SA Mining Industry Update & Investments: briefing by Chamber of Mines

ECONOMIC AND FOREIGN AFFAIRS SELECT COMMITTEE
7 February 2007
SA MINING INDUSTRY UPDATE & INVESTMENTS: BRIEFING BY CHAMBER OF MINES

Chairperson: Ms N Ntwanambi (ANC, Western Cape)

Documents handed out
Chamber of Mines presentation

Audio Recording of the meeting

SUMMARY
The Chamber of Mines outlined the importance of mining to the economy, exports and the job market. Mining overlapped with several policies and sectors, and the vision of the Chamber of Mines was to achieve a good framework that would allow resources to be converted into wealth for the benefit of all South Africans. The Chamber’s advocacy role was detailed. It was addressing historic imbalances and was progressing fairly well on empowerment and gender issues. Tripartite cooperation was set out. The challenges included a decline in exploratory investment in South Africa, costs of mine closures, climate change, and the need for biodiversity and water management. Safety and labour issues were discussed. The reasons were outlined why, despite the worldwide commodities boom, South Africa had experienced a lower than average improvement. The programmes of action to deal with the challenges were outlined. There were still concerns over the second draft of the Royalties Bill, but the Chamber was interacting with the Department. Questions by members included the bursary schemes offered by the industry, the position of women in the industry, the effect of land claims, international agreements and cooperation, and the position of foreign workers. Illegal mining and gold theft, disused mines, and low exploration rates were raised and fully explained. Further questions related to royalties, AIDS and ARV treatment, loss of jobs in the industry, possible prescription of claims under the Act, the possibility of re-opening mines, the portability of mining skills, accommodation of workers, and medical care in cases of injury.

MINUTES
Chamber of Mines briefing
Mr Mzolisi Diliza, CEO Chamber of Mines, outlined the importance of mining to the economy, exports, and the job market. It contributed also to energy and investment and was able to play a complementary role in deep rural areas. Mining found itself overlapping and interacting with government policy and other national issues such as health, the environment, water issues, labour, economic growth. The vision of the Chamber of Mines was to achieve a policy, legislative and governance framework that was widely supported and would allow the resources to be converted into wealth that would benefit all South Africans. He indicated that the Chamber was a private sector body, fully funded by private companies.

Mr Roger Baxter, Chief Economist, Chamber of Mines, stated that mining directly comprised 6.2% of South Africa’s Gross Domestic Product (GDP). Its removal from the GDP would however impact more strongly, removing between 16% and 20% of GDP because of its additional indirect contributions. He named some of the contributions to specific areas, including R10 billion to the transport services sector, and R105 billion in exports earnings for 2006. Mining employed 450 000 people and had a total wage bill of R36 billion, which meant that miners were able to become consumers and this in turn had a multiplier effect. There were around 5 million dependents of miners. A further 150 000 jobs were produced in associated industries, giving a ratio of 1 associated job for every 3 mining jobs.

Dr Frans Barker, Senior Executive, Chamber of Mines outlined that the Chamber, which had been in operation since1889, was an advocacy organisation. It had been successful because of its ability to change and adapt to the ever-increasing demands within the industry. The Chamber was fully funded by private donations and its aim was to convert South Africa’s mineral resources into wealth for the benefit of all South Africans. The Chamber had recognised historical imbalances and accepted that it should play a leading role in transforming itself as well as promoting transformation of the entire sector. It had acknowledged the importance of unions in the industry and sought to engage them in a constructive manner.

Dr Barker outlined black empowerment within The Chamber of Mines. Black people already constituted 40% of managerial and professional positions and women held a total of 47% in the same categories. He added that within 12 major mining firms women accounted for 7% of employment, but in the entire sector good progress had been made to achieving the targets set in the Mining Charter, which was 10% women employees by 2009. Dr Barker emphasised that the Chamber was fully mandate driven and served the views of its members, although senior executives would take a proactive role in persuading members towards advantageous transformation and black empowerment.

Dr Barker addressed importance of tripartite co-operation in mining. Various segments included an HIV/AIDS committee, Mine Health and Safety Council, a forum for sustainable development issues, Minerals and Mining Development Board and the sector partnership committee.

