Address by Honourable Godfrey Oliphant (MP) on the occasion of the 2011/2012 budget vote of the Department of Mineral Resources National Assembly Parliament
1 Jun 2011
Ministers and Deputy Ministers present
Leaders of the trade Union Movement
Leaders of the business community
Ladies and gentlemen
Comrades and friends
It is amasing how time flies and perhaps the Nobel Laureate for literature Nadine Gordimer is correct in observing that “time is change; we measure its passing by how much things alter.”
It has been a remarkable seven months since I was deployed by the President and our movement, the ANC, to this critically important portfolio in Mineral Resources. I would like to express my gratitude to these two great institutions for having confidence in my ability to discharge these responsibilities.
In the Department of Mineral Resources (DMR), I have joined a team of dedicated professionals who go about executing their tasks with the diligence and fortitude that the demands of our time impose on them. This is perhaps what Ayi Kwei Armah had in mind when he wrote in the Beautyful Ones Are Not Yet Born that:"Alone, I am nothing. I have nothing. We have power. But we will never know it; We will never see it work. Unless we come together to make it work."
I have also been humbled and impressed by the warmth with which I was received in the department which can only bode well for the successful execution of our immediate and urgent tasks. In this regard, I want to thank the Minister for her leadership and guidance during this exciting period. To the DG, Advocate Sandile Nogxina: Thank you Mde nge ntonga.
Let me take this opportunity to welcome two comrades, Duma Nkosi and Mandla Rasmeni, to the offices of the director general and deputy minister respectively. These two servants of the people were right here in Parliament during the period of the drafting of the MPRDA. I have no doubt that they will add a lot of value to our work as a department. They will be right in the thick of things as they serve as a nexus between the legislature, the executive and the department.
It is within the context of recognition of our achievements that we have invited two erstwhile and doyen leaders of the trade union movement comrades Cyril Ramaphosa and James Motlatsi to attend today’s budget vote. These stalwarts were founder members of the NUM. Through this gesture we are honouring their role and contribution to the achievements of our democratic mining jurisprudence.
As we start this month to reflect on our programmes that reflects our support for young people and to assess how far we have gone in implementing the vision of the Freedom Charter.
As the mining industry, it is our duty to ensure that we do not fail these young people and that the 1.5 million of them who started grade one this year finish grade twelve without disappearing from the system.
Indeed, last week we were told that a huge number of those who walk the streets looking for work are youth between ages 16 to 35. This is a call to action for us who went through the June 1976 struggle to do our utmost to honour the youth through providing them with opportunities for decent work.
As we meet today we are a mere month away (July 18) from celebrating our international icon, President Nelson Mandela who very much like President Oliver Tambo is the unifier of the nation and the organiser of victory.
President Mandela, himself a former mineworker was in fact elected in 1989 as the honorary life-president of the National Union of Mineworkers.
The mining industry therefore will need to play its part in marking the activities associated with the noble values of sacrifice and selflessness that Madiba has come to symbolise. Nelson Mandela’s name should ordinarily be appropriated by, among others, the democratic trade union movement and progressive forces that have at their frontline cadres who share the same values with him.
I believe there is no better tribute we can pay to President Mandela than to get the mine workers and mine bosses to work together to improve the living conditions of people within and without this industry.
Indeed, in 2007 this house resolved that the living and working conditions of mineworkers be investigated and improved, support the initiatives by the NUM to build a workers museum and that this democratic Parliament should give consideration to naming some of its buildings after JB Marks, the leader of the African Mineworkers Union.
Honourable chair! We are called upon to see to the implementation of this resolution. When we visited India recently we were reminded by one of the cabinet ministers from the Silicon Valley who said, “It is indeed an honour and a privilege to live during the same time as Nelson Mandela, the greatest revolutionary of our time.” We salute you Sthwalandwe Seaparankoe.
The Minister has already outlined the budget that has been allocated to the department, after all budgets are but an expression of policy in numbers. However, the Minister’s budget statement represents a programme of the ANC-led government to use the vast mineral resources of our country to contribute to the overall objective of lifting our people out of the grinding poverty and underdevelopment that currently afflicts them.
Revitalisation of the Diamond Industry for Growth and Job Creation
As instructed by President Zuma, in his state of the nation address, it is our belief that we can use the possibilities offered by the diamond industry to meet the twin imperatives of job creation and economic growth.
South Africa is one of the few countries in the world who are involved in the entire spectrum of the diamond value chain, whichincludes exploration, mining, rough and polished trading, cutting and polishing, jewellery manufacturing and ultimately retail. This is understandable as South Africa is a major diamond producer and ranks sixth in the world in terms of volume (carats) and fourth in terms of value.
It is however, worrying that we remain a small player in the downstream sector of the diamond value chain, with a disproportionately small and underdeveloped beneficiation industry. The situation has been further exacerbated by the impact of the recent global recession, which forced many businesses (particularly the small businesses) involved in rough and polished trading, cutting and polishing as well as jewellery manufacturing either to close shop or reduce production substantially. As a result, thousands of people have lost their jobs.
However, the 2011 outlook for the diamond industry is very positive and we have witnessed a strong recovery in rough diamonds prices and demand. This bodes well for the downstream diamond beneficiation industry. We produce enough rough diamonds to satisfy the demand for our downstream diamond beneficiation industry. Other diamond cutting and polishing centres around the world (India, Belgium and Israel) continue to thrive partly due to their dependence on diamond supplies from South Africa.
The country’s diamond beneficiation industry remains significantly small and its development has an immense potential to stimulate further economic activities and to create thousands of new jobs. It is precisely for this reason that we have, through consultations with the diamond producers, Diamond Task Team of the Chamber of Mines, State Diamond Trader, South African Diamond and Precious Metals Regulator, United Diamond Association of South Africa and others, sought to gain a better understanding of the factors that have constrained the sustainable development of our country’s diamond beneficiation industry.
The findings of our consultative engagements have revealed that there are four broad categories of challenges that need to be addressed systematically in order to reposition and revitalise our downstream diamond beneficiation industry for sustainable growth and development. Briefly these challenges are:
Lack of access to finance
Diamond beneficiation is a capital intensive industry that requires funding, particularly for small players. This is so because of the costly nature of the industry’s raw materials, equipment and the time-honoured persistence by the main rough diamond producers for their clients to pay cash on (or even before) delivery. As a result, no substantial trading and cutting business can flourish without a supportive banking environment. Lack of capital prohibits business growth and access to modern technology.
In South Africa only two commercial banks (Nedbank and ABN Amro) are currently providing funding for the sector and mainly focus on the Diamond Trading Company (DTC) preferred clients (sight holders) which are normally large established companies. The local small and medium-sized manufacturers have no or very limited access to sources of finance. The IDC has provided funding to some companies in the sector. However, the majority of beneficiating entities do not have access to funding.
We are currently studying different Diamond Funding models (Antwerp Diamond Bank, Israel Banks and State Bank of India) in order to propose to local financial institutions and, especially the IDC, to consider developing a South African Diamond Funding model to support our local beneficiation industry.
Shortage of advanced cutting and polishing as well as jewellery manufacturing skills remains a major barrier to the development of a competitive diamond beneficiation industry. Those who possess the skills in this highly specialised field have an obligation to impart this skill to a younger generation.This means that training is critical in developing younger talent.
To this end, we are working with the Further Education and Training (FET) sector, through the Ministry of Higher Education and Training, Mining Qualification Authority (MQA) and other industry stakeholders to develop a curriculum that will respond meaningfully to the skills needs of the diamond beneficiation industry.
Most of our bilateral agreements with different countries around the world include a component on skills/technology transfer. We are also exploring this avenue in our quest to develop skills to underwrite the development of a sustainable and globally competitive diamond beneficiation industry. In fact, one of the countries that have become the world centre of cutting and polishing diamonds has already committed to sending its skilled and trained polishers and cutters to the country to assist in terms developing our skills locally.
