DEPARTMENT OF MINERALS AND ENERGY PRESENTATION OF THE 2007/8 MTEF STRATEGIC PLAN TO THE MINERALS AND ENERGY PARLIAMENTARY PORTFOLIO COMMITTEE

08 MAY 2007

DIRECTOR-GENERAL'S OVERVIEW

SLIDES 1 - 5

INTRODUCTION

Chairperson of the Portfolio Committee, honourable members, thank you for the opportunity to present to you the Department's strategic plan for the 2007/8 MTEF period. Before I start on my presentation, I would like to extend the Minister's apology. She is in New York attending the 15th Session of the UN Commission on Sustainable Development (CSD15).

As indicated on the slide, the presentation for today will include an overview of the Department's strategic plan and the discussions on Energy, Mine Health and Safety and Corporate Services. Tomorrow our discussions will be on Mineral Regulation, Mineral Policy and Promotion followed by a briefing on the amendments to the MPRDA.

The DME Team is as indicated on the screen.

PLANNING FOR THE 2007/8 MTEF

SLIDE 6

Two years ago I presented to this committee the Department's changed strategic focus where I indicated that we will be moving away from focusing on policy development, to ensuring the implementation of our policies. As a result, the last two years has seen the development of various computerised and non-computerised implementation systems, processes and procedures. The time has now come for us to strengthen our capacity to monitor-monitoring the impact of our policies on the lives of beneficiaries, monitoring the effectiveness of our transformation processes, monitoring how the Department together with other government. structures (like our SOEs) are participating in the implementation of government policy.

Honourable members, in February this year, the Department held its annual strategic planning session where we reviewed our vision, mission and strategic objectives. We further reviewed the Department's 2006/7 performance against specified targets. During the same session the Minister gave us her strategic direction for the Department. The Minister's statement form the basis and the approach to our strategic planning. In addition, our plans have also heeded to the President's call during the 2007 State of the Nation Address where he called upon government to, amongst other things, intensify the fight against poverty, security of energy supply and expand access to electricity, promote the growth of the small and medium business sectors, address the challenges of the second economy, reduce the cost of doing business in South Africa, and raise the state investment in the first economy.

Over the next two days we are going to indicate to this committee how we plan to implement the Minister's vision, explaining to the Committee the plans, targets and objectives of our various branches.

IMPLEMENTING OUR STRATEGY

SLIDES 8 - 11: ENERGY

Security of energy supply

Honourable members, the same message has been echoed from both the private and public sectors that South Africa's energy demand is fast outpacing available supply. Security of supply is still a key issue for Government and all energy sources need to be investigated fully.

Fuel shortages and electricity blackouts of the, past year indicated the need for South Africa to "better plan for energy demand and provision. Energy is the lifeblood of every economy but resource-based economies like South Africa just cannot continue to produce without cheap, reliable energy. For South Africa, security of energy supply is of paramount importance. It is only with appropriate planning that energy supply, now and in the future, can "be secured.

The Integrated Energy Master Plan

The recent energy challenges that have been experienced in the country are an indication of a need to develop integrated energy modelling system which will inform an integrated energy plan on an annual basis. To address these challenges., we have adopted a two pronged strategy. Firstly, we will present an Energy Master Plan that will incorporate a detailed energy infrastructure plan covering the next five years (including 2010) by June 2007. In 2009 a modelling system to gather data that will enable development of energy outlook for long term planning, will be in place. This modelling system will allow for the plan to be updated annually to take account of any changes at both policy and technological fronts.

The current energy supply dynamics have driven home the need for improving energy efficiency, that is, efficiency in both the production and use of energy. In setting targets for energy efficiency for the country, it has also become abundantly clear that international standards can never be achieved without the promotion of appropriate energy carriers for applications. In this regard, greater focus will be placed this year in the securing and promotion of gas both natural and liquefied as a thermal energy of choice.

To support the renewable energy drive, energy planning and energy efficiency, we will be introducing a piece of legislation that will mandate provision of energy data and mandating the use of healthy, safe, energy efficient and environmentally-friendly energy appliances. The same piece of legislation will create entities that will promote energy efficiency, renewable energies, energy planning and environmental protection.

The biofuels strategy will be published this year. The final strategy will take into account all stakeholder comments received during the consultation process that took place at the beginning of the year. Introduction of biofuels is part of our response to the climate change challenge facing the world. This is but one of the many initiatives that are supported by our renewable energy subsidy programme that commenced in earnest this year with the signing of the first subsidy contract. Most of the renewable energy projects, because of the difficulty with moving them from an idea to a bankable project, have very long incubation periods. Most of these projects have also applied and have received our support for CDM credits. We are going to be pushing ahead with a drive to promote participation by a lot more .people in these much needed renewable projects.

