Deputy Minister Oliphant
Director General Nogxina
Chamber of Mines Chair Dr Xolani Mkhwanazi
Chamber CEO Mr Bheki Sibiya and your team
National Union of Mineworkers SG Mr Frans Baleni and your team
Mr Sipho Dube from the South African Mining Development Association
Mr Franz Stehring from UASA
Mr Leigh McMaster from Solidarity
Members of the Fourth Estate
Ladies and gentlemen
On 30 August 2010, I placed a moratorium in respect of the lodgement of new applications for Prospecting Rights. This was initially supposed to be for a period of six months. The primary objective of the moratorium was to streamline administrative processes, determine optimal utilisation of mineral resources as well as the amount of prospecting rights that have graduated to mining rights.
During November 2010, I provided an update on progress that had been made with regard to the moratorium including some of the challenges that were encountered during the moratorium.
The inclement weather that we experienced, and together with our decision to ensure that we are properly prepared for the eventual introduction of the new online system when the moratorium is finally lifted influenced our decision to extend the moratorium.
I need to indicate that the extensions that we granted also afforded us the opportunity to conduct further engagements with stakeholders, and their inputs have invaluably strengthened our administrative processes. We also conducted road shows across all our nine regions, and the feedback we received from these confirmed that we are on the right path.
I also wish to indicate that various players in this sector are looking forward to the working with us to implement the new system. Of course, with change there is bound to be anxiety and it is my fervent wish that the constructive working relationship we have built with the industry and labour will sustain us going forward.
We would like to urge all interested and affected parties particularly those who care about the prospects of a democratic South Africa to follow suit and be part of the solution. As I have consistently stated, both here and abroad: South Africa is open for business!
Whilst the moratorium was in place, we used the space provided by this window of opportunity to conduct various audits in respect of all Prospecting Rights that have been issued since the implementation of the Mineral and Petroleum Resources Development Act. These audits, we must indicate, were conducted using internal resources and funded from the reprioritisation of our budget.
This has been an exercise of life-long learning. It has immensely assisted us by ensuring that our officials deepen their knowledge and understanding of compliance. It also helped to further broaden the skills base of the department, and ultimately ensured that knowledge in respect of our mining jurisprudence is enhanced.
We took a conscious decision, as a department, to resist the temptation to outsource this project. We wanted purely to remain true to the objectives of this crucial exercise. The moratorium and the audits were not targeted at any particular category of the mining industry value chain, as some amongst us would want society to believe. As a ministry we did not go out on a limb in a bid to target Black Economic Empowerment entities, we aimed our arrows at all the right holders.
Based on the data from our National Mining Promotion System - a system we use to administer various categories of Rights and Permits - we planned to conduct a total number of three thousand, five hundred and seven (3507) inspections, and we ultimately conducted three thousand, two hundred and sixty-six (3266) inspections during this period. The difference of two hundred and forty-one (241) is caused by the fact that we could not trace the relevant right holders. (The breakdown in respect of these is outlined in the attached handout).
I must indicate that some of the reasons we could not trace the right holders included:
- Companies that had been liquidated
- Companies de-registered
- Right holders were either deceased or had left the country, and
- In some instances they have changed their details and are consequently untraceable
The scope of the audits covered various aspects of the terms and conditions of the rights including amongst others:
- Compliance with prospecting or Mining Works Programme,
- Environmental Management Programme,
- Black Economic Empowerment
With regard to Prospecting Works Programme we covered the following:
- Whether commencement of prospecting happened within the stipulated 120 days as per the contract with the right holder.
- Level of adherence to the Prospecting Works Programme,
- Whether there was payment of prospecting fees, etc
We consequently identified right holders who failed to comply by wilfully failing to commence with prospecting activities within the stipulated period, thereby breaching the law.
A total number of four hundred and thirty-four (434) statutory notices in terms of Section 47 (i.e. intention to cancel the Right) were issued.
Such notices relate to:
- Some holders who did not commence with prospecting activities within the prescribed 120 days, or even cases of severe environmental degradation, deviation from the implementation of approved prospecting work programs.
- Cases of distorted and inaccurate information that has been supplied to the department
These statutory notices are at various stages of execution and these could be revoked. I am not at liberty to disclose the identity of the affected entities. The affected entities know who they are and the law is very clear in terms of processes to be followed in this regard.
Reasons advanced for the failure of execution are attributed to the lack of financial wherewithal - which raises a number of questions relating to the submission of information during applications that led to the granting of the original rights in the first place.
Other reasons are the denial of access by land owners and the recent global credit crunch. Regarding the denial of access by land owners, the Mineral and Petroleum Resources Development Act stipulates that right holders must approach the department for intervention – a process that is provided for in terms of Section 54. Accordingly, not all the right holders approached the department. This on its own constitutes non-compliance and is highly regrettable.
Cases relating to the denial of access that were reported to the department are currently being processed through the Regional Mining Development and Environmental Committee mechanism. In instances where some remain unresolved and the affected parties always and almost resort to the courts for recourse.
Payment of prospecting fees
During the audits, we discovered that some of the right holders still owed prospecting fees. Included amongst these, are some of the established leaders in the mining industry. This is not acceptable and will have to stop forthwith.
Environmental Management issues
As you probably know we take our environment very seriously, in fact, it is one of the areas that are close to the heart of this democratic government. Mining by its very nature is bound to effect the environment. It is precisely for this reason that we place great store in environmental management programmes. These are a vital cog of our mining jurisprudence. I have also stated repeatedly that mining and environment can and should co-exist. There is no reason why one cannot exist without the other.
During the audits we also focused on the following with regard to Environmental Management issues:
- Compliance with approved Environmental Management Programmes
- Annual revision and adequacy of financial provision for rehabilitation,
- Submission of performance information and payment of prospecting fees, as stipulated during the granting of the right
The audits have revealed that a number of right holders are not complying with their approved Environmental Management Plans.A total number of seven hundred and thirteen (713) statutory notices have since been issued to non-compliant right holders in terms of Section 93 of the Mineral and Petroleum Resources Development Act. These right holders are being given an opportunity to rectify cases of non compliance.
This is necessary as failure to do so would or may result in the right being revoked.
We find it odd that listed entities are not prone to notifying their shareholders about such notices as they do when they attribute delays to the regulator, especially during the period when applications are being processed.
The criteria we have used in this regard include amongst others; adequacy of financial provision for rehabilitation, prospecting in areas where holders of rights were not authorised, non submission of performance assessment information, outstanding prospecting fees, and disposal of commodities without a section 20(2) permission. The breakdown in respect of each of the sub areas is supplied in the attached report.
I regret very much to state that some established companies are also guilty of the same issue.
Right holders not available
In conducting these audits, we also sought to empower Black Economic Empowerment participants in the industry by raising their awareness and skills levels. I must register my disappointment though that, despite our genuine effort to engage them, not all of them shared our vision. In some respects, Black Economic Empowerment partners did not even honour this call. Mining is a serious business and is not one for the faint hearted who are prone to excuses each time they are presented with an historic opportunity.
Double granting
Prior to the moratorium, reports were abound in the media regarding the prevalence of rampant cases of double granting by the department. It was fashionable to approach the media without even bothering to verify the facts. In fact, the very integrity of our regulatory framework was under serious attack.
There were even reports that these cases numbered tens of thousands and that the security of tenure was under attack. As I said during the Mining Indaba, known cases of double granting were less than one hundred and twenty (120), representing less that 0,005% of the over twenty-six thousand (26 000) applications that were received since the promulgation of the Mineral and Petroleum Resources Development Act.
In order to address these cases I constituted a high level task team led by the Acting Deputy Director General, Mr Joel Raphela, to visit all the affected regions and to deal with these cases. This approach has ensured that the mining industry is characterized by the spirit of working together.
Of the reported cases, eleven (11) of these are of a complex nature and four are a subject of litigation and are thus sub judice.
Fronting
There are clear cases of fronting, helped along by the prevalence of willing participants. In some cases these ‘fronters’ have even resorted to physical violence in a belated attempt to protect their crumbling turf represented by the ‘stake’ they allegedly have.
We are accordingly busy with the amendment process of the Mineral and Petroleum Resources Development Act. We have every intention to work together with other government departments to deal decisively with this abominable process fronting. We have to rid our society of this nefarious cancer of fronting as it is perilously eating the very fibre of our nascent democracy.
South African Mineral Regulation Administration system
We have been provided with valuable information that, we believe, will enhance our new online system that commenced today. They system, called South African Mineral Regulation Administration system, has features such as Geographic Information Systems, which will make available real time information relating developmental platforms that are used for planning within government. This platform also includes information regarding environmentally sensitive and protected areas.
I would like to repeat that the moratorium is being lifted everywhere else in our country except Mpumalanga where it will remain in place until end of September this year (2011).
During the moratorium we also reviewed all the rights that were granted and not executed. Even in this instance the picture does not look good, and in some instances it confirms that there is a lot of hoarding of rights and actions that are encouraging speculation in the mining industry.
The statistics, in this regard, point to instances of lack of seriousness by some right holders where some of these players fail to submit outstanding information whilst others simply ignore these and take their own time.As a corrective measure, we have put these entities on terms and we are taking decisions to reverse these rights and this is done in terms of Section 103 of the Act.
Policy and Regulatory issues arising from the audit
Time has arrived for us to conduct a critical review of our past practices and approach things differently. We have also had a look at other mining jurisdictions elsewhere in the world. We need to ask the question; should we not enhance the quality of applications by introducing a competitive process in respect of new prospecting rights applications.
We will improve on the lessons learnt in awarding rights for the current system. We need to improve the quality of applications, ensure proper alignment of applications with the objectives of the Act as well as realise the broader objectives of government.
To this end, internal policies are being put in place to ensure there is proper management of applications (relating to strategic minerals such as coal, rare earth minerals, manganese, iron ore, etc and their potential concentration into the hands of applicants) in order to best serve the interests of South Africans and their future generations. We have committed ourselves to learn from best practice while making sure that these policies advance the country’s interests.
The first come first served principle is all well and good when it comes to allocation of new rights, but the interests of optimal utilisation that serves the interests of both the state and applicants are not always achieved.
The bidding system that is provided for in the Act will be put in place which will be applicable to all rights that are granted, issued, expired, revoked, abandoned. I will, through a notice in the Government Gazzette, invite proposals from interested parties.
I thank you.
Enquiries:
Ms Zingaphi Jakuja
Tel: 012 444 3279
Fax: 086 617 9977
Cell: 082 766 3940
E-mail: zingaphij@mobileemail.vodafonesa.co.za
