CGS, Mintek, State Diamond Trader & SADPMR 2016/17 Annual Report

Meeting report

South African Diamond and Precious Metals Regulator: 2016/2017 Annual Report

Mr Xolile Mbonambi, Chief Executive Officer (CEO), South African Diamond and Precious Metals Regulator (SADPMR), said the entity’s mandate as the regulator was to regulate the buying, selling, importing and exporting of diamonds and precious metals in the Republic. The strategic objectives were to improve the competitiveness and sustainable growth as well as job creation in the diamond and precious metal industries, to promote equitable access to resources for local beneficiation, to transform the diamond and precious metals sector, to enforce compliance with legislative compliance and to improve organisational capacity for maximum excellence.

SADPMR received an unqualified audit opinion on matters of emphasis for the 2016/2017financial year. The areas that gave challenges were the issues of cost of employment liabilities which were not recognised in the previous years. However, the annual financial statements had been restated to include the prior year’s error and the disclosure of the forced employment obligations for the three retirees.

On achievements against the predetermined objectives, the report indicated all five pillars of the human resource plan had been implemented to ensure that the organisational capacity for maximum application of excellence was achieved. Regarding the diamond trade, SADPMR managed to ensure that two skills initiatives were facilitated during the year under review against the target of two, which in the main was to assist licencees to understand diamond valuations. During the same period, 425 diamond evaluation activities were conducted and 100% of those activities on diamonds offered and presented were valued, and there was no dispute between producers and government diamond valuators.

Due to its new facilities, the Regulator had managed to ensure an improvement in the number of clients who visited the new Diamond Exchange and Export Centre (DEEC) to place and bid for diamond parcels, and 103 diamond beneficiators had visited the centre. To improve equitable access, they had facilitated over 18 special tenders for small beneficiators in the diamond space.

For regulatory compliance, they had managed to conduct the inspections they planned, as well as the audit for broad-based socio-economic empowerment.

With regard to prospective diamond and precious metal industry entrepreneurs, they had managed to achieve a target of 10 activities against a target of nine. They had also assisted 31 inactive businesses against a target of 30, in the spirit of promoting local beneficiation. On commitment to skills development by the licence holders, they had also improved from a target of 70, to 75.

The employment equity statistics within the regulator indicated they currently had three executive managers (who were men), three senior managers, 30 professional-skilled employees, 11 skilled employees and two unskilled employees. There were 49 male employees and 70 female employees, and one person with disabilities. During the financial year there were two new appointments, five terminations, and one employee was promoted within the regulator. Of the seven internship programmes, six were occupied by females. At least 19 females and 12 males attended short courses to improve their skills.

Mr Sibusiso Mandlazi, Acting Chief Financial Officer (CFO), said the SADPMR started the financial year with a revenue budget of R94.6 million. The revenue realised for the year was R102 million, which included transfer payments of R53.2 million and the in-house generated revenue, which increased to R49 million from R42.6 million. A contributing factor was that the average Rand/US$ rate of exchange was at R14, compared to their estimate of R13. They had reported an expenditure of R96.7 million, compared to R88.2 million the previous year. There was a surplus of R5.4 million, up from the previous R4.8 million.

The SADPMR had achieved 88% of the targets that it had planned to achieve. 

Discussion

Mr M Matlala (ANC) wanted to check the SADPMR’s alignment to the objectives of the National Development Plan (NDP). He suggested they should consider women for appointment to executive positions in the near future, as more women were needed in senior posts. There should be an appropriate time frame for people with disabilities to be appointed. He felt the report had too many generalities, and needed more specific detail.

