BUDGETARY REVIEW AND RECOMMENDATION REPORT OF
THE PORTFOLIO COMMITTEE ON MINERAL RESOURCES ON THE
PERFORMANCE OF THE DEPARTMENT OF MINERAL RESOURCES FOR THE 2011/12 FINANCIAL
YEAR, DATED 24 OCTOBER 2012
The
Portfolio Committee on Mineral Resources, having assessed the performance of
the Department of Mineral Resources for the period 01 April 2011 to 31 March
2012, reports as follows:
1. Introduction
The split of the former Department
of Minerals and Energy (DME) into two stand-alone entities has meant that the
new Department of Mineral Resources (the Department) was now able to focus
squarely on the mining and minerals industry.
This report
seeks to analyse, amongst others, the performance and expenditure of the
Department during the 2011/2012 financial year.
1.1
The Portfolio Committee on Mineral Resources
1.1.1 The
Role of the Portfolio Committee on Mineral Resources
In terms of
the Constitution of the
Furthermore,
Section
5 of the Money Bills Amendment Procedures and Related Matters Act, No. 9 of
2009 (the Act) provides that the National Assembly, through its committees,
must annually assess the performance of each national department and these
Committees must annually submit Budgetary Review and Recommendations Reports
(BRR Reports) for tabling in the National Assembly. These should be submitted
to the Minister of Finance and the relevant Ministers.
1.1.2
Process/method
followed by the Committee in writing the BRR Report
The
Committee in reviewing the work of the Department for the 2011/2012 financial
year placed emphasis on the following aspects:
·
An overview and analysis of the Department’s strategic
priorities and measurable objectives;
·
An overview of the overall performance of voted funds:
Vote 32;
·
Consideration of the Auditor-General’s activities in
relation to the Department;
·
Consideration of the Financial Fiscal Commission
·
Committee observations; and
·
Recommendations.
The
Committee, in undertaking this process used a number of source documents,
including the 2009-2013 Strategic Plan, Annual Report, Financial Statements,
2010 and 2011 Estimates of the National Expenditure (ENE), briefings by the
Department and its entities during the course of the year, as well as the State
of the Nation Address. The Committee also used the Constitution as its basis.
1.2
The
Department
The Department of Mineral
Resources is the primary Government institution responsible for formulating and
implementing policy on mining. It reports to and advises the Minister of
Mineral Resources (the Minister) who, in conjunction with the Cabinet, takes final
responsibility for Government policy. The Department is headed by the
Director-General responsible for ensuring the exploration, development,
processing, utilisation and management of
The legislative mandate of the Department
is to ensure transformation, economic growth, health, safety and sustainability
of the minerals and mining sector. Its vision is to promote investment in the
mineral sector and through regulation ensure a healthier, safer and equitably
transformed mineral sector by 2014, and also be a leader in the transformation
of
2. Department’s
Strategic Priorities and Programmes
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
·
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
·
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
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
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
·
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.
3. Analysis of attainment of the
Department’s Prevailing Strategic and Operational Plans
The
Department of Mineral Resources comprises four programmes, namely:
Administration, Promotion of Mine Safety and Health, Mineral Regulation and
Mineral Policy and Promotion.
3.1. Programme 1: Administration
The purpose
of Administration Programme is to provide strategic support and management
services to the Ministry and the Department of Mineral Resources.
This
programme comprises: Audit Services Chief Directorate, Corporate Service
Branch, the Office of the Chief Financial Officer and the Chief Operations
Officer.
3.1.1. Programme performance
3.1.1.1. Corporate Services Branch
Contribute
to skills development
The
Department had 15 mining career awareness initiatives against a target of
eight.
Sustainably
develop vulnerable groups
The
Department exceeded the target of two projects facilitated and led by
vulnerable groups by achieving six.
Communicate
the DMR policies and programmes among internal and external stakeholders
The DMR
exceeded the target of holding five media engagements by 2011/2012 by a varience of 18. It held a total of 23 media engagements.
The
Department achieved the target of developing and implementing one new website
and intranet by 2011/2012. The target of 80 positive or balanced news items by
2011/2012 was exceeded by 115.
Facilitate
and support transformation initiatives
There is
inconsistency in the manner in which the targets under this strategic objective
are stated in the Strategic Plan and the Annual Report. The Strategic Plan
stated the target was to initiate two mainstreaming projects for women in
mining. The Annual Report reflects that 12 women mainstreaming projects were
initiated against a target of four.
Develop,
review and improve internal processes/ guidelines/ procedures
The
Strategic Plan reflected a target of nine polices to be reviewed developed by
2011/2012. However, the Annual Report shows that 14 policies were developed/
reviewed against a target of three. Therefore the varience
is wrongly reflected as 11 instead of five.
