Hon Chairperson, Deputy Minister Oliphant, hon Fred Gona, chairperson of the portfolio committee, hon members, may I begin by acknowledging the presence in the public gallery of 21 young learners from disadvantaged communities?
Chairperson, with your permission, I would like to request them to stand, so that hon members can see the young girls who are going to be the chief executive officers, CEOs, of the mining industry. I do not know where they put my kids. [Laughter.] Where are my children? [Applause.] Thank you very much. These are the future CEOs of the mining industry, the miners, and owners of the mining industry. When we talk about transformation in this industry, we are not talking about fronting; we are talking about building a sector which will reflect the future, where all of us will be treated equally. Hon members, beneficiaries of the ministerial programme, these are my children.
We stand at the cusp of a new era in South Africa, one which sees so clearly now the resurgence of mining as a central force. I am, therefore, honoured to present the budget of the department that is responsible for a sector so critical to our country's future.
The fact is that the ANC has placed the mineral and energy complex right at the centre of its socioeconomic and political agenda. This is an appropriately far-sighted step as the organisation and movement I represent marks its centenary, committed as it is with even more vigour to changing the lives of our people for the better.
Over the decades the nation has inexorably grown economically, despite the ravages of apartheid. We have now thrown off injustice and strengthened our economy, and in doing these things we have shown our true greatness as a nation, for the all the world to see. The resulting unity of spirit, rooted in our diversity, is what gives us real strength and drives us today in an advanced economy characterised by features of both the developed and underdeveloped worlds.
Today we are tabling a budget of R1,169 billion for the 2012-13 financial year, which represents an increase of R130 million from the previous budget of R1,039 billion. This increase is largely earmarked for research and development in the minerals and mining industry, through Mintek and the Council for Geoscience. My department will continue to manage this allocation in line with good financial management principles, as prescribed by the Public Finance Management Act, PFMA.
In the same spirit, I am pleased to report that my department utilised 99,1% of its allocated budget for the 2011-12 financial year. We have developed clear targets and action plans to address matters which arose out of the audit of the previous financial year.
In response to the call by the President with regard to tightening supply chain management practices, the department has begun reviewing its procurement policies and procedures to ensure that the acquisition of goods and services continues to be done in a manner that is fair, equitable, transparent, competitive, and cost-effective. Furthermore, the department has a process in place where, annually, all supply chain management practitioners sign a code of conduct. All bid committees have been appointed and are functioning effectively. The department has already begun the practice of vetting all supply chain management practitioners.
Underpinning it all is the fact that in 2011 the mining industry contributed 9,6% to our country's gross domestic product, GDP, more than 12% to total fixed capital formation, and more than 35% to our total export revenue, and employed 2,9% of the country's economically active population, which currently stands at more than half a million that are directly employed. Furthermore, the sector contributes significantly to the country's corporate tax. It is important to note that more than 60% of the country's energy and more than 90% of electricity generation are derived from activities associated with mining.
We are tabling this budget at a time when, influenced by our mining sector strategy, which is a product of the tripartism of the Mining Industry Growth Development and Employment Task Team, Migdett, we have an historic opportunity to rekindle the role of the mining and energy complex in our economy in a quest to eliminate the evil triplets of poverty, unemployment and inequality, which are stubbornly refusing to disappear from our landscape almost two decades after 1994.
The urgency of ensuring that we take advantage of the next wave of the commodity boom, which will surely come, was underscored when President Jacob Zuma announced massive infrastructure plans in his state of the nation address. The projects promise solid progress ahead for our nation.
We are committed to working together with our state institutions on action plans to optimise the sector's extractive capacity and to attract investment, as well as to maximise mining's job creation potential. The availability of more rail, port and water infrastructure necessary for mining will raise the level of mining, resulting in job creation and economic development in various commodities, including iron ore and manganese ore in the Northern Cape, and coal from the Witbank and Waterberg coalfields in Mpumalanga and Limpopo.