Mr Nkosi Z Mandela (ANC) was concerned that the SADPMR’s structure presented a “men’s club,” and that was problematic, as this emphasised that this was a male-dominated industry, and this it needed to be changed. The SADPMR had spoken about transforming the diamond and mining sector, and he wanted to know what the methodology for measuring the transformation was. He said that there should be targets indicated, along with the growth in terms of transformation. An illustration of what had been done was needed. How many women had attended and benefited from the 14 workshops and meetings that were conducted by the regulator? SADPMR had spoken of 2 873 clients who had visited the DEEC to place and bid -- how many of those clients were previously disadvantaged and from what provinces had they come? How many women had benefited from the tenders in relation to their disability, race, and other factors? He wanted to know what challenges were faced to obtain the target goal of 66 licences -- 56 were issued -- and how many were women, disabled, or previously disadvantaged. There were 73 female employees against 41 male employees in the regulator, and this left him baffled as to why they had not included women in this delegation. There had been two new appointments and five terminations, which meant that there were three vacancies. When would they be filled?

State Diamond Trader (SDT): 2016/2017 Annual Report

Mr Kagiso Menoe, Acting CEO, stated that the SDT’s vision was to be a catalyst for transformation and growth of the local diamond industry.

Their mission was based on three pillars:  

• Ensuring that there was equitable access to rough diamonds from producers, with a focus on historically disadvantaged South Africans (HDSAs), as provided for in legislation;
• Promoting the growth of the diamond beneficiation industry through relevant interventions;
• Establishing and maintaining a transformed client base of local diamond beneficiators.

As part of their strategic outcomes, they would like to see a sustainable and globally competitive and transformed diamond beneficiation industry, with an entrance by new players into the industry, and be an efficient and development-orientated organisation. They were looking to promote growth in terms of the local diamond beneficiation industry, and implement the outcomes of the South African Diamond Indaba. It aimed to contribute towards youth skills development and focus on communities where diamonds were being mined, and ensure people were aware of the opportunities which existed.

The operating model of the State Diamond Trader was for it to be a business enterprise. They were not funded by government, and funded themselves through charging a margin on rough diamonds sold to clients, and tried to keep that margin at 4%.

When looking at the global operating environment, the SDT first started by doing an environmental analysis of the trends globally and what they saw was that for 2016, the prices of both rough and polished diamonds increased, although rough diamond prices had increased at a much higher and faster rate than those of polished diamonds.

Sales and purchases were much higher than the previous year. There had been a 70% increase on the rough sales, and a 49% increase in the gross margins. Clients were categorised into four categories, and most focus was given to the growth and transformation of clients and equitable access for clients. Growth and transformation clients were those showing growth, and all were black-owned entities.

The SDT facilitated training for 13 of their clients, which had been undertaken by ABSA with regard to enterprise development. It had also engaged with the Sector Education and Training Authority (SETA), where SETA gave training to 10 SDT clients.

It had participated in the Hong Kong Gem and Jewellery Show. 16 SDT clients had taken part, and five clients of the trader had participated in the Japan Jewellery Show. The SDT had a partnership with the South African Jewellery Council, where they had a pavilion and established a jewellery exhibition, and 18 clients had participated.

The SDT had provincial activities which increased awareness of the activities of the SDT within the provinces, and the opportunities available. 17 participants also took part in the enterprise development initiatives, where clients offered mentorship and the participants were placed in the factories to get exposure to diamond cutting and polishing.

Ms Mpumie Danisa, CFO, said that the gross margin at the entity had increased from R12 million to R24 million. Profit from operations was R5.4 million, compared to last year’s loss of R3 million. Profit before income and tax was R7.1 in 2016/2017, compared to the loss of R3 million in 2015/2016. The outcome of the audit of SDT was clean.

Discussion

Ms H Nyambi (ANC) said the SDT had talked about training for clients and about young participants. She wanted to know if they were from one province or from various provinces.

Mr Matlala also asked from which provinces, and which municipalities, the young people had come so that the programme would be able to trace them and train them further. Was there any way to ensure that the young people participating in those programmes did not disappear, and that those skills would not leave the industry or the country?