Electrification

Addressing energy poverty still remains a 9hallenge for the Department. Significant progress has been made within the implementation of the integrated national electrification programme. Challenges of poor and the absence of infrastructure, especially in rural areas, have put a strain on the performance of the programme. A total of R 1,4 billion has been allocated in the 2007/8 financial year, for the electrification of 150 000 households, 700 schools and all clinics, and the building of 10 substations. As part of the electrification plan for this year going forward, we will prioritise schools and clinics, with the target of all clinics by the end of this financial year and all schools by 2010.

Some of the questions we need to continuously address are whether we have enough capacity to roll out the electrification programme to meet the 2012 target and to what extent are we able to influence Eskom and Municipalities to deliver on our plans. We will be finalising concrete plans in the implementation of the final stages of our programme to meet the target of universal access to electricity by 2012.

As part of our objective of monitoring the impact of our policies, we will be evaluating the socio impact of INEP. A baseline study was commenced in 2007, which will allow trends to be established of the various impacts of electrification on the electrified communities. For example, we would be able to establish the correlation between education, healthcare, enterprise development and job creation as an outcome of electrification

Electricity distribution

The problems afflicting the distribution sector are acknowledged by all as being fragmentation of the industry and poor regulation. This manifests as the blackouts and brownouts that are currently being experienced as we approach the winter. In 20Q7, we will focus on addressing these problems by advancing the RED creation process and by implementing the Electricity Regulation Act.

As per the Cabinet decision of October 2006, 6 REDS are to be formed as public entities. A roadmap has already being finalized to establish the processes for RED rollout. In a parallel process, the EDI Restructuring Bill will be presented to parliament this year, providing the legislative framework for RED establishment.

The biggest challenge to RED creation still remains the voluntary participation nature of the process due to Constitutional constraints.

Free basic energy

Free Basic Electricity provision has further being augmented by the promulgation of the Free Basic Alternative Energy policy, to cover those qualifying households without access to grid electricity. In this way, the thermal needs of especially rural areas can be addressed, without having to make them wait for the grid infrastructure.

The Department's role is limited to providing the policy framework and supporting municipalities and Eskom in implementation of the policy. As you might be aware, the challenge exists of blanket covering even non-deserving households in FBE provision. Our policy framework provides for limited implementation of FBE to qualifying households only.

Nuclear

The debate on climate change and security of supply is not complete without the discussion on nuclear energy. If we are to deal decisively with the challenges of greenhouse gas emissions and to reduce our over-reliance on coal for power generation, we have to seriously consider nuclear energy as part of the solution. We are accelerating our work to ensure greater reliance on nuclear power generation. It is in this context that we are developing a nuclear energy policy that responds to this challenge. The draft nuclear energy policy has already been submitted to Cabinet to enable consultation with other Government Departments. We are concomitantly addressing the issues of nuclear fuel supply. The proposed programme of uranium beneficiation is a response to this need. The development of a comprehensive nuclear energy industrial complex is inevitable given the envisaged scale of the nuclear programme. A strategy for the development of skills required to support this programme will be developed. Legislation emanating from the Radioactive Waste Management Policy and Strategy will also be finalised during this year.

Petroleum licensinq

Licensing of petroleum activities started in earnest last year, with over 12 500 applications received, mostly in the last week of the conversion period, which closed on the 17th of September 2006. The process of evaluation of applications has begun in earnest and we are expecting to issue all licences by the end of this financial year.

Transformation of the petroleum industry still remains high on our agenda. The commencement of licensing under the Petroleum Products Amendment Act has given us leverage to begin to deal effectively with the promotion of transformation of the liquid fuels sector. It has become clear to us with the best of intentions real change can only come with proper mandates, legal mandates.

Addressing energy poverty still remains a challenge for the department. Although significant strides have been reached in the provision of electricity to the masses of our people who have previously been underserved or not served at all, there is clearly a need for thermal energy solutions. Some of people, even when they have electricity, still use low grade coals and paraffin for thermal needs. We have recognised that in most cases, it is not the type of fuel per se that presents health, safety and environmental challenges for households but appliances that are used with fuel. With the continued focus in correcting the prices of certain fuel types that are overpriced, we will pilot different energy appliances.

The 2007 Energy Summit is planned for June this year: The main objective of this summit is to engage stakeholders in reviewing the EWP of 1998, to assess the relevance of some of the policies in the context of the prevailing energy situation.