At the end of July my department will release the coal resources and reserves study, which has been led by the Council for Geoscience and which reveals that the Waterberg region hosts a significant share of our country's remaining coal reserves. This is the first comprehensive assessment of South Africa's coal resources and reserves since 1987.
The promulgation of the Mineral and Petroleum Resources Development Act, MPRDA, in 2004 introduced a policy of equal access to South Africa's mineral resources, which had previously been the exclusive preserve of one racial group. The democratic mineral dispensation introduced the policy of socioeconomic responsibility, which was to be achieved through the application of the black economic empowerment policy, ensuring that historically disadvantaged South Africans were brought into line and into the mainstream of mining.
However, challenges experienced in the implementation of these policies resulted in the need to review both the MPRDA and the Mine Health and Safety Act, the MHSA. The objectives of the review are as follows: to provide a detailed consultation process; to support the beneficiation strategy; to streamline the licensing processes to avoid delays and inefficiencies; to provide for enhanced punitive measures; to improve the current construct of the Act and remove ambiguities; and to provide clarity on the mining of associated minerals.
The review of the Act, however, does not seek to introduce any major policy shifts in respect of the exploration and exploitation of South Africa's mineral resources. Accordingly, in our efforts to harmonise our legislation, the creation of a synergy between the MPRDA and the MHSA is pivotal in ensuring that we create regulatory alignment.
Last year we launched our flagship on-line mining licence application system, which we referred to as Samrad, that is, the South African mineral resources administration system. I am pleased to report that after initial teething problems associated with implementing a ground-breaking system, we have now entered a stage where the system is rapidly gaining ground. To date, we have had over 3 500 applications that have been successfully lodged remotely through the department's website into a system designed to ensure that we achieve transparency, reduce the margin of error and ensure a consistent systematic approach to the evaluation and the eventual decisions regarding the awarding of rights.
Hon members will recall that on this occasion last year we reported on a process of cleaning up our data with the intention of ensuring that we migrated it into the new system. This has now been done. Working together with the mining industry, we are now giving priority to processing legitimate old-order rights applications that are in our system. We are committed to ensuring that these conversions yield positive results.
The department will continue to search for ways to upgrade the system to ensure that we remain a relevant, attractive and competitive mining jurisdiction. These improvements will include, amongst other things, the ability of the system to allow users ultimately to lodge various categories of reports online.
A fragmented regulatory and mining licensing system has long been identified as one of the impediments to investment and therefore the competitiveness of the South African mining industry. The current timeframes for obtaining a mining right, a water-use licence and environmental authorisation are not aligned, which results in prolonged processes and unnecessary delays. As a result, the Department of Mineral Resources and the Department of Water and Environmental Affairs are currently reviewing the regulatory framework in an effort to put in place an integrated and streamlined licensing system, which will not have a negative impact on the timeframes. It is envisaged that the streamlined licensing process will ensure compliance by right holders with the various pieces of legislation, create certainty in the regulatory framework, expedite the licensing process, and ultimately strengthen the constitutional imperative of security of tenure. This is in keeping with a principle of co-operative governance which dictates that government departments streamline their processes to promote seamless compliance with all relevant and applicable legislation.
Over and above this, I am pleased to announce that a task team reporting directly to the Minister of Water and Environmental Affairs and me will deal with the issues that we have just outlined.
Hon members will recall that we extended the moratorium in Mpumalanga owing to the complex nature of environmental challenges in that province. This culminated in over 41 rights that are located in Wakkerstroom and Chrissiesmeer being identified as those belonging to the category of environmentally sensitive areas. Consequently, we have taken action to prohibit mining in these areas, and those rights have been withdrawn.
At the Mining Indaba I announced measures we intend taking to address the issue of the rights that are either being revoked or lapsing. In February this year I published a notice in the Government Gazette inviting submissions with regard to our intention to introduce a new system in regard to the auctioning of rights. I would like to thank all those who made representations which, I must add, were not opposed to the system, but instead offered suggestions on how best we can address the technical aspects of the process itself. After due consideration, I have decided to issue a proclamation in the Government Gazette which will invite applications on revoked or lapsed rights. In this regard, rules that are aligned with the MPRDA will be clearly spelt out in the Gazette. I must indicate that the first round of bidding will take place before the end of June.