The
Strategic Plan reflected a target of developing/ reviewing three guidelines and
procedures by 2011/2012. However, the Annual Report shows that the Department
exceeded the target by developing/reviewing two guidelines against a target of
one. Therefore the Department did not achieve the target of developing/
reviewing three guidelines and procedures as stated in the Strategic Plan.
The
Department also did not achieve the target of implementing one service level
agreement by 2011/2012.
Provide
professional legal support and advisory service to Ministry and Department
The
Department achieved 68 per cent timeous response rate
to opinions, appeals and litigation against a target of 75 per cent.
Effective implementation of the Performance Management Development
System (PMDS)
The
Department managed to sign only 89 per cent of SMS agreements within the
prescribed period against a target of 100 per cent.
Facilitate
management and leadership development
The
Strategic Plan reflected a target of implementing six management development
programmes by 2011/2012. However the Annual Report reflects the Department
achieved the target of implementing two management development plans. The
Department trained 45 managers against a target of 12, thus exceeding the
target by 33.
Filling of
fully funded vacant positions
The
Department only managed to reduce its vacancy rate by 18 per cent against a
target of 50 per cent.
Attract
develop and retain skills
The
Department did not achieve a target of improving numbers for identified EE
categories. It only achieved 32 per cent of this measure. It also failed to
reduce staff turnover rate by one per cent. It implemented eight HRD
initiatives out of a target of 10.
Align budget
to strategy
The
Department exceeded its target of allocating 80 per cent of budget to strategy
by allocating 100 per cent.
Maximise
utilisation of resources
The
Department managed to reduce the number of assets disposed by branches prior to
the end-of-lifespan by 100 per cent against a target of 15 per cent.
Manage cost
effectively
The
Department planned to reduce wasteful, fruitless and irregular expenditure by
60 per cent but only managed 18 per cent. It reported that verbal or written
warnings were given to responsible officials.
The
Department also could not reach the target of five per cent underspending on
allocated budget for goods and services. The underspending was 10.27 per cent of
allocated budget.
Promote
corporate governance
Management
did not achieve a 30 per cent reduction in repeat audit findings on internal
audit follow-up report within the branch. It only managed 16 per cent
reduction. The Department achieved 100 per cent PFMA compliance.
It executed
57 per cent of Fraud Prevention and Enterprise Risk Management Plans against a
target of 100 per cent.
3.1.1.2. Chief Financial Officer
Align ICT
with business objectives
The
Department did not manage to reduce licensing costs by 10 per cent in 2011/2012
financial year.
Attract,
develop and retain skills
The
Department reduced staff turnover rate by two per cent, instead of the planned
five per cent.
Fill funded
vacancies
It was
reported that the Department did not manage to reduce the vacancy rate by 50
per cent as planned. However, the report reflects that the Department reduced
the vacancy rate by 79 per cent, which should be reported as over achievement.
Manage costs
effectively
The
Department reduced wasteful, fruitless and irregular expenditure by 86 per
cent, exceeding the target of 60 per cent.
Promote
corporate governance
The
Department executed 87 per cent of Fraud Prevention and Risk Management Plans
against a target of 100 per cent. It slightly missed the target of reducing
repeat audit findings on internal audit report. It reduced it by 29 instead of
30 per cent.
3.2. Programme 2: Promotion
of Mine Health and Safety
This
programme is responsible for the safe mining of minerals under healthy working
conditions.
The
programme is composed of two sub-programmes, namely, Mine Health and Safety
(Regions) and Governance Policy and Oversight. Mine Health and Safety (Regions)
is responsible for conducting audits, inspections, investigations, enquiries
and examination services, as well as enforcing the Mine Health and Safety Act
and its provisions and providing professional advice. The Governance Policy and
Oversight sub-programme develops policy and legislation to guide enforcement,
provide technical support to regional offices, chair tripartite structures and
facilitate HIV and AIDS work in the sector.
3.2.1. Programme Performance
Promote
health and safety
The
Department reduced occupational injuries, fatalities, diseases and dangerous occurancies by 15 per cent instead of planned 20 per cent.
The explanation provided was that the number of fatalities was higher than
could be expected. It conducted 473 audits against a target of 396, thus
exceeding the target by 77. The Department exceeded the target of conducting 8 000
inspections by 161. It conducted 8161. It completed 83.5 per cent of enquiries
against a target of 70 per cent, thus exceeding the target by 13.5 per cent.
However, the three targets do not appear on the relevant Strategic Plan.
Improve
Turnaround Time
The
Department did not achieve the target of completing 100 per cent of appeals. It
managed to complete 76 per cent of appeals.