Lack of access to markets
Currently there are five major polished diamond wholesalers in the country. Since most of the beneficiators in this country do not have access to overseas markets, they have to sell their polished diamonds to these wholesalers. The wholesalers, however, are alleged to have the propensity to drive down the prices of polished diamonds thereby squeezing the margins of the diamond beneficiators. This has a negative impact on the profit margins of beneficiators, thus rendering their business unsustainable.
The African Growth and Opportunity Act (AGOA) provide access to markets in the US, which consumes more than 50 percent of all diamond jewellery in the world. This is an opportunity for local diamond beneficiators to grow their markets internationally. In addition, a free trade area exists with the European Union (EU), which provides for duty free access into the EU.
Together with local diamond beneficiators, we will be exploring means to leverage on these instruments in order facilitate access of local beneficiators’ goods into these lucrative markets.
Lack of security of supply
With the exception of sight holders, most beneficiators do not have access to a constant supply of rough diamonds of a consistent quality. This challenge has a significant impact on diamond beneficiators as it precludes long term planning and leads to other secondary challenges, such as difficulty in accessing finance. Limited access to rough diamonds is often cited as one of the main reasons why the local downstream beneficiation industry has not really taken off.
Through the research we have been conducting, we now have a fairly good sense of how much rough diamond supply is required to enable firms that had closed down or scaled down their operations due to lack of access to rough diamonds to resume their full scale production. We are working with the State Diamond Trader and producers to ensure that there is constant supply of rough diamonds.
In particular, we are engaging Alexkor and other producers in which the State has a stake with a view to developing a long-term solution to the challenge of the supply of rough diamonds for the downstream beneficiation industry. South Africa produces enough rough diamonds to feed its downstream beneficiation industry and both the privately and publicly owned institutions must rise to the challenge of ensuring that there is sufficient rough for the local beneficiation industry.
We are most grateful to the Task Team of the diamond industry and the DMR which, when it was approached to provide short-term relief to the plight of small cutters and polishers, rose to the challenge and made certain carats available for the cutting and polishing industry. This gesture of goodwill is appreciated and indeed demonstrates the level of maturity of the relationship that the state and industry have built over time.
To supplement locally produced diamonds we are exploring the possibilities of importing diamonds from other African diamond producing countries. In particular, through our membership of the African Diamond Producing Countries (ADPA), we are looking at importing diamonds from, among others, Angola, Democratic Republic of Congo and Zimbabwe.
We have noticed that small beneficiators typically beneficiate few stone per year, and due to their small size, usually focus on polishing high value gem quality stones. There are small scale diamond producers in the country who mostly mine alluvial deposits. These deposits generally yield quality gem stones. We are engaging these producers to avail a portion if not all of their production to the State Diamond Trader. This will ensure that the Trader has steady but low volume stream of diamonds that can be used to satisfy the demands of the small diamond beneficiators.
Creating a sustainable and globally competitive diamond beneficiation industry capable of creating meaningful employment opportunities requires us to work closely with other government departments and state institutions. In this regard, I am happy to report that we are currently engaging the national treasury regarding the implementation of our call for the repatriation of proceeds generated by exports of unpolished diamonds (section 69A of the Diamonds Amendment Act of 2005). We believe that some of the financial regulations have had the unintended consequence of not helping with the competitiveness of the diamond beneficiation industry and consequently this practise must be reviewed.
We need to review the business model of the Trader to allow it to continue implementing its core mandate of promoting equitable access to and local beneficiation of the country’s diamonds. An institution established to carry out the developmental agenda of government function effectively if its business model is entirely driven by free market principles.
Derelict and owners mines
South Africa has a long history of mining, however it has only recently developed and implemented comprehensive legislation to regulate environmental management and mine closure processes. Consequently, a large number of historical mining operations have been abandoned by their operators with little or no regard to the management of the impact on public health and safety and the environment. In 2009 the Department developed a strategy for the management of the residual mining legacies.
Formal mine closure only became legislative requirement in 1956 with the promulgation of the Mines and Works Act, and the regulation of environmental management of the mining sites only came to being with the promulgation of the Minerals Act of 1991 and the Minerals and Petroleum Resources Development of2002. In many cases, mines have had adverse impact on the health and safety of local and remote communities and the environment.
Public health and safety impact include physical features of the mines such as open shafts, unstable slopes on dumps and pits, collapse features and abandoned mine infrastructure. Other hazards such as contaminated water and soil, mining chemicals, explosives, radioactivity, windblown dust and, in the case of coal mines, spontaneous combustion of coal and coal wastes. In addition to the hazards relating to people accessing abandoned sites, mining can have a devastating impact on surface and groundwater resources, air quality and on sensitive and protected ecosystems. There are cases where mining forms part of the historical heritage and a balance therefore needs to be found between rehabilitation and the preservation of historical sites.
The negative impact of these derelict and ownerless mines presents themselves in two broad aspects, surface and underground impacts.Surface impacts generally involve land disturbance, air, water resources pollution and aesthetics while underground impacts involve pollution of underground water resources, spontaneous underground fires and creation of sinkholes.While surface impacts might be easily rehabilitated and managed, managing underground impacts is more complex and in some cases impossible to contain in cases where they have developed over years.
To this end, the Department has identified Mpumalanga as one province which has the prevalence of such complex surface and underground mining impacts.We have since established that the challenges in this province traverse beyond the functional area of the department and have taken the lead in bringing together all affected stakeholders such as, among others, DWA, Emalahleni Municipality, DEA, and in some cases Transnet.
In this regard we have just initiated a process that would culminate in the development of a macro plan to address the challenges in Mpumalanga in a coordinated manner; we will do this whilst we embark on rehabilitation. We are also mindful other sites are also presenting immediate risks to nearby communities and we therefore have to deal with them with the same vigour.
Acid mine drainage
Of late you would have been reading about this imminent threat to our water supply. This is a serious threat. But what exactly is AMD?
Acid rock drainage forms due to reactions between sulphide minerals, oxygen and water, catalysed by bacteria. The mining of sulphide-rich materials exposes sulphide minerals to the elements, accelerating the natural process, forming acid mine drainage.
The sulphuric acid generated in these reactions can mobilise other components of materials, often resulting in high concentrations of toxic heavy metals in the rivers and streams which drain mining areas.
The DMR, working together with other government departments and state- owned entities will continue to deal with the urgent challenge of Acid Mine Drainage. Key areas where acid mine drainage related problems have been identified in our country include the Witwatersrand Gold Fields (gold mining areas of Gauteng and Free State), various coal fields with serious impact reported in Mpumalanga and the O’Kiep Copper District in the Northern Cape. Other areas where sulphide-rich materials are mined still need further investigation. We have therefore done the following to address this challenge:
Government has commenced with the construction of a number of canals including Grootvlei and the Klipspruit area between Florida Lake and Fleurhof Dam which is currently under construction. We are in this respect currently implementing the report that was drafted by a team of experts led by the Council for Geoscience. Working together through an inter-governmental team we are implementing the recommendations which among others include the pumping and the treatment of water in the three prioritised basins (Western, Central and Eastern basins).
Health and safety
The Minister has tackled the issue of health and safety and in addition we need to recognise there is a need for collaboration within the mining industry in the context of the South African National Aids Council (SANAC). We should use this window of opportunity to tackle the scourge of HIV and AIDS in the mining industry. The mining industry was a pioneer in establishing centres of excellence in fighting this scourge. Let us therefore work together to ensure that this is sustainable beyond the confines of the mining environment so that those infected and affected continue to receive treatment perhaps in concert with the public health system once the worker leaves the mining industry.
Finally, I want to thank the staff in the ministry and the department as well as my family for continued support.Working together, indeed, we can do more. I would like to close by quoting from Jacob Riis, a journalist and social reformer and I quote: When nothing seems to help, I go and look at a stone-cutter hammering away at his rock perhaps a hundred times without as much as a crack showing in it. Yet at the hundred and first blow it would split in two, and I know it was not that blow that did it, but all that had gone before together. -Jacob A. Riis, journalist and social reformer (1849-1914)
I thank you.
Cell: 082 766 3940
Issued by: Department of Mineral Resources
1 Jun 2011
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