Department of Mineral Resources; Mine Health and Safety Council 2016/17 Annual Report, with Auditor-General input

Meeting report

Opening Remarks by Chairperson

The Chairperson opened the meeting by outlining the programme over the next two days, requesting that all senior staff and CEO’s of the entities reporting to DMR attend the meeting on both days in case the Committee needed to clarify any issues with them. 

He apologised for a technical problem which meant that none of the slides could be viewed on the overhead projector.

Mr J Lorimer (DA) wanted to know if the programme for the day would include an update on when Committee Members could engage with the Minister of Mineral Resources on the State Capture Report.  

The Chairperson responded that he would provide feedback on the issue.

The Chairperson commented on the recent passing away of the Harmony Regional Manager - it seemed he was killed outside the mine premises and that he hoped that justice would prevail to ensure things like this would be stamped out.

He said he was liaising with the Office of the Minister and the House Chair to secure a date for the Committee to engage with the Minister. The the18th of October has been proposed, as the issue is a priority for the Committee. He emphasised that this would only be a first phase in engaging the Minister on State Capture and that there may be other developments. The Committee had a very full schedule and to assist with resolving issues, he was also liaising with the House Chair for additional meetings days for the Committee. 

Briefing by AGSA

Ms Zolisa Zwakala, Business Executive, AGSA, reported that the DMR audit was carried in terms of government’s Medium Term Strategic Framework (MTSF) and that a key theme of the AGSA audit was to look at overall accountability in terms of government priorities within DMR and its entities that included the Council for Geoscience (CGS), Mintek, the State Diamond Trader (SDT), the Mining Health and Safety Council (MHSC) and the South African Diamond and Precious Metals Regulator (SADPMR). Some of the key aspects assessed were:  internal controls and supervision, consequence management and the impact of programmes (providing a better life for all). 

She concluded her introductory remarks by congratulating DMR on an overall improvement on its audit outcomes compared to previous periods and that the AGSA remained hopeful that this performance would be sustained.

Ms Lufano Mmbadi, Senior Manager, AGSA, said some of the detailed aspects the AGSA examined included the quality of financial statements and annual performance reports, irregular fruitful and wasteful expenditure, fraud and consequence management and the strength of internal controls and assurances. In this regard, the audit examined three key areas:

-fair presentation and absence of significant misstatements in financial data

-reliable and credible performance information for predetermined objectives

-and lastly, compliance with all laws and regulations governing financial matters

In 2013/14 neither DMR or any of its entities had a clean audit, however during the next two audit periods, 2014/15 and 2015/16 - 33% of the Department and its entities achieved clean audits. This improved to 67% in the 2016/17 period - see below for more detail:

-2013/14 - DMR and all its entities had a qualified audit with findings

-2014/15 - Mintek and SDT had clean audits and the rest of DMR and its entities had a qualified audit with findings (DMR, CGS, MHSC and SADPMR)

-2015/16 – Mintek and SADPMR had clean audits and the rest of DMR and its entities had a qualified audit with findings (DMR, CGS, MHSC and SDT)

-2016/17 - DMR, MHSC, Mintek and SDT all had clean audits whilst CGS and SADPMR had qualified audits.

Some further detailed audit findings that resulted in the above findings for the period 2015/16 to 2016/17 were:

Irregular expenditure was incurred by two DMR entities (the rest had a clean audit). CSG paid R393 000 to board members in contravention of the entity policy and Treasury regulations, whilst SDT awarded R31 000 on a quotation without applying the preference points system. However, there was a big improvement from the previous periods in terms of irregular expenditure (R9.7m in 2014/15 and R774 742 in 2015/16). Only CGS incurred fruitless and wasteful expenditure - an interest payment of R33 000 due to late payment to a supplier.