It completed
93 per cent of Mineral and Petroleum Resources Development Act (MPRDA)
applications against a target of 100 per cent. The explanation provided is that
the target was not achieved because of Resolution 3 and shortage of staff. To
rectify the situation, the Department reported that it has applied for
exemption from Department of Public Service and Administration (DPSA)
Resolution 3 and is awaiting outcome. The Inspectorate will continue with
advertising and filling of vacant posts in 2012/2013 financial year.
The
Department fell short of two per cent in achieving the target of 80 per cent
improvement in adherence to prescribed time frames. Of the above measures, this
is the only one appearing under Improve Turnaround Time strategic objective.
Attract,
develop and retain skills
The
Department achieved 35 per cent improvement for identified Employment Equity
(EE) categories against a target of 80 per cent. It did not achieve the target
of reducing staff turnover by one per cent. The reason provided for not
achieving the planned percentage was Resolution 3 and shortage of staff. The
Department exceeded its target of implementing 10 per cent Human Resources
Development (HRD) initiatives by five.
Fill funded
vacancies
According to
the Strategic Plan 20114 -2014, the Department planned to reduce the vacancy
rate by 20 per cent in 2011. However, in the Annual Report the number of HRD
initiatives implemented was used as a measure for the above objective. The lack of alignment between these measures
made it difficult to assess performance against the objective.
Manage costs
effectively
The
Department exceeded its target of reducing wasteful, fruitless and irregular
expenditure cases by 60 per cent. It reduced theses cases by 75 per cent.
Promote
Corporate Governance
The
Department did not manage to reduce repeat audit findings in internal audit
follow-up report by 30 per cent. It only achieved 86 per cent compliance to the
PFMA against a target of 100 per cent. Only 88 per cent execution of fraud
prevention and enterprise Risk Management Plans was achieved against a target
of 100 per cent.
3.3. Programme 3: Mineral Regulation
The purpose
of the Mineral Regulation programme is to regulate the mineral and mining
sector in order to ensure economic development, employment, transformation and
environmental compliance.
3.3.1. Programme Performance
Implement
transformation policies
All targets
under this objective were met and exceeded. They relate to:
·
Number of consultations/ engagements
with communities
·
Number of industry workshops
conducted
·
Number of new HDSA entrants
supplying the mining industry
·
Number of rights issued to new HDSA
entities
Nevertheless,
the report does not clearly articulate the link between the first two measures
and transformation.
Promote job
creation
Thirty four
Local Economic Development (LED) projects were created against a target of 76.
Twenty new
Small Medium and Micro Enterprises (SMMEs) development projects were
implemented by mining companies against a target of 40.
Seventeen
thousand and twenty three jobs were created through issuing of new mining
rights against a target of 14 000.
Promote sustainable
resource use and management
All targets
under this objective were met. They included:
·
Percentage of approved environmental
plans relative to rights issued
·
Percentage of approved Social and
Labour Plans relative to rights issued
·
Percentage of evaluated work
programmes relative to rights issued
It was worth
noting that all the above are statutory requirements.
Reduce state
environmental liability and financial risk
Six hundred
and twenty nine rights and/or mines with inadequate financial provisions for
rehabilitation were identified. All mines that were issued with closure
certificates had no residual state liability.
Monitor and
enforce compliance
·
The Department conducted 164 legal
compliance inspections against a target of 65.
·
It conducted 1 898 environmental
management plan/ programme inspections against a target of 1 740.
·
Two hundred and fifty nine mining
charter inspections (SLP and BEE) were conducted against a target of 160.
·
Only 541 mining work programme/
prospecting work programme inspections were conducted against a target of 650.
The shortfall was 109. However, according to the Strategic Plan, the target was
565. Therefore, shortfall was 24.
Attract,
develop and retain skills
Only two HRD
initiatives were implemented against a target of ten. Staff turnover was
reduced by 0.2 per cent instead of one.
Fill funded
vacancies
The vacancy
rate was reduced by 51 per cent against a target of 50 per cent
Manage costs
effectively
The
Department managed to reduce wasteful, fruitless and irregular expenditure by
100 per cent.
Promote
corporate governance
·
Only 69 per cent of fraud prevention
and risk management plans was executed.
·
The Department managed to reduce
repeat audit findings in the internal audit follow-up report by 38 per cent,
exceeding the set 30 per cent targets.
·
It fully complied with the PFMA.
3.4. Programme 4: Mineral Policy and Promotion
The purpose
of this programme is to formulate mineral related policies and promote the
mining and minerals industry of
3.4.1. Programme Performance
Promote
investment in the mining sector
The
Department produced two beneficiation strategy implementation plans against a
target of one. The target of implementing two economic strategic partnerships
was achieved. Twelve publications were produced against a target of one. Eighty
five SMMEs were supported against a target of 67. The Department met the target
of forming five strategic partnerships.
Promote
sustainable resource use and management
The Department
met the target for developing one framework for mine environmental management.
