Budget Vote process; Budget & Sector Analysis: briefing by Committee staff; Mintek on its 2014 Strategic Plan

Meeting report

Chairperson’s opening remarks
The Chairperson welcomed Members to the meeting together with the representatives from the various entities of the Department of Mineral Resources (DMR). The Chairperson indicated to Members that the Committee did not have the luxury of time, therefore it was hoped that the Committee would wrap up all the necessary budget vote work by the following week.

Processing of Budget Votes by Committees of Parliament
Ms Ayanda Boss, Committee Secretary, explained that Section 27(1) of the Public Finance Management Act (PFMA) states that the Minister must table the annual budget to the National Assembly before the start of a financial year. The Minister therefore tabled the national budget in March of each year.

Section 27(4) of the PFMA required that on the introduction of the annual budget, the Accounting Officer for the department submit this to Parliament, with measurable objectives for each main programme in the department’s vote. These measurable objectives were contained in the Strategic Plans for each department. National  Assembly Rule 137 required that Committees report on their work before a debate in the House on a particular budget vote. Committees were required to process budget votes and finalise these by 11 July 2014. She outlined the budget vote process followed by Committee which was done in the following three phases:
- Phase 1: Administrative Support
- Departmental Inputs
- Committee Deliberations and Reporting.

The Chairperson said it would have been of great value if the Auditor-General was invited as the first entity to brief the Committee so that Members could have a better understanding of the financial obligations of each of the DMR entities. However the Auditor-General would be briefing the Committee in between the briefings by the DMR and its entities.

Mr Lorimer asked that the Committee receive all documentation well ahead of time so that Members could adequately prepare for the meetings. The Committee would have loved to have copies of the DMR’s Strategic Plan. It was therefore not acceptable for the DMR to deliver documents less than 24 hours before the day of the meeting.

The Chairperson agreed that the Committee was not happy with the DMR on this point. The delay was putting strain on Members as well as Committee Staff. He assured Members that these concerns would be raised with the DMR, especially through the Parliamentary Liaison Officer.

The Chairperson indicated that the vacancy of Content Advisor to the Committee had not yet been filled; therefore the Committee Researcher was required to do the work of the Content Advisor in preparation for the meeting.

Presentation: Budget of the Department of Mineral Resources Vote 32.
Mr Martin Nicol, Committee Researcher, explained that the aim of the DMR was to “promote and regulate the mining sector for transformation, growth, development and to ensure that all South Africans benefit from the mineral wealth of the country”. He spoke about the DMR’s strategic goals, gave an overview of the 2013/14 financial year and the 2013 Budgetary Review and Recommendations Report, and provided an analysis of Budget Vote 23.

Ms N Mdaka (ANC) indicated that some Members did not have the relevant documentation. The Chairperson said all paper documents would be made available to those Members who did not have during the course of the meeting.

Mr J Malema (EFF) said it was very worrying that some Members did not have the documents even though the documents had been sent through to Members electronically. He raised a concern that Members had not read the documents and therefore were not prepared for the meeting. He suggested that Members move away from relying on printed documents but rather move towards using the electronic gadgets provided by Parliament. Documents were emailed to Members before the meeting.

The Chairperson said it should not be assumed that Members did not prepare for the meeting simply because they did not have the printed documents in front of them. The meeting was an introduction to the budgetary processes and the documents were therefore not the subject for discussion, it was simply an informative process for Members to better understand the budgetary process within the DMR.

Mr Z Mandela (ANC) said it was hoped that Members would come to understand that some Members were still settling into Parliament and therefore did not yet have the relevant assistance, especially when it came to getting their documents in time. Once Members were located the relevant assistance, the work of Members would be better coordinated, especially in preparation for meetings.

Mr Nicol continued with the presentation and explained that National Treasury set the framework; the main point of reference when evaluating an Annual Report was the Strategic Plan which Parliament agreed to fund through the budget. The DMR had an appropriation of R 1.3 billion available in 2013/14, 99.5% of the budget had been spent. A budget of R 692.7 million was set aside for transfers and subsidies, and 99.4% was allocated to Mintek. The DMR was left with an operational budget of R 701 million. The DMR received a qualified audit in 2012/13 because it did not have an adequate system to manage and value receivables for departmental revenue. Of the total planned performance targets DMR had set for itself in the 2012/13 financial year, 21%  were not achieved. The Auditor-General found that DMR failed to enforce compliance with Section 28 of the Mineral and Petroleum Development Act (MPRDA). The policy priorities for the DMR would be outlined in its presentation of the 2014-19 Strategic Plan and Annual Performance Plan for 2014/15. The DMR had four main funding programmes:
•Programme 1: Administration
•Programme 2: Promotion of Mine Safety and Health
•Programme 3: Mineral Regulation
•Programme 4: Mineral Policy and Promotion.

