This report replaces the report of the Portfolio Committee on Mineral Resources that was published on page 1682 of ATC No 62 on 30 May 2011.

Report of the Portfolio Committee on Mineral Resources on the Strategic Plan and Budget Vote 32 of the Department of Mineral Resources for the 2011/12 Financial Year, dated 25 May 2011.

The Portfolio Committee on Mineral Resources (the Committee), having considered the Strategic Plan [2011/12] and Budget Vote 32: Mineral Resources, reports as follows:

1. Introduction

The Department of Mineral Resources (the Department) was able to split from the erstwhile Department of Minerals and Energy (DME) to become a stand alone department on 01 April 2010 as planned. Subsequent to the State-of-the-Nation Address (SONA) delivered by the President of the Republic of South Africa, Mr Jacob Zuma, on February 2011, the Minister of Finance delivered his Budget Speech on February 2011. In his speech, the Minister allocated funds to the priorities identified in the SONA.

The Strategic Plan of the Department of Mineral Resources (the Department) and Budget vote 32 were referred to the Portfolio Committee on Mineral Resources (the Committee), for consideration and report, on 09 March 2011. The Committee received briefings from the Department on its Strategic Plan for the 2011/12-2013/14 period and Estimates of National Expenditure 2011 on 20 April 2011.

2. Overview of Budget Vote 32 and Strategic Plan of the Department

The Strategic Plan of the Department was informed by government priorities, the 2011 State of the Nation Address, 2011 National Budget Speech and sector specific challenges.

The mandate of the Department of Mineral Resources is to ensure transformation, economic growth, health, safety and sustainability of the minerals and mining sector. The Department seeks to promote and regulate the minerals and mining sector for transformation, growth, development and ensure that all South Africans derive sustainable benefit from the country’s mineral wealth. Its two-fold vision envisages a globally competitive, sustainable and meaningfully transformed mining and minerals sector by 2014, and ultimately, leading in the transformation of South Africa through economic growth and sustainable development by 2025. The following are State Owned Entities reporting to the Department of Mineral Resources and their purpose is to provide related services in support of the Department’s mandate through funded and non-funded statutory bodies and organisations:

· Council for Mineral Technology and Research (Mintek);

· Council for Geoscience (CGS);

· The Mine Health and Safety Council (MHSC);

· The South African Diamond and Precious Metals Regulator (SADPMR);

· The State Diamond Trader (SDT); and

· Petroleum Agency South Africa (PASA).

2.1 Departmental Strategic Goals and Priorities

The Department has set itself the following strategic goals for the 2011/12-2013/14 period:

· Increased investment in the minerals and mining sector;

· Improve the health and safety conditions in the mining sector;

· Achieve equitable and sustainable benefit from mineral resources;

· Transform the minerals sector; and

· Create an efficient, effective and development-oriented Department.

One of the focus areas of the Department in its strategic plan was to finalise a Service Level Agreement (SLA) with the Mining Qualifications Authority (MQA) to support and improve the current initiatives to address the skills shortage in the Department.

In line with the afore-mentioned departmental mandate and the policy priorities identified in the 2011 SONA and 2011 Budget Speech, the Department has identified the policy priorities for the minerals and mining sector for the 2011/12 financial year, and these are the following:

· The implementation of the National Mining Sector Strategy, if approved by Cabinet;

· The completion of various processes related to the Mineral Beneficiation Strategy;

· Policy and legislative developments;

· Amendment of the Mining Charter and the Mineral and Petroleum Resources Development Act (policy and legislative developments);

· The establishment of the State Owned Mining Company;

· The implementation of the strategy on Small Scale Mining;

· Management of derelict and ownerless mines (protecting the environment),

· Acid Mine Drainage (AMD);

· Mineral Regulation administrative processes (as well as ensuring the transparent administration of prospecting applications);

· The South African Mineral Resources Administration (SAMRAD) online system;

· The establishment of the Compliance Inspectorate Unit within the Mineral Regulation Branch;

· Ensuring that companies comply with Social and Labour Plans (SLPs);

· Addressing capacity challenges in the regional offices (skills development) ; and

· Improving Mine Health and Safety.