The Department rehabilitated three derelict and ownerless mines against a
target of ten.
Fill funded
vacancies
The
Department did not achieve the target of reducing the vacancy rate by 50 per
cent. The vacancy rate remained at 11 per cent.
Attract, develop and retain skills
The
Department exceeded a target of reducing staff turnover. It was reduced by four
per cent against the target of one per cent. The target of implementing ten HRD
initiatives was achieved. The target of 80 per cent improvement in identified
EE targets was not achieved.
Manage costs
effectively
The
Department did not achieve the target of reducing wasteful, fruitless and
irregular expenditure by 60 per cent. The sub-programme had two cases of
irregular expenditure during the year under review, which reflects an increase
rather than a decrease in irregular expenditure.
Promote
corporate governance
The
Department was unable to reduce repeat audit findings in internal audit follow
up report by 30 per cent. The sub-programme recorded a 75 per cent increase on
repeat audit findings.
The
Department did not achieve 100 per cent compliance with the PFMA. It only
managed 71 per cent.
The
Department achieved a 43 per cent execution of the fraud prevention and
enterprise risk management plans against a target of 100 per cent.
4. Analysis
of Expenditure Reports
4.1. The overall departmental allocation and
expenditures for 2011/12 financial year
The original
budget allocated to the DMR for 2011/2012 was R1.036 billion, which was
allocated to departmental programmes as follows:
·
Administration R247.9 million
·
Promotion of Mine Safety and Health
R147.5 million
·
Mineral Regulation R160.4 million
·
Mineral Policy and promotion R480.4
million
After
virements and shifting of funds the total budget came up to R1.038 billion,
which was distributed between programmes as follows:
·
Administration R265.9 million
·
Promotion of Mine safety and Health
R141.4 million
·
Mineral Regulation R184.4 million
·
Mineral Policy and Promotion R447.2
million
The actual
expenditure was R1.029 million, which reflects an underspending of R9.5 million
or 0.92 per cent. The underspending in the 2010/2011 was R1.1 million or 0.12
per cent. There was therefore an increase of R8.3 million in underspending
between 2010/2011 and 2011/2012. Mineral Policy and Promotion had the highest
expenditure of R446.2 million (43.3 per cent) and R442.3 million (44.5 per
cent) in 2011/2012 and 2010/2011 financial years, respectively. The programme
with the lowest actual expenditure was the Promotion of Mine Safety and Health,
which registered R141.3 million (13.7 per cent) and R137.1 million (13.8 per
cent) in 2011/2012 and 2010/2011 respectively.
4.2.
Administration
Administration-spent
R257.6 million or 96.8 per cent of the available R265.9 million. The actual spending is 4
per cent more than the projected expenditure of R247.9 million due to
operational lease costs which were not adequately budgeted for and leave gratuity
payments which were more than projected and unforeseen in nature.
4.3. Promotion of Mine Safety
and Health
Promotion
of Mine Safety and Health-spent R141.2 million or 99.8 per cent of the
available R141.4 million. Spending was 4 per cent below the projected R147.5 million.
It was slower than expected due to delays in the procurement of technical
equipment for mine survey and vacancies in the inspectorate due to the
inability to attract skills with the current salary bands.
4.4. Mineral Regulation
Mineral
Regulation-spent R184.4 million or 100 per cent of the available R184.4
million. Spending is 14 per cent more than the R162.2 million projected
expenditure.
4.5.
Mineral
Policy and Promotion
Mineral Policy and
Promotion-spent R446.2 million or 99.7 per cent of the available budget of
R447.2 million. Spending is 8 per cent below the R481 million projected. It
is slow because of, among other things, under expenditure on travel and
subsistence due to postponement of public participation workshops
4.6. Economic classification
of spending trends
4.6.1. Current Payments
The current payments
spent by the department amounted to R589.8 million or 98.4 per cent of the
available R599.4 million. Spending was within the benchmark of the projected
R588.8 million. The slow spending mainly in goods and services is due to
unspent funds, Information Technology systems and office accommodation.
4.6.2. Transfers and subsidies
Transfers and subsidies spent
amounted to R420.8 million or 100 per cent of the available R420.8 million,
which is 4 per cent below the projected R438.4 million. There were savings that
were shifted to current payments. This translates to spending is within the
allocated funds.
4.6.3. Payment of capital assets
The payments for capital assets spent
18.6 million or 100 per cent of the available budget. Spending was 58 per cent
more than the projected R11.7 million, mainly attributable to the
reclassification of finance lease costs from the item goods and services to
capital payments. The rehabilitation of ownerless and derelict mines were not
realised as anticipated. There were delays in implementing the projects and
capacity problems within the sub-programme Mine Environmental Management: Mine
Closure Directorate. The sub-programme spent 69 per cent of the allocated
budget. Transfers and subsidies to public entities and agencies constituted
R438 million or 42 per cent of the total vote allocation.
