Department of Mineral Resources and Energy & Mine Health and Safety Council 2021/22 Annual Performance Plans, with Minister

This premium content has been made freely available

Mineral Resources and Energy

04 May 2021
Chairperson: Mr S Luzipo (ANC)
Share this page:

Meeting Summary

Annual Performance Plans

The Department of Mineral Resources and Energy and the Mine Health and Safety Council briefed the Committee on their Annual Performance Plans and budgets for 2021/22. Similar presentations had been expected from the Central Energy Fund and the South African Nuclear Energy Corporation but these could not take place as the relevant documents had not yet been tabled in Parliament.

The Minister of Mineral Resources and Energy introduced the presentations and responded to questions from Members.

Questions were posed by several Members on the Risk Mitigation Independent Power Producer Procurement Programme and on bid windows for the Renewable Energy Independent Power Producers Programme. Concerns were expressed on whether the goals of the Integrated Resource Plan would be met and whether government still aimed at the procurement of 2 500 megawatts of new nuclear power. What were the intentions regarding the containment and disposal of high-level radioactive waste?

Members asked when the planned merger of state-owned oil and gas entities into the National Petroleum Company would be finalised and requested a timetable for the presentation of several bills to Parliament, including the long-delayed amendments to the Mine Health and Safety Act.

Details and timing for the Exploration Strategy were raised, as were the Department’s plans regarding both artisanal mining and the attraction of international investors to the sector. Several Members asked about the problematic Solar Water Heating Programme.

The Council was asked to explain its programme around the “Fourth Industrial Revolution” and what benefits would flow from this. It was also asked to outline the work it was undertaking to protect communities close to mines from the impacts of mining.

The Chairperson asked that the Department explain more clearly what it was asking for when presenting to the Committee, including the effects of the budget cuts. He asked how the Department was using procurement to create black industrialists and whether there was an overarching investment strategy for state-owned entities?

Meeting report

The Chairperson welcomed Members, the Department of Mineral Resources and Energy (DMRE) and the Mine Health and Safety Council (MHSC). He highlighted the importance of the mineral resources and energy sector to South Africa’s economy, but also expressed his frustration with the way that money is utilised in relation to public services – there have been serious cases of non-expenditure as well as wasteful and fruitless expenditure. Addressing these issues of non- and wasteful expenditure will make a fundamental difference in the handling of the country’s shortcomings. Members were urged, when dealing with these issues, to put aside their own interests in favour of the interests of the majority of citizens. The Committee must ensure that citizens – especially the youth, women and those living in the rural countryside – must benefit. This is the foundation for this parliamentary process that takes place annually at the start of the financial year. The process of discussing the Annual Performance Plans (APPs) of the various entities is an important process that requires meaningful and constructive contribution from Members. He stressed that Parliamentary meetings – whether virtual or physical – are flexible, and as such, entities scheduled to present must be ready at all times following the commencement of the meeting.

Mr T Langa (EFF) said that he would have to leave at 17:00 due to another commitment, but Ms P Madokwe (EFF) would be able to stay on.

Letters from the Central Energy Fund and the SA Nuclear Energy Corporation

The Chairperson read out letters from the Central Energy Fund (CEF) and South African Nuclear Energy Corporation (NESCA) regarding these entities’ corporate plans and shareholder compacts.

He explained that, because these two entities had not tabled [their documents], it would be difficult for the Committee to deal with the suggested corporate plan, APP and budget proposal [as had been planned for the meeting agenda]. The DMRE must ensure that the CEF, NESCA and other entities are ready for discussion after the Committee has received counselling on the abovementioned letter.

Briefing by the DMRE
The Minister introduced his delegation and stated that the large size of the team reflected the seriousness taken by the DMRE when called by the Committee. There was no confusion in the Department about the Committee’s oversight responsibility of the Department’s work. The Department is quite keen to subject itself to questioning and assessment by the Committee.

This was the second time that the merged Department of Mineral Resources and Energy had appeared before the Committee. The Department appreciated the fact that it has a responsibility to respond to the strategic objective derived from the NDP (National Development Plan), Medium Term Strategic Framework (MTSF) and Economic Reconstruction and Recovery Plan as they relate to the regulation of the mining and energy sector.

In every action taken by the Department, meritocracy cannot be separated from transformation. Transformation includes meritocracy, which supports black excellence. The Minister said the transformation of the State remains a big issue that needs solving. In 1994, when South Africa became a democracy, every Director-General (DG) was a white male. The APP will reflect that the Department improved transformation as well as performance.

Mr Thabo Mokoena (the DG) and Ms Yvonne Chetty (the Chief Financial Officer) then took the Committee through the DMRE’s APP for 2021/22 and Budget Vote No. 34.

[Please see the slides for full details on what was presented to the Committee]

-On 15 March 2020, the President declared a national state of disaster in terms of the Disaster Management Act of 2002 after WHO (the World Health Organisation) declared COVID-19 a global pandemic.

-The COVID-19 pandemic has had a serious impact on societies and has had an immeasurable impact on economies and industries around the world. The mining and energy industries, being industries that operate on a global scale and heavily relies on being people being employed, were not spared from this pandemic.

-It became imperative that the complex initiatives of the DMRE, which were aimed at stimulating the economy, fit into the risk-adjusted approach adopted by the government.

-The Department’s complex initiatives and responses during the re-opening of the economy, which, according to a risk-adjusted approach, recognised that the minerals and energy sectors would be operating in an environment characterised by factors such as a possibility of a reduced global demand for commodities.

