Minister of Mineral Resources on current state of department

Meeting report

Chairperson’s opening remarks
Mr S Luzipho (ANC) welcomed the Minister and everyone after a long recess. He spoke about the trauma that his family had recently experienced: “It’s a tough life but we have to solider on, that’s part of it”.

The Chairperson said there had been several developments in the industry, a positive one was the Mining Charter process. He referred to MPRDA Bill which seemed to be stuck. Since the Committee last met there have been two incidents of fatalities at Sibanye Gold and Palabora Mining Company. The Sibanye incident happened in June and since then there have been discussions with the trade unions, Sibanye management and DMR. Labour had requested a side meeting, without the employers present, to make a comprehensive presentation which the Committee agreed to on condition that it was one presentation and not one per union. On 19 July 2018, the unions requested an extension to 4 August 2018 which the Committee acceded to and some of the contents were revealed during the meeting. Mine health and safety continues to be a serious problem within the industry. As if that was not enough, whilst dealing with the fatalities, along come the job losses in the industry. The meeting had to attend to these problems for the benefit of South Africa and its people. There are external issues that impact on the industry such as the current energy challenges and the general state of the economy - he hoped there would be an opportunity to engage on those issues too.

Minister of Mineral Resources briefing
Minister Gwede Mantashe began by saying he hears of developments since taking over, “Unfortunately leadership is a continuous process. When I took office I took office voetstoots with all its problems and glory”. There is nothing he disowns and he accepts that everything in DMR is his responsibility now.

Seven key areas require urgent attention were identified.

One of the first things the Minister discovered when he arrived at DMR almost six months ago was that DMR was unstable. DMR has five branches and of the five only two had Deputy Directors General running the branches. Three of the branches were run by acting DDGs. “We can’t stabilize DMR unless we have a stable top management structure”. He reported to the Committee that all DDGs had now been appointed. At Chief Director level, there were four vacancies. One post had been filled and the other three are in process of being filled. There were 12 vacant Director posts and four had been filled. The Department had a total of 18 vacancies at 28 February 2018. Now seven positions had been filled and 11 are in the process of being filled. The sooner the positions are filled the better. “If top management is not in place, DMR cannot be stable”, he re-emphasised.

The second area of concern was regulatory uncertainty. When the Minister took office the MPRDA Bill was already in the NCOP and it is still there. There has been no positive progress. The Department’s view is that the MPRDA Bill should be withdrawn and they live with the current MPRDA as that would create more regulatory certainty. In addition, the DMR should engage the petroleum sector and try develop a legislative framework for the sector. It will work better than trying to squeeze petroleum issues into the MPRDA. The Department will go to Cabinet for approval to withdraw the MPRDA Bill. The Minister said there seems to be a lack of understanding of the Bill within the NCOP, without casting aspersions on Members of Parliament. There were some people who were looking out for their own narrow interests without considering the legislation in its entirety. There were various mandates from provinces on the Bill and DMR expressed the opinion that no headway will be made if it remains where it is. There is nothing that inhibits the work of the sector with the current MPRDA.

DMR had set itself three months to complete the Mining Charter process which had been completed. It had finished the consultations and it had been one of the most comprehensive consultation processes. The Department visited 11 major mining areas and met with everybody. During that process, it was discovered that NGOs, that are city based and well-funded, tend to articulate positions on behalf of communities. The hearings gave opportunities for small community based organisations access to the consultation process. The consultation process culminated in a Mining Summit on the Mining Charter that accommodated representatives from all provinces. Many of the stakeholders came face-to-face for the first time. There was some tension at the beginning of the summit because all the stakeholders were in one room and had to talk face-to-face which was a rare occurrence. However, “it was an enriching process”, the Minister reported. After publishing the Mining Charter, stakeholders asked for an extension to the comment closing date until 30 August 2018, which was granted. The Department will consolidate the comments and it intends to gazette the Mining Charter in November 2018 before the investment conference in November to remove any uncertainty.