He identified the following key issues for the Committee to consider: testing the extent of transformation in the minerals sector, oversight over the DMR by the Portfolio Committee, oil and gas implications of amendments to the Mineral and Petroleum Resources Development Act and the Council for Geoscience which was not funded sufficiently to implement the Geoscience Amendment Act.

Discussion
Mr Lorimer asked if the Presidency’s Report on the DMR’s lack of transformation could be made available to the Committee.

Mr Malema asked what would be the possible actions for the DMR to take in dealing with non-compliance with the Mining Charter. How were water and environmental issues within mining communities being improved? The communities around most mines still did not have access to proper services such as water and electricity, while the mines were fully functional. What was the state’s view on the ownership and control of state owned mining companies?

Ms M Mafolo (ANC) asked whether the 208 vacancies within the DMR were at senior management level.

Mr Nicol replied that the report from the Presidency was available on DMR’s website but copies of it would be made available. He said if non-compliance with the Mining Charter was proved before the end of December 2014 the Minister of DMR had every right to revoke a company’s mining rights. However non-compliance was a matter which had not yet been adequately defined and was therefore difficult to measure or assess. Health and safety issues around mining communities were constantly being dealt with by DMR, Mintek and the Council for Geoscience. The DMR had a fixed strategy for dealing with those matters. On the question of state owned mines he said he could not speak to the attitude of the DMR, however the DMR was not involved in the management of state owned mines. The 208 vacancies were spread throughout DMR; however the crux of the vacancies was for Mine Inspectors and Safety Officers because the number of mines has drastically increased. In response to the need, the DMR has established a Mine, Health and Safety Inspectorate. 

The Chairperson said it was interesting to see that even though there were problems which the DMR was experiencing financially, however the DMR was still one of the best departments in financial management. The briefing from the DMR would therefore be an interesting one. The Chairperson welcomed the delegation from Mintek.

Mintek Strategic Plan 2014/15 presentation
Mr Abiel Mngomezulu, President and Chief Executive Officer, Mintek explained that the core business of Mintek was around the research and development of efficient mineral processing technologies and value added products and services, together with the promotion of mineral based economies and building world class research and development excellence (see detailed presentation document).

Mintek was busy with the first urban mining initiative which project was scheduled for July 2014, however there was a slight delay in the delivery of copper from Zambia. Mintek’s capital expenditure projects included the:
•Solvent Extraction Pilot plant worth R 3.5 million
•SAVMIN Pilot Plant R 4.7 million
•Optical sorting R 4.7 million
•Semi precious gemstone facility in Northern Cape R 3.3 million
•Atomiser R 40 million
•Infrastructure R 12 million.

He explained that Mintek maintained a strong balance sheet position with assets of more than R300 million. Income and expenditure trends would continue with income expected to pass the R0.5 billion mark while main expenditure costs would be influenced by electricity charges. Mintek contributed to human capital development in the fields of Science, Engineering, Technology and Mathematics. Bursaries were provided to target around 45 undergraduate and 15 post-graduate students. Mintek absorbed 100% of its bursars. Mintek was in its second year of its three-year contract with the DMR to manage certain rehabilitation projects selected by the DMR, mainly old asbestos mines in Limpopo and the Northern Cape. Mintek had a target to complete work on the following sites for 2014/15:
•Lusikisiki quarry wall (E Cape)
•Ditabogong asbestos waste dump (Limpopo)
•Mahlatjane asbestos waste dump (Limpopo)
•Mang-le-mang asbestos waste dump (Limpopo)

Mr Mngomezulu explained that South Africa had large deposits of low grade coal, the purpose of its coal-sorting project was to develop technology that allows for the upgrading of below specification coal for use as a feedstock by Eskom.

Mr Peter Craven, General Manager: Business Development, Mintek took over and concluded the presentation, saying that Mintek operated in a global environment where around 60% of Mintek’s income was derived from international activities.

