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7 June 2007

Chairperson
Colleagues
Members of Parliament
Ladies and gentlemen

The programmes of the Department of Minerals and Energy are geared towards the upliftment of vulnerable groups, which include women and youth. Being the month of June, where we celebrate the contribution made by our youth, we would like to strengthen our endeavours to uplift them and integrate them more meaningfully into our society and economy. In so doing, they will be able to carry the baton, continue to alleviate poverty and create a better life for all in our country beyond our time.

It is through the vibrancy, energy and enthusiasm of our youth, as well as the compassion and perseverance of our women that we will achieve our objectives of transforming and empowering all communities in our country. This is why it is important for us to ensure that these groups have access to opportunities in two of the sectors that are central to South Africa’s economy – the mining and energy sectors.

Honourable members, the Department of Minerals and Energy (DME) is well placed to heed the call made by President Mbeki of a South Africa that has a sustainable energy supply and mineral wealth that is shared by all her people, including our vulnerable groups. The budget that we are tabling responds to the challenges and government priorities that have been articulated. I therefore would like to table the Department's 2007/08 budget of R2.96 billion of which 63% is allocated to the electrification programme, which includes transfers to Eskom and municipalities. The Department only receives 21% of this amount. In the 2006/07 financial year, the Department was allocated a budget of R2.6 billion and members will be pleased to note that we spent 99% of that budget.

Energy

Madam Speaker, Energy, both electricity and liquid fuels, are a necessity in the lives of all our people, and one of the tools through which we can achieve sustainable development in the country. As a result, capacity challenges that have manifested themselves in frequent blackouts and fuel shortages have been a concern for me as a Minister charged with the security of energy supply. These are as a consequence of infrastructure constraints as well as the inadequacy of some of the demand and supply plans that were put in place years ago. In addressing these challenges we will present an Energy Master Plan which incorporates a detailed energy infrastructure plan covering the next five years (including 2010) by June this year. Following this, we will develop an integrated energy modelling system that will inform integrated energy planning. This modelling system which will be in place by 2009 will allow for data capturing and the development of a long term energy plan.

In support of renewable energies, energy efficiency and planning we would have, by the end of October 2007, introduced a piece of legislation that will mandate provision of energy data and the use of healthy, safe, energy efficient and energy friendly appliances.

Energy efficiency will be key in our comprehensive strategy aimed at ensuring security of energy supply. This morning I launched an Intensive Multi Media Energy Efficiency Campaign in partnership with the Department of Public Enterprises (DPE), Eskom and other state organs. The campaign targets ordinary households and industrial consumers with a view of influencing prudent consumer behavioural patterns without negatively impacting on the economy.

Electricity

A few weeks ago the National Energy Regulator of South Africa (Nersa) released an audit report conducted in 11 electricity distribution utilities in the country. The report showed that the distribution industry's operations are sub-optimal with an infrastructure maintenance backlog of approximately R7 billion. This scenario poses a serious challenge for the restructuring of the electricity industry in the country and calls for the acceleration of the EDI restructuring process.

To this end, I will be presenting the Electricity Distribution Industry (EDI) Restructuring Bill to Parliament before the end of this year. This will be in line with the Cabinet decision of 25 October 2006 in terms of which the EDI will be restructured into six wall-to-wall Regional Electricity Distributors (REDs) as public entities managed through the Public Finance Management Act and regulated by Nersa.

Within the implementation of the Integrated National Electrification Programme (INEP), the absence of bulk infrastructure, especially in rural areas has put a strain on the performance of the programme. Last year an amount of R282 million had to be channelled from electricity connections to bulk infrastructure resulting in a reduced number of connections planned for the year. This year again, out of a total of R1.4 billion allocated for household electrification, a further R380 million has been set aside for the building of 10 substations. This year, we will electrify 150 000 households, 700 schools and also improve the quality of supply in preparation for the 2010 FIFA World Cup and beyond. We will eradicate the backlog of all clinics by the end of this financial year and all schools within three years.

