Mining : Minister's Budget Speech

Department of Minerals and Energy Budget Vote Speech by Ms Susan Shabangu, MP Minister of Mineral Resources
23 June 2009

Mister Speaker
Honourable 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; to ensure that we create decent, sustainable employment, and; to ensure that we are ready to take advantage of the boom that will inevitably come after the dark clouds which are looming large over the world economy.
Honourable Speaker, 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 must 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.

The 2009 Estimates of National Expenditure shows that the DME has been allocated a budget of R4,6 billion for the 2009/10 financial year.  As Honourable Members will be aware, we are still in the process of splitting the Department of Minerals and Energy. We will therefore 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 final 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 will 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 to lessen 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 cooperation among all stakeholders in the sector, represented by Government, business and labour. This collaborative work is rooted in the departmental led Mining Industry Growth, Development and Employment Task Team (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 is over crisis.  

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 anti-competitive practices, that there are no job losses and to ensure that it does not affect market principles.

In line with the internationally recognized principle that natural resources are a national patrimony, the heritage of all South Africans, the Minerals 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 MPRDA, some progress, albeit less than envisaged has been made toward the attainment of the objectives of the Mining Charter. The promulgation of the MPRDA 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 above 20 000 and resulting in the development of several new projects.  This is completely contrary to what has proven to be inept analysis, which suggested at the time that our new regulatory framework would destroy the mining industry.

The window for conversions of old order mining rights closed on the 30^th of 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 want to warn them that those who continue mining without having lodged a conversion submission beyond the 30^th of April are doing so illegally.


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 producers.


THE MINING CHARTER: IMPLEMENTATION AND REVIEW    
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 is 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. In reviewing the Charter, community upliftment will 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 anticipated 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 are more pronounced in Limpopo and the Eastern Cape. We believe that communities would not oppose mining if they were meaningful beneficiaries. We recognize that some companies are taking active steps in this regard and encourage those who are not doing so proactively to initiate programs 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 obtain a social license through cooperation with communities. I therefore implore mining companies to take their commitments in their Social and Labour Plans seriously. 

Our focus in the Department over the last five years 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 will continue for as long as the minerals and mining sector remains un-transformed. However, we are going to engage the highest gear when it comes to the minerals and mining industry’s contribution to socio-economic development.  Our guiding light in this regard will 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 will make ensure 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 socio-economic 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 of the Charter 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 may be an onerous task, but it is a very important process for all stakeholders. I must 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 MPRDA to publish both the Codes of Good Practice and the Housing and Living Conditions Standard documents within five years of the implementation of the MPRDA. I am happy to announce that we Gazetted both documents by 30 April 2009. However, I am also aware that some stakeholders have concerns in this regard and my Department will be consulting them with a view to finding a lasting solution to this problem.

BENEFICIATION
Guided by our understanding that the country’s mineral resources are limited but creativity is unlimited, we have embarked on the development of a beneficiation strategy. The strategy was launched to all representative stakeholders on the 31^st of March 2009, with a deadline for written submissions on the 15^th of 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, among others.
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 will also have be reduced somewhat. This proposition is a natural progression from a resource-based economy to a secondary and tertiary economy, which is consistent with other developed economies in the world. Accordingly, this strategy will present opportunities for investment in the country by South African 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 (SDT) 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 is essentially not developmental, but a classical business model. The Department is 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 intend to finalise these corrections during this financial year so that the Trader can maximise its contribution to socio-economic development when the upswing in the economy returns.

CONTINENTAL SHELF CLAIM
The department presented its continental shelf claim to the United Nations in May this year. Early indications are that the country is 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 benefit from this undertaking are significant for the benefit of the country.

MINING ENVIRONMENTAL IMPACT
The department recognises the three spheres of sustainable development, comprising the economic, social and environmental aspects. In the past, the economic sphere took centre stage, with mining only focused on economic benefits at the expense of the social and environmental aspects. Consequently, there are 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 must caution against excessive focus on one specific sphere of sustainable development at the expense of others.