-Energy forms an integral part of the economy, and the energy sector is a key enabler for the attainment of national policy imperatives such as those expressed in the National Development Plan (NDP), the Medium-term Strategic Framework (MTSF) and the Economic Reconstruction and Recovery Plan.

-South Africa needs to grow its energy supply.

-Energy Prices in South Africa have roughly tripled in real terms over the past decade.

-High electricity prices, load shedding and technology advancement are driving electricity consumers to alternative power supply options. An increasing number of consumers is therefore generating its own power or planning to do so in the future.

-The Department will increase mining exploration activities with the aim of attracting a minimum of 3% of the total global exploration expenditure.

-As pronounced by the President in his State of the Nation Address, the Department has finalised the procurement of 2 000 megawatts under the Risk Mitigation Independent Power Producer Procurement programme.

-The Department will, in this financial year, issue a request for proposals (RFP) for 2600 megawatts from wind and solar energy as part of Bid Window 5.

-Looking ahead, the Department has considered the feasibility of natural gas for economic use in the South African market.

-The government is focused on renewing investment in exploration, which is the lifeblood of mining.

-Mineral beneficiation is a strategic objective for the country following the adoption of the mineral beneficiation policy articulated in the White Paper.

-The Department will implement the Nuclear New Build Programme at a scale and pace that the country can afford to ensure the security of supply in line with IRP 2019.

(View the presentation for further detail.)

Briefing by the MHSC
Mr David Msiza, Inspector General of Mines and MHSC Chairperson, and Mr Dumisani Dlamini (Acting CEO) took the Committee through the MHSC’s strategic plan, APP and budget for 2021/22. Mr M Mahlaule (ANC) asked for the Committee to be able to see the presentation.

[Please see the slides for full details on what was presented to the Committee]

Alignment with National Initiatives
-National Reconstruction and Economic Recovery Plan: Interventions for economic recovery are prioritised, with a focus on gender equality and economic inclusion.

-Key enablers to restore growth: The importance of skills development and the building of a capable state is highlighted.

Strategic objectives
Advise the Minister on health and safety matters in South African mining
Promote a culture of health and safety in the South African mining industry through engagement, communication, participation and dissemination of occupational health and safety (OHS) best practices
Liaise with statutory bodies, strategic partners and stakeholders on matters relating to OHS
Ensure the best human capital management practices that will support the achievement of highly skilled, motivated and capable MHSC employees, council and advisory committees.
Improve MHSC compliance and implementation of good corporate governance
Ensure MHSC information is adequately managed and secured
Ensure MHSC office ICT infrastructure is available to facilitate the implementation of core MHSC systems and automation
Leverage on the Fourth Industrial Revolution (4IR) for the improvement of OHS in the South African mining industry
Ensure financial sustainability
Ensure efficient and effective financial management

Issues faced by SA Mining Industry
-Elimination of fatalities and injuries
-HIV/AIDS and TB
-Occupational Lung Diseases

Issues faced by MHSC
-Research
-Human Capital
-Good Corporate Governance

(View the presentation for further detail.)

Discussion
Mr K Mileham (DA) expressed his concern with the DG’s repeated statements of not wanting to go through the details throughout the Department’s presentation. The details form the basis for this meeting. It is easy for Members to read the documents that are submitted to them. It is the job of the DG to elaborate on the details of the documents and inform the Committee as to what the documents mean. The DG saying that he did not want to go into the details essentially means that he is not interested in what the Portfolio Committee has to say.

On slide 14, the DG noted that the Department has finalised the procurement of 2 000 megawatts in terms of Risk Mitigation Independent Power Producer programme. Mr Mileham was concerned because this fact was not true – there is still the issue of the financial closure of the bidders and there are still Eskom power purchase agreements that must be finalised. This programme is still a long way away from being finalised. Could the Department provide feedback on this? [The acronym RMIPP does not appear in the presentation. The RMIPPPP is the Risk Mitigation Independent Power Producer Procurement Programme. This is the acronym used below]

In relation to slide 15, how often, over the next five years, did the Department anticipate opening Bid Windows for the Renewable Energy Independent Power Producers Programme? The Committee has seen an indication that there will be another Bid Window in the third quarter, but the IRP (Integrated Resource Plan) indicates that there should be a Bid Window roughly every year.

In relation to slide 22 – in connection with the Nuclear New Build – what is the status of the section 34 determination regarding the procurement of 2 500 megawatts of nuclear power? Has the Department made provision for legal challenges to this decision to procure nuclear power? In 2015, the Department also pursued nuclear power and there were a number of legal challenges to this decision.

The IRP emphasises that the procurement of 2 500 megawatts of new nuclear power is at a pace and scale that the country can afford. How does this align with the financial status of Eskom and the country as a whole? At present, it does not seem that South Africa can afford 2 500 megawatts of nuclear power.

In relation to slide 24’s discussion on the National Radioactive Waste Disposal Institute (NRWDI), what is being done in line with the decision to pursue new nuclear power to accelerate the storage of high-level nuclear waste at Vaalputs or elsewhere? Because the current plans are that high-level waste will be stored from 2050 onwards, if nuclear energy is going to be pursued, what will be done to bring that timeline forward?

The budget for Programme 3: Mining, Minerals and Energy Policy Development (MMEPD) indicates a 32% expenditure increase in nuclear, electricity and gas policy. What is this for?

