Address by the Minister of Mineral Resources, Ms Susan Shabangu, MP, on the occasion of the Budget Vote 32: National Assembly, Cape Town
28 May 2013
Mr Speaker,
Honourable Members.
May I convey my sincere condolences to all mineworkers who passed on during the past year. We are honoured to table our budget allocation of one billion three hundred and ninety four million rands (R1, 394 Billion) for 2013/ 2014 financial year which represents an increase of two hundred and eighteen million and three hundred and sixteen thousand Rands (R218, 316 million) at the most testing time in the post-apartheid history of the mining industry.
We are mindful of the fact that we are tabling this budget one year short of the two decades of freedom whose 20thanniversary we will celebrate next year. This, in fact, is the last budget of the current administration.
Our budget vote also coincides with the 50th anniversary of the formation of the Organisation of African Unity (OAU), now called the African Union (AU), which played a key role in the decolonisation and liberation of the peoples of Africa. This is also the time when we are celebrating "Workers' Month."
Through the budget we are tabling today, we are outlining the actions that we are taking to respond to the challenges currently bedevilling the mining industry. We are confident that, despite the current cyclical downturn and labour relations challenges, the medium to long term outlook for the South African mining industry looks extremely attractive.
Last week, our President, Jacob Zuma, quite correctly called for leaders of this industry to restore calm and confidence in the sector. Following this, the Minister of Finance and I met with the leadership of the mining industry on Friday last week in a bid to address the challenges faced by this important sector of our economy.
In this regard, we drew inspiration from our longstanding and well entrenched culture of partnerships in mining, which has consistently served us well during difficult times. In this all-important meeting, we agreed on a specific program of action. We agreed that the government side will be led by the National Treasury, Department of Labour and Department of Mineral Resources, while participation from the mining companies will be led by Chairpersons of the Boards and will also engage the leadership of trade unions.
This was a bold and decisive action taken with a view to dealing head on with the challenges faced by our economy. This has arisen as a result of a crisis of perception, of both our country and the mining industry which invariably has an effect on, among others, the fluctuation of our exchange rate, the result of which we can ill afford as a country.
This process that was established at the Friday meeting is scheduled to conclude its initial tasks and provide progress report within a month. Whilst we respect workers inalienable right to strike, and the right to the freedom of association as enshrined in our Constitution, we will not tolerate anarchy, violence, intimidation and illegal strikes, which threaten, not just our democratic freedoms, but also the sustainable growth and employment in a sector with so much to offer not only in terms of retaining employment but also in creating new jobs on a larger scale than ordinarily would be the case.
We are accordingly calling on all signatories to honour the letter and spirit of the law and the recently signed "Peace and Stability Framework" of the mining industry. We need urgently to join hands and deal a cruel blow to those who are wilfully undermining the well-established system of collective bargaining that has been a critical component of the mining industry.
It is the truth that South Africa has the world's largest mineral endowment, with an estimated value of US $3.8 trillion dollars. These endowments, if properly exploited using the combination of appropriate policies and regulatory framework such as we have, we are more than capable of breaking the back of the triple evils of poverty, unemployment and inequality.
There is a confluence of factors which gives us good reason to be optimistic. Both the 2013 World Bank Doing Business and the World Economic Forum's World Competitive Reports place South Africa in the top quartile. These reports show a set of enabling factors, including among others, the ease of doing business, investor protection, access to loans, starting a business and ease of dealing with construction permits, which if properly harnessed could significantly create a broad based and robust economy, which our country desperately requires.
In the same vein, I am encouraged by the voices of the young people in the leadership of the African National Congress Youth League (ANCYL) who are saying boldly: ‘it is cool to get educated and get a degree'. After all, it was the late ANC President, Oliver Tambo, who said a country that does not take care of its youth does not deserve its' future.
This is the kind of spirit that we need to re-ignite among workers in the Rustenburg Platinum belt and in the mining executives.
Honourable Members,
As you know, we are currently in the cycle of wage negotiations in the mining sector which we have done for decades. This year should be no different. However, there has never been a more opportune time to call on the protagonists in these negotiations to be more responsible and take decisions that will retain jobs, bring about stability of this sector and ultimately help our economy as it emerges from the ravages of the recent economic downturn.
We should all take responsibility and accountability for the success of these negotiations. For, if we do not grasp the nettle, we run the risk of losing jobs and further fuelling negative perceptions that are being used to run our country down at the most inopportune time.
Accordingly, we believe that, if we can work together and forgo our narrow interests and act in the interests of all our people, we will indeed be able to rise to the challenge of regrouping and consolidating the existing building blocks for the long term success of our mining industry.
This time last year, some observers were in a state of frenzy which they attributed to, among others, the calls from some siren voices, for nationalisation. The African National Congress (ANC) Mangaung conference unequivocally rejected this option and further called for the intensification of beneficiation and industrialisation, which have been part of ANC policy since we adopted the ready to govern document, declaration of strategic minerals, as well as promoting of the state owned mining company among others.