MINE HEALTH AND SAFETY
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, 2007, when 220 miners lost their lives.
A seismic event of 3.5 magnitude on the Richter scale occurred at the Driefontein mine belonging to Goldfields Mining Company this past Saturday, 20 June 2009, which resulted in the death of two mine workers. This incident - and others in the recent past - calls for an urgent review of seismic monitoring practices at mines. Both the Council for Geoscience and the Mine Health and Safety Council need to expedite the work which 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 the Honourable 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 indicates;
An overall compliance of 66% on the number of items critical for ensuring that there is effective management system at mines;
The Mine Health and Safety Council must urgently develop and implement a programme that will promote a culture of health and safety at mines, and;
An urgent need to develop a national mine seismic network that will be fully integrated with the Council of Geoscience’s seismic network.
The stakeholders, through the Mine Health and Safety Council, have developed an implementation plan to address the recommendations contained in the report. Some of the recommendations of the audit are already being implemented to ensure complete eradication of accidents and ill-health in the mining industry. Honourable members, I will soon be tabling the detailed Presidential Audit Report to the Committee.

We have introduced two critical amendments to the Mine Health and Safety Amendment Act which will enhance the State’s ability to tackle the mine health and safety challenge of high injuries, ill health and deaths. The amendment introduces stricter sanctions for non compliance to health and safety standards by individuals and corporate bodies as well as prosecution. This amendment is in tune with the outcome of the Presidential audits which shows an overall low compliance to health and safety standards. Second is the establishment of the Mine inspectorate as juristic person. This amendment is significant in that it provides a platform upon which the critical question of capacity to effectively enforce health and safety regulatory requirements can be addressed.  The Department will be working hard with all the stakeholders to implement the legislation.

The Department has 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 are being managed concurrently. Firstly, a bursary scheme with 16 students at universities and technikons who will complete their course in the next four years. Secondly, 23 learners are undergoing experiential training at the Goldfields Training Academy. Upon successful completion in August, they will be employed as Trainee Inspectors in the Department. Finally, the ongoing internal training programme of diplomats and graduates in different engineering and occupational health disciplines.  The Mining Qualifications Authority will in the next financial year train more than 100 mining inspectors at a cost of R4.2 million. We are also developing a tailor made mine inspector training programme with Wits university as a long term measure to address the department’s capacity constraints.

SKILLS DEVELOPMENT
We have not invested adequately, or in a well coordinated manner to address the challenge of skills shortage in the country. This challenge requires a revolutionary approach. While our regulatory regime makes sufficient provisions for skills development, we shall be embarking on a more coordinated implementation of the provisions of the MPRDA and the mining Charter. The Department will continue to use its regulatory framework to directly impact on the five key programmes of Government relating to poverty eradication, job creation, education, rural development and skills development. The Mining Charter is instrumental in so far as LED projects and education are concerned and the following should be mentioned in this regard, namely:
A Strategic Partnership was entered into between the MQA and the Jewellery Council of South Africa in terms of the MQA’s strategy to support Beneficiation in the Mining and Minerals sector.
The National Skills Fund (NSF) funded a special project for an additional 1000 artisans in the mining and minerals sector.
The small scale mining and artisanal mining programme in the MQA was introduced to ensure that potential trainees can be trained.

ILLEGAL MINING IN SOUTH AFRICA
Despite its significant contributions to the economy, mining has also been associated with illegal activities which are becoming sophisticated by the day. The recent and widely reported incidents of unnecessary loss of lives at a shaft in Welkom, is a clear indication of the magnitude of the problem facing the industry. This problem is compounded by the existence of a market, which thrives because it is being fed.

The illegal miners operate in abandoned and disused areas of the mine. Earlier, more than 20 illegal miners died of a similar incident in the Barberton area in Mpumalanga. Illegal miners are not only a risk to themselves but also to the mine employees and to mine property. Illegal mining is a commercial crime and ought to be dealt with as such. I am will be working with my colleagues in the security cluster with a view of developing a comprehensive approach to this problem.

In conclusion, Mr Speaker.

On Friday, 26 June, it will be 54 years since all South Africa’s racial groups gathered at Kliptown in 1955 to adopt the Freedom Charter. This historic document sets out the democratic changes required to enable all the people of South Africa to live in harmony, enjoying equal rights and opportunities without regard for colour, race, sex or belief.

Honourable Members, working together with our communities, mining companies and trade unions, we are on course to realise the ideals enshrined in the Freedom Charter when it says: “The national wealth of our country, the heritage of South Africans, shall be restored to the people. The mineral wealth beneath the soil…shall be transferred to the ownership of the people as a whole.”

As enjoined by the Freedom Charter, we have, through the Minerals and Petroleum Resources Development Act, vested the mining and prospecting rights in the state. However, there is still a lot that needs to be done to ensure that all the people of South Africa share in its wealth. We are resolute in our determination to ensure that we fully realise the ideals of the Freedom Charter, so that all our people can have the ‘better life’ which the African National Congress has promised.

ENDS