Why is there a significant decrease in funding for Subprogramme 5 – namely, electricity, infrastructure and industry transformation? Surely this is one of the most important initiatives of the Department given the increased role of IPPs (Independent Power Producers) in reinforcing South Africa’s diminished electricity generation and electricity deficit?

Where is the National Solar Water Heating Programme in this APP? Where is it accommodated? It appears to have fallen off in terms of both budget and targets, with this being something that this Committee has grappled with for quite some time.

In relation to clean fuels, what is being done to implement IMO 2020? What is being done to make very low sulphur fuel oils available for shipping to South Africa? [“IMO 2020” is a rule of the International Maritime Organization (IMO), a United Nations agency that limits the sulphur in the fuel oil used on board ships. This new limit was made compulsory from 2020, following an amendment to Annex VI of the International Convention for the Prevention of Pollution from Ships (MARPOL)].

Mr S Kula (ANC) asked, in relation to the procurement of an additional 11 800 megawatts of power from renewable energy, when this programme will be kickstarted. This programme will seemingly supersede the RMIPPPP’s target of 2 000 megawatts.

How does the Department plan to mitigate some of the problems that it has encountered in relation to the RMIPPPP, including its negative perception? What will the Department do differently to ensure that its programme of additional procurement proceeds without any problems?

Regarding the rationalisation of state-owned entities (SOEs) [slide 33] and the Cabinet approval of the merger of iGAS, the Strategic Fuel Fund (SFF) and PetroSA, when will the merger into the National Petroleum Company (NPC) be finalised?

The CFO spoke about the need for the entities to be self-sustaining in the future. Have these entities submitted plans to the Department detailing how they would ensure their long-term self-sustainability? By what year did the Department envisage that its entities would become self-sustainable? 

The budget set for goods and services is around 6% [see slide 74], but the Department is in agreement with Treasury that it would have to spend less than this 6%. How did the Department plan to meet this requirement? Will the Department be able to operate optimally and fulfil its mandate in light of this reduction?

Mr J Lorimer (DA) was pleased that the presentation reflected the Department and Minister’s understanding of the need for economic reconstruction. However, he said, some of these plans are not very credible. There are a number of sterile themes emerging that have been talked about for a long time.

The Department stated that the Exploration Strategy is going to go to Cabinet this financial year despite suggesting in the Zoom Meeting with Fasken and international investors that it could only go to cabinet by February 2022. Did the Department think that this impacted on the credibility of the administration if it takes a year to get the plan before Cabinet, let alone implement it? Can the Department provide a target date for when this Exploration Strategy will be made public?

It was again stated that the process of formalisation of artisanal mining is being accelerated. This has been stated for years without being acted upon. What are the steps in this process of formalisation of artisanal mining, and by when will these steps be taken?

He was disappointed that beneficiation was raised again. It is a concept that sounds nice but is not economically feasible. The question is, with what power is beneficiation going to take place? Beneficiation capacity is being closed – not added to – in the form of smelters. South Africa simply does not have the electricity. Beyond that, the model remains flawed. It will only work where it makes financial sense to access the value of beneficiation. For example, the Department must look at the massive amounts of money earned by other mining countries such as Australia and Canada, who do very little beneficiation. These countries are good at mining and exporting. They do not try to force beneficiation, instead sending production elsewhere and becoming rich as a result. These countries excel at what they are good at and South Africa should do the same. If it makes financial sense to use beneficiation, it can be done, but if it does not, time should not be wasted trying to force it as this would simply disincentivise mining investment.

Where will South Africa get the power to beneficiate? Does the Department intend to introduce additional regulation to enforce beneficiation by mining companies?

He expressed his frustration with the fact that the Department believes that it can facilitate simultaneously both job creation and economic transformation. The measures designed by the Department to enforce transformation will almost always result in disincentives to investment and job loss rather than job creation. The Committee believes that these two goals cannot be achieved together as experiences have proven. economic growth should be the primary goal. Transformation has taken place at the cost of economic growth and will continue to do so. Has the Department done any work to examine the impact of transformation policies on investment growth? If it has, what was the result? If it has not, why?

In relation to the MHSC, can the Committee be given a brief overview of the “4IR programme” on slide 13? What is it, and what does it hope to achieve?

He was interested in the work that the Council is doing to mitigate the impact of mining on surrounding communities. Can the Committee be given concrete examples of any programmes in this regard?

Mr M Mahlaule (ANC) conveyed the questions by Ms V Malinga (ANC), who was performing oversight with another Portfolio Committee and also experiencing network troubles.

She was pleased with the Department’s executive summary, but disappointed with the R2 billion transferred to Eskom to undertake electrification (slide 77). When that fails, the money that was meant for INEP (Integrated National Electrification Programme) is returned while people are still without electricity. How soon can the Department mitigate this?

In relation to the need to increase transfers in 2024 for entities to mitigate the baseline of 2021, [slides 77 and 78] does the Department not believe that entities would be self-sustainable by that time?

Mr Mahlaule asked, in relation to the 2021 MTEF Allocation summary per economic classification, why the R61 516 000 for the payments of capital assets is 0% on the pie chart. [Slides 74 and 75]

Responses by the DMRE and MHSC
The Minister explained that Mr Mileham was both correct and incorrect in his statement that the procurement of 2 000 megawatts was not yet finalised. The Department acknowledged the successful bidders [for the RMIPPPP], and other technical work is being done to actually implement the decision. There are still three bidders that are being assessed, but the reality is that the work of actually finalising the emergency procurement is done.