5. Analysis
of the Department’s Annual Report and Financial Statements
5.1. Analysis of Non-Financial Performance
The
Department of Mineral Resources comprises four programmes, namely:
Administration, Promotion of Mine Safety and Health, Mineral Regulation and
Mineral Policy and Promotion.
5.1.1 Administration
This
programme comprises: Audit Services Chief Directorate, Corporate Service
Branch, the Office of the Chief Financial Officer and the Chief Operations
Officer.
5.1.1.1. Corporate Services Branch
Contribute
to skills development
The
Department had 15 mining career awareness initiatives against a target of
eight.
Sustainably
develop vulnerable groups
The
Department exceeded the target of two projects facilitated and led by
vulnerable groups by achieving six.
Communicate
the DMR policies and programmes among internal and external stakeholders
The DMR
exceeded the target of holding five media engagements by 2011/2012 by a
variance of 18. It held a total of 23 media engagements. The DMR achieved the
target of developing and implementing one new website and intranet by
2011/2012. The target of 80 positive or balanced news items by 2011/2012 was
exceeded by 115.
Facilitate
and support transformation initiatives
There is
inconsistency in the manner in which the targets under this strategic objective
are stated in the Strategic Plan and the Annual Report. The Strategic Plan
stated the target was to initiate two mainstreaming projects for women in
mining. The Annual Report reflects that 12 women mainstreaming projects were
initiated against a target of four.
Develop,
review and improve internal processes/ guidelines/ procedures
The
Strategic Plan reflected a target of nine polices to be reviewed developed by
2011/2012. However, the Annual Report shows that 14 policies were developed/
reviewed against a target of three. Therefore the variance is wrongly reflected
as 11 instead of five.
The
Strategic Plan reflected a target of developing/ reviewing three guidelines and
procedures by 2011/2012. However, the Annual Report shows that the Department
exceeded the target by developing/reviewing two guidelines against a target of
one. Therefore the Department did not achieve the target of developing/
reviewing three guidelines and procedures as stated in the Strategic Plan.
The DMR also
did not achieve the target of implementing one service level agreement by 2011/2012.
Provide
professional legal support and advisory service to Ministry and Department
The DMR
achieved 68 per cent timeous response rate to
opinions, appeals and litigation against a target of 75 per cent.
Effective implementation of the Performance Management Development
System (PMDS)
The
Department managed to sign only 89 per cent of SMS agreements within the
prescribed period against a target of 100 per cent.
Facilitate
management and leadership development
The
Strategic Plan reflected a target of implementing six management development
programmes by 2011/2012. However the Annual Report reflects the Department
achieved the target of implementing two management development plans. The
department trained 45 managers against a target of 12, thus exceeding the
target by 33.
Filling of
fully funded vacant positions
The
Department only managed to reduce its vacancy rate by 18 per cent against a
target of 50 per cent.
Attract
develop and retain skills
The
Department did not achieve a target of improving numbers for identified EE
categories. It only achieved 32 per cent of this measure. It also failed to
reduce staff turnover rate by one per cent. It implemented eight HRD
initiatives out of a target of 10.
Align budget
to strategy
The
Department exceeded its target of allocating 80 per cent of budget to strategy
by allocating 100 per cent.
Maximise
utilisation of resources
The
Department managed to reduce the number of assets disposed by branches prior to
the end-of-lifespan by 100 per cent against a target of 15 per cent.
Manage cost
effectively
The
Department planned to reduce wasteful, fruitless and irregular expenditure by
60 per cent but only managed 18 per cent. It reported that verbal or written
warnings were given to responsible officials. The Department also could not
reach the target of five per cent underspending on allocated budget for goods
and services. The underspending was 10.27 per cent of allocated budget.
Promote
corporate governance
Management
did not achieve a 30 per cent reduction in repeat audit findings on internal
audit follow-up report within the branch. It only managed 16 per cent
reduction. The Department achieved 100 per cent PFMA compliance. It executed 57
per cent of Fraud Prevention and Enterprise Risk Management Plans against a
target of 100 per cent.
5.1.1.2. Chief Financial Officer
Align ICT
with business objectives
The
Department did not manage to reduce licensing costs by 10 per cent in 2011/2012
financial year.
Attract,
develop and retain skills
The
Department reduced staff turnover rate by two per cent, instead of the planned
five per cent.
Fill funded
vacancies
It was reported that the
Department did not manage to reduce the vacancy rate by 50 per cent as planned.
However, the report reflects that the Department reduced the vacancy rate by 79
per cent, which should be reported as over achievement.
Manage costs
effectively
The
Department reduced wasteful, fruitless and irregular expenditure by 86 per
cent, exceeding the target of 60 per cent.