These decisions demonstrate that South Africa's premier liberation movement, the ANC, is keen to ensure that we balance the imperatives of transformation with those of competitiveness of this crucial sector of our economy.
Regulatory framework
We believe that we have created a predictable regulatory framework which is in sync with the dynamic socio-economic and political landscape of our country. These have resulted in the following milestones:
- Gross fixed capital formation has increased significantly under the MPRDA from R18 billion in 2004 to R75 billion in 2012 (Data source: South African Reserve Bank).
- Foreign Direct Investment grew exponentially from R112 billion to R389 billion from 2004 to 2012 (Data source: South African Reserve Bank).
- Employment grew from approximately 448 909 in 2004 to 518 240 in 2012.
- Gross sales of primary minerals have appreciated from R98.5 billion in 2000 to R371.7 billion in 2012, whilst the number of operating mines has increased from 993 in 2004 to 1579 in 2012.
This is over and above the fact that during the 2012\13 financial year, 56 new mining rights were granted and have the potential to create an additional eleven thousand and fifty two (11052) decent and sustainable jobs and attract capital expenditure of about R7.3 billion.
More than a decade of implementation has provided us with sufficient jurisprudence to further review and amend the Act. We sought to effect holistic review and amendments of the Principal Act that will cater of the dynamic changes and sufficiently incorporate the notion of subsequent events.
Following Cabinet approval in December 2012, we are satisfied with the quality of extensive stakeholder consultations and their substantive input. The issues raised by stakeholders centred among others, the definitions, the repeal of the first-come first-served principle, trading in shares and transfer of rights, the environmental provisions, the dissolution of the designated agency, Ministerial discretion on mineral beneficiation and State free carried interest, the revised sanctions and the concept of associated minerals.
All these quality submissions have been duly considered in the process of finalizing the Bill.
The Bill further enhances provisions relating to the regulation and implementation of Social and Labour Plans (SLPs) and also includes integration of SLP into the Integrated Development Plans of District municipalities in order to streamline and optimise the development impact of the mining contribution; Introduces provisions for classification of mineral resources as strategic, taking into account strategic national developmental imperatives; Realigns functions in order to consolidate the regulation of petroleum resources under the auspices of the DMR, while the promotional geo-scientific research functions are incorporated into the Council for Geoscience (CGS).
The draft Bill is currently at final stages of Cabinet processes and we are intending to submit to Parliament soon. There has been further improvement on health and safety of workers in the mining industry since implementation of the Mine Health and Safety Act. I directed my department to embark on a process to review the MHSA and align it with the MPRDA to ensure consistency and ensure that we employ regulatory best practice regarding the impacts that mining activities will have on the health and safety of mine employees and affected communities.
The review of the Mine Health and Safety Act seeks to. Amongst others, strengthen enforcement provisions, streamline the administrative processes, reinforce offences and penalties, remove ambiguities in certain definitions and expressions and to harmonize the Act with other laws, in particular the MPRDA.
Implementation of SAMRAD
Honourable Members,
May I report that we have made sterling progress in the implementation of the South African Mineral Resources Administration System (SAMRAD) online, since it was launched. Prospective applicants are now able to apply for rights using computes online without having to travel to the regional offices to lodge an application.
The system contains information regarding land availability, requirements for various types of applications to be lodged, and payment arrangements for fees payable. As a benefit of that, contestation as a result of the documents getting lost, is a thing of the past.
To assist applicants, guidelines and templates were then supplied to improve the quality of applications as well as ensuring consistency in the adjudication process. We are continuously making sure that we improve this system in order to deliver an application system that is seamless and efficient.
In this regard application for Prospecting, Mining Rights, Permit as well as Ancillary applications such as Sections 11, 102, etc. can be lodged online. These include, among others, a module which provides for the auto parking of applications which addresses one of the key concerns that have been raised by the prospective applicants.
This is being carried with the additional allocation of R 3 million from National Treasury, for the current financial year for the development of a number of reporting modules, including a transformation monitoring system, appeals as well as the acquisition of hardware infrastructure.
Mining charter
We introduced the "broad based socio-economic empowerment charter for the South African mining and minerals industry", commonly known as the Mining Charter to effect the meaningful transformation of the mining industry, consistent with our democratic landscape. This was a consensus document by mining stakeholders that introduced a transitional transformation window of ten years, with specific targets to be attained by 2014.
We subjected the efficacy of this transformation tool to a rigorous test in 2009 in respect of its progress, the findings of which were less than desirable. During this time, every other stakeholder suffered from a case of parochial amnesia in terms of their responsibility for the implementation of this transformation agenda. As a result, we ended up with widely varied accounts on the extent or otherwise of the progress that has been made in this regard.