Mr Mandela that the SDT had painted a beautiful vision of how many beneficiaries had been empowered to transform and grow the diamond industry, but he wanted to know the “real figures,” and how many young people -- black, coloured, Indian and disabled -- had benefited. They had spoken about making “a better Africa and a better world,” but would they ensure that they built “a better South Africa?” How had the SDT made Kimberly a better city, so that they could say that in Kimberly, it had improved so many people’s lives? He asked for a detailed breakdown of sales to clients, growth and transformation. What did it mean by the term “black-owned companies” -- how many of them were owned by blacks, Indians or coloureds individually, and not “black” as a generic term.

Mr Menoe responded that the SDT would have to go back and look at its storage banks to get the correct and accurate figures. With regard to the Executive Development Programme (EDP), participants were from different provinces, but he would have to go back to check the provinces and municipalities from which they had come. Regarding the programmes to help them afterwards, the idea was to allow them to be able to start their own diamond businesses once they were done with training. The first part was that they would be exposed to the manufacturing processes, and once they had learnt about the diamond sector they would be enrolled to learn business management at a college in Johannesburg, and the SDT would look at other ways to get them exposure and support to become successful entrepreneurs.

When SDT said “black,” it was defining them as a previously disadvantaged group as a generic term. They were 100% black-owned and three of them were women-owned -- two black Africans one Indian. It had not focused on disabled people, but it was an oversight that the SDT would focus on and correct. It was working with Kimberly closely to try and facilitate growth in the area.

Ms Danisa said that by stating “black owned,” the SDT was talking about 100% black owned. There was one client who was a Chinese male, and there were three coloured male businesses, and six female ones which were black African ladies, and eight black African males.

Mr Mandela said that the Department of Mineral Resources would not want to be sponsoring peoples’ tickets to Hong Kong and Japan, and wanted to know what had been achieved on the trip. How much was the SDT doing in order to facilitate new companies to be able to break through into those countries, and not just go on trips that they would not be able to account for?

Mr Menoe responded that the SDT’s main focus for sales was Hong Kong. It had taken 11 of its clients there and what they saw was amazing. Six of those were new companies, and those clients had sponsored their own way to the show and were able to sell more due to the trust and contacts gained from the trip of the previous year.

Mr Menoe said that the information which was outstanding would be made available by Friday. The board recognised that transformation was slow, and were putting strategies in place to achieve the transformation. They would come back to show the real transformation they had carried out.

Mintek: 2016/2017 Annual Report

Mr David Msiza, Acting CEO: Mintek, said the entity aligned their vision to the DMR’s vision, in that they strived to be a global leader. Through their mandate, they aimed to serve their stakeholders, local and abroad, through the technologies that they produced and the research and human development work they looked at. They were also looking at ways to find water alternatives, and at mining and consumer waste treatments.

In 2008 there had been a recession which had affected the market in mining. and it decreased the market cap to about $600 billion. There had been an improvement in 2009 in metal prices. From 2011 onwards, there had been an extended lull in mining due to the geopolitical aspects of mining, and these had affected the activities of Mintek. There had been an improvement in terms of the commodity prices from the third quarter of 2016, and it was expected that for 2017 there would be a more positive trend.

The metals most affected by the global economic situation had been the platinum group metals (PGM), as around 90% or more of mineral resources were of the PGM group. There was a 50-year planning cycle on what could be done to ensure that mineral resources continued to be relevant. Major and minor mining companies had been heavily affected by the global economic situation, but with junior mining companies, the government should play a role to allow them to operate.

Mintek focused mainly on the efficiency of the processing plants, and believed that if it focused on this aspect it would allow the mining houses to be more viable and profitable.

Mintek state funding had been helping with research work. Due to the changing trends globally in mining, Mintek had been receiving significant proposals, not only in Africa but globally as well, which would help with the revenue income.

The entity employed 646 people, and 40% of the workforce was female, and they were looking to surpass the 50% level. At the skilled and management levels they were doing accordingly, but they were still considering senior management for women. On top and senior management, they were not where they should be.

Mintek ensured that that there was collaboration and that their clients were satisfied with its work. They had set a target of 90% satisfaction, and currently they were at 97% overall for the fiscal period. They were also looking at health, safety and quality issues also.