The third area the DMR was worried about was the state of Optimum and Tegeta group of mines. DMR is actively involved there and continues to monitor the situation. At the beginning, there was one business rescue process which had been split into two. The IDC objected to the business rescue practitioners because of the major loan given to Shiva Uranium and Brakfontein Coal Mine under the Shiva Group. DMR suspects that the IDC may subject the mines to a liquidation process so it can recoup what it can, which would be unfortunate. The Minister reported that Optimum and Koornfontein are at bidding stage, there are interested buyers, and the process had started. “In simple terms Optimum was raped for a long time. It has to be saved, that is what we are focusing on and hoping to get a good and experienced mine operator to run Optimum successfully”, said the Minister. DMR had raised its concern with the business rescue practitioners that the group that is running the mine now is also allowed to bid. The Department is of the view that equates to insider trading and will meet with the rescue practitioners soon to take the matter further. It hopes the Optimum - Koornfontein side will be resolved by the end of the year but the Shiva situation is more complex and DMR would have to understand the intention of IDC better.

The fourth area was the relationship with industry social partners in the mining sector. The industry and DMR were not on talking terms when the Minister joined the sector, “they were in a shouting spree”. This was resolved by encouraging healthy engagements starting with the Charter process that pulled them together and they are now talking to one another. There is better rapport between DMR, industry and labour and community stakeholders. Where there are conflicts the DMR intervenes directly. All unions were participating and had committed actively to collaborative engagements. Through the Mining Charter process two task teams were established. The first team was dealing with the Mining Charter and the other was dealing with growth and competiveness to revive the sector into a sustainable and transformed industry. Both task teams had completed their work.

There have been two awkward retrenchment situations: Gold Fields and Impala Platinum Mine. What the DMR then initiated and what was working well is that when a mining company wants to retrench it should first engage DMR in terms of section 52 of the MPRDA. Where that has happened, DMR has managed the processes better. However, Gold Fields and Impala did not fully comply and continued with retrenchments shortly after engaging with DMR only once. “You can’t be reckless about workers, workers are not just figures, they are the people who put their lives on the line to convert investment into wealth,” the Minister told them. “If you invest in a mining company your wealth will not be generated unless workers go down to drill, charter, blast and hoist”. DMR is engaging further with Gold Fields and Impala Platinum Mine and talking to the industry to treat mineworkers better.

The Department met with the industry to find ways to improve the sector and 35 CEOs had attended, to explore areas of growth, investment and potential employment creation and prospects of absorbing more young people into the industry. The Minister reported two mines were opened in Mpumalanga over the last four weeks: the Exxaro mine and Shondoni Colliery of Sasol. Tomorrow, DMR will be opening a training centre at a mining company and it will motivate for the training centre to have a bigger role in training and skilling young people in the area.

It was the first time in last four months that mining production registered growth, with 2.8% growth. This was registered against the background of gold production declining by 19%. The 2.8% cent growth in production shows the industry is beginning to pump. The Minister was optimistic that if this is sustained the sector will improve. Also surprising was the large growth in platinum production. It was behaving strangely. The price and demand drop at the same time. DMR was working together with industry to initiate developing a demand in platinum and they are also in development of hydrogen energy fuel cells using platinum, which it plans to commercialise for mass utilisation and economic growth. DMR and the industry have started to talk to National Treasury and the Reserve Bank to develop a Mandela platinum coin, before November, like the Kruger rand coin. All these initiatives are intended to improve the demand for platinum. Other sectors are doing well: coal is leading when it comes to sales and has improved by 15% over the last month.

The state of health and safety in the mining sector was the fifth area of concern. There was an increase in the number of fatalities in gold mines from 23 fatalities last year to 32 fatalities this year. Sibanye Gold had 22 out of the 32 fatalities. Many people called the Minister to take away Sibanye Gold’s licence. The Minister had to appeal to them not to become emotional when dealing with fatalities. When the Minister was previously working in the sector he experienced a series of disasters but mines were never closed. “When you deal with health and safety, one of the issues to avoid is being emotional; it requires rational thinking and engagement and cool headedness,” he conveyed. Even though there was a problem in gold mines, there was a decrease in the number of fatalities in coal and platinum. There is an impressive record in the platinum mines after AngloGold registered one fatality last quarter. The disaster that happened at Palabora Mining Company was quite devastating. The conveyor belt that caught fire was not SAB approved as a conveyor belt should have a fire suppresser. Two workers were burnt to death. DMR is awaiting a report from the Inspectorate on what exactly was discovered. There was a visible decline in injuries from the numbers registered last and this year. It was agreed that the Health and Safety Summit scheduled for November be brought forward to September to address health and safety sooner.