In order to obviate against the recurrence of this misrepresentation and distortion, my department has initiated a comprehensive evaluation of transformation against the scorecard of the amended mining charter as a precursor to the 2014 transformational milestone.
Let me emphasise that we have no intention of shifting the goal-posts with regard to our targets, but we wish to reiterate that we remain unequivocal and resolute in our commitment to transformation, which remains a vital component of normalising our society and creating a genuinely non-racial and democratic country, without which we do not have a prosperous future.
The societal problem that was accentuated by the unfortunate developments at Marikana in 2012 as well as several other related occurrences reflects that there has been glaring lapses in the implementation of our transformation tool.
I cannot over-emphasise the urgent need to modernise the mining industry entirely, including recruitment patterns that remain trapped in the archaic model of migrant labour systems that entrenched apartheid. This system results in mineworkers leading multiple families, which they struggle to sustain.
In this regard, I call upon the entire mining industry to develop a ten year company specific strategy that will transition this industry from the obsolete model to be part of modern society within which it operates, without creating abrupt discontinuities that result in unnecessary instability.
This will enable us to enhance our global competitiveness, improve working and living conditions of mineworkers and ultimately reduce the dependence of workers on the mining industry. Further, such strategies will assist us in preparing for the transition well in advance, anticipate potential effect and plan accordingly to manage the transition to an appropriately modernised mining industry.
In this regard, we recognise the work of the Farlam Commission of Inquiry and we are confident that it will be able to emerge with recommendations, which will strengthen our resolve to improve the lives of mineworkers and immediate communities.
The President also established an Inter-Ministerial Committee to address socio-economic developmental challenges arising out of the mining industry. Consequently, the aforesaid IMC has developed a responsive Presidential Package, whose results will be released soon, to optimise inclusive community development and improve the living and working conditions of mineworkers.
Coal sector
The coal sector is important for the economy of South Africa. The accelerated demand for coal, accompanied by an increase in international coal prices, has invariably changed the buying patterns and structure of the local coal export industry. The emergence of the export market for lower grade coal has presented the government with a challenge in that it has constrained the availability of coal that was historically sold to our utility, Eskom.
In our national energy plan, coal remains an important component of our future energy mix and requirements. It is therefore paramount that we work towards a common objective, in which South Africa Incorporated confronts the challenges facing the coal industry and turn them into net positive opportunities for all.
We have resolved that certain minerals such as coal should be declared strategic national resources, based on the balance of evidence. The coal resources and reserves report has been concluded by the Council for Geosciences and the findings will be released soon.
Shale gas
Honourable Members, last year Cabinet approved and accepted the release of a comprehensive report compiled by experts on hydraulic fracturing, which not only confirmed a shale gas resource of 485 trillion cubic feet, but also extensively considered optimal exploitation of the resource that appropriately balances economic interest with both environmental and social development considerations. The report was widely accepted by all interested and affected parties.
Cabinet directed further established an inter-departmental committee to develop regulations to presage further development of the shale gas resource. The committee will release the appropriate regulations during this financial year, which will prescribe a process and methodologies for exploitation of shale gas.
We are engaging legal processes to finalise the establishment of a State Owned Mining Company.
Platinum and gold sectors
The platinum and gold sectors, which are amongst the largest sectors of our mining industry in terms of employment, investment and revenue generation, are negatively affected by the persistent global economic market environment, which has an adverse bearing on their long term viability.
As such, I have directed my officials to urgently explore all available avenues and develop a rescue plan, which will enable us to find appropriate government-wide measures for appropriate sector-wide responses with particular focus on both supply and demand side interventions in order to position them along a recovery path and a trajectory of long term sustainability through the well-established tripartite structure of Mining Growth, Development, and Employment Task Team (MIGDETT).
Our recently concluded bilateral agreement with Russia during the BRICS Summit in Durban on cooperation in development of Platinum Group Metals is premised on an understanding that parties will make every effort to achieve, among others, sustainable expansion of the PGM market, create value-adding enterprises closer to production and, work towards realising the potential for developing other sectors of the economy.
It is our considered view that this bilateral cooperation will contribute significantly to the creation of a suite of interventions necessary to stabilize the platinum industry. I invite PGM companies to work with my department to leverage relations we have established with the Russian Republic.
Honourable Members,
In January this year, Anglo American Platinum announced its intention to restructure its business, following which President Zuma and the chairman of Anglo American plc, Sir Parker, met in Pretoria and agreed on finding sustainable interventions that will enable business continuity and sustainability, whilst preserving employment where possible.
It is our firm belief that working together we have found a sustainable, discerning solution, which we hope the labour movement will consider favourably. This demonstrates and emphasises the importance of taking different stakeholders into confidence and opening to them a long term window which enables them to appreciate the dynamics of inherently cyclical nature of the mining industry.