He acknowledged that Bid Window 5 [under the REIPPP] had been gazetted, with Bid Window 6 being gazetted in August and Bid Window 7 in February 2022. There is not a bid per year – there are going to be two Bid Windows this year, one early next year and the Department will proceed from there.

Regarding the persistent question of what ‘at a pace and scale the country can afford’ means in terms of Eskom’s and the country’s financial status, at present, the country is not able to afford 2 500 megawatts of nuclear power.

The reason that the Department issues a request for proposals, gathers information, and does a section 34 ministerial determination is because it is testing the market. The money available for any technology does not depend wholly on the fiscus. It depends on the demand of the market for that technology. When the technology is in demand, many people will come forward to offer their funds.

In response to the question on the decrease in budget, he explained that when the government goes through a difficult period, it implements something called reprioritisation where there are multiple budget cuts in different areas.

This Department is relatively small when it comes to budget allocation, and one area where there was a cut was in the INEP.

On the issue of the negative perception, one of the things he learned during his relatively short time as a Minister is that one must accept attempts by others to slander one’s reputation as an occupational hazard. It will hurt, but one must be resilient when working and ensure that these allegations do not have a lasting effect.

Regarding the merger [of the oil and gas entities], the Department intends to account before the Committee on its status in the future. It was agreed that the Department would return to Cabinet to show the preparatory work that was done. The Department wants to obtain options in order to begin developing a structure for the merged entity. Once a fully-fledged study is held based on the option selected, the Committee will be updated. The Department does not want to put the cart before the horse.

On the credibility of the Economic Reconstruction and Recovery Plan, it is not about looking good on the outside; the only way to evaluate an Economic Reconstruction and Recovery plan is to analyse the results. There was a lockdown which almost led to a disastrous collapse in the economy during the second quarter of 2020. This Department did something that it was widely criticised for. It absorbed this criticism when it systematically opened up mining. He was told that blood would be in his hands for the death of mineworkers, and that there would be more blood in his hands if the Department destroyed the mining industry. The mines were systematically opened in terms of lockdown restrictions, and despite sentiments that mineworkers would be killed, mineworkers were on the bottom of the list when it came to frontline worker deaths. The results in the third quarter also prove the correctness of the strategy. Mining was the lead sector in the recovery of the economy in the third quarter by 28% and was third in terms of contributing to the GDP (Gross Domestic Product) of South Africa.

Exploration is the future of mining. Activities such as beneficiation can be considered, but without mining, minerals cannot be discovered, and the economy will not succeed. In response, the Department is developing the Exploration Implementation Plan together with the industry, and it will be implemented when the time is right. The Plan is almost finalised. The Department is encouraged by the investment that is beginning to flow into the mining industry from a number of companies, despite the Plan seemingly being not credible.

In response to the critiques of beneficiation, he explained that one of the Department’s goals is to persuade companies to open their smelters, which is why ‘Company X’ wants to take the smelters belonging to ‘Company Y’ as part of the strategic energy programme and open them. When this takeover materialises, the Department will account to the Portfolio Committee.

He agreed that the high price of electricity is an inhibiting factor but did not agree on the strategy in response. The price of electricity is administered, and therefore the State must be able to determine it in a similar way to that of the price of chrome and electricity during the 1980s and 1990s. There will not be agreement in this regard because one might suggest that there would be governmental interference in the market. This issue of pricing must be solved, however, including whether embedded generation could be an alternative solution.

On the issue of transformation destroying job creation and economic growth, he stated that this was a belief shared by Members of the DA. He did not share this belief and explained that he and the DA are speaking from two different perspectives. In 1994, every governmental DG was a white male benefitting from the system. Transformation is about changing this status quo. The Department must not be apologetic about this objective, instead emphasising the fact that transformation and meritocracy are not mutually exclusive. Research was conducted on the qualification of white males that were DGs in 1994, and the qualification of DGs today. The results show that today’s DGs possess the basic qualification for their positions. Today’s DGs are getting exposure and improving at their jobs because they possess the tools to improve. He does not understand how Mr Lorimer can say that transformation is destroying job creation. Anything is possible due to the benefits of synergy, and he emphasised that transformation is necessary.

The Minister of the Department of Public Service and Administration (DPSA) says that 65% of public service employees at high levels meet all the requirements. If one were to imagine a situation where there were no black miners in 1987, with black people only issued certificates and becoming mining engineers from 1989, one would acknowledge that this 65% today is a sign of progress. This progress must be built upon by improving the 35% that do not meet the requirements. This can be done by asking workers to retire or by sending them to specialised programmes.

The Minister said that he [Mr Lorimer] will never agree on the topic of transformation because Mr Lorimer speaks from an advantaged point of view, whereas he speaks from a disadvantaged point of view. They do not share experiences.

Mr Jacob Mbele, Deputy Director General: Programmes and Projects, DMRE, confirmed that in the next 12 months there will be a number of Bid Windows. They are not necessarily every year – they are staggered because at least 36 months are required for a power project to be commissioned. At present, the Department is already in need of some of the capacity that was due to arrive around 2022/23.