DMR, CGS and SADPMR senior management were advised to take immediate action to rectify these specific audit shortcomings. In this regard, the Minister, the departmental audit committee and internal audit units had provided assurances that this would be addressed, specifically for financial and performance management. AGSA requested that a key root cause, namely - instability or vacancies in key positions at SAPDMR and CGS had to be addressed urgently. In this regard, the Minister had given the following commitments:

-Management teams had to monitor and comply with legislation (implemented)

-Governance structures for internal audit had to review financial information produced for audits (implemented)

-Filling of key positions to facilitate effective monthly reporting (in progress)

To provide further stability and a sustained clean audit outcome AGSA proposed the following recommendations for the Committee in its oversight role:

-Committee should request management to provide timeous feedback on the progress of action plans to improve the overall audit outcome of this portfolio

-The Committee had to review transgressors on a quarterly basis (list provided by Department) to ensure appropriate action taken to avoid irregular and fruitless and wasteful expenditure.

-The Committee should monitor implementation of commitments by accounting officers and the Executive Authority.

Discussion

The Chairperson commented that as a whole this seems to be a good outcome for the Department and its entities.

Mr Lorimer wanted to know what happened to transgressors and whether a list of transgressors was available. He also wanted to know what the nature of the wasteful and fruitless expenditure was in the audit.

Ms Mmbadi responded that R33 000 was incurred by CGS due to late payment of a supplier and that if this was due to negligence, the money could be recovered from the transgressor. 

The Chairperson said that as the Committee had an oversight role, some of the recommendations suggested by the AGSA, was not feasible in terms of the Committee’s parliamentary mandate. The Committee could oversee implementation but accountability and actual compliance must be elsewhere.

Ms Zwakala said that she understood the issue, but that the office of the AGSA wanted to ensure responsibility for compliance is put at the right door. The Committee’s responsibility should be to engage and review departmental reports to ensure appropriate interventions are in place to address shortcomings.

The Chairperson responded that nothing was “swept under the carpet” at this Committee. All entities are here so they had to answer for themselves. He thanked the AGSA for their report and thanked DMR and its entities for the overall improvement in the audit outcome, noting that all had passed - but that there others that had passed with distinction. He urged DMR and its entities to ensure they remained “above the line”, and that those who had just missed being above the line on some audit outcomes had to plan to be above the line in future.

Briefing by the Researcher and Content Advisor on the analysis and content of the annual DMR reports for 2016/2017 financial year

Dr Martin Nicol, Committee Researcher and Mr Nkhosinati Kweyama, Content Advisor, briefed the Committee on their findings.

DMR achievements during 2016/17 showed that 85% of performance targets were met. In addition 2016 was the safest year in terms of mining fatalities, injuries and reduced occupational diseases. Mine fatalities declined to 73 and only 9% injuries were reported.

In terms of Performance Measures, the AGSA reported that DMR performance was consistent with planned programmes, indicators and targets were well defined, verifiable, specific and measurable - aligned with National Treasury’s framework. The overall high score of 85% hid some underperformance within some entities when compared to 2015/16, i.e.

-Administration improved from 74% to 95% in 2016/17

-Mine Health and Safety declined from 80% to 70% in 2016/17

-Mineral Regulation declined from 90% to 77% in 2016/17

-Mineral Policy and Promotion increased from 82% to 85% in 2016/17

Reservations and concerns were noted on the lack of policy certainty on investment in mining and attitudes to mining communities. In particular on the following issues:

-poor and antagonistic relationship with the Chamber of Mines

-18 month delay in launching the Mining Phakisa

-lack of performance measures on granting of mineral rights and SAMRAD (online SA Mineral Resources Administration System)

-delays in finalising MPRDA and Mining Charter

-delay in Mine Health and Safety Act amendments (promised Q4 2017/18)

-lack of legislation against illegal mining

-lack of proposals to change diamond legislation

-delay in implementation of the Geoscience Act

A key concern was that none of the Committee recommendations made for the 2017/18 APP had been included in the current APP. In terms of meeting 85% of targets achieved within DMR and its entities, there were some concerns with the scores of two entities - CGS and Mine Health and Safety Inspectorate (MHSI), in that the latter only met 70% of its performance targets, while CGS could not be measured as its reported performance targets differed from what was submitted in its APP. 