A challenge which continues to confront us is that most of our people especially the vulnerable groups have limited access to energy to meet their thermal needs. Even when they have electricity, they continue to use low-grade coal and paraffin for heating and cooking. In studying ways to uplift the vulnerable groups through efficient energy resources, we have launched a pilot project in partnership with municipalities in Tshwane and Tembisile to provide 30 000 households with modern thermal fuels, in the form of LP Gas (LPG). This pilot will allow us to review our regulatory framework on two counts: (1) the promotion of a more energy efficient carrier like LP Gas as an electricity demand side management initiative and (2) for the development of an appropriate pricing mechanism for LPG. We have over years made noises that we thought would trigger an appropriate market solution to the high LPG prices but it has remained unacceptably high. We now have no choice but to regulate the LPG industry.

Nuclear energy

The President in his SONA indicated that government will be accelerating preparatory work to ensure greater reliance on nuclear energy and renewable energies. With regard to nuclear energy, the Department recently tabled a draft nuclear energy policy and strategy in Cabinet. The policy will guide the expanded nuclear build programme and address the issue of investment in uranium beneficiation. The policy will ensure that uranium output from our mines shall always be used to first satisfy our own beneficiation needs. In keeping with the empowerment of women, we will as we have in the past continue to support their participation through the "Women in Nuclear South Africa" (WINSA) programme.

Liquid fuels
Honourable Speaker, in response to the Moerane Commission's recommendations, the Department together with the oil industry established a Fuel Strategic Supply Task Team (FSSTT). The task team identified short and long-term constraints and made proposals on how the identified constraints could be eliminated. The initial indications pointed at a need for investment by State-owned entities in pipelines, storage and handling facilities but further analysis has also pointed to inefficiencies emanating from current industry practices, especially in port and railway operations, which will have to be corrected for security of fuel supply to be guaranteed. The FSSTT is finalising plans, which are part of energy Masterplan, to take recommendations forward.

Last year we started with the licensing of petroleum activities. Before the end of the financial year, we will be rolling out petroleum licensing and inspection services to our regional offices. We have received over 12 500 applications to date. We expect to issue all licences by the end of this financial year.

The transformation of the petroleum sector has been slow. Licensing under the Petroleum Products Amendment Act provides us with an invaluable tool to effect transformation in the sector.

Biofuels

The draft biofuels strategy served before Cabinet last year and was published for public comment early this year. We have just completed this extensive public consultation process. The final strategy will be concluded before the end of the financial year after all issues that were raised during the consultation process have been extensively debated and addressed.

Integrated Energy Centres Programme

As part of our efforts to ensure access to energy by all South Africans, the Department in collaboration with municipalities and some Oil Companies, has committed to increase the number of Integrated Energy Centres (IECs) countrywide. The main objective is to bring affordable and sustainable energy services and information closer to the poor communities. A strategy and roll out plan to establish more IECs until 2015 has been approved.

Energy summit

Previously, the role played by energy globally was under estimated but recent geopolitical and technological developments have shown beyond doubt the significance of energy in shaping economies and foreign policies of many countries in the world. To this end I will be convening a stakeholder summit in September, during which these issues would be discussed.

Mining

Honourable members, the commodities boom of 2005 continued into 2006. Sadly this strong growth in mineral sales was initially not matched by any meaningful fixed capital investment unlike in other mining countries. However, recently we have noted a marked improvement in this area. We have also seen new Black Economic Empowerment (BEE) compliant mines opening especially in Limpopo and North West. Last week near Brits in the North West, International Ferrometal South Africa was officially opened. This is a further sign of confidence in our regulatory environment.

Reports about lack of direct investment in the sector resulted in the DME conducting international road shows to understand the obstacles to investments. In addition, we together with the Chamber of Mines and the National Union of Mineworkers conducted a desktop study that helped provide us with an indication of what some of the causes of this lack of investment were. We are also organising an all-inclusive indaba for 11 June 2007, where we will be discussing all the aspects of the industry in order to come up with concrete strategies. All players as well as suppliers of infrastructure are urged to attend. The results from this indaba will be fed into the work of the Accelerated and Shared Growth Initiative for South Africa (AsgiSA) and possibly form part of future Parliamentary debates.

Small-scale mining

The Department has continued to roll out its support to the development of small-scale mining and for the first time, this year, extended this support to jewellery fabrication projects as they are easily portable. Both these interventions have an immense contribution to the second economy. With the annual budget of R21 million we have been able to support for example four projects in Limpopo to the tune of 14, 6 million and three in KwaZulu-Natal at R7,2 million. Last year we received more than 80 applications for financial assistance and we expect the figure to double this year.