The 11 800 megawatts of renewable energy cover renewable energy requirements from 2022 up until 2024/25. It covers gas – which is already sitting in 2026 – and coal, which is sitting in 2024 and 2027. The commissioning of additional capacity will take place annually in terms of the Requests for Proposals (RFPs) which will be issued in the coming months. It is not necessarily about holding a bid window every year; it is about ensuring that additional capacity is commissioned every year. The Department has made provision for this.

Regarding the kickstarting of the procurement of 11 800 megawatts of renewable energy, the Department has already issued an RFP for 2 600 megawatts of renewable energy – 1 600 from wind and 1 000 from solar PV (photovoltaic). The Department expects these projects to reach financial closure before the end of this year in order for construction to take place next year, and for them to come online by the end of 2023.

Regarding the question raised on Subprogramme 5, the budget cut was in relation to human resources. This unit was initially anticipated to be populated with additional resources and assist in the procurement of additional capacity. However, during the reconstruction of the Department, some of those positions were done away with. This unit implements the IRP through the use of the resources at the IPP office.

In terms of the solar water heaters, due to challenges faced by the Department, the commitments are tracked in the IOP (Internal Operations Plan). When the right time comes, the Department, when invited by this Portfolio Committee, will account for the commitments made regarding this programme.

Mr Zizamele Mbambo, Deputy Director-General (DDG): Nuclear Energy, DMRE, confirmed that the process detailed by the Minister regarding the procurement of nuclear energy was indeed correct. The Department had already briefed the Committee in February regarding the various approaches which the DMRE had seen from the market.

This process was challenged in the past in terms of whether there are provisions in the projects that test the appetite of the market.

In projects of this nature, when dealing with project management, risk mitigation measures are compiled. As the Department plans the rollout of the project, it takes into account the various risks associated and implements the various risk mitigation measures.

Regarding the issue of the containment of high-level waste, the Minister has established a ministerial task team to deal with the central interim storage facility for this high-level radioactive waste. This team has already developed a pre-feasibility report that has been submitted to the Minister. The next stage involves the team submitting a feasibility report for the project to ensure that, by 2024, a process is established on how to procure this central interim storage facility. The pre-feasibility study indicates that construction should be complete by 2030.

NRWDI is a designated State entity that is executing this project, with a multidisciplinary team consisting of the Department, NECSA and Eskom to ensure that the project has sufficient capacity in terms of its execution.

Ms Ntokozo Ngcwabe, Deputy Director-General: Mining, Minerals and Energy Policy Development, DMRE, expanded on the artisanal mining policy. This policy was born from the widespread acknowledgement of the role that artisanal and small-scale mining plays in the bigger economy. This policy benefits the economy by creating jobs and contributing to the fiscus though taxes. Critically, this policy provides for the optimal exploitation of resources. In many cases, large corporations would exploit a resource to such a degree that it is no longer commercially viable for this corporation to operate.

It is important to note that the role of artisanal mining in the economy is also acknowledged in South Africa’s mining and mineral policy drafted in 1998. This policy clearly recognises this sector and outlines a number of factors which justify the need for the Department to ensure development in this sector.

The Department considered during its drafting of the artisanal mining policy the fact that these smaller operators are subjected – in terms of the MPRDA (Mineral and Petroleum Resources Development Act) – to the same stringent licencing conditions and requirements that are applicable to large corporations. This needed to be changed.

To this extent, the DMRE has also been in consultation with the Department of Agriculture, Forestry and Fisheries to ensure that environmental degradation is considered, as well as the type of environmental requirements that must be implemented for this sector.

In terms of the progress of this policy, the Department has conducted benchmarking against countries such as Nigeria, Ghana and Tanzania. These countries have all excelled at the regulation of artisanal mining and the utilisation of artisanal mining to benefit the economy. The Department has also consulted – under the difficult conditions created by lockdown level 5 – with other stakeholders. Unfortunately, the Department could not consult with interested and affected communities because of the lockdown restrictions.

The Department is at the stage where it intends to visit communities to consult regarding the draft policy that was developed. Afterwards, the Department will take the policy through cluster in Cabinet for approval to gazette for consultations. In the coming week, the Department would gazette the draft to solicit input from broader stakeholders, while simultaneously going out to communities. Thus, interested and affected communities will be consulted with physically due to these communities lacking the technology required to consult virtually.

By the end of the present fiscal year, the policy should be finalised and approved for implementation, with the guidelines and standards for the implementation of the policy developed afterwards.

Ms Chetty stated that, regarding the Solar Water Heating Programme, the budget for the 2021/22 financial year is R73.6 million; in 2022/23 the budget is R74.5 million; and in 2023/24 the budget is R74.5 million. These figures are in terms of Programme 5.

Regarding entities becoming self-sustainable, she explained that the rationalisation of the entities is a lengthy process. The approvals go through the Board, the Minister and Cabinet. The process has commenced in some areas such as NECSA – a service provider has been appointed to advise the entity, and the progress thereof will be reported on.

Looking at the effect of rationalisation in the outer two years of 2023 and 2024, these figures are still indicative. Any changes that do occur will be factored in. She confirmed that the amounts being transferred to entities are indeed still increasing. Any major changes will be factored in and the amounts will decrease accordingly. The base of the transfers decreased because of the huge R1.5 billion reduction last year.

Regarding the pie chart, the 0% is actually 0,002% that had been rounded off to a full percentage.

Mr Msiza explained that one of the key issues that was agreed upon by the tripartite stakeholders (organised labour, the State and business) is that their vision is to ultimately achieve the goal of zero harm. Related to this is the agreement on the importance of technology.