The chrome value chain participants have led the path to proactively find and explore mechanisms to implement and expand competitive mineral beneficiation. To this extent, the stakeholder task team that I initiated in August 2012 to address the plight of the sector has recommended substantive measures in line with the beneficiation strategy and its implementation.
Mineral beneficiation
As we have announced on previous occasions we have pioneered a mineral beneficiation strategy as national policy, we have developed a beneficiation strategy implementation plan framework.
The implementation plan further outlines modalities for implementation of the "game-changing" opportunity, which is conceptualised as a "win-win" value proposition for miners, beneficiators and the country at large.
It is important to reaffirm our position that mining right holders are not expected to undertake beneficiation, as it is not their core business, but rather to contribute meaningfully to national development through mechanisms outlined in the plan. The beneficiation implementation plan will be a subject of stakeholder consultation within the next month.
Since the introduction of the Precious Metals Act and Diamond Act, as amended, the benefit of jurisprudence has highlighted significant shortcomings during implementation of both Acts, both of which have experienced reversal of transformation and decline in beneficiation activities related to jewellery manufacturing. It is our intention to review both Acts in order to maximise the beneficiation of precious metals and diamonds, the developmental impact as well as transformation in general in the sub-sector.
We have partnered with the Provincial government of Gauteng to jointly develop, amongst others, the jewellery hub in the city of Johannesburg as well as collaborate with regard to the resuscitation of the steel industries.
I am finalising arrangements for the Jewellery Summit to be held in August this year, in partnership with relevant government institutions as well as mining and jewellery manufacturing associations. One of the critical components of the Summit relates to a program of creating appropriate skills and entrepreneurs in the jewellery manufacturing that will enable South Africa to become the global jewellery hub.
South Africa is not only a founding member State of the Kimberley Process Certification Scheme, aptly inaugurated at the "Tabernacle Church" in Kimberley", but was the first chair of the scheme. This year, the international diamond community has reaffirmed its confidence in South Africa by bestowing the honour of chairing the scheme at its 10th anniversary since its establishment.
The Kimberley Process community has substantially reduced trading in conflict diamonds from approximately 4% of total annual sales value at its inception to well below one percent. The proceeds of conflict diamonds have previously been used to destabilise democratic governments, especially in Africa.
I am pleased to inform the house of our readiness to host important meetings of the KP, starting with inter-sessional meeting from 3rd to 7th of June to be convened in Kimberley, Northern Cape, and the plenary later in the year. We have coined a felicitous theme for the period of South Africa's chairship of KP that is titled "10 years of stemming the flow of conflict diamonds", which will inform and direct proceedings of the crucial engagements with KP participants.
South Africa appointed Ambassador Welile Nhlapo as chair of the KPCS during its tenure, given his vast multi-lateral experience and has the assurance of further progressing the global mandate of the KP towards conflict free trading of diamonds.
Mintek is involved in research on nano-technology for medical applications of gold as well as giving effect to the Hydrogen Strategy, in partnership with my department, the Department of Science and Technology and the Department of Trade and Industry. This work is intended to create future demand for both gold and platinum, in keeping with our national objective of achieving 20% global market share of platinum catalysis by 2020.
Honourable Chairperson,
Our implementation of the rehabilitation of derelict and ownerless mines continues unabated, culminating in the closure of 13 mine sites in the financial year 2012/13. Our science councils in the form of MINTEK and the Council for Geoscience play a critical role as delivery agents for the rehabilitation programme that seeks to mitigate the negative environmental legacy of mining and associated latent hazards to proximal communities.
We have received an additional allocation for this year for the rehabilitation of derelict and ownerless mines to expedite the rehabilitation program. We have accordingly prioritised the rehabilitation of the Osizweni site in partnership with the KwaZulu-Natal Provincial government. Mintek will lead the rehabilitation of the site and has already started with a scoping exercise for the project.
We have sought the services of actuaries to determine the contingent liability of derelict and ownerless mines in South Africa. The findings of the actuarial report give us better insights on the extent of the problem of derelict and ownerless mines and place us in an advantaged position to enhance appropriate interventions to accelerate the rehabilitation of these sites. The report will be released on the departmental website soon.
In conclusion, we have demonstrated both, as the ANC and the government led by this glorious movement of our people, that we are perfectly capable of rising above narrow shortemism and take decisions that are in the best interest of this country and our people.
I am sure, building on what we outlined today, we can indeed work together in partnership and demonstrate respect for basic and decent things like collective bargaining structures. If we succeed we will build on the Freedom Charter and the constitutional promise of handing over a country to the next generation that truly and genuinely belong to all those who live here, black and white.
I respectfully request this committee to support this budget and on our side we will continue to work towards a clean audit going forward.
I thank you!
Issued by the Department of Mineral Resources, May 28 2013
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