The sixth area that needed urgent attention was the huge licencing backlog. Since the confirmation of a permanent DDG for that branch, things had improved. There are no backlogs in five regional offices. Limpopo and Mpumalanga have serious backlogs and there are some in North West and Northern Cape. There were serious allegations of corruption in the Witbank office and a few others. The internal audit team was sent out to conduct audits in all offices. The Witbank office was very problematic. The audit discovered DMR was paying rent on a non-existent building. The address provided for the inspection was a mortuary. Criminal charges have been instituted against certain officials. The Limpopo office had been reopened after the arrest of five people, three from DMR, for the death of the regional manager. As part of addressing the challenge, DMR took top management on an ethical leadership course. DMR had also embarked on a process to develop the integrated ICT system where an application lodged at regional offices will reflect at national office. Once the system is developed it will eliminate licencing backlogs and accelerate the licensing process.

The last area was the development of a stimulus package to revive the sector. As a sector, it had made proposals to Cabinet to deal with administered prices (electricity and water price adjustment). It was a necessary intervention for the industry.

In closing, the Minister said DMR was hard at work. It was a complex department with many challenges that it is trying to overcome to be an efficient and effective Department for the improvement of the industry.

Discussion
Mr H Schmidt (DA) commented that reference to regulatory uncertainty should not only deal with the MPRDA amendment and the Mining Charter. “It should deal with a lot more”. The regulatory uncertainty should consider the economic environment and not just a narrow perspective of regulatory certainty. It needs to widen the concept to deal with external issues as well which determine whether the mining sector will be successful. He warned that if it is confined to the MPRDA and Mining Charter, there will be problems.

Mr J Lorimer (DA) complimented the Minister on the proposal to withdraw the MPRDA Bill and was in support of its withdrawal. He asked if the Minister planned to re-introduce the Bill in the new Parliament. He put it on a record that he still thinks the Mining Charter will be bad for the industry. There are only four new projects, where are all the others? People in the industry say they cannot get investment money and the projects it gets will be few and far between. He felt that the stimulus package will go a long way to keep the industry happy. He requested the Minister expand on the comments from NGOs during the consultations. Were the comments problematic? Was the DMR ignoring the advice of NGOs? Are there any NGOs it was particularly worried about? The older deep level gold and platinum mines, the ones that are the older employers, are of major concern. Anything that keeps those mines going without shedding jobs should be done. He was of the view that administered prices seem like a good idea.

Ms M Mafolo (ANC) welcomed the presentation and commended the Minister, saying finally there is light at the end of the tunnel. She asked if the MPRDA Bill is going to be reintroduced, how long will it take. The Chamber of Mines was intending to take DMR to court over the Mining Charter. Had that been resolved?

Mr M Matlala (ANC) asked for the time frame for finalisation of permanent staff in the acting positions in DMR. If these acting positions continue into the next financial year it will create a problem for the employees who are in acting positions to perform their duties due to job uncertainty. When appointments are made, employees will be more hands on because they will be permanently employed.

The Minister clarified that the MPRDA Bill had not been withdrawn. He was reporting to the Committee that the DMR was proposing that it should be. The Department was not cancelling the MPRDA it remains the law. It was considering amending it to exclude the proposed management of the petroleum sector. So, the likelihood of what would come back in the Sixth Parliament would be legislation to manage the petroleum sector and to keep mining separate. DMR will be in detailed discussions with the petroleum sector to figure out what must be done with the sector before the Bill is withdrawn. The Department and the industry agree on the Mining Charter and that benefits should go the communities. What they were all trying to figure out is how this should be done. The Department is aware that regulatory uncertainty deals with a number of aspects but it was focusing narrowly on what DMR has control over. It wants to remove the uncertainties that emanate from its sector.