The tripartite stakeholders convened to reach a common understanding of what 4IR is. In the context of mine health and safety, the tripartite stakeholders looked at the key areas in which provisions are actually implementable, with some of them having already started. For instance, some of the mines are very deep and extensive, with some being up to 10 kilometres away from the main shaft. Challenges related to this are the underground conditions such as intense heat that could lead to fires and emergency situations. One of the things agreed upon in response, in terms of research, is the usage of drones underground to enhance the health and safety during emergency situations. There have been instances of mine workers getting lost underground, with some, unfortunately, traversing dangerous areas and losing their lives. In response, the Department is researching an employee underground detection system, and together with the sector, researching other technologies than can assist in this regard.

Regarding the programmes which mitigate the impact on the surrounding communities, the Department has been receiving complaints, for example, on its blasting in close proximity to communities. Research work has been done in this regard to determine how to minimise this occurrence, including technology and the relevant legislation. The Department has also looked to other countries to examine how to strengthen South Africa’s legislation, while simultaneously examining the blasting technology of those countries.

Mr Dlamini expanded on the issue of the impact on surrounding communities. The MHSC has conducted research with the CSIR (Council for Scientific and Industrial Research) to assess the impact of blasting in the mining communities. The outcome of this research is in the process of being used to develop guidelines and to assist mining companies in conducting blasting and mining activity in a safer manner.

The team that was tasked to develop the guidelines is comprised of industry experts and tripartite stakeholders, with these guidelines due to be finalised within the current financial year.

On the issue of 4IR, there are two aspects. The first is the internal focus which looks at the integration and automation of MHSC systems. The second is the external focus which looks at whether mines are able to deploy systems to reduce injuries and fatalities, as well as deploy systems capable of sending alerts or warning signals with the aim of reducing fatalities and injuries. Medical forms that are still hardcopy are being made digital, with robots being evaluated to assist with safety.

Mr Tseliso Maqubela, Deputy Director General: Minerals and Petroleum Regulation, DMRE, responded to the question on clean fuels. Most of the refineries in the country have been converted to be able to produce 50 ppm diesel, which is required in terms of IMO 2020. Unfortunately, two refineries that were converted with an investment of over R1 billion were lost through fires and explosions. In response, the Department had increased import capacity in anticipation of IMO 2020. There is sufficient storage in Durban and Cape Town for the 50 ppm diesel. In fact, some companies are already bringing 10 ppm diesel. The Department is thus not presently concerned with the country’s ability to meet IMO 2020 requirements. The Minister has published a regulation which had been developed by the policy branch on clean fuels and is currently out for comment.

The Minister concluded by stating that the Department would have to return to the Committee and explain that the work it does in communities is work that is done quietly and that is never noticed. This is the case when local emerging companies complain about procurement and when there is local procurement by big companies. The Department physically visits these areas for consultation and discussion. This includes the handing over of SLPs (Social and Labour Plans) and INEP projects.

Follow-up questions/comments
The Chairperson highlighted a point raised by the Minister that spoke to the importance of the Department’s ability – when presenting to the Committee – to state what it is pleading for, but also to assist the Committee by providing clarity on issues raised. An example would be the explanation of the budget cuts.

It is dangerous to Chair a meeting and discover that there were certain things that you did not fully understand. For example, during the CFO’s explanation of the solar water heaters’ budget, he could not find in the presentation the figures she mentioned. It is not clear whether these figures have been allocated to an ongoing or previously failed project.

This is an area which requires rectification as mistakes have previously been made in this area. It is awkward when an allocation is asserted but cannot be seen by Members. Does this allocation serve to fast track a new programme? If so, what happened with the previous programme? Does this allocation form part of an existing budget or a new one that takes no consideration of what has been previously allocated?

In general, has government ever considered an overarching investment strategy that could function as a blueprint for state-owned entities? For example, how do these entities venture into projects with or interact with other private or state-owned entities? There is potential for collaborative work between entities, which had already been tested.

Regarding Programme 1, does a projected 95% reduction in corruption mean that the target should be 100%? How does one measure a 95% reduction in corruption?

Is the 100% approval rate of invoices a reality, or something the Department strives to achieve? Is this even possible to achieve in light of the COVID-19 pandemic?

Regarding Programme 2, the 1 500 Retail Site Compliance Inspections conducted is an understandable amount under present conditions. The 50% of licence applications that have been approved with a minimum of 50% HDSA (Historically Disadvantaged South African) ownership is worrying. Does the 120 rights and permits granted to HDSA already reflect this 50%? Is this 120 a number that should be celebrated or a number that must be improved upon?

Regarding black industrialists, how was the Department able to create black industrialists through procurement? A black industrialist must be able to raise production levels of the economy. Is this possible through procurement?

The Department is doing a good job, However, there are a large number of Bills – seven including the Gas Amendment Bill. What is the status of the Bills, including the Mine Health and Safety Bill?

Regarding the 10% reduction in fatalities, is this figure a 10% reduction in the previous year’s figure, or 10% of what was projected in the strive towards zero harm?

He was concerned when reading reports from Eskom that have been targeted at municipalities. There is a similar issue regarding the solar water heaters. The involvement of COGTA (Cooperative Governance and Traditional Affairs) should be considered, especially in the context of the District Development Model that had been launched.

Why have only three derelict and ownerless mines been rehabilitated?