A further critical concern was that there had been drastic fall in senior scientific staff at CGS, with MSc and PhD degrees. The target was around 60% and the current percentage is now around 20%.

Discussion

Mr Z Mandela (ANC) wanted to know why the Mining Phakisa was included here as it was a project residing in the Presidency, meaning that DMR had very little control over outcomes. 

Mr I Pikinini (ANC) said he was concerned about the South African Mineral Resources Administration Database (SAMRAD), as it was supposed to improve the work of the Department.

Dr Nicol responded that he agreed that the Mining Phakisa was a Presidency initiative - the reason it had been included in this report was that DMR had it as a performance measure in their reports. He was unable to comment on SAMRAD as DMR has not reported on the issue as yet.

The Chairperson commented that departmental performance measures were still not clear enough to comment with assurance. He was concerned that “we” (ie referring to DMR and the Committee in its oversight role) were not making a positive difference in respect of customer satisfaction. He was not convinced that some of the concerns and shortcomings identified in the report could be laid at the door of DMR, e.g. the lack of progress on the MPRDA was a parliamentary issue, not a departmental issue.

Briefing by DMR on its 2016/17Annual Report

Adv Thabo Mokoena, Director-General, DMR, prefaced the departmental annual report by reporting on some general mining and economic statistics and the importance of mining in the local economy. Total state revenue from mining had increased nearly from R7 billion in 2015 to R18.5 billion in 2016. Iron ore was the most important contributor, at 30.4%. Other minerals contributing to the state revenue were coal (19.8%), chrome (11.8%) and platinum (10.3%). In 2016 mining contributed around R306 billion to GDP, or 7.9% of GDP. This was an increase from the R286 billion of 2015. However, overall mining as a contribution to GDP had fallen from around 9% in 2011, to current levels in 2017 below 8%. Employment in mining had also fallen drastically over recent years - currently the sector employed around 467 000 employees, while in 2014 the figure was 498 000, in 3 years over 30 000 jobs had been shed in the mining industry. This was due to low commodity prices and lower demand from major export destinations like the European Union (EU) and China. DMR, its entities and its partners were working on plans maintain the importance of mining in the South African economy and more would be revealed in the various presentations to follow

Ms Rofhiwa Singo, CFO, DMR, briefed the Committee on the financials, highlighting that it received an unqualified audit opinion with no material findings. Overall revenue collected increased from R30.2 million to R37.7 million largely due to increased efficiency.  In terms of overall expenditure, the following were highlighted:

-expenditure up to 31 March 2017 was R1.66 billion (99.5% of budget)

-variance of about R8 million due to employee compensation and acquisition of capital assets

-Virements of around R57.4 million due to amounts required to cater for shortfall in accommodation 

-All transfers to entities were fully implemented

Pressures on the budget meant that DMR was struggling to meaningfully fulfil its mandates due to staff shortages in certain critical areas, like the establishment of the Centre of Excellence (CoE) at the MHSC which seeks to improve its research functions and knowledge and information management. At this stage the budget allocation for the CoE of R576.7 million was not enough and DMR anticipated a deficit of around R21 million at the end of 2017. The issue was been addressed with Treasury, including a virement of R18 million.

Ms Patricia Gamede, Deputy Director-general: Corporate Services gave an overview of developments of DMR’s corporate programmes. These were mainly aimed at vulnerable groups and some of the important projects and programmes contained as per above were:

-SMME workshop for youth in Westonaria

-Entrepreneurship projects at Kamhlashwa Village

-Workshop for young woman in mining in partnership with MHSC 

-Ensure compliance with Human Resources and Occupational Health and Safety by implementing health risk assessment programmes like – HIV/AIDS awareness, breast cancer awareness, fitness programmes and others.

