in December 2020. Many posts had been advertised and applications had come in. He noted the issues on consequence management and stated that more details would be given on that and the matter of the legal team in the next meeting. He explained that a decision was taken ten years before to rotate personnel [between the regional offices] to avoid comfortability and the likelihood of corruption. Finally, he said that the presentation would be enhanced, and more details would be discussed in response to these issues at the next meeting.

The Chairperson asked that responses on the letters, including the one that was sent to the Speaker’s office, be given in writing at the next meeting. He asked for a graphic of how SAMRAD and the application process worked. He wanted to see the hierarchy and who dealt with the applications for licenses and the appeals. This would allow the Members to know if the complaints were genuine. He also wanted the DMRE to explain each process and how long they should take. Could the DMRE explain how double-and-triple dipping comes about?

In addition to the issues raised, how did SAMRAD work and how did the DMRE arrive at a decision that the system was functional? If SAMRAD should be improved, what should it ideally achieve? If it could not be improved, what other system could be used as an alternative? At what point was there an intervention? To what extent was that process itself transparent?

He noted that these issues must be focused on. He asked what happened if personnel had not completed the required work within 14 days where they had the necessary resources available. He said that for both minerals and petroleum, the SAMRAD system should not be affected by working from home. How old were some of the outstanding applications? The Committee must be given performance indicators and targets, as well as a budget.

Finally, he noted that it must be remembered that South Africa was dealing with an economic crisis. If the DMRE continued to have backlogs it would contribute to economic decline rather than economic growth. He asked Adv Mokoena what transpired from the investigation of the regional offices, especially those of Mpumalanga, Limpopo, and the North West. The Mpumalanga and Limpopo offices were closed at some point, so what happened that resulted in those offices being reopened? Surely there were improvements? Or were internal investigations still ongoing?

He requested the DMRE to be ready to brief the Committee in more detail on 3 March.

The meeting was adjourned.

 

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