2.2 Departmental programmes

The strategic plan of the Department outlines in detail the objectives, measures, Medium Term Expenditure Framework targets and initiatives of the four departmental programmes, namely;

· Programme 1: Administration;

· Programme 2: Promotion of Mine Safety and Health;

· Programme 3: Mineral Regulation; and

· Programme 4: Mineral Policy and Promotion.

2.2.1 Programme 1: Administration

The purpose of the branch is to provide strategic support and management services to the Ministry and the Department. This programme houses the following branches: Corporate Services, the Chief Financial Office, Audit Services and the Chief Operating Office.

2.2.1.1 Corporate Services

The following are the priority areas of the Corporate Services Branch:

· Contributing to skills development;

· Communicating the department’s policies and programmes;

· Facilitating transformation initiatives;

· Developing, reviewing and implementing policies and procedures;

· Proving legal support to the department;

· Implementing the national vetting strategy;

· Implementing the performance management development system;

· Facilitating management and leadership development;

· Filling funded and vacant posts; and

· Attracting, developing and retaining skills.

2.2.1.2 Chief Financial Office

The office has set itself 15 priority areas, which include:

· Providing reliable and timely information;

· Educating and empowering stakeholders;

· Promoting transformation policies;

· Aligning Information and Communications Technology (ICT) with business objectives;

· Facilitating management and leadership development;

· Attracting, developing and retaining skills;

· Aligning the Department’s budget with its strategy;

· Managing costs effectively;

· Filling of funded vacancies;

· Maximising utilization of resources;

· Improving turnaround times;

· Providing adequate facilities for effective service delivery;

· Implementing policies, processes and procedures;

· Providing ICT systems; and

· Promoting corporate governance.

2.2.2 Programme 2: Promotion of Mine Health and Safety

The Promotion of Mine Safety and Health programme aims to ensure the safe mining of minerals under healthy working conditions. The programme is composed of two sub-programmes, which are Governance Policy and Oversight and Mine Health and Safety ( in regions). The priority areas of the Mine Health and Safety branch for the medium term are as follows:

· The promotion of health and safety – the branch will target a 20 per cent percentage reduction (per annum) in occupational injuries, fatalities, diseases and dangerous;

· Contribute to skills development – a 10 per cent increase in certificates of competency issued in envisaged; and

· Ensuring an efficient and development-oriented Department – by ensuring compliance with Service Level Agreements, developing and reviewing internal processes as well as improving turnaround times.

2.2.2.1 Mine Health and Safety Inspectorate’s Capacity Building

The Department initiated the process of restructuring the Mine Health and Safety Inspectorate to enhance its capacity to enforce the provisions of the Mine Health and Safety Act. The Province of the North West’s Mine and Health Inspectorate in Rustenburg and Klerksdorp will be capacitated independently so as to ensure effective mines coverage.

The process of filling the Health Unit’s posts of chief director and directors was being finalized. The filling of these vacancies will advance the focus on occupational health matters. The learner inspectors’ project has assisted with improving the vacancy rate in the regions.

2.2.3 Programme 3: Mineral Regulation

The aim of the Mineral Regulation Programme is to regulate the minerals and mining sector, to promote economic development, employment and ensure transformation and environmental compliance. This programme is comprised of three sub-programmes, which are Mineral Regulation and Administration, Management Mineral Regulation, and the South African Diamond and Precious Metal Regulator (SADPMR).

The priority areas of the Mineral Regulation branch for the medium term are as follows:

· Promoting job creation – this will be achieved by ensuring jobs from new mining rights, through the development projects for Small, Medium and Micro Enterprises (SMMEs) as a result of increased compliance inspections, and local economic development projects;

· Promoting sustainable resource use and management – through the adjudication of work programmes and verify these by means of inspections;

· Reducing State environmental liability and financial risk – in cases of identified rights and/or those with inadequate financial provision, inspections will be conducted and statutory notices or orders issued where there is non compliance. The branch will also seek to ensure that no residual liabilities remain for the State before any closure certificates are issued;

· Ensuring the implementation of transformation policies; and

· Monitoring and enforcing compliance – the branch seeks to achieve 100% compliance with regulatory requirements.

2.2.4 Programme 4: Mineral Policy and Promotion

The Mineral Policy and Promotion programme aims to develop relevant mineral policies that promote South Africa’s mining and minerals industries so as to attract investments to the country. This programme comprises the following sub-programmes:

· Management;

· Mineral Policy;

· Mineral Promotion;

· Assistance to Mines;

· Council for Geoscience;

· Council for Mineral Technology and Research;

· Economic Advisory Services; and

· Mine Environmental Management.

The following are the priority areas for the Mineral Policy and Promotion programme:

· Promoting investment in the mineral sector – by targeting a percentage growth in fixed capital investment in the sector. The implementation of the mining sector strategy and the beneficiation strategy, amongst other things, will play an important role in achieving this goal;

· Promoting sustainable resource use and management – a framework for mine environmental management will be strengthened, whilst the department also seeks to rehabilitate more derelict and ownerless mines (for example, there are plans to rehabilitate 12 more mines in 2011/12 financial year). The management of acid mine drainage is another key priority for this programme;

· Ensuring transformation in the mining sector – by reviewing incumbent legislation, implementing the competitiveness and growth strategy as well as Research and Development partnerships at regional and international levels;

· Developing and reviewing internal processes; and

· Improving turnaround times – improve turnaround times on all processes.

2.3 Budget summary

2.3.1 Expenditure Analysis

The table below outlines the department’s allocation for the medium term, as well as its analysis:

Programme	Budget				Nominal Rand change	Real Rand change	Nominal change (%)	Real change (%)
R million	2010/11	2011/12	2012/13	2013/14	2010/11-2011/12		2010/11-2011/12
Administration	223.7	247.9	258.7	274.6	24.2	12.8	10.82	5.74
Promotion of Mine Safety and Health	142.1	147.5	157.5	170.1	5.4	- 1.4	3.80	-0.95
Mineral Regulation	212.4	160.4	171.0	175.4	- 52.0	- 59.3	-24.48	-27.94
Mineral Policy and Promotion	417.7	480.4	520.3	558.7	62.7	40.7	15.01	9.74 per
TOTAL	995.9	1 036.2	848.8	1 178.8	40.3	- 7.2	4.05	-0.72

The Department received R1.0 billion, which is 0.21 per cent of the total appropriation for all votes in the 2011/12 financial year, and a marginal decrease from last year’s 0.22 per cent share of the total appropriation by vote. However, the total departmental budget has increased by 4.05 per cent in nominal terms but decreased by 0.72 per cent in real terms from the 2010/11 financial year.

The bulk of the budget, which is 56.7 per cent, has been allocated for current payments. Current payments constitute a total value of R587.6 million. A large portion of the current expenditure goes to the Compensation of Employees and this amount takes up 64.3 per cent of the total allocation to current payments. The total value of employee compensation is R377.6 million. The remainder of the current payments, at 35.7 per cent or R210 million, has been allocated to goods and services. Of this amount, the largest share of 28.3 per cent or R59.4 million will be spent on travel and subsistence. In terms of the overall departmental allocation, a total portion of R377.6 million or 36.4 per cent will be spent on employee compensation and R59.4 million or 5.7 per cent will be spent on travel and subsistence. All capital payments will be allocated to Machinery and Equipment in the 2011/12 financial year.

Transfers and subsidies have been allocated R438.4 million or 42.3 per cent of the total vote allocation. The largest share of the transfers and subsidies, that is R238.3 million or 54.4 per cent, has been allocated to public corporations and private enterprises. An amount of R199.1 million or 45.4 per cent will be transferred to departmental agencies and accounts.

2.3.2 Programme Budget Analysis

2.3.2.1 Programme 1: Administration

This Programme budget has increased from R223 million in the 2010/11 financial year to R247.9 million in the 2011/12 financial year, which is an increase of 10.8 per cent in nominal terms and 5.7 per cent in real terms. Although all sub-programmes within the Administration programme increased in nominal terms, this increase is also due to the significant increase in the Ministry sub-programme budget. This sub-programme increased by 94.4 per cent in nominal and 82.2 per cent in real terms from R1.8 million in the 2010/11 financial year to R3.5 million in the 2011/12 financial year. This increase can be attributed to the establishment of the Ministry after the split of the former Department of Minerals and Energy (DME). The Corporate Services sub-programme receives a budget allocation of R191.8 million or 77.4 per cent of the programme budget.

In terms of economic classification, 95.7 per cent of the budget has been allocated to current payments. Compensation of Employees received an allocation of R119.6 million or 50.4 per cent of the current payments budget and the rest has been allocated to Goods and Services. The largest expenditure items under Goods and Services are Lease Payments at R39.4 million followed by Travel and Subsistence at R22.3 million.

2.3.2.2 Programme 2: Promotion of Mine Safety and Health

This programme’s budget increased from R142.1 million in the 2010/11 financial year to R147.5 million in the 2011/12 financial year. This represents an increase of 3.8 per cent in nominal terms but a decrease of 0.95 per cent in real terms as a result of the decrease in real terms in both Governance Policy and Oversight and Mine Health and Safety ( in regions) sub-programmes’ allocation. The greater portion of this programme’s budget has been allocated to Mine Health and Safety (in regions) sub-programme, which is responsible for inspections, audits, monitoring and enforcing compliance with the Mine Health and Safety Act of1996. This sub-programme received R100.9 million or 68.4 per cent of the programme budget, which is a 4.7 per cent increase in nominal terms and a 0.1 per cent decrease in real terms compared to the previous financial year.

In terms of economic classification, 96.1 per cent of the programme budget is allocated to current payments. Compensation of Employees receives 83.0 per cent of the current payments budget. Transfers and Subsidies receive 3.6 per cent of the programme budget, which is R5.3 million in monetary terms. This is a decrease in nominal terms from the R5.4 million allocated in the previous financial year. This amount is for transfer to the Mine Health and Safety Council whose roles are to:

· Advise the Minister of Mineral Resources (the Minister) on all occupational health and safety issues in the mining industry relating to legislation, research and promotion;

· Review and develop legislation for recommendation to the Minister;

· Promote health and safety in the mining industry;

· Oversee research in relation to health and safety in the mining industry; and

· Liaise with other bodies concerned with health and safety issues;

The programme focus areas in the next three years are:

· Capacity development and process improvement;

· Monitoring and evaluation of occupational health programmes at mines;

· Monitoring and evaluation of mine safety programmes; and

· Reviewing health and safety legislation to incorporate best practice.

2.3.2.3 Programme 3: Mineral Regulation

This programme receives 15.5 percent of the total Department allocation, which is a decrease from the 21.3 percent allocated in the 2010/2011 financial year. The allocation to the Mineral Regulation and Administration sub-programme has decreased in both nominal and real terms by 31.83 and 34.95 per cent respectively. This sub-programme receives R113.3 million in 2011/12 compared to the R166.2 million received in 2010/11 financial year. However, this sub-programme has received 70.6 per cent of the programme budget. The SADPMR sub-programme is allocated the second highest budget at 24.56 per cent of the programme budget or R39.4 million in monetary terms.

In terms of economic classification, 75.4 per cent of the budget has been allocated to current payments. The larger percentage share of 81.7 per cent of the current payments budget is allocated to compensation of employees. Transfers and subsidies received 24.56 per cent of the programme budget, which is a transfer to the South African Diamonds and Precious Metals Regulator (SADPMR). There is no budget allocated for the payment of capital assets in this programme.

2.3.2.4 Programme 4: Mineral Policy and Promotion

This programme receives the largest allocation at 46.4 per cent of the Department’s budget. The budget allocation for the Mineral Policy and Promotion Programme increases by 9.74 per cent in real terms compared to the 2010/2011 financial year.

The Council for Mineral Technology and Research sub-programme received the highest allocation at R197.0 million or 41 per cent of the programme budget to provide research, development and technology that fosters the development of business in the mineral and mineral products industries. This is a real increase of 13.4 per cent in real terms compared to the 2010/2011 financial year.. The Council for Geoscience sub-programme receives the second largest allocation at R154.4 million or 32.1 per cent of the programme’s budget. This translates to a 7.9 real per cent real increase from the previous year’s allocation. The Mine Environmental Management sub-programme receives the largest increase at 720 per cent in real terms in the current financial year’s allocation.. The sub-programme allocation increased from R3.7 million in the 2010/11 financial year to R31.8 million in the 2011/12 financial year. This sub-programme aims to provide strategic guidance on mine environmental management and mine closure. The significant increase is as a result of the shift of funds from the Mineral Regulation programme to this programme for the rehabilitation of derelict and ownerless mines.

In terms of economic classification, the highest percentage of the programme budget is allocated for Transfers and Subsidies at 81.74 per cent. This is because of transfers to the Council for Mineral Technology and Research (MINTEK) and the Council for Geoscience (CGS).

3. Deliberations

Following questions raised by the Committee, the following is the account of the issues on which the Committee and the Department deliberated:

· The rehabilitation of derelict and ownerless mines: Whether budget has been allocated, what is the actual figure and whether the Department has managed to trace previous owners of these mines?

It was reported that the budget for rehabilitation of ownerless and derelict mines for the current financial year was R52 million. It was further reported that 98 mining companies had been traced and linked to the ownerless and derelict mines.

· Reduction of staff turnover: Whether the Department was putting effort in retaining staff and what challenges were they facing in attracting people?

The Department identified attraction, development and retention of skills as well as filling of vacant funded posts as one of its priority areas for the MTEF period.

· Acid Mine Drainage: Whether there was improvement, what the financial implications were and who was playing what role?

It was agreed that the Committee would, in the near future, be provided with an opportunity to interact with the Department on this matter.

· The establishment of the Compliance Inspectorate: its powers and accounting lines: To whom would the Unit account to and what punitive measures would it take?

The envisaged Compliance Inspectorate would reside under the Department of Mineral Resources and account to the Accounting Officer (Director-General). The Inspectorate Unit would invoke punitive measures such as revoking licences and, in some instances, a fine could be imposed depending on the nature of the offence. The Inspectorate would monitor the implementation of the social and labour plans.

· The State Owned Mining Company: Where the funding would come from?

The Department could not adequately say where the budget would come from but provided that the process was being discussed by the Executives.

· Beneficiation: It was stressed that the Department needed to start from somewhere. The Committee saw a serious need to sit down and explore sound strategies of managing raw materials, not simply exporting them.

The Department stated that the issue was before the Inter-Ministerial committee where other departments had been consulted on specific issues. The beneficiation strategy would be tabled in Parliament after the 2011 local government elections.

· Job creation: It was emphasized that the Department should contribute to the call by the President of the Republic of South Africa to create more jobs.

· Small-scale mining: It was stated that the problem with small scale mining was financing. There were a number of investors who were taking advantage of small scale miners and something serious had to be done to stop these investors from exploiting small scale miners

It was reported that the Small-scale mining strategy has been developed and was ready to be sent to Cabinet.

· Supply Chain Management practices: Whether there was a gap in legislation since it appeared that there was an inability in payments being made within 30 days?

It was reported that there were problems with the supply chain management but these were not a reflection of a legislative problem. It was stated that if a supplier supplied goods to government, it was supposed to have a government official order and if there was no order number, payment would be delayed.

· The South African Mineral Resources Administration System (SAMRAD online): Whether it was related to the information technology (IT) development?

The Department admitted that there is a relationship between the two and that it was planning to integrate its systems. The Department would be developing other modules in the near future.

· Transforming the sector: The Department’s capacity to run stakeholder training workshops: Whether the Department would be able to run workshops on their own or they would outsource the responsibility?

The Department responded by saying that the running of workshops was a matter that the Department was not going to outsource hence the Department would run its own workshops internally.

4. Conclusion

The Committee appreciated the presentations received and noted the progress made. Briefings by the Department of Mineral Resources on their strategic plan and their budget allocation enabled the Committee to explore the budget and strategic plans of the Department. The Committee however noted that not much is mentioned on the budget allocated for training and development of staff. Although the Committee was aware of the nature of work of the Department, which involves a lot of travelling, a concern was raised about the amount of R59.4 million that is allocated for travel and subsistence. The Committee further noted that the budget allocations for rehabilitation of derelict and ownerless mines and the Research and Development institutes (MINTEK and Council for Geoscience) were inadequate and therefore needed to be increased. The Committee welcomed the establishment of the Compliance Inspectorate Unit.

The report was unanimously adopted by the Portfolio Committee on Mineral Resources on 25 May 2011.

Report to be considered.