Mr Diliza spoke of the challenges facing South African mining. The Chamber considered compliance with The Minerals Act and The Mining Charter Beneficiation as vital and conceded that there remained much work to be done. Sustainable development, economic and environmental issues, safety, labour relations and skills development were also of great importance. The reasons for the fall in investment in mining in South Africa, along with other economics issues such as the increasing costs of doing business and the issue of royalties, needed to be discussed. Challenges included the cost of mine closures, the impact of climate change, and the need for biodiversity and water resource management. Safety was always an issue that was pertinent to mining, and milestones and targets for safety had to be met by 2013. He also emphasised the importance of combating HIV/AIDS. The Chamber had also set up a bargaining council to address labour-related issues.

Mr Diliza stated that one of the biggest concerns for the industry was the shortage of skilled labour. The industry had created bursaries and scholarships to address the shortage. Sustainable development and ensuring that mining caused as little harm as possible to the environment had led to the Chamber’s involvement with Registration, Evaluation and Authorisation of Chemicals (REACH), a project led by the European Union (EU), in which the Chamber contributed together with the Department of Foreign Affairs.

Because the AIDS pandemic was particularly significant in the mining industry, the industry had undertaken to share its information and knowledge on AIDS and had pledged to provide Anti-Retroviral Treatment (ART) to all its workers. Firms encouraged workers to undergo voluntary testing and counselling. 40% to 45% of mineworkers were already receiving treatment and 94% of those being treated could return to work.

2005 had heralded the largest improvement in mining safety records with a substantial 16% increase. 2006 had set higher targets of 20% but had not achieved below this target. A task team had been formed to address issues of safety and improvement.

Mr Diliza remarked that there had been a worldwide commodities boom although South Africa had not been able to take full advantage, having only experienced an increase of 27% against a world average of 43%. Although Australia had achieved 95% pre-tax profits, South Africa’s rise in profits was only 12%. The global boom had coincided with the strengthening of the rand, which damaged exports, and this was compounded by infrastructure constraints in rail and port services, as well as a shortage of water. The new Minerals and Petroleum Resources Development Act (MPRDA) had also caused some bottlenecks in implementation and there were challenges with environmental licensing because three governmental departments were involved.

Mr Diliza tabled and explained the programme of action that was being implemented to deal with the problems. He reported beneficial developments in the areas of granting new prospecting licences, mining rights and permit applications. There had also been pleasing transparency. There had been an 8.3% increase in investment from the third quarter of 2005 to 2006. There would be enhanced spending on infrastructure investments in a railroad and a new dam.

Mr Diliza said that there were still concerns over the two-tier system of the second draft of the Royalties Bill, and although it was not fully supported by the Chamber, at least it was an improvement on the last draft. The Chamber was still in discussion with the Department of Minerals and Energy over the best options, and was hoping for a competitive system that would draw other companies to take advantage of down-stream benefits. It was clear that the MPRDA needed amendment, and the matter should be addressed urgently before 30 April, which was the cut off date for prescription of claims.

Mr Diliza concluded that the Chamber would welcome increased interaction with the Committee and proposed that the Chamber assist in funding visits to mining sites, to foster better understanding of the industry’s challenges and note improvements.

Discussion
Mr J Sibiya (ANC, Limpopo Province) enquired who could qualify for bursaries or scholarships from the mining industry. He also asked if the industry ensured that there were enough placements for those trained.

Mr Diliza replied that the bursaries were not just specific to mining but also covered other areas such as business and commerce, so there was a broader training base. The industry made funds available to universities or technikons, which those institutions then awarded to students. In 2004 there had been difficulty in placing graduates but the Chamber, through co-ordination with its members and non-members, had managed to increase the placement of graduates. Those with mining degrees or formal training were in high demand overseas and South Africa should do much more to ensure that these people were not enticed away once they had been trained. Currently, there was huge demand locally, so that the concerns were not perhaps as pressing.
He added that mining companies had established a fund to help pay lecturers to ensure they remained in the country to provide a high level of well-trained graduates.

Mr Sibiya asked what was the highest position that a woman was currently holding.