The Minister shared that he had a different view when it comes to strikes. He does not consider them to be negative. He gave an example of when he was a union branch chairperson in a mine. There were 24 work stoppages in 14 months but it broke world underground gold mining production records five times. He had asked the industry what were their issues with the labour laws and he still wants that answer.

The Minister responded that DMR would only consider exempting the deep mines from taxes if there were examples of this being the practice in other countries. DMR wants innovative interventions but it was not willing to be adventurous. No NGO was ignored or is ignored. All DMR did was to allow all NGOs to participate together with CBOs. There was an aggressive NGO that was present in all 11 consultations and DMR appreciated how the NGO had also talked to all CBOs present as well. There was no court case between the DMR and the Chamber of Mines. DMR is appealing the ‘once empowered always empowered’ judgment. DMR is of the view it exceeded the plea. Industry appreciates this action. DMR was systematic in dealing with the filling of positions and was starting from top management down. The fact that there are no acting DDGs is a stabilizing factor.

The Chairperson clarified that in terms of the President’s reservations on the MPRDA Bill, they were a little bit confining when in it came to the National Assembly and more broad and open when it came to the NCOP. It would be difficult when the NCOP was given leeway for public consultation to then say to the NCOP Committee that the Amendment Bill should be withdrawn. However, nothing stopped the Executive from doing so. At what stage is the Mining Charter? He was very skeptical from a Committee point of view to the move for a 5% free-carried interest when it comes to employees as if that is final and part of the agreement, or was there flexibility? He commented that there do need to be further discussions on tax exemptions for deep mines. He asked if that would be in the scope of DMR or is there another relevant body that is custodian of tax issues? Defining the life of a mine or the life of the interest to invest in a mine was becoming problematic as there could be different reasons for either and may not necessarily always mean loss in commodity. The Chairperson also raised concern about community trusts as a vehicle to transfer benefits to the communities because of the conflict that arose on succession of traditional leadership.

Mr Lorimer agreed on the separation of oil and gas. It was something he had proposed five years ago so it was long overdue. This was a good development and would be a good target to pass an oil and gas bill before the end of this Parliament. He justified that the economic benefits would be massive. The nice thing about free carry was that communities are recognised and will have a right to benefit from the mines in their midst which was positive. He suggested that mining shares were not always a good thing for a community to have and a way of ensuring that a community benefit no matter the success of the mine is to ensure royalties instead of free carry. This will ensure that the community will get something the minute the mine gets dug. He believes this will work better. His objection was the stipulation that 5% will go to BEE entrepreneurs. The industry could welcome this approach instead and suggested DMR consider it if it was not too late.

The Minister agreed that community trusts were very complex and DMR should get all the ideas on how benefits should flow into mining communities. It welcomes any ideas from the Portfolio Committee on the accruing of benefits to the communities. There was always conflict because it was already made money and the conflict mostly involved the royal family split into two. The life of a mine is defined by the deposit; if the deposit is mined out, the mine life comes to an end, explained the Minister. He differed fundamentally with Mr Lorimer’s thinking on free carry that blacks must be workers and not owners. Black entrepreneurs must be supported and developed. Afrikaners are a product of affirmative action and empowerment. The reason the University of Pretoria was opened was for affirmative action and empowerment. It has the second largest mining engineering school. “It is something that we should sit down, cool our heads, talk about it and accept it, BEE is a necessary intervention”, the Minister asserted. He encouraged Mr Lorimer to convey to the DA that it must appreciate BEE is a necessary intervention. Without the co-existence of political power and economic power, things are going to be more complex. The more empowerment is treated as something foreign there will be a revolt and the periphery of extremes will take control. What works is that blacks must be owners.