Mintek promoted interest in science, technology, mathematics and innovation. It had trained more than 1 000 individuals. Internally, a total of 24 bursaries had been issued to undergraduate and postgraduate students and 100% of those would be absorbed once they had finished at the respective institutions. The bursaries were mainly for blacks, Indians and coloureds, and 71% were female recipients. It also provided training to 11 participants from different countries, and some trainees from South Africa.

Mintek also participated in the Nelson Mandela Day as part of their corporate social responsibility. They had been with the children of Bongani Community Development Centre and donated toys, clothing and bed linen and provided school shoes for learners at a school in Mpumalanga. They had also provided funding for research programme support. It had worked in support of the National Council for Persons with Disabilities, and employees had collected approximately R5 000 through ticket sales towards a cause that had happened internally. Mintek had also collected about R42 000 for the Cancer Association of South Africa.

Discussion

Mr Mandela referred to the vision of Mintek, as they were fresh from a study tour to Australia where they were exposed to a number of entities in Perth, particularly the Department of Mining and the manner it had engaged with various institutions over 130 years of data capturing. He would like to know, with regard to the vision and study tours, what universities, institutions and mining houses were being used to capture Mintek’s vision. How would Mintek ensure that those entities would be able to have access to the best technologies? What knowledge or technicalities were Mintek bringing to institutions, and on the other hand, what would Mintek be learning from them? What was meant by the training of 312 learners in small scale mining, and at what institutions were learners able to utilize the training when going forward? On Nelson Mandela day, employees of Mintek had spent 67 minutes with the children of Bongani in Soweto, but before it had rendered the children of Bongani a charity case, what had it done with and for the children, and what had those children done?

Mr Msiza (Mintek) said that Mintek had partnerships not only locally but globally, also including Australia. The current mining schools were within three universities, and they did mining engineering. The training was done through Mintek itself. Addressing the question of the Nelson Mandela Day, instead of Mintek determining itself what to do, it had received requests from centres, and Bongani had requested items and therefore the items given were due to the request. The activities were once again a response to requests, such as talks on the work that Mintek did and the possibilities that were available in mining.

Mr Alan McKenzie, General Manager: Technology, responded that as far as Mintek’s interactions with mining houses and institutions in Africa were concerned, Mintek had over 10 agreements with governments and institutions that it was involved with. In the rest of the world, Mintek had agreements with most of the large mining regimes in institutions that it worked with. There were really no large global mining houses that Mintek did not work with, and that was where the bulk of the commercial work came from.

Mr Mandela said that none of the speakers had answered his questions. Mintek had gone to Bongani for the day. Businesses could not just sign a cheque and say that they had done their 67 minutes. His question was, did Mintek do what the United Nations call was about -- that everyone should dedicate 67 minutes doing something good which would be required in the community, such as painting or cleaning. It should not just have been about giving toys, it should have been about doing, and inspiring them to do good. He asked what he 312 trainees were qualified in, and what their qualification was. What technology had Mintek imparted to the institutions to help empower them? Those had been his questions, not generic global questions.

Mr Msiza responded that the training that Mintek offered was accredited training. Students were trained in jewellery design and trading. Trainees could make pottery out of clay and sell it, for example, and they could also become entrepreneurs and create their own businesses. Once they were qualified, Mintek helped them to sell and generate income. Mintek took note that the emphasis should be on the quality of time spent with their contribution, but at the time Mintek did not want to go away leaving something that was not tangible. Mintek did apologise about that, and next time it would go back and put emphasis where it mattered and not just give, but would also do more timewise.

Council for Geoscience (CGS): 2016/2017 annual report

Mr Mosa Mabuza, CEO, Council for Geoscience, said that the exercise of mapping South Africa on a 1:50 000 scale would show that there was an abundance of underground water, and that would help with the current issue of drought and would help policy makers on how to store water. The mapping programme was a 10-year period, and it would require about R20 billion to complete the exercise. Regarding corporate governance, with the stability now at the level of the executive with the appointment of Mr Mabuza, he would appoint a capable team that would carry out the mandate.