Dr Barker replied that Anglo-American PLC, had a woman as its Chief Executive. He confirmed that the industry did need more women and, more specifically, women in positions of leadership. The Chamber and industry had taken steps towards ameliorating the employment of women.

Mr Sibiya asked to what extent land claims affected the industry.

Dr Barker responded that it had been a problem in the past and had become more of an issue. However, no specific complaints had come from members and it seemed that members and the government were working well in finding solutions and coming up with compromises.

The Chairperson asked if the Chamber had international relationships, and how it benefited from them.

Mr Diliza replied that the Chamber did indeed have international relations. It participated in Southern African Development Community (SADC) events and The Mining Industry Association of Southern Africa. An SADC meeting to be held shortly would cover a number of areas, including the harmonisation of legislation. The Chamber was a partner in the International Council for Mining and Metals, based in London. It was also involved in the EU’s REACH programme, which affected mining exports to the EU.

Ms Ntawanambi asked if foreign workers were covered by the Labour Relations Act (LRA), and what they did when returning to their country of origin.

Dr Barker replied that foreign mine workers were fully covered as long as they were working in the country. He said that they were thus entitled to minimum wages and full access to the provident fund. All other conditions, such as safety and health, were equally applicable. Mr Diliza added that these concessions had resulted from much negotiation with foreign governments. Although there had been some problem had been remittances to Mozambique, that had finally been accomplished.

Dr Barker added that he was not sure if foreigners were able to access unemployment insurance payouts from South Africa back in their country of origin. He asked that he be given time to check on this and respond in writing. TEBA Bank handled remittances to foreign countries after agreement via inter-governmental agreements. This was a very sophisticated system that allowed dependents to access funds of the mine workers easily in their home countries.

The Chairperson asked about illegal mining, and specifically about the situation with foreigners in Mpumalanga.

Mr Diliza said that the issue of illegal mining and gold theft was a very complex issue globally. He said that South Africa was a leader in addressing this problem. He reminded Members of the Kimberley Accord, which was created to tackle illegal diamond trading with regard to origin and certification. He added that the Chamber had been working for some time with the police, the diamond squad, the Receiver of Revenue and others in trying to clamp down on illegal trading and mining. The Chamber had committed many resources to this. An important development had been the “fingerprinting” of gold, which enabled a trace back to the mine from which the gold was extracted. This process was being extended to neighbouring countries and Namibia and Botswana had given the necessary information to create a database of gold “fingerprints.” The Chamber still awaited information from Zimbabwe. It hoped to make serious inroads into addressing the problem in the near future, but would appreciate the assistance of government.

The Chairperson asked about disused mines in the East Rand, enquiring what was the position if a mine became unproductive.
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Mr Diliza said that previously the legislation had not addressed these issues properly, but now the new legislation created far more certainty and was on the right track.

Mr N Hendricks (UIF, Western Cape) wanted to know why such a low percentage of mine workers with HIV/AIDS were receiving ARVs.

Mr Diliza explained that these figures were uptake figures and they should improve. It was difficult to persuade all those diagnosed with HIV/AIDS to take ARVs, but the Chamber was trying to raise the figure as high as possible.

Mr Hendricks asked why the exploration rates were so low and voiced concern that South African was not attracting enough investment.

Mr Baxter answered that exploration was a critical component and was considered the lifeblood of the industry. The Chamber had on the previous day been discussing the concept of flow-through shares, which was being used in Canada to encourage venture capitalists through use of tax incentives. He added that small venture capitalist firms did most exploration globally. He said that it was a very high-risk business and that the chances of finding a usable deposit were about 500:1. The boom that was taking place now was demand driven with a shortage in the market of specific minerals and metals.

Mr Baxter added that there were three factors that had been identified that appeared to be limiting South Africa’s exploration investment. Firstly, the availability of venture capital funding since South African investors had historically been averse to risk, and banks and development funding institutions did not lend to junior resource exploration companies that did not have any income. These types of companies basically make their money by finding deposits and then selling the rights to other companies. The Stock Exchange (JSE) was pushing hard to list more of these companies and this might create some very interesting possibilities. The issue of flow-through shares was also being investigated by the Chamber, unions and others. The second cause was regulatory constraints. The Department of Minerals had received over 6 200 applications for new prospecting, creating a severe bottleneck. The Department had been doing an impressive job at handling all the new applications. Thirdly, the limitations arose through problems on the information front. The Council for Geosciences had been trying hard to standardise the industry, which caused some constraints. Australia, during the 1970s also went through a time of lowered or stagnated exploration, and it had re-mapped that country and lowered entry costs into the industry. The Chamber believed that South Africa’s geology was not well known and that was a further cause of the decline. There was a strong likelihood of geological prospecting still to be done.

