Chairperson, Minister Peters, Chairperson for Mineral Resources, Comrade Gona, Chair of Energy, Comrade Elizabeth Thabethe, hon members, board members and executives of state-owned enterprises, members of the labour movement, members of the business community, honoured guests, ladies and gentlemen, it is a privilege to address you so soon after our country's fourth democratic election, which saw an overwhelming majority of the electorate making an X for further improvements in the quality of their lives.
President Jacob Zuma issued marching orders to our government in his state of the nation address. It is now our duty to ensure that our economy weathers the current global storm by continuing to court stability and a favourable climate for investment; to ensure that we protect the jobs of workers during these difficult times; create decent, sustainable employment, and that we are ready to take advantage of the boom that will inevitably come after the dark clouds which are now looming large over the world economy.
As we present the budget for 2009-10, we are mindful of the fact that there is a bumpy road ahead. The mining sector is under severe strain, but we have sown the seeds of a resilient economy. The difficulties that come with this stormy downpour won't last; the sun will shine through, and we should be ready to harvest in the summer. Whilst we are aware of the difficulties ahead, we are also under no illusion that the mineral resources of South Africa can and must be used to further improve the quality of our people's lives, especially those who did not benefit in the past from the substantial wealth of our country.
To Mr Spies, unfortunately those who are complaining whilst you did not complete your statement on the issue of ... [Interjections.] Oh, he is gone? Unfortunately these members come and go. The 2009 Estimates of National Expenditure was showing that the Department of Minerals and Energy had been allocated a budget of R4,6 billion for the 2009-10 financial year. As hon members would be aware, we were still in the process of splitting the Department of Minerals and Energy. Therefore, we will be in a better position to elaborate on the Budgetary implications of this split after the mid-year adjustments process.
Our performance against budget continues to be remarkable. The department managed to spend 99% of its financial appropriation for the 2008-09 financial year. The department has yet again achieved an unqualified audit report with no emphasis of matter for the 2007-08 financial year. I am confident that the audit report for 2008-09, which we are expecting later this year, will be in line with the high standard we have set for ourselves. Indeed, the challenge going forward is whether the new departments would maintain this standard.
Mining remains an important contributor to the country's economic growth, with an average of 50% of the country's export earnings being derived from mining, while the sector is also a leading contributor to the country's coffers through taxation. This emphasises the sensitivity with which we must treat the industry. At the start of the global financial crisis, conservative projections of anticipated job losses were in excess of 100 000 during the first year of the economic slump.
The government immediately initiated a process of lessening the impact of the global financial crisis on the South African mining industry. To this end the aggregated commodity prices of minerals produced in the country lost some 40% of its value, while job losses were contained to less than 25 000, representing about 5% of total employment in the industry. This is a result of the instantaneous co-operation among all stakeholders in the sector, represented by government, business and labour. This collaborative work is rooted in the department led Mining Industry Growth, Development and Employment Task Team, referred to as Migdett. The team was also tasked with developing recommendations that would ensure optimal development of the mining industry to benefit South Africa once the crisis was over.
We have been observing a global move towards consolidation of the mining industry during this financial crisis. We are keenly watching these developments to ensure, amongst others, that such consolidation does not take us back to the age of anticompetitive practices, that there are no job losses and to ensure that it does not affect market prices.
In line with the internationally recognised principle that natural resources are a national patrimony, the heritage of all South Africans, the Mineral and Petroleum Resources Development Act, MPRDA, vested the custodianship of all exploration and mineral rights in the state in 2004. Since the promulgation of the Act, some progress, albeit less than envisaged, has been made toward the attainment of the objectives of the Mining Charter. The promulgation of the Act has also unlocked the mineral development potential of South Africa.
Since May 2004 we have received and processed an unparalleled number of applications for prospecting, exploration and mining, collectively peaking at about 20 000 and resulting in the development of several new projects. This is completely contrary to what has proven to be an inept analysis, which suggested in the past that, at the time of our regulatory framework, it would destroy the mining industry.