SLIDE 12

MINING

Mineral Regulation

Honourable Members, we presented to you a plan on eradicating the backlogs relating to the processing of mining applications last year. We had indicated at the time that backlogs would be eradicated by end of September 2006. Because of the negative perceptions these' delays had caused amongst investors and analysts, we embarked on an international roadshow targeting strategic mining investment countries such as Canada, USA, Switzerland, and the results were very positive. We have and continue to challenge any company that claim to have overdue applications, to come forward so that we can address these.

Monitoring

As part of monitoring compliance with the mining charter, both an unplanned inspections are conducted on a periodic basis. According to our strategic plan, an average of 150- 200 inspections per Region are planned for the 2007-8 financial year to monitor the various compliance aspects.

We will continue to monitor the implementation of the Social and labour Plans as a tool to achieve objectives of the Mining Charter, ensuring that projects introduced by the industry are sustainable and contribute to the long-term economic empowerment of the communities. To firm up government approach to LED projects, a workshop is being organised for this month of May between the Department and SALGA to set the minimum standards for acceptable LED projects and to discourage the 'small time-monkey projects' that sometimes companies submit for approval to the department claiming that such projects have already received a blessing by local/provincial government.

Capacity [number of personnel and knowledge base]:

Last year, the Department together with the DPSA conducted an investigation into the capacity challenges of this Department, with emphasis on the challenges brought about by the implementation of the MPRDA and the Petroleum licensing process. Recommendations made include management training programmes for the regional staff (to ensure greater understanding of the requirements of the Act and improve efficiency) and creating an environment for the sharing of best practice.

Training, workshops and information sharing discussions are already planned and being implemented this very year. Though the number of officials in this Branch was increased last year, in the light of these Vulindlela recommendations requests for additional personnel have been submitted to HR this last week and are under consideration. A Directorate: BEE has been created and the appointment of the Director is eminent. A plan and budget will be provided this MTEF period to secure the services of experts that will assist and train the BEE Directorate in evaluating the economic and financial models and BEE deals.

Mineral Policy and Promotion

The Branch will continue with its promotional activities in the main highlighting the investment potential South' Africa has in the mining sector. Late last year there were discussiens that South African Mining Sector is not attracting any new investments during the commodity boom. In this regard an all stakeholder meeting is to be held shortly to finalise commodity strategies highlighting issues that need to be implemented for the industry to continue attracting further investments. However, it should be noted that the industry has already started seeing a number of new investments due to huge investments the state has put in upgrading the infrastructure and the certainty in the outlook of the Industry due to the efficient way in which we process licenses.

The Minister in her Budget Vote Speech will be updating you on the Implementation Programme for the Precious Metals Act and the Diamond Amendment Acts of 2006. It suffices for me to say that we have completed all the preparatory work in this regard.

Shortly we will be presenting to you the long awaited Mineral and Petroleum Resources Development Amendment Bill. I might as well mention to you that these amendments are mainly of a technical nature and do not bring any fundamental changes. During the latter half of the financial year we will also be bringing to you amendments to the Geoscience Act which will seek to foster the alignment with the MPRD Amendment Bill

The department will continue to contribute towards sustainable development through mining. This we will do by:

 

·         Managing and administering the committee of the Mineral and Mining Development Board that is responsible for sustainable development:

 

·         Develop a strategy for rehabilitation of derelict and ownerless mines; and

 

·         Developing a strategy for the water ingress programme in the different mining areas.

 

Slide 12 Mine Health and Safety

The strategic goal of the Mine Health and Safety Inspectorate would be to continue with their improvement in governing the mining industry to be healthier, cleaner and safer. The overall trend in mining occupational related deaths have been decreasing however the numbers still remain far too high and the burden of occupational illness and disease also remains a concern. To this end the MHSI will ensure that all planned mine audits and 'inspections are carried out. Ensuring compliance to the Mine Health and Safety Council's milestones of health and safety targets is one of the MHS's primary goals.

This will require that the restructuring process that is near completion is finalised to ensure stability and-staff retention. The Human Resources Development plan for the MHSI that has been developed is currently being implemented with the recruitment of "inspectors in training". The internal restructuring of the MHSI is being carried out also to prepare the MHSI for integration with other inspection agencies as part of the National Integration of Occupational Health and Safety Competencies (a November 1999 Cabinet Decision).

This year also heralds. the' Mine Health and Safety Councils bi­ennial summits 'to review the state of health and safety at mines'. As required in terms of section 43(e) of the Mine Health and Safety Act (1996). The tentative date for the MHSC Tripartite Summit is the 5th of October 2007 in Johannesburg. Allied to this Summit will be a Mini-Indaba on Seismicity and Rockbursts as requested by the Minister of Minerals and Energy in response to the increasing trend of accidents related to these agencies and further aggravated by the rockburst incident in October last year where 5 miners lost their lives at the TauTona Gold mine in CarletonvilIe. The tentative date for the Mini- Indaba in the 7th September 2007 in- Carletonville.