The Committee had visited most mines. He was worried because the Department utilises a state-owned mining company to do a certain job, and then a separate state-owned entity to provide financial services to these entities.

Can the Department provide clarity on the budget allocation of R26 million to the IDC (Industrial Development Corporation) for small scale mining projects? One might determine that this could be done internally using the requisite resources.

The DG explained that the Department briefs the Minister and prepares submissions for his approval and guidance. The Department told the Minister that this amount was actually transferred to Eskom, and the Minister’s initial response was whether the Department was able to implement this project on its own. Discussions were held with the Executive Authority and it was explained that the Department does not have capacity at present. The Department was advised to develop the necessary capacity to implement the project because, at present, Eskom has the capacity and has been appointed as an implementing agent along with certain municipalities. This is a matter which the Department had already started to deliberate upon after the issue had been raised in the Department by the Minister. The Department noted some of the comments made by the Chairperson, and, under the guidance of the Minister, will determine how to move forward on this matter.

Mr Mbele clarified that Treasury has made about R73 million available for the Department to proceed with the implementation of the Solar Water Heating Programme.

Regarding INEP, the programme is structured in such a way where the Department gives money to licenced municipalities in areas where Eskom is the licenced distributor. The allocation of the INEP money towards municipalities is on the basis that an electricity unit is already providing electricity in that particular area.

Regarding the interaction between structures, entities such as COGTA and SALGA (South African Local Government Association), form part of various forums which the Department engages with.

When the Department allocates the programme or faces challenges in some of the municipalities, it participates in a provincial process where it is invited to present the allocations.

In response to the question on the investment strategy, Ms Ngcwabe stated that an overarching investment strategy is currently utilised internally by the Department. The Department came to the realisation that its global relations work – previously known as internationally coordination – has for the longest time been skewed towards political diplomacy and not economic diplomacy. The Department undertook an exercise last year where it determined its role in this area of work, and it became apparent that its role was not coordination. The Department considered how to redefine, re-engineer and recalibrate this area of its work. It sought to identify pillars which supported this area of work, namely political and economic diplomacy. The Department evaluated the number of MOUs (Memoranda of Understanding) that it had signed with other countries, with some having been signed by SOEs reporting to the Department with their counterparts in various countries. An audit was conducted to see the progress of the implementation of these MOUs, and the results were disappointing. The Department went back to the drawing board, and, following the diagnostic work, it was determined that an investment strategy must be developed. This strategy has already been drafted and is being finalised. The Department has been consulting with SOEs on the strategy in order to elicit their input. The whole approach with this strategy is that the SOEs have been told to use the Department to perform economic diplomacy – the Department would market the products and technologies of the SOEs. It is encouraging to see that even before the strategy has been finalised, there have been positive results. Canada is at the forefront in this regard. During the PDAC (Prospectors & Developers Association of Canada) Convention last year, the Department, with a number of entities, presented the technologies and services on offer. The Department was excited to see that it had been receiving a number of inquiries from investors from that part of the world in relation to these technologies. The Minister emphasised to the Department the need to pursue economic diplomacy work for the Department in certain strategic countries. The Department had various consultations with the entity leading this area of work, and this entity is guiding the Department in terms of the requirements to pursue economic diplomacy. When the time is right and the strategy has been approved, the Department will present a number of strategic countries to the Minister, who would then request Cabinet approval for the Department to enter these areas.

On the number of Bills, she explained that the Mine Health and Safety Bill is an old Bill that is being revived. There is a need for improvement in the weaknesses of this piece of legislation because the Department takes the health and safety of workers very seriously. The Upstream Petroleum Resources Development Bill was drafted in 2019, and in December 2019 it was presented for public comment. Last year, the Department held virtual consultations and incorporated all the comments that it had received in December 2019 to March 2020. It then proceeded to process the Bill, and currently the Bill is ready to go to Cabinet to ask for approval to table the Bill in Parliament.

The Gas Amendment Bill was officially introduced in Parliament on Friday [30 April 2021]. The National Nuclear Regulator Amendment Bill was being taken to Cabinet that same week to ask for permission to gazette for public comment. In the next few weeks, the Department will take the Nuclear Waste Fund Management Bill to Cabinet again for approval to seek public comment.

These Bills – particularly the energy Bills – were inherited from the former DOE (Department of Energy), and all of them had been in the system for at least 10 years without being finalised. The Department evaluated the importance of these Bills and whether to pursue them, and it was determined that they were all important.

Regarding the Electricity Regulation Act, it is an important piece of legislation being dealt with by the Department. Contained in this Act are provisions which relate to the restructuring currently happening within Eskom. The Department will gazette for public comments on this Act this year, and it will be taken to Parliament next year.

Mr Msiza reiterated that the ultimate goal of the Department is to achieve zero harm. The sector has agreed that it should compare favourably with the best performing countries in the world such as Australia, Canada and the USA. Since 2003, there has been a reduction in the fatality rates in terms of a million hours worked – from 0,32 to almost 0,05 in 2019. In general, South Africa is comparing favourably with the best performing countries, but the biggest issue remains the persistent loss of lives. The percentage is based on the previous year’s fatality rate in comparison to global figures on this issue.

In response to the question on the Solar Water Heating Programme, Ms Chetty clarified that there was no additional funding. The R194 million for goods and services in Programme 5 stated on slide 83 includes the amount for the continued implementation of the solar water programme, which is R73.6 million.