The window for conversions of old order mining rights closed on 30 April 2009 with most of the mining companies having lodged their submissions. However, we are aware that there are some who have made submissions and we would like to warn them that those who continue mining without having lodged a conversion submission beyond 30 April would be doing so illegally. So be warned. The department has established the coal industry task team to assist with the sector's market challenges in South Africa, including the infrastructure constraints and monopolisation of export facilities by a handful of large companies.
The introduction of the Mining Charter in South Africa was aimed at transforming the mining industry, to redress historical imbalances engendered by apartheid, so that the industry would be consistent with the changes in South Africa's overall transformation of its social, political and economic landscape. Embedded in the Mining Charter are provisions to asses the extent of progress towards the attainment of its objectives and to review the charter after five years of implementation. This is the year. In reviewing the charter, community upliftment would be among the key focus areas, to ensure that development of mining does not continue at the exclusion of the communities. The role of communities in mining has been less than adequate, with only a few pockets of excellence, which we anticipate would demonstrate the value of community participation, and would be widely adopted as a model for effective community participation.
We remain concerned about the tensions between mining companies and communities in areas where mining activities take place. Such tensions were more pronounced in Limpopo and the Eastern Cape. We believe that communities would not oppose mining if they were meaningful beneficiaries. We recognise that some companies are taking active steps in this regard and encourage those who are not doing so proactively to initiate programmes to contribute towards improving the social conditions of the affected communities.
Mining companies should take cognisance of the fact that, over and above the legal license to operate, they should also obtain a social license through co-operation with communities. I therefore implore mining companies to take their commitments in their social and labour plans seriously.
Over the last five years our focus in the department has been on the transformation of the minerals and mining industry. We have driven the process of ensuring black participation in the mining sector as operators, investors and managers. This would continue for as long as the minerals and mining sector remains untransformed. However, we are going to engage the highest gear when it comes to the minerals and mining industry's contribution to socioeconomic development. Our guiding light in this regard would be the five priorities of government. Gone are the days when mining projects did not have an impact on the quality of life of our people. Therefore, the new Department of Mineral Resources will, as of this financial year, conduct inspections on all social and labour projects.
We are going make sure that companies deliver on their commitments. We have no choice but to ensure that our people see and feel the direct benefits of minerals in their lifetime. In this regard, we are going to boost the department's capacity to facilitate and address the socioeconomic development challenges faced by hosting communities and labour-sending areas. We will, in future, identify projects that will contribute towards the improvement of the lives of our people and announce them in our annual Budget Vote.
As we review the Charter this year, we will assess progress in all areas objectively and truthfully as this will inform the review process and its direction. We have appointed an independent service provider to quantify the progress made to date against the commitments of the pillars of the Charter. This might be an onerous task, but it is a very important process for all stakeholders. I should also emphasise that the commitments of the Charter are not intended for compliance purposes only. They do not have a shelf life ending in 2014, but are meant to permanently transform the industry to be truly reflective of South Africa. Rights holders who continue to create a ripe environment for fronting will soon be losing their licenses.
We are enjoined by section 100 of the Act to publish both the Codes of Good Practice and the Housing and Living Conditions Standard documents within five years of their implementation. I am happy to announce that we have gazetted both documents by 30 April 2009. However, I am also aware that some stakeholders have concerns in this regard. My department and I are ready to consult with them with a view to finding a lasting solution to this problem.
Guided by our understanding that the country's mineral resources are finite, but creativity is unlimited, we have embarked on the development of a beneficiation strategy. The strategy was launched to all representative stakeholders on 31 March 2009, with a deadline for written submissions 15 May 2009. All submissions received are encouraging and are being consolidated in preparation for adoption of the mineral beneficiation strategy as a policy by July this year. This is essentially intended to support national programmes such as the National Industrial Policy Framework.
I am certain that as we embark on our beneficiation route all stakeholders will benefit from the country's comparative and competitive advantages. The extent of the external vulnerabilities created by our significant dependence on international markets are also going to be reduced somewhat. This proposition was a natural progression from a resource-based economy to a secondary and tertiary economy, which was consistent with other developed economies in the world.