Promote
corporate governance
The
Department executed 87 per cent of Fraud Prevention and Risk Management Plans
against a target of 100 per cent. It slightly missed the target of reducing
repeat audit findings on internal audit report. It reduced it by 29 instead of
30 per cent.
5.1.2.
Promotion
of Mine Health and Safety
The
programme is composed of two sub-programmes, namely, Mine Health and Safety
(Regions) and Governance Policy and Oversight. Mine Health and Safety (Regions)
is responsible for conducting audits, inspections, investigations, enquiries
and examination services, as well as enforcing the Mine Health and Safety Act
and its provisions and providing professional advice. The Governance Policy and
Oversight sub-programme develops policy and legislation to guide enforcement,
provide technical support to regional offices, chair tripartite structures and
facilitate HIV and AIDS work in the sector.
Promote
health and safety
The
Department reduced occupational injuries, fatalities, diseases and dangerous occurancies by 15 per cent instead of planned 20 per cent.
The explanation provided was that the number of fatalities was higher than
could be expected. It conducted 473 audits against a target of 396, thus
exceeding the target by 77.
The
Department exceeded the target of conducting 8 000 inspections by 161. It
conducted 8161. It completed 83.5 per cent of enquiries against a target of 70
per cent, thus exceeding the target by 13.5 per cent. However, the above three
targets do not appear on the relevant Strategic Plan.
Improve
Turnaround Time
The
Department did not achieve the target of completing 100 per cent of appeals. It
managed to complete 76 per cent of appeals. It completed 93 per cent of Mineral
and Petroleum Resources Development Act (MPRDA) applications against a target
of 100 per cent. The explanation provided is that the target was not achieved
because of Resolution 3 and shortage of staff. To rectify the situation, the
Department reported that it has applied for exemption from Department of Public
Service and Administration (DPSA) Resolution 3 and is awaiting outcome. The
Inspectorate will continue with advertising and filling of vacant posts in
2012/2013 financial year.
The
Department fell short of two per cent in achieving the target of 80 per cent
improvement in adherence to prescribed time frames. Of the above measures, this
is the only one appearing under Improve Turnaround Time strategic objective.
Attract,
develop and retain skills
The
Department achieved 35 per cent improvement for identified Employment Equity
(EE) categories against a target of 80 per cent. It did not achieve the target
of reducing staff turnover by one per cent. The reason provided for not
achieving the planned percentage was Resolution 3 and shortage of staff. The
Department exceeded its target of implementing 10 per cent Human Resources
Development (HRD) initiatives by five.
Fill funded
vacancies
The
Department planned to reduce the vacancy rate by 20 per cent in 2011, according
to the Strategic Plan (See page 37 of the Strategic Plan 2011-2014). However,
in the Annual Report the number of HRD initiatives implemented is used as a
measure for the above objective (See page 60 of the Annual Report 2011/2012).
Lack of
alignment between these measures makes it difficult to assess performance
against this objective.
Manage costs
effectively
The
Department exceeded its target of reducing wasteful, fruitless and irregular
expenditure cases by 60 per cent. It reduced theses cases by 75 per cent.
Promote
Corporate Governance
The
Department did not manage to reduce repeat audit findings in internal audit
follow-up report by 30 per cent. It only achieved 86 per cent compliance to the
PFMA against a target of 100 per cent.
Only 88 per cent execution of fraud prevention and enterprise Risk Management
Plans was achieved against a target of 100 per cent.
5.1.3. Mineral Regulation
Implement
transformation policies
All targets
under this objective were met and exceeded. They relate to:
·
Number of consultations/ engagements
with communities
·
Number of industry workshops
conducted
·
Number of new HDSA entrants
supplying the mining industry
·
Number of rights issued to new HDSA
entities
Nevertheless,
the report does not clearly articulate the link between the first two measures
and transformation.
Promote job
creation
Thirty four
Local Economic Development (LED) projects were created against a target of 76.
Twenty new
Small Medium and Micro Enterprises (SMMEs) development projects were
implemented by mining companies against a target of 40.
Seventeen thousand
and twenty three jobs were created through issuing of new mining rights against
a target of 14 000.
Promote
sustainable resource use and management
All targets
under this objective were met. They included:
·
Percentage of approved environmental
plans relative to rights issued
·
Percentage of approved Social and
Labour Plans relative to rights issued
·
Percentage of evaluated work
programmes relative to rights issued
It is worth
noting that all the above are statutory requirements.
Reduce state
environmental liability and financial risk
Six hundred
and twenty nine rights and/or mines with inadequate financial provisions for
rehabilitation were identified.
All mines
that were issued with closure certificates had no residual state liability.
Monitor and
enforce compliance
·
The Department conducted 164 legal
compliance inspections against a target of 65.
·
It conducted 1 898
environmental management plan/ programme inspections against a target of
1 740.
·
Two hundred and fifty nine mining
charter inspections (SLP and BEE) were conducted against a target of 160.
·
Only 541 mining work programme/
prospecting work programme inspections were conducted against a target of 650.
The shortfall was 109. However, according to the Strategic Plan, the target was
565. Therefore, shortfall was 24.
Attract,
develop and retain skills
Only two HRD
initiatives were implemented against a target of ten.
Staff
turnover was reduced by 0.2 per cent instead of one.
Fill funded
vacancies
The vacancy
rate was reduced by 51 per cent against a target of 50 per cent
Manage costs
effectively
The
Department managed to reduce wasteful, fruitless and irregular expenditure by
100 per cent.
Promote
corporate governance
·
Only 69 per cent of fraud prevention
and risk management plans was executed.
·
The Department managed to reduce
repeat audit findings in the internal audit follow-up report by 38 per cent,
exceeding the set 30 per cent targets.
·
It fully complied with the PFMA.
5.1.4. Mineral Policy and
Promotion
Promote
investment in the mining sector
The
Department produced two beneficiation strategy implementation plans against a
target of one. The target of implementing two economic strategic partnerships
was achieved. Twelve publications were produced against a target of one. Eighty
five SMMEs were supported against a target of 67. The Department met the target
of forming five strategic partnerships.
Promote
sustainable resource use and management
The
Department met the target for developing one framework for mine environmental
management.
The Department
rehabilitated three derelict and ownerless mines against a target of ten.
Fill funded
vacancies
The
Department did not achieve the target of reducing the vacancy rate by 50 per
cent. The vacancy rate remained at 11 per cent.
Attract, develop and retain skills
The
Department exceeded a target of reducing staff turnover. It was reduced by four
per cent against the target of one per cent. The target of implementing ten HRD
initiatives was achieved. The target of 80 per cent improvement in identified
EE targets was not achieved.
Manage costs
effectively
The
Department did not achieve the target of reducing wasteful, fruitless and
irregular expenditure by 60 per cent. The sub-programme had two cases of
irregular expenditure during the year under review, which reflects an increase
rather than a decrease in irregular expenditure.
Promote
corporate governance
The
Department was unable to reduce repeat audit findings in internal audit follow
up report by 30 per cent. The sub-programme recorded a 75 per cent increase on
repeat audit findings. The Department did not achieve 100 per cent compliance
with the PFMA. It only managed 71 per cent. The Department achieved a 43 per
cent execution of the fraud prevention and enterprise risk management plans against
a target of 100 per cent.
5.2. Analysis of Financial
Performance
5.2.1.
Statement
of Financial Performance
The original
budget for the Department was R1.036 billion. After virements and shifting of
funds, the total budget was R1.038 billion (See page 21 of the Annual Report).
The Departmental revenue was R93.1 million amounting to the total revenue of
R1.132 billion. This is an increase of six per cent from the previous year’s
total revenue. The appropriation increased from R995.8 million in 2010/2011 financial
year to R1.038 billion in 2011/2012 or by 4.3 per cent.
The current
expenditure amounted to R589.8 million or 57.3 per cent of total expenditure.
This is an increase of R61.6 million or 11.6 per cent from the R528.1 million
in the previous financial year. The larger portion of current expenditure (61.8
per cent) went to compensation of employees. This was followed by Goods and
Services at 37.7 per cent of the total current expenditure.
Expenditure
on Transfers and Subsidies amounted to R420.8 million or 40.9 per cent of total
expenditure. This amount was divided as follows:
·
Departmental Agencies and Accounts –
R199.0 million
·
Public corporations and private
enterprises – R220.3 million
·
Households – R1.5 million
Transfers to
Departmental Agencies were divided as follows:
·
Council for Geoscience
– R154.4 million
·
Mine Health and Safety Council –
R5.3 million
·
South African Diamond and Precious
Metals Regulator – R39.4 million
Transfers to
Public Corporations/ Private Enterprises were divided as follows:
·
Mintek
– R196.9 million
·
Industrial Development Corporation
of
Transfers to
Households were divided as follows:
·
Leave Gratuity – R1.4 million
·
Household claims against State –
R5 000
·
Donations and Gifts – R120 000.
Expenditure
for Capital Assets amounted to R18.6 million or 1.8 per cent of total
expenditure. Expenditure on Capital Assets was divided as follows:
·
Tangible Capital Assets – R17.9
million
·
Computer software – R630 000
Payment for
Financial Assets amounted to R209 000, which was used to write off debts
The
Department recorded a surplus of R102.7 million in the 2011/2012 financial
year.
5.2.2. Statement of Financial
Position
The
Department registered the total assets of R28.5 million and the total
liabilities of R26.3 million resulting to the net assets of R2.1 million. There
was a significant decrease in total assets, total liabilities and an increase
in net assets of R29.7 million, 30.8 million and R1.8 million respectively. Net
assets increased by 102.4 per cent between 2010/2011 and 2011/2012.
5.2.3.
Report of the Auditor-General
5.2.3.1. Audit Opinion
The
Department of Mineral Resources received an unqualified audit opinion in the
2011/2012 financial year.
5.2.3.2. Report on other legal
and regulatory requirements
Achievement
of planned targets
Of the total
number of planned targets, 107 targets were achieved during the year under
review. This represents 72 per cent of total planned targets that were achieved
during the year under review. In other words, 42 or 28 per cent of the targets
were not achieved during the year under review.
According to
the Auditor General, the root cause for failure to achieve some targets was the
formulation of targets whose achievement was beyond the Department’s control.
Expenditure
management
Money owed
by the Department was not always paid within 30 days of receiving an invoice or
statement, as required by section 38(1)(f) of the PFMA and Treasury Regulation
8.2.3.
Prepayments
for goods and services (i.e. payments in advance of the receipt of the goods or
services) other than where required by the contractual arrangements with the
supplier was not avoided as required by Treasury Regulation 15.10.1.2(c).
Human
Resources Management
Employees
received overtime compensation in excess of 30 per cent of their monthly
salaries, in contravention of Public Service Regulation I/V/D.2(d).
Employees
acted in higher vacant posts for an uninterrupted period exceeding 12 months,
in contravention of the Public Service Regulation 1/VII/B.5.3.
5.2.3.3
Irregular expenditure
The Department incurred
an irregular expenditure of R7.97 million in the 2010/2011 financial year. Of
this amount, R619 000 was condoned and an amount of R131 000 was recorded
as recoverable. This resulted to the amount of R7.2 million recorded as
irregular expenditure in the 2010/2011 Annual Report of DMR.
The Department incurred
an irregular expenditure of R7.9 million in 2011/2012 financial year. The
opening balance was R7.2 million plus R120 000 relating to irregular
expenditure of the previous year adding up to R15.3 million. The condoned
amount of R810 000 was subtracted from this amount leaving a balance of
R14.4 million irregular expenditure awaiting condonation.
There was no fruitless and wasteful expenditure recorded in the 2011/2012
financial year.
6. Committee’s
Observations
Having
assessed the above information, the Portfolio Committee on Mineral Resources
has made the following observations:
·
Of the total number of planned targets,
42 were not achieved during the year under review. This represents 28% of total
planned targets that were not achieved during the year under review.
·
Employees received overtime compensation
in excess of 30% of their monthly salaries, in contravention of Public Service
Regulations I/V/D.2(d).
·
The audit committee was not regularly
meeting as it supposed to meet.
·
The Department is seriously underfunded to the extent that it is difficult for it to
perform some of its functions.
7. Conclusion
The
Portfolio Committee on Mineral Resources commends the department for getting
the unqualified report for the year 2011/2012. The Department met most of the
target it set in the Strategic Plan (72 per cent). However, there are some of
the targets that were not met (28 per cent) and are highlighted in this brief.
In terms of financial performance, the Department recorded a surplus of R102.7
million. The Department is in a good financial position with assets worth more
than its liabilities.
8. Recommendations
The
Portfolio Committee on Mineral Resources recommends that the Minister of
Mineral Resources ensures that:
·
The Department of Mineral Resources should fast-track
the filling of vacant posts, especially the funded vacancies.
·
The Department of Mineral Resources should create a
recruitment and retention strategy for its staff members.
·
The Department of Mineral Resources should fast-track
the implementation of the talent management strategy to reverse the tide of
staff-turnover.
·
The Department of Mineral Resources should give
quarterly reports of financial performance to ensure speedy observation of
deviations and to prevent regression of audit outcomes.
·
The Department of Mineral Resources should build
capacity to ensure the enforcement of compliance requirements.
·
The Department of Mineral Resources should address the
issues raised by the Auditor General in his 2011/12 financial year report and
present to Parliament action plan thereof with specific timeframes.
·
The Department of Mineral Resources should consider a
downward adjustment for the Payment of Capital Assets in order to mitigate a
possible over expenditure on Transfers and Subsidies.
·
The Department of Mineral Resources should fast-track
the quantification of government liability with regard to the Rehabilitation of
Derelict and Ownerless Mines.
·
The Department of Mineral Resources should ensure that
inspections of projects that impact upon vulnerable groups are conducted.
·
The Department of Mineral Resources should develop a
much clearer score card used for compliance to the Mining Charter in order to
prevent the confusion within the mining industry.
Report to be considered