It was unfortunate the CGS was not one of the entities to deliver a clean audit. They had mandated the team to address the aspects highlighted by the Auditor-General.

The vision of the CGS was a prosperous and transformed society enabled by geoscience solutions to create prosperity for the society that we live in. They were placing greater emphasis on their mandate. They were at the advanced stages of approaching the President to fully discharge the mandate in its entirety.

The predecessors had done an exceptionally good job at mapping the entire country to a scale of 1:100 000 and 1:250 000. When looking at the geology, the emphasis was on a country that was successful with the optimal utilisation of its land. The expanded mapping programme was in high resolution, and took an integrated approach to mapping at the 1:50 000 scale. It used a thematic and systematic approach, and there would be both onshore and offshore mapping. The CGS planned to cover the country in 10 years.

Ms T Nxumalo, Company Secretary, said that CGS offered bursaries to external students to ensure there was a pipeline of skills which the organisation may need in the future. An overall profile was given of the racial demographics in the organisation, and there was emphasis to address the issues of coloureds and Indians, to get them into the organisation and prioritise positions for those groups. A profile of the gender was given, where the emphasis was to try and improve the female workforce. Over the years, the gender profile had been improving.

They were trying to get Africans, coloureds and whites into the bursary programme, and had to address the coloureds and Indians situation. The number of bursaries had also been improving, but on the internship programme there had been a slight decline in the intake.

Discussion

Mr Mandela said the CGS had a number of rural development projects which it had completed, and he would like to know where were those projects were located, and information about them. What was CGS’s relationship with council leaders. Of those 22 projects, which ones were located in areas under traditional leaders so that he could see the relationship between the CGS and the traditional leaders. Apart from seeing the reports that there may not be sufficient shale gas, he would like an answer to the knowledge that CGS had acquired, if the shale gas programme would be a 10 or 20 year programme.

Referring to derelict and ownerless mines in South Africa, he said mine closure seemed to have been assumed to be a responsibility of the CGS. However, he believed the responsibility belonged to the mining companies, as they had  to rehabilitate those lands, and mine closures had to be done through rehabilitation of that land. He emphasised that the onus lay solidly with the mining houses.

The CGS had said its staff were monitoring water levels, but what was the role of the mining houses in monitoring the water levels within their space of mining?

He questioned the overall demographic profile by race, and said he wanted to understand why there was such a challenge to ensure that coloured and Indian people were empowered. In the struggle, coloureds and Indians played a pivotal role in the fight for freedom, yet they were right at the bottom of the scale. Why were white people still being awarded more bursaries than Indians and coloureds?

Mr Matlala said the CGS had spoke about closing mines, like the abandoned mine in Boksburg, and he wanted to know how much was budgeted for this.

Mr Mabuza responded on the relationship with traditional leaders. What the CGS had done, as part of shifting its orientation, was to create a dedicated unit on stakeholder relations, and he himself had given them a specific mandate as part of CGS’s specific programme implementation, that they must arrange a proper meeting and introduction as part of the CGS.

He was not aware of any projects that were done for communities, and asked if his colleagues would assist him in that matter.

On shale gas, the CGS played a science-based contributory role. For the deep drilling, they had budgeted for 15 to 18 months from March next year, so once the CGS was done with the drilling, it was then the interpretation of the data, and after that it would take roughly two to three years for completion of the project by the CGS.

With the closure of the derelict and ownerless mines, CGS had started to look at the land ownership. Where there had been state ownership or community ownership, it prioritised those sites, so that the land owners would remain liable for the conditions of those grounds. However, the CGS was not rehabilitating existing mines.

On the issue of foreign nationals, at some stage foreign nationals with specialised skills had been brought in to assist and train some of the young geologists and transfer the skills to younger geologists. To change the demographics, investment was also needed. The CGS could not exclude whites, but the proportionate investment was certainly a focus of significance the CGS had to address.

The meeting was adjourned.