Mr T Rawula (EFF) asked if DMR had received a comprehensive report on the business rescue from the business rescue practitioners. The MPRDA was also informed by lack of inclusion of communities in participating in the mines which was meant to be addressed through the Social Labour Plans (SLPs). Will this not be affected by the withdrawal of the Bill? What about the process of legalisation of Zama Zamas, will this also be halted because of the Bill delaying? Were there terms of reference for the bidding on the mines so DMR reservations about the current operating company participating in the bid can be arrested as this was very important?

Mr I Pikinini (ANC) welcomed the presentation and sought clarity on the two business rescues. How far was the Lily mine? How far was the South African Mineral Resources Administration System (SAMRAS) process to ensure people access licences?

Mr Lorimer asked if there was still mining at Brakfontein? What can DMR do, if anything, to stop the asset stripping that seems to be going on at Shiva gold mine? Equipment is being vandalised or disappearing. He requested a timeline for the DMR meeting with IDC to establish its intention about the two mines.

Mr H Schmidt (DA) agreed that a business rescue operator cannot be bidding for the same mine.

The Minister responded that compliance with the SLP assures that the mine is operational. A Social Labour Plan is a commitment by a mine company to invest in the social development of communities. Optimum is not operational and where the business rescue can comply with the SLP they can but the basic requirement is to pay the creditors and the workers. Whether they should get into a development phase is not the biggest concern now. The mine must first get back into full operation and only then should it be made to commit to the SLP. A mine that is not operational cannot meet the requirements of SLP. DMR is emphasising the linkage of SLP to Integrated Development Mine (IDP) because these cannot be parallel processes. There have been examples of duplicated developments because there is no linkage. In one community two community halls were built. Over and above this the DMR must also engage with the communities. The legalizing of the Zama Zamas is a separate issue. There is nothing stopping Zama Zamas from being legalised and creating a more comprehensive framework to deal with artisanal and small scale mining which is provided for in the MPRDA. This was being experimented in Kimberley and DMR is monitoring the experiences to see if they are working so it can be rolled out. The contracting of two business rescue practitioners showed the interest of creditors and it happens sometimes that different business practitioners are appointed. The Lily Mine court case tried to stop the re-opening of the mine but the case had been withdrawn and the mine is going to open and start mining. The police would be better able to stop the asset stripping at Shiva if it was reported. DMR is reintroducing the licencing system to prevent looting so people will be able to log-in any licence application as it is happening in the regions. It was looking at all possibilities to minimize the delay in licences. The Minister had advised the IDC that the stopping of mining was counter-productive, it reduces the opportunity of getting back its money. As to when the DMR would further engage with the IDC is dependent on the availability for meetings.

The Chairperson said the Committee also had a duty to find mechanisms to see what it can do about the asset stripping at Shiva. The IDC was a very interested partner when it came to investing in the mining industry. However, their stripping assets is not in the developmental interest of the state which it should put in the highest regard as the state’s financial institution.

Mr Lorimer requested to see the reports on the recent big accidents that caused fatalities.

Mr Rawula asked what the obligation is of the companies whose negligence resulted in fatalities and injuries. Is it permissible for workers to sign indemnity forms to indemnify the mines in event of injury and fatality?

Mr Schmidt asked if the report on the number of hours worked by mineworkers usually reported on by mining companies was available and whether this had reduced fatalities.

The Chairperson asked DMR to provide a summarised version of the outcomes and observations on the causes of fatalities based on the inquiries conducted since the standing of the Fifth Parliament? What is the status of the amendment of the Mine Health and Safety Act? The NCOP seems to be of the view that any Bill that is not before them now will have to wait for the Sixth Parliament. There was concern about the application of section 54 of MPRDA. There are complaints that sometimes it is abused and applied unfairly even when it was not warranted.

Mr Lorimer reported that he just received a message that the mine management at Shiva had a meeting to try and get workers to sign a document for the removal of the business rescue practitioners. The son of the IT specialist at the mine drew a gun at the workers and police have been called. This was traumatic stuff that is ongoing.