Some corporate services programmes had been affected by some staffing challenges, but plans were in place to ensure that programmes and funding for vulnerable groups were prioritised

Mr Mthokozisi Zondi, Acting Chief Inspector of Mines, DMR, stressed that MHSI’s key mandate was to safeguard the health and safety of mine workers and mining community workers. Some of the successes gained by the directorate and its partners were a decline in the exposure of employees to airborne pollution, reduction in noise, and reduction in health risk (e.g. reported cases of silicosis were 1 609 in 2007 and  635 in 2016). There had also been an increase in the number of employees screened for TB (376 718 in 2014 to 437 436 in 2016). Fatalities in mining had reduced from above 250 in 2003 to 73 in 2016).

However challenges remained on the ground and the directorate was aware that occupational diseases remained unacceptably high; loss of life had seen an increase of disaster type incidents

Some of the corrective measures and programmes initiated in MHSI to ensure the directorate meets it mandate to safeguard the health and safety of mine workers and mining community workers, were:

-develop code of practice for workers to refuse dangerous work

-conduct quarterly health and safety meetings with mine CEOs

-intensify health and safety campaigns 

Ms Seipati Dlamini, Acting Deputy Director-General: Mineral Regulation, briefed the Committee on the departmental programme to regulate minerals and the mining sector to ensure economic development, employment, transformation and environmental compliance. 

An important milestone flowing from above was the training of 124 officials as designated mineral resource inspectors who would enforce regulation in terms of the department’s One Environmental System - as directed by the National Environmental Act (NEMA). In addition, DMR was intensifying its fight against illegal mining by joining forces with other government agencies to stop and manage illegal mining around the area of Sekhukhune - 33 people had been arrested and assets seized. This programme, to combat illegal mining would be expanded to other provinces.

However there were still some challenges that required attention - namely job creation through mining, adherence to prescribed time frames (licence applications), effective management of environmental complaints and enforcement procedures to collect arrear prospecting fees. 

Plans in place to address the above were as follows:

-improve turnaround times in issuing mining rights and to use section 11 of MPRDA to create an environment for mining companies to sustain jobs. (Section 11 deals with the transfer of shares and transfer of prospecting and mining rights)

-licensing committees to meet at least one a month to improve turnaround times 

-improve the process on engaging with competent authorities

Mr Andries Moatshe, Acting Deputy Director-General: Mineral Policy and Promotion, DMR, briefed the Committee on its projects and programmes aimed at promoting the country’s mineral wealth and attractiveness to investors.

According to Mr Moatshe, the directorate had the following successes:

-the MPRDA was being prioritised in the Select Committee on Land and Minerals and provincial legislatures. There was an expectation that this process will be finalised in November 2017.

-The Mining Company of SA (MINCOSA) Bill will be introduced to Parliament before end of 2017/8, subsequent to the divestment of the African Exploration Mining and Finance Company (AEMFC). 

-The Mining Charter 2017 had been published on 15 June 2017 following stakeholder consultations. 

-The shale gas action plan was being implemented - a key development was that CGS in collaboration with PASA was investigating the occurrence of near surface hydrocarbon.

-the Oceans Phakisa National Plan was being implemented. This included amongst other things, the operationalisation of the IOPC fund (that would assist with pollution control)

-Strategic technical partnerships had been established with Nigeria, Lesotho, Angola, Russia, Japan and China.

Some of the challenges faced by the directorate were that it could not finalise the Mining Charter an in addition, Operation Mining Phakisa could not be implemented pending an outstanding report from the Department of Planning Monitoring and Evaluation (DPME). Some of the directorate risk management plans could not be implemented due to capacity challenges. 

The directorate was working with all stakeholders to address the challenges - i.e. the Mining Charter had finally been gazetted in June 2017 and DMR was currently engaging DPME on Operation Phakisa and all outstanding risk management plans would be finalised during this financial year.