Discussion
Mr Malema asked for clarity on why Mintek needed money from the DMR when they should in fact be generating their own income through the work they do. Mintek should be able to sustain itself in the long run. State intervention should not mean a permanent injection of money into Mintek projects. As an investor, the state should be able to benefit from whatever investments it has made in Mintek projects. He asked whether the work of Mintek was specifically centered on researching new technologies or whether the research went beyond that to include water and energy. He congratulated Mintek for the work that they did, alluding to the fact that Mintek was one of the best research institutions in the world. The state should only intervene when there was a crisis.

Mr Lorimer thanked Minteck for the interesting presentation. What would getting a baseline increase enable Mintek to do which was currently not being done? He asked whether Mintek’s coal-sorting project would enable Eskom to be more efficient in the work that they do.

Mr Mandela asked which July was the project scheduled for? What would be the contributing factors for the copper delays from Zambia; when was the estimated date for delivery? He referred to the R10 million which was allocated to the Northern Cape for a pilot project; when was the full implementation of the project expected? When would these pilot projects move towards being more long term, sustainable and operational projects? According to the presentation, Mintek had extended external bursaries; 45 undergraduate and 15 postgraduate; which courses were these students enrolled in? Four projects have been targeted for completion in 2014/15; one was the Lusikisiki Quarry Wall, when exactly would this purification project be completed?

The Chairperson wondered what the social implications were of the work which Mintek understood. To what extent do the research interventions address the problems faced at community level? He said the Committee would like to get some clarity from Mintek on its use of state resources; it was not the state’s responsibility to rehabilitate damaged private property.

Mr Craven responded to the question around the sustainability of the work of Mintek and said the way Mintek developed technology was meant to generate full value for the entity. He said when Mintek can be able to develop technology which could be licensed to industry this would generate more revenue for the entity; through license fees and investments through capital. Mintek’s technology was made solely on a commercial basis. He explained that Mintek was indeed doing its best to make sure that the entity was in fact profitable; all activities were being subsidized so that the institution could at least be 50% sustainable. A lot of the work Mintek does were strategic activities for companies to take on Mintek activities.

Mintek started its commercial strategy around the 1980s and with that history Mintek has got to the point where the research it generates became more profitable, with state intervention of course. However he said he did not believe that Mintek could become self-sustainable. He agreed that water and electricity matters could not be ignored; as a result Mintek is driving to be more responsive to these needs. This is why urban mining had become some of the work of the entity. On the question on coal, he said any increase in coal quality would have an impact on Eskom’s efficiency so Mintek was removing ash from the coal in order to promote better efficiency. A lot of Mintek’s increases have been as a result of a 6 year economic support package, Mintek was therefore not asking for more money, they were asking for sustainment. It was very important for Mintek to plan 5 years ahead, therefore applications to Treasury have also been approached. He responded to Nkosi Mandela’s question and said the project was for July 2014. Getting copper from Zambia had proved to be more convenient and cheaper, the delay was not a long term delay.  There were a few indirect implications to the work of Mintek; the one was to sustain the mining industry, the indirect benefit to communities was that coastlines were then more sustainable. Secondly, a lot of Mintek’s technology was aimed at using fewer natural resources such as water and energy, and therefore having less of a negative impact on the environment. The benefit of this was that mining was working in consideration of the agricultural sector.

Mr Mngomezulu responded to the question on financial sustainability. He said in the history of South Africa a number of mining companies had their own research teams but most of these companies have disposed of their research units and were now making use of Mintek’s resources. Only one mining company still had its own research unit, but they were also working to dispose it. Mintek was therefore very successful in carrying out its mandate. On the question on bursaries, all the information would be provided in writing to the Committee within 24 hours.

The Chairperson thanked Mintek for the presentation and Members for their contributions. He however raised it as a concern that Mr Mngomezulu was carrying two titles; that of CEO and President of Mintek.

Adoption of the Committee Programme
The Chairperson said it has been a lot of work for the Committee to try and accommodate its entire programme and all entities because the time frame was highly congested. Members were therefore asked to go through the circulated programme and if there were any items they did not agree with, to raise this with the Committee.

Adoption of Committee Minutes, 25 June 2014
The minutes were adopted without any amendments.

Mr Lorimer asked that the Committee receive some indication as to what the programme for the following week would look like, seeing that the Committee programme seemed to be changing rapidly.

The Chairperson said it would rest on the Committee what the programme would look like. With regard to apologies, the Chairperson said if a Member was not able to attend a meeting; an apology should be forwarded to the Committee in writing. A phone call apology was not recordable.

The meeting was adjourned.