Department of Mineral Resources response to State of Nation Address

Meeting report

Department of Mineral Resources: Response to State of the Nation Address
Mr Edson Ragimane, Chief Financial Officer, Department of Mineral Resources, outlined the impact of the State of the Nation Address (SONA) for the Department of Mineral Resources (DMR or the Department). Eight areas for attention by the mining sector were identified in the SONA: namely, job creation, beneficiation, the need to develop competitiveness, improvement of infrastructure, skills development, health issues, procurement and employment equity.

Mr Ragimane noted that the mining industry was one of the key job drivers in the South African economy. Stakeholders had developed a strategy for sustainable growth and meaningful development. All parties had made a commitment to creating 140 000 jobs by 2020, and it seemed that this could be achieved. Progress would be monitored through the job creation task team, and issuing of prospecting and mining licences. Another contributor to job creation would be the Department’s efforts at licencing and regulation. The Department would also improve its monitoring and enforcement of compliance of social and labour plans.

On relation to beneficiation, Mr Ragimane said that according to last estimates, South Africa’s underground minerals had the value of US$ 2,5 trillion. The main challenge that South Africa faced was how to add value to these minerals, instead of merely mining and exporting them in a raw form. For this purpose, a beneficiation strategy had been developed. The implementation plans on iron ore and steel, and energy were approved by Cabinet in November 2011. The plans for diesel particulates and autocatalytic converters, pigment and titanium metal production and jewellery fabrication would be submitted to Cabinet during 2012.

Mr Ragimane then dealt with competitiveness, saying that urgent attention had to be paid to infrastructure, research and development, and availability of energy, to ensure competitiveness of the mining sector, which would be essential to the creation of more jobs.

Skills development was still a challenge in the mining sector.  For this reason, programmes in collaboration with the Department of Higher Education and Training (DHET) were developed to ensure that necessary skilled resources would be available. The DMR was also concentrating on the training of artisans, improve the participation of women, and develop black managers. It would also see to development of skills to support the beneficiation strategy, including the offering of bursaries. DMR also had its own internal programmes to improve the competency of its staff.

The general health of employees in the mining sector remained a priority as well, and DMR was paying particular attention to HIV and Aids, tuberculosis and silicosis.  

Mr Ragimane then touched upon the need to ensure tight procurement measures, and to avoid corruption, and noted in this regard that supply chain management procedures had been tightened, and that DMR was screening all its employees prior to their appointment.

In relation to disability, DMR was aiming to increase the complement of disabled staff up to 2% of DMR employees, instead of the current 0.6%.

Discussion
The Chairperson said that the mining industry should be enabled to grow to the extent it had in the 1970s and 1980s, when it had contributed to over one million jobs and was one of the major employers in the country. This would be achieved through new innovation and a beneficiation strategy. The current lack of growth was due to insufficient infrastructure in the mining sector, as complained about by the producers.
 
Mr J Lorimer (DA) asked how the DMR intended to create 140 000 jobs by 2020, and how dependent this would be on the world economic climate. He also asked about the other binding constraints on growth. He was interested in DMR’s opinion on nationalisation, and whether this was also considered to be a constraint.

Mr Lorimer asked for an assessment of the Department’s current performance in issuing of prospecting and mining rights, and whether there were specific targets set for the improvement of this activity.

Mr Ragimane replied that the target of creating 140 000 jobs was going to be achieved by the work of the Multi-Stakeholder Forum. However, Mr Ragimane emphasised that constraints on reaching the target were identified, and the Department was, at the same time, working on addressing these constraints. This figure did not include the implementation of the beneficiation strategy, because at the time of setting the target the beneficiation strategy was not yet developed. Once enough work was done on the beneficiation implementation plan, exact figures could be submitted to the Committee.

Mr Tseko Nell, Acting Deputy Director General: Mineral Policy and Promotion, DMR, added that from January to September 2011, 15 000 jobs were created, which was quite good performance. He was confident that the target of 140 000 would be achieved.

The Chairperson added that gold prices had surpassed platinum. A closer look at the annual reports of mining companies revealed that a great number of them had performed very well. He asked whether the creation of 15 000 jobs was not an indication of profit maximisation by these companies, at the expense of job creation, or whether there would be a general problem created by over-automatisation in the mining industry. Mining companies, during their presentations at the Mining Charter public hearings, presented their estimates of the number of jobs they expected to create. They should be held accountable for any failure to reach these targets. The Committee would ask the companies to report on this further on 14 March 2012.

Mr Ragimane promised to take back the issues to the DMR’s task team and deliver more details next time the DMR came to the Committee.

Mr Lorimer asked, in relation to staff, who vetted the employees of the Department, whether any employees had been rejected as a result of the vetting, and, if so, how many.

Mr Ragimane noted that there was an internal vetting unit within DMR, and that there had been no rejections thus far.

Mr Lorimer felt that the presentation was too general, and had not mentioned any of the exciting infrastructure projects that were outlined in the SONA. He asked which of these was likely to be chosen, and why.

Mr Ragimane admitted that the presentation was general but promised that the DMR would in the future give a much more detailed presentation to the Committee about exact targets and deadlines for achieving them.

The Chairperson reminded the Committee that issues should not be mixed. He clarified that the State Intervention in Mining Sector (SIMS) report was not a departmental report, but one drawn by a team of researchers, and if there was interest in this, the Committee could initiate a separate and detailed discussion of it at another meeting.

Mr E Lucas (ANC) was concerned whether the discussed activities were provided for in this year’s budget or they would be included in next year’s budget.

Ms F Bikani (ANC) asked if DMR was hoping to receive more funding.

Mr Ragimane assured Mr Lucas that DMR did not make plans for anything for which there was no funding available. The available resources were being aligned every year.   

Mr Lucas drew a comparison with South Africa, which was rich in minerals, and the Middle East which had rich oil and gas industries, saying that in the latter, the infrastructure had been vastly improved and the people had acquired wealth. He wondered why South Africa was not in the same position. He suggested that job creation should go together with wealth creation. He was concerned that at the moment, materials were being sold by South Africa, manufactured outside and finished products were being sold back to the country. This should be avoided, and he suggested that whatever was manufactured in South Africa should be sold in this country as well.

Mr Lucas commented on skills development, noting that skilled young people were being poached away by large industry, and he asked DMR what was being done to encourage young people to join the mining sector. He believed the mining industry could make a difference.

Mr H Schmidt (DA) emphasized that some of his questions were political, and it was unfortunate that the Minister was not able to be present to answer them.

Mr Schmidt pointed out that attention had been paid to infrastructure and, to a certain extent, to access to minerals, but the regulatory environment was not mentioned, although it was, in his view, one of the most important issues, as in order to stimulate South Africa’s economy, the regulatory environment must be certain and safe.

Mr M Sonto (ANC) agreed that infrastructure was an issue, but said that no funding was available for infrastructure.

Mr Schmidt also expressed the concern that there was not enough infrastructure to export all produced coal and asked what could be done to improve it. Without better infrastructure, it was not possible to increase production. He said that water, electricity and railway were all very important for mining. A mine could not be set up if there was no water available. Hence, the three issues need to be considered together, and not treated separately.

Mr Ragimane admitted that there were indeed constraints around infrastructure.

Mr Lorimer asked what the value chains for beneficiation were, and what the role of the DMR would be in implementing them and making them a reality.

Mr Schmidt expressed the opinion that beneficiation was not the primary role of mining companies, but it was relevant for providing access to minerals. He asked, what role mining companies played in beneficiation - for example of iron ore. He stressed that mining companies should not be involved in manufacturing, because manufacturing and mining were two different sectors, but said that mining companies played a huge role in making accessible the finished products to the manufacturing sector. In regard to beneficiation, he also asked how South Africa was going to compete with other countries (such as India), where fabrication was done within economic development zones, and asked how, as one example, South Africa would compete in the jewellery sector. He stressed the importance of accessibility to information and access of the public to this information.

Mr Ragimane noted, in response to questions on beneficiation, that the implementation plan focused on high level initiatives that had to be undertaken by various partners in order to unlock the potential around beneficiation. DMR recognised that this particular strategy could not be fulfilled by one Department only, so the implementation plan determined in detail the involvement of various Departments. He answered Mr Schmidt’s point on the role of the mining companies by saying that mining companies were not being required to do beneficiation, but this was foreseen in the implementation plans of the beneficiation strategy. DMR’s role consisted of a combination of providing infrastructure and ensuring that resources were available to the parties.

Mr Schmidt enquired whether there was any proposal by the DMR on what was to be done with mining rights that had not yet been converted.

Ms F Bikani (ANC) noted that she was concerned about the litigation expenses, which could have a significant effect on the budget, and noted that the DMR had lost several cases.

Mr Ragimane noted that DMR had already responded to similar questions posed by Ms Bikani in the past, and he conceded that there were some legal challenges.

The Chairperson Mr Gona commented that some of the judgments handed down were worrisome. He gave as an example the case of Agri SA v Minister of Mineral Resources, which dealt with Agri SA’s expropriation claim against the Minister of Mineral Resources. The Pretoria High Court found that the mere enactment of the Mineral and Petroleum Resources Development Act in May 2004 had brought about a generalised expropriation of all unused old order mineral rights, entitling the claimants to receive a ‘just and equitable’ compensation in accordance with section 25(3) of the Constitution.

He thought that this kind of judgment set back whatever transformation processes were achieved in the mining industry since 2004. He found it dangerous to say that the majority of South Africa had to be excluded from the benefits of the mining industry. These issues had a direct political impact on the country. If there were any indications that the MPRDA had loopholes that were being exploited, then an amendment should be considered.

Mr Schmidt wanted to comment further, but the Chairperson disallowed this, saying that it was undesirable that every time the Chairperson made a comment, all other Members could respond.