Mr Baxter concluded that despite this, there had been a 40% improvement in exploration last year, putting South Africa in line with global averages and showing that progress had been made.

Mr Hendricks asked about the reports that the industry had been shedding jobs recently, and asked what had been done by the Chamber and its members.

Mr Diliza replied that if downsizing took place then members must have a plan to train those who had lost their jobs. This was done to increase their employability in other areas of the economy. A task team had been created to develop the portability of mining jobs to other non-mining jobs. The platinum mines were hiring those who had lost their jobs in coal or gold mining.

Ms B Matlhoahelo (ID, Northern Cape) commented that it would be easier to combat gold theft if the Chamber was aware of how it was occurring.

Mr Diliza responded that this was already being investigated.

Ms Matlhoahelo asked about prescription of claims and why this was likely to happen.

Mr Diliza replied that the Chamber was trying to become a “one-stop shop” in claims-related issues. He said that this was a challenge in itself and that the debate was ongoing to find a workable solution that would be agreeable to all parties.

Ms Matlhoahelo asked how the ARVs were handled at the mines.

Dr Barker said that 94% of workers with HIV/AIDS did return to work while using ARVs. Previously workers would start treatment too late into the disease, but now they received treatment as soon as they knew their HIV status. They were able to attend the mines’ hospitals while on sick leave and their jobs were held open for their return. South Africa’s figures for workers taking their medication properly were better than in the EU.

A member requested details on the use of windmills during water and electricity shortages.

Mr Diliza acknowledged that such shortages were a problem that had added to the decline in profits in the sector. The solutions were being addressed very seriously.

A member asked about closure of the coalmines in Northern KwaZulu Natal, and if there was any possibility of re-opening them.

Mr Baxter replied that the possibility of re-opening those mines had been considered and this might happen. However, he reiterated that platinum mines were taking in most miners who lost their jobs in the coal or gold mines.

A member asked about what safety measures could be taken to prevent female train drivers being attacked and raped on the trains servicing coal-mining areas and Richards Bay.

Mr Diliza said that this matter had been raised with the industry task team. The mining industry had to work with Transnet on the issue.

Another member commented that mining skills were not very portable to other parts of the national economy.

Mr Diliza explained that this is why the task team had been created and it had become incumbent on member companies to retrain miners who lost their jobs.

A question was asked about the accommodation of the workers, specifically hostels.

Dr Barker replied that the member companies had to provide at least 50% of workers with a choice of free accommodation by 2009, rising to 100% by 2011. So, it would effectively allow all miners the choice whether to stay at home or in a free hostel.

A question was posed whether it was reasonable to expect other sectors of the economy to be able to take in miners who had lost their jobs.

Mr Baxter said that there had been a slight increase in the number of people employed in mine work. Coalmines in KwaZulu Natal and Witbank might be re-opened, although this was likely only within around twenty years as new technology had still to be refined. Coal reserves were known to be present, but current technology made it unprofitable to take the coal out.

Mr D Mkono (ANC, Eastern Cape) asked about royalties, and amounts payable to kings and chiefs in rural communities.

Dr Barker responded that the concept of ownership over mining rights had changed. The process of conversion was still ongoing and should be completed by 2009. He said that it would be best to see how to settle the claims within the context of the MPDRA, which would also involve the Department. Local communities should be part of the talks and solution as well.

The Chairperson asked whether physically challenged or disabled workers would receive medical care.

Dr Baxter replied that all mines had a centre to deal with miners’ health. He said that some miners were unable to work because of injury, but would receive home-based care and incapacity benefits. He added that workers received various types of compensation depending upon whether the injury had been work related, and had taken place in the mine.

The meeting was adjourned.