Ms Singo informed the Committee that lack of funding was hampering the effective functioning of SAMRAD.

Discussion

Ms M Mafolo (ANC) requested clarity on the low staff capacity in the Corporate Affairs directorate. She wanted to know if it was due outstanding posts that were frozen.

Mr Pkinini wanted to know how the Department planned to handle illegal mining activities. He also wanted to know if the departmental plan on mining fatalities was about decreasing the number or if it was to have zero fatalities. Lastly, he wanted clarity on staffing matters and how the Department was managing this. He was of the view that it was better to have staff at the “coal face” where work was being done, rather than in “administrative office” positions.

Mr Mandela wanted to know how many jobs were lost - or alternatively, how many jobs were created in this final year. He was concerned that staffing continued to be problematic and wanted to know when vacancies would be filled. In respect of the Department’s social upliftment programmes, he wanted to know if it was working with traditional leaders on these programmes.

Adv Mokoena responded that DMR had a very good relationship with traditional leaders and that the Department always consulted traditional leaders on aspects such as raised by Mr Mandela. The Department had a policy of zero harm - no loss of lives.

In response to the question on low capacity, Ms Gamede, said that it was not always possible to fill posts where resignations had occurred, due to departmental priorities brought about by the reduced staffing budget.

Ms Dlamini informed the Committee that the departmental plan was to facilitate the creation of around 7 000 jobs via licensing, but that it had only managed to create around 6 511 jobs. Regarding broad job losses in the sector, she said these numbers were as reported to NEDLAC recently - in the period Oct 2016 to date:

-3 000 jobs were shed in the coal sector - of these 1002 was saved

-about 16 000 were lost in the gold sector (Anglo Gold, Sibanye etc.)

-about 5 000 jobs were lost in the platinum sector, of these about 2 700 jobs were saved via CCMA consultations.

Mr Pikinini wanted to know how it was possible not to fill staff positions if there were resignations.

The DG responded that the departmental policy was that if anyone resigned, the position would be filled at some level. Information and data on this could be made available to the Committee.

The Chairperson said he was a bit concerned about some aspects of the briefing. The report was good but he was concerned about how the Department was still able to meet its targets despite a reduction in staff numbers. In addition, the budget was also cut. In terms of its oversight mandate, the He was concerned that targets were too low and the Committee may have to interrogate the report in greater depth to get a better understanding of these issues. He was also concerned about transformation, especially what was being done at the base.

Presentation by the Mine Health and Safety Council (MHSC)

Mr Thabo Dube, CEO, MHSC, said MHSC advised the Minister on all occupational health and safety issues relating to legislation, research and promotion. There were three key areas that the MHSC focussed on; these were occupational safety, occupational health and human factors. Some of the programmes in place to address these areas were:

-guidelines for small scale mines to comply with health and safety

-identification, selection and promotion of TB leading practices in SA mining

-handbook on personal protective equipment for woman in mining (WiM)

An important aspect of the work done by MHSC was to promote awareness on occupational health and safety (OHS). This was done amongst others, via regional workshops, commenting on media articles, hosting OHS summits including WiM conferences; commenting on mining disasters and promoting MHSC work at exhibitions and participation in conferences like the Mining Indaba. An important initiative was engaging mines and mine owners to set aside one day for health and safety only, i.e. no production.

The establishment of the CoE was a key programme to enhance the capacity at MHSC. The CoE was in the process of being implemented and being resourced to improve research capability, store, disseminate knowledge and information better and improve promotion of MHSC activities and programmes. 