The Department has developed a database for derelict and ownerless mines and a ranking system to assist in the prioritisation of those mines that need urgent attention. More than 30% of the identified mines are ownerless and therefore become Government's responsibility to close .and rehabilitate in the interest of the neighbouring communities.

SLIDE 15

Corporate Services

As of 1st March 2007, we introduced the Corporate Services Branch within the Department. Priorities for this branch will be skills development, building the Department's corporate culture, turning DME into a learning organisation, enhancing the observance and implementation of the Batho Pele principles within the Department.

Skills challenges in both the mining and energy sectors continue to pose serious challenges for the Department. The Department will be focusing on the implementation of the January Cabinet Lekgotla decisions in relation to capacity building within the Mining and Petroleum licensing processes, as well as the implementation of the Vulindlela capacity outcomes. This will hopefully strengthen the capacity of DME to deliver on its mandate.

An Integrated Human Resource Plan will also be developed to enable the department to meet its strategic human resource needs, resulting from the strategic plan. Based on the aforementioned, the HR capacity of the core line-function components within the department will be strengthened and the Human Resource Planning function will be repositioned and restructured in line with the new Human Resource Framework for the Public Service as issued by the Department of Public Service and Administration.

Competency assessments will also be conducted for all employees within the department, commencing with Senior Management and regional offices' employees, particularly in view of the capacity constraints as identified during the capacity assessment project and the need to enhance service delivery as informed by the new Legislative Framework for both Mining and Petroleum. This will be followed by the development and implementation of a comprehensive Management Development Programme as well as tailor made line function specific training programmes for other employees. Learnerships and the departmental programmes will also be embarked upon to ensure an increase of the skills pool from which the department will recruit its human "resources as and when they are required. This will be complemented by the Couching and Mentorship programmes that the department already has in place.

SLIDE 16 -18

The Department's 2007/8 Budget

Over the MTEF period, overall spending for the Department is projected to grow from R2, 6 billion in 2006/07 to an estimated R4 billion in 2009/10, at an average rate of 16.3 per cent. Additional allocations for increasing the number of employees in the Department to meet its statutory obligations in implementing new legislation and regulating the mining and energy sectors contributes to this increase in spending. R18 million, 22, 4 million and R24,8 million has been provided for unfunded posts and administrative expenditure relating to these unfunded posts over the MTEF. Other additional allocations over the same period have gone to the Integrated National Electrification Programme (INEP), R285 million for electrification backlogs in schools and clinics, the Council for Geoscience (R50 million) and the Nuclear Energy Corporation of South Africa (R145, 6 million) and the implementation of new transfer payments to the Diamond and Precious Metals Regulator (R 100 million) also contribute to the increase in transfer payments at an annual rate of 19, 6 per cent.

Departmental receipts

The main sources of receipts for the Department are royalties and prospecting fees collected from mining companies. During 2005/06 and 2006/07, royalties; surface rental prospecting fees represented approximately 96 percent of total Departmental revenue. Projected revenue over the MTEF period is expected to increase from R120, 8 million in 2006/07 to an estimated R146, 8 million in 2008/09.

SLIDE 19

I The following Bills will be tabled during 2007/8:

1. The EDI Restructuring Bill

2. Radioactive Waste Management Agency Bill

3. Energy Bill

4. Mineral and Petroleum Resources Development Amendment Bill

5. Geoscience Amendment Bill

SLIDE 20

Monitoring of our State Owned Entities

The variety and uniqueness of State Owned Entities reporting to the Minister of Minerals and Energy poses a great challenge with regard to the department's oversight role. Last year our Minister held her first annual strategic workshop with the Chairpersons and CEOs of our entities as well as the Department's representatives on SOE boards, where challenges and future plans were outlined. Among these was the alignment of the Government, Department and SOEs strategies going forward.

One of the commitments made was to capacitate the monitoring processes within the Department. The new structure for the Strategy, Risk and Monitoring Chief Directorate (previously known as the Compliance Office) has been approved ,and funded and the plan is to have this component fully complimented within the first half of 2007/8.

One of the questions that has been asked a number of times is whether our SOE boards really understand what is expected of them by the entity itself as well as by government. How much understanding do the different members have of the business of the entities and how this relates to government priorities. Within the first six months of the year, we will come up with proposals to implement a comprehensive SOE oversight plan that will include an entity Department and Government specific induction programme.

In conclusion, we wish to assure the Committee that all the Departmental programmes have been aligned with overall strategic imperatives of government. This includes issues on women empowerment, youth, and disabled persons mainly around economic emancipation of the historically disadvantaged.

I THANK YOU.