The Minister said the accident reports can be provided to the Portfolio Committee. Mining companies have an obligation to provide safe working places. If there was an accident or death or injury an investigation was conducted to identify if there was negligence. There were cases of mine managers being convicted because of negligence. “The call for the closing of mines is emotional”, he repeated. If DMR closed mines ‘willy-nilly’ it would be called to answer about the recklessness of destroying jobs. Once a licence is withdrawn, the mine stops operating and there will be no jobs. Thus it requires a more relaxed and sober mind to deal with an emotional issue. Action should be taken as an outcome of an investigation. DMR gets the full reports on the investigation of accidents and not just summaries. Mines do take pride in the number of hours worked per shift and the information was published so it could be shared with the Committee. The application of section 54 is not used to punish people for different sins other than for health and safety. Section 54 must not be used out of anger but because the work spaces are not safe. Complaints about abuse have decreased. Instead there were more calls for the application of section 54. People do not consider that for the duration of the investigation, mine operation stops. However, only the section where the accident occurred, and perhaps neighbouring areas should be closed during investigation and not the whole mine. DMR will investigate workers being made to sign indemnity forms if there are fatalities. It required more details of the case to decide if it was allowed or not.

Ms Ntokozo Ngcwabe, DDG: Mineral Policy and Promotion, DMR, replied that the amendments to the Mine Health and Safety Act have been halted but it is on the 2018/19 programme for all legislation DMR must review.

The Chairperson informed DMR that the unions had a problem that mine owners were not being held as accountable in the same way as mine managers. Health and safety were not being dealt with by the directors of the mine but by the CEOs and management only. There was a question of power relations at a lower level. What becomes of the powers of Health and Safety representatives? The enforcement of authority seems to apply more than the circumstances of the conditions. When the Committee visited Exxaro, the mining company reported the DMR had visited 15 times but it could not answer who from DMR had visited, whether from national or regional office, and what exactly it was inspecting. He asked how many inspectors does the DMR have and what specialised skills do they have? Was it necessary that a Chief Inspectorate of Mines in charge of applying compliance should automatically become the Chairperson of the Mine Health and Safety Council? He is of the view that the Chief Inspectorate should be reporting and accounting to the Council on what needs to be done.

Mr Schmidt said not enough attention was given to rehabilitation and it was more important than what it appears. Canada and Australia have what is called a flow through share system. This was the reason they were so successful. Section 12J that is trying to promote investment in the country had down well in terms of building shopping centres but that is not mine related. The flow through share system should be considered to create more investments in the mining sector. What is the argument against flow through shares when it has been so successful in other jurisdictions?

The Minister responded that there can be no artificial separation of operations and ownership. A shareholder of a mine company cannot be exempted from the responsibility for the mines. However, safety is part of operational responsibility and currently you cannot arrest shareholders for negligence. People who run operations must take full responsibility. Power relations are unequal – that is why workers organise themselves into unions. It is in the law that workers have the right to refuse dangerous work and it is the unions that should enforce that right. Lawmakers have done their job and cannot go to the workplace to make sure of this; that is for the unions to do. Trade unions must take mine companies to court when they contravene the law. He undertook that DMR would provide information on the number of inspectors and their qualifications and skills. He agreed with the Chairperson on the point of the Chief Inspectorate being made the Chairperson of the Mine Health and Safety Council. DMR will return to report on rehabilitation because mines do pay money for rehabilitation as they mine. It wants to accelerate the work of rehabilitation and for DMR to work more efficiently on the matter. In closing, the Minister thanked the Members for the opportunity and jokingly said he must not be summoned every week.

Committee Programme
The Chairperson went through the draft committee programme for the next four weeks.

Mr Lorimer appreciated being asked to approve the programme and requested Members have as much input into the programme as had been the case in the past. He requested a closer look into the ongoing killings between rival unions on the platinum belt. More people had been killed on the platinum belt than at Marikana.

The Chairperson clarified no one had a right to reject an item from being included in the programme.

The committee programme was adopted subject to the confirmation of questions to the Deputy President in the parliamentary plenary programme on Tuesday 11 September 2018. This would clash with the Committee’s oversight visit week, 10-14 September 2018. If the questions to the Deputy President are confirmed, the oversight visits will be put aside and there will be a Portfolio Committee meeting on Wednesday 12 September 2018.

The meeting was adjourned.