Mr Karabo Mkwanazi, CFP, MHSC, emphasised the entity’s clean audit opinion and said the target was to sustain this for the next three years. MHSC compliance with government approved SCM was at 81% vs. the target of 80%. The collection of levies was at 96% vs. its target of 90% (R72.2 million collected). Levies contributed 82% to the funding of MHSC. The current levy was being reviewed to be aligned to zero harm. In terms of its financial performance, as at 31 March 2017, MHSC incurred a deficit of R22.7 million. Income was at R91.5 million while expenses totalled R114.2 million. The R22.7 million deficits were being funded from accumulated surplus funds. Expenses were dominated by operating costs (34%), research (35%) and employee related costs (28%). 

Mr Dube concluded the presentation by saying that the MHSC was striving for zero harm, so that every mine worker can return from work, unharmed every day.

Discussion

Mr Mandela (ANC) was concerned about what else could be done to put workers lives first above profit.

Mr Zondi responded that after every enquiry where fatalities were present, reports were referred to the Public Prosecutor; however these did not always end up as prosecutions.

Mr Dube said that the bonus system meant that workers often took (safety) short cuts to achieve production bonuses at the expense of health and safety. He was of the view that bonuses should just not be paid on production, but that health and safety had to be included as well.

Mr Mandela wanted to know what further steps were being taken to ensure the safety of women underground. He was concerned both about sexual harassment and early morning attacks as woman were on their way to work. 

Mr Dube said that base on its own research, MHSC was in the process of drafting comprehensive guidelines to address this issue.

Nkosi Mandela raised the issue of mineworkers with illnesses that “fall through the cracks”, in that they do not always follow up on medical visits and return to their villages with those illnesses.

A MHSC board member responded that section 13 of the Mine Health and Safety Act, provides for continuous health monitoring of mine workers. Once miners left their employment, the monitoring of their health falls within the jurisdiction of the Department of Health, where they are afforded a two yearly check-up to ensure they were monitored for diseases.

Ms Masekoa informed the Committee that Deputy Minister Oliphant (Mineral Resources) led the One Stop Service initiative to monitor and assist mine workers in conjunction with the Departments of Health and Labour.

Mr Mandela said he was aware of these sites at Carletonville and another one in Umtata that were doing excellent work. He wanted to know if there were any plans for more of these.

Mr Franz Stehring, board member, MHSC, responded that another unit in Burgersfort would be operational within one year. In addition there were mobile units that moved around providing a similar one stop service.

The Chairperson indicated he was not happy with the overall MHSC initiatives to stop the carnage on mines (fatalities). Collective responsibility had to be taken by all concerned in this issue to ensure “we” addressed the loss of life on mines. He felt that not enough was being done to help people working on the mines. He also wanted to know what the turnaround time was being referred to in SCM and how it was calculated. He wanted more clarity on the new levy that would be based on zero harm. He was especially concerned about the expenses being augmented by surplus funds, as the Committee was still waiting for MHSC to formally brief it on how it was going to spend surplus funds.

Mr Dube explained that the detail related to the 81% SCM turnaround time was not provided in the presentation due to time constraints; however the full report on this was available and could be sent to the Committee. In essence the 81% compliance score consisted of how different procurement timetables were being met. Regarding the new levy model that would reflect zero harm, he indicated that the current levy was based on mine incidents, but that the new zero harm levy would reflect the number of people employed and the number of people eposes to risk (i.e. not linked to direct mine incidents).

Mr Mkwanazi said that in order to fund budgeted shortfalls, the MHSC decided to utilise funds already in the bank (surplus) rather than from levies. The plan was to utilise these funds over the next three year budget period, i.e. until 2021.

Mr Dube acknowledged that MHSC owed a report to the Committee on their plan to spend the surplus. This report has been finalised and once all internal approvals and consultations are done, the report would be sent to the Committee.

Mr Stehring said that one of the contributing factors of the surplus funds was the delay in establishing the CoE.

The Chairperson said he was most concerned that there was a notion within MHSC that people could stop paying levies. He was also concerned how the MHSC could have so much surplus funds as it was operating in a risk based industry. He requested the CEO to draft a letter to the Committee on how the MHSC intends spending the surplus.  

The meeting was adjourned.