While reaping the fruits of transformation brought about by the MPRDA, we as a department are concerned about the current litigation which intends to reverse the gains of transformation in the mining industry. Therefore, we are watching this space closely, as we have to make sure that whatever happens in this country never ever takes us back in the transformation of our whole economy. [Applause.]
We call on the mining industry to implement fully all the provisions contained in the Scorecard of the Mining Charter. Audits that were conducted by my department have revealed that the level of compliance is not what it should be. There are, amongst other things, low levels of implementation of employment equity by some mining companies; low levels of women's representation at senior management level, especially in decision- making structures; fronting, especially by women, who do it on behalf of men; companies that change approved social labour plans without appropriate consent from the department and without consulting communities; suppliers of capital goods to the mining industry that are mostly reluctant to transfer skills to black economic empowerment, BEE, entities; and rampant use of expired BEE verification certificates, which forms part of fronting.
Procurement is one of the critical pillars of the Mining Charter. In this regard, I am concerned about the manner in which the entire procurement value chain is being handled in the mining industry. It is disturbing that procurement benefits are being reduced for BEE entities and are limited to mundane and peripheral issues, such as catering, cleaning and gardening services.
The social labour plans are an essential instrument in the hands of the democratic state to ensure that communities benefit from mining. It is in this area that we have identified gaps in the proper alignment of identified projects with integrated development plans, IDPs, and consultation with communities and municipalities. Sadly, this is one of the areas that constitute conflict between communities and mining companies. I therefore call on the mining industry to embrace and implement these imperatives without equivocation, as they will create harmony between the mining industry and communities.
We are keen to work with the mining industry in circumstances in which voluntary compliance is both a moral and an ethical issue. My department is continuing with the project of rehabilitating derelict and ownerless mines. Working together with Mintek, we have reached agreements with communities on the implementation of the Heuningvlei project whose scope has been finalised. In the year 2011-12, a total of 115 temporary jobs were created in the Northern Cape.
I must also indicate that we have reflected on the issue of ownerless and derelict mines, and we have employed the services of an actuary to help us quantify the total cost, and also how best we can ensure that we are able to implement a process of changing the land and ensuring user-friendly land. We are expecting the report at the end of this month.
In July last year Cabinet adopted the beneficiation strategy, which is central to our bid to ensure that the mining and energy complex yields concrete benefits. This will take the form of an implementation plan with clear actions for the identified commodity groups. It will, however, align the Act with the recently approved beneficiation policy to ensure that the mining industry contributes to local value addition by making available the requisite mineral inputs to the local benefactors. We as a country are also endowed with semi-precious stones, which we need to use to reconfigure the racial patterns of our jewellery industry. This, amongst other things, includes jewellery fabrication which seeks to increase beneficiation, thus leveraging maximum value from our mineral resources. At the end of this year we intend to host a jewellery summit, which is aimed at making sure we create opportunities for previously disadvantaged communities in South Africa.
My department will work with the State Diamond Trader to ensure that historically disadvantaged communities become part of the mainstream and contribute to economic growth and job creation. We want to revisit the State Diamond Trader. We are currently looking at the SA Diamond and Precious Metals Regulator, SADPMR, and the State Diamond Trader to make sure that we align them in a way that will ensure that we are able to deliver on this mandate.
In the same vein, the Kimberley Process elected South Africa as the deputy chairperson 2012, and we will assume the chair in 2013. As founding members we accept this honour, as it coincides with the 10th anniversary of this initiative, founded in the modest Tabernacle Church in Kimberley.
Subsequent to the Cabinet's decision to establish a state-owned mining company and the endorsement of the African Exploration Mining and Finance Corporations operating as a nucleus for this entity, Cabinet approved the model and the hiving off of the African Exploration Mining and Finance Corporation from the Central Energy Fund group of companies. We as a department have to ensure ...