Accordingly, this strategy will present opportunities for investment in the country by South Africans and foreign investors, as per the beneficiation of the Platinum Group Metals, which grew from less than 2% in the latter part of the 1990s to just over 20% in 2008. It is our intention to increase the value addition per capita in South Africa, contributing to job creation, skills development, poverty eradication and economic growth.
The State Diamond Trader has been severely affected by the global economic crisis, with diamond prices losing considerable value since the implosion of the global financial crisis. The challenges facing the State Diamond Trader are compounded by the standing financial model, which was essentially not developmental, but a classical business model. The department was assessing the prospect of a new business model for the State Diamond Trader, which will allow the Trader to continue implementing their core mandate of promoting equitable access to and beneficiation of diamond resources, addressing distortions in the diamond industry and correcting historical market failures to develop and grow South Africa's diamond cutting and polishing industry.
We are intending to finalise these corrections during this financial year so that the Trader can maximise its contribution to socioeconomic development when the upswing in the economy returns. The department presented its continental shelf claim to the United Nations in May this year. Early indications were that the country was likely to be granted this claim, which will not only extend the surface extent of the country, but increase the potential for mineral and petroleum resources as well as fishery. The medium- to long-term benefits from this undertaking are significant for the country.
The department recognised the three spheres of sustainable development, which comprises the economic, social and environmental aspects. In the past, the economic sphere took centre stage, with only mining focusing on economic benefits at the expense of the social and environmental aspects. Consequently, there were several thousand ownerless and derelict mines, meaning that the government has inherited a massive environmental liability.
In dealing with the consequences of this liability, the department has developed a dynamic strategy in dealing with derelict and ownerless mines in South Africa, recognising the long heritage of mining and its inherent environmental liability. Accordingly, we should caution against excessive focus on one specific sphere of sustainable development at the expense of others.
The levels of death, ill health and injuries at mines remain a serious concern for my department. The industry's stakeholders have over the last year managed to record a welcome 24% improvement in fatalities due to mine accidents when compared to the previous year, when 220 miners lost their lives. A seismic event of 3,5 magnitude on the Richter scale occurred at the Driefontein Mine belonging to Gold Fields Mining Company this past Saturday, 20 June 2009, which resulted in the death of two miners, and this is a concern to us.
This incident, and others in the recent past, called for an urgent review of seismic monitoring practices at mines. Both the Council for Geosciences and the Mine Health and Safety Council need to expedite the work that they are currently undertaking to improve seismic network coverage and seismic data integration and transparency.
I would like to take this opportunity to report back to hon members on the completion of the presidential audit of mines which was conducted on the instruction of the former President. The auditing programme covered mainly the high-risk mines in the country which amounted to 355. Amongst others, the audit indicated that an overall compliance of 66% on the number of items is critical for ensuring that there is an effective management system at mines. There are various issues that have been highlighted by this report.
We have introduced two critical amendments to the Mine Health and Safety Amendment Act which enhanced the state's ability to tackle the mine health and safety challenge of high injuries, ill health and deaths. The amendments introduce stricter sanctions for noncompliance with health and safety standards by individuals and corporate bodies as well as prosecutions. This amendment is in tune with the outcome of the presidential audits, which show an overall low compliance with health and safety standards. The second one was the establishment of the Mines Inspectorate as juristic person. This amendment was significant in that it provides a platform upon which the critical question of capacity to effectively enforce health and safety regulatory requirements could be addressed. The department will be working hard with all the stakeholders to implement the legislation. We have developed a human resource development plan to address the acute shortage of inspectors. Over the years it has become more and more difficult to recruit inspectors. It is our intention to create our own skills pool with the intention of improving the race and gender profile of our inspectors.
There are three projects which were being managed concurrently: Firstly, a bursary scheme with 16 students at universities and technikons, who will complete their course in the next four years; and secondly, 23 learners are undergoing experiential training at the Gold Fields training academy.