Ms Bikani pointed out that the issuing of licences also caused a lot of expenses and frustration.

Ms Bikani asked what difficulties were encountered in connection with the Social and Labour Plan, which had already been launched.

Ms Bikani questioned whether there had been any review of the Mineral and Petroleum Resources Development Act [28- 002], whether any amendments to it were necessary and whether the SONA had mentioned anything that was relevant to it.

Ms Bikani enquired what plans DMR had, in regard to COP 17, to ensure that South Africa would not have to defend the use of coal as an energy source.

Ms Bikani wanted attention to be paid, as part of the skills development, to improving the participation of women. She suggested that women’s empowerment and gender equality building should have been included under employment equity, especially since they had also been mentioned in SONA. The Mining Charter had noted women’s issues as a priority focus area.

Mr C Gololo (ANC) asked whether there was a plan for establishing of centres to train people in different provinces.

Mr Sonto also asked about employment equity, asking what physical challenges were encountered with employees, and what skills were targeted from the mining sector. With regard to skills development, he noted that within the mining industry there had been a great deal said, over a long period, about the skills need, and it was for this reason that, in collaboration with Department for Higher Education and Training, certain areas of training were identified. However, there was not clarity on the timeline and targets. He noted complaints from government and the public in general that some companies simply did not comply with job creation efforts, but pointed out that the DMR had based job creation on the issuing of mining permits to compliant applicants. However, even if they were compliant mining companies that would receive mining permits, he questioned whether they would indeed raise employment to the level expected by the DMR. Furthermore, since it seemed that there was substantial non-compliance, he asked how the DMR could ensure that compliance happened, and that it led to the creation of jobs.

Mr Ragimane noted that rights would only be issued to applicants who were compliant and this would result in jobs being created.

Ms Bikani expressed the opinion that there was a need for a lot of intergovernmental interaction. She asked to what extent these plans prioritised working with other departments, especially in the terms of infrastructure, training and energy.

Mr David Msiza, Chief Inspector of Mines, DMR, also answered questions on employment equity and skills issues. agreed that women’s participation should be supported as stipulated in the Mining Charter. With regard to the number of questions on skills development, he said that there was agreement on the need for both long and short term coaching, and DMR was trying to ensure that there were enough skills, both in DMR and related industries, who were all struggling with the current lack of engineers.

Ms Patricia Gamede, Deputy Director General: Corporate Services, DMR, also noted that the DMR target of employing women in the mining sector had been exceeded, but now there was a need for intervention to train women to rise to management levels. In addition, there were interventions put in place to attract other race groups (Indians and coloureds) but she conceded that so far there was a failure to reach the targets. Physically disadvantaged people had to be specifically targeted, since they comprised only 0.6% of DMR’s employees.

Ms N Ngele (ANC)(former Member of this Committee) noted that health issues as they related to mining had been discussed four years ago, and she was surprised that they were still being raised. She wondered when something positive would be done to address them.

Mr Msiza said that the lack of improvement in health issues was acknowledged by DMR. More efforts had to be made, and he cited as one example the prevention of exposure to dust. The health issues were also addressed by Dr Aaron Motsoaledi, Minister of Health. DMR has also committed itself to tackling silicosis, HIV and AIDS.

Mr Schmidt cited the case of Kumba and Imperial Crown Trading (ICT), where it was found that Kumba was, in fact, entitled to 100% of the mining right to Sishen Iron Ore Mine because mining rights could not be subdivided under existing mining law. He asked whether this judgement had an impact on MPRDA. He wondered when the amendments to that Act could be expected. Mr Schmidt also asked whether DMR was going to appeal that case. Unfortunately, he could not see what actions were taken by DMR in response to such judgements.

Mr Ragimane replied that the DMR was busy working on an amendment of MPRDA but nothing had yet been presented to the Cabinet. Once the proposed amendments had been finalised, the Department would brief the Committee.

Mr Lucas raised the question of costs of electricity and fuel, asking how they could be met.

The Chairperson noted that the Government was engaging with Eskom on issues pertaining to scarcity of water, scarcity and cost of energy, in a way that would enable Eskom to survive as an entity but would also make the costs decrease. However, the National Energy Regulator (NERSA) representative made it clear that unless Eskom was given money, there would be no easing of prices. This was very worrisome.

The Chairperson linked the prospecting and mining rights to the outcome of the moratorium on the issuing of permits for six months.

The Chairperson asked what role the private sector played in infrastructure development. When the idea of auctioning of mineral rights was discussed, it was linked to the infrastructure development. In fact, it went even beyond the business of mining to the extent of social infrastructure development. He agreed with Mr Lorimer that a report on all implementation plans of beneficiation should be made. He thought that procurement equity seemed more inter-departmentally oriented. He wanted to know what impact the DMR’s work would have on the industry.

Mr Ragimane agreed with comments on procurement issues and promised that DMR would continue to monitor the companies in their compliance with the Mining Charter.

The meeting was adjourned.