The 100% approved invoices is a target that the Department strives for, but this target has co-dependencies from end-users, with COVID-19 having a significant contribution in this regard. For payments to happen within 30 days, there are challenges on the ground that the Department must overcome such as verification exercises that must be completed before payments are effected, and issues with supporting documents.

The 100% elimination of fruitless and wasteful expenditure is also a target which the Department strives towards. The Department calculated, based on the previous year, the fruitless and wasteful expenditure that had occurred and compared this number to the current year under review. In that comparison, the Department hopes to achieve a 100% reduction.

Mr Maqubela explained that black industrialists is an area which requires refinement. When looking at the black industrialist framework, it can be seen that when a mining company procures manufactured goods from any company that is 50% black-owned and does the actual manufacturing, the owner of this manufacturing company qualifies to be a black industrialist.

It can be argued that it is possible for this company not to have obtained the funding from the black industrialist programme, but in the view of the Department, the objective of ensuring that black people participate in the manufacturing sector is still achieved. Going forward, the Department will examine high-end manufacturing, such as the manufacturing of heavy industrial equipment. At present, there are plenty of black-owned companies manufacturing PPE (personal protective equipment) for example.

The Department sends officials out on a regular basis to mining companies to determine the procurement spend of the companies, where they procure from, and whether they manufacture items themselves. This is the reason for the relatively low number of 10 industrialists – it is not really possible to have more than 10 every year because a manufacturer would then have to supply other mining companies in order to grow.

Regarding HDSA in the mining sector, the figure may look small, but in reality, the Department receives many applications from companies that are majority HDSA. Once these companies have successfully applied, they seek investors. The Department then ensures that these companies are actually majority-owned by HDSA. The target of 120 is something the Department strives towards, but this is dependent on the number of applications that are submitted.

The Minister stated that the Solar Water Heating Programme is an unmitigated disaster that must be dealt with within the Department. It is important that the Department owns up to this. Every time that he met with an official, there was an argument about the funding for the Solar Water Heating Programme. The problem with this programme started with the funding, and currently there is a large amount of stock that is not being cleared. The issue of funding hides the more pertinent issue of the lack of implementation of solar water heaters. The Committee must request that the Department accounts for this issue.

He explained that an overarching investment strategy does not really exist because every SOE has its own developmental and financial mandate. If one of these mandates fails, the SOE will fail in response. Every action by an SOE must reflect these mandates, but this is not happening.

The Department regularly establishes partnerships with private entities and will continue to do so. However, these entities must be commercially viable and financially sustainable.

He emphasised that there should be a zero tolerance for corruption in the same way that zero harm is targeted.

Regarding the black industrialists, an activity which the Department partakes in on a regular basis is field work on the mines and the physical consultation with people in villages and townships on the issue of mining activity.

He told the story of the Department creating a black industrialist through procurement – a young man who started from nothing five years ago created a business with an Anglo-American Operation that is now worth R21 million.

It is possible to develop black industrialists through procurement because procurement involves procuring services from somebody. Black businesses must offer services or products that can be procured. Another example of a black industrialist is the owner of the South Deep Gold Mine – a business which partnered with a company that was looking to expand abroad. South Deep supplies this company with mining machinery, which is a form of procurement.

In response to the consideration of COGTA, he told the story of a programme that was run by the DBSA (Development Bank of South Africa) for COGTA – retired engineers were recruited along with other specialists and allocated to municipalities. This project gradually collapsed, and the DMRE should be weary of shifting responsibility to a sister Department. If the Solar Water Heating Programme is given to Eskom, it should be given on the basis of capacity considerations.

He was not sure whether COGTA should be relied upon because, for example, a water purification project that was started in a North West municipality in 2017 remains at a standstill. The Department is currently ensuring that a state-owned mining company is in the condition required to operate as a mining company.

Regarding the IDC, it provides loans to companies which are converted into equity if the loans are not able to be repaid.

Further comments by the Committee  
The Chairperson reiterated the importance of the Department clarifying any grey areas which may arise after presenting. The Committee must accept and appreciate the clarification that is given in this regard.

He explained that the meeting was reaching a somewhat premature end because the presentations that were supposed to be given by the CEF and NESCA were not tabled. The Committee still has the right to call these entities to make presentations at a later stage, but the Committee cannot hear issues that were not on today’s schedule as there was not time to amend the programme.

Mr Mileham expressed his concern with the letter sent to the Committee by the DG. It is bad in law and is not an accurate reflection of the PFMA’s (Public Finance Management Act) revised framework and guidelines. He requested guidance from the parliamentary legal advisors as to whether in fact this was the case, because his understanding was that every entity must submit its APP to Parliament for consideration. The Chairperson told Mr Mileham that his request for guidance may be granted, but there is nothing that the Committee can do at the moment because of the issue of tabling. The Committee will ensure that all briefings for the future have been properly tabled to avoid a repeat of today.

Closing remarks
The Minister thanked the Committee for today’s engagement. The Department was sharpened by the Committee’s difficult questions. The Department would return on the following day and continue with the programme as outlined and was grateful for the premature ending of this taxing meeting.

The Chairperson thanked the Minister and his team for providing a basis on which the Committee can move forward. He requested that all entities scheduled to present on the following day should arrive on time in case of technological issues.

The meeting was adjourned.
 

Download as PDF

You can download this page as a PDF using your browser's print functionality. Click on the "Print" button below and select the "PDF" option under destinations/printers.

See detailed instructions for your browser here.

Share this page: