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. South Africa is the world's biggest producer of platinum, chrome, vanadium and manganese, the third-largest gold producer and a major source of coal. Against the backdrop of clear signs that the economy is recovering from the global recession, the mining industry has an opportunity to ensure that South Africa and its people benefit from the wealth of resources beneath the soil. Whilst the pace of recovery remains uncertain, the Department has to work towards positioning the South African mining and minerals industry to ensure that it is ready to take full advantage of the inevitable upswing in the economy.

 

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 Republic of South Africa, Act 108 of 1996 (the Constitution), portfolio committees have a mandate to legislate, conduct oversight over the Executive and facilitate public participation. The Portfolio Committee on Mineral Resources (the Committee) mandate is governed by Parliament’s mission and vision statements; the rules of Parliament and its Constitutional obligations. The mission of the Committee is to contribute to the realisation of a developmental state and ensure effective Service Delivery through discharging its responsibility as a portfolio committee of Parliament. Its vision includes enhancing and developing the capacity of Committee Members in the exercise of effective oversight over the Executive Authority. One of the Committee’s core objectives is to oversee, scrutinise and influence the actions of the Executive and its agencies. This implies holding the Executive and related entities accountable through oversight of objectives of its programmes, scrutinising its budget and expenditure (annually), and recommending through Parliament actions it should take in order to attain its strategic goals and contribute to service delivery.

 

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 South Africa’s mineral resources.

 

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 South Africa through economic growth and sustainable development by 2025. Its mission includes promoting and regulating the Minerals and mining sector for transformation, growth and development. It further ensures that all South Africans derive sustainable benefit from the country’s mineral wealth.

 

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 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).

 

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.

 

 

 

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 South Africa, thus making it attractive to investors.

 

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 South Africa – R23.3 million

 

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