Beneficiation

We are developing skills in the jewellery sector for our people to be able to take leadership roles and for the provinces to be able to play a supporting role when we start implementing the Diamond Amendment Act, the Second Diamond Amendment Act and the Precious Metals Act before the end of August. These amendments will usher in a more representative South African Diamonds and Precious Metals Regulator to replace the South African Diamond Board. The Diamond Exchange and Export Centre to be introduced will monitor the export of diamonds whilst the State Diamond Trader would make diamonds available solely to the diamond beneficiators. The State Diamond Trader will initially open in Johannesburg but with time will permanently move to Kimberly to make Kimberly the real diamond hub of South Africa.

Implementation of the Mining and Petroleum Resources Development Act (MPRDA)

Our efforts to pursue and consolidate gender empowerment in the mining industry have culminated in the revitalisation of South African Women in Mining Association (SAWIMA) and the official launch of their national offices in Johannesburg. Women empowerment is duly assured when women’s organisations are placed on sound administrative and financial footing. It is through SAWIMA that we will continue to lend assistance to women in mining to ensure that this sector does not continue to be the domain of men only.

Madam Speaker, our demonstrable will to facilitate the participation of women and youth in the minerals and energy sectors saw the birth of yet another sector group during 2006, Youth in Energy and Mining (YEM) which serves as a vehicle to facilitate youth programmes and also to reach out to as many youth in our country as possible. To further fulfil the objectives of the Joint Initiative for Priority Skills Acquisition (JIPSA), the Council for Geoscience, the Central Energy Fund (CEF) group of companies together with the University of Fort Hare have entered into a collaborative programme for skills development in the fields of geology, chemistry, and economics.

The Department has received 11 447 applications for various types of rights since the promulgation of the MPRDA in April 2004. The number of applications received is unprecedented in the history of mining in South Africa. I also want to inform you that there is no backlog in respect of applications received, as all applications are finalized within the timeframes prescribed in the MPRDA.

The Department further utilises the MPRDA through its requirements for a social and labour plan to intensify the "struggle against poverty" which also act as a catalyst in the upliftment of the vulnerable groups. We want to ensure that the communities where these mining activities occur survive beyond the depletion of the ore-body. We appreciate the companies that have undertaken some projects in this regard for example: the housing by Umcebo Mining at Middelkraal in Mpumalanga; Housing projects by Lonmin, Hernic Ferrocrhome and Aquarius at Bojanala District Municipality; and skills development centers by Transhex, United Manganese of Kalahari and SAMANCO in the Northern Cape. We expect the mining companies to continue acting as a catalyst for positive change in areas where there could be little opportunities for economic and social development.

A few weeks ago I had the privilege to meet 10 students from OR Tambo and 10 others from Taung who have been granted bursaries by Implats for their study as part of the social and labour plan, which is one the pillars in the Mining Charter. This is laudable given the fact that these are poverty nodes affected by mining in different ways, one as a dense labour sending area and the other as a hosting community.

Rehabilitation

A database for derelict and ownerless mines and a ranking system were developed to assist the Department in prioritising the rehabilitation of derelict and ownerless mines. This will form part of a bigger strategy on the rehabilitation of derelict and ownerless mines to be finalised in the next financial year. The rehabilitation of unsafe derelict and ownerless mine shafts and subsidence project was initiated by the DME in 2005 and 600 of the shafts and subsidence were identified. Forty-four extremely hazardous openings and subsidence have been closed as part of phase 1. Of the 600, 201 are ownerless and will become government's responsibility to close and rehabilitate in the interest of the communities. Mining companies who are responsible for the closure and rehabilitation of the rest (399) will be instructed to do so in terms of the Mine Health and Safety Act, 1996. We will continue to forge links with local authorities in identified these hotspots.

Mine health and safety

Honourable members, we must pay tribute to 199 miners who lost their lives in the mines in 2006. Unfortunately, the mining sector failed to achieve the targets agreed to in 2003, of reducing the fatality rate by at least 20% per annum. A further analysis shows that the platinum sector had a 21% reduction in fatality rates but there is still room for improvement. On Monday, three miners lost their lives in a mud-rush accident at Paardekraal Mine. This matter is of great concern. In response, the Department has put together an investigation team of experts to assist us in getting to the root causes of the accident.

Last year there was a seismic event at Tau Tona that claimed the lives of five miners. Subsequently I have called for a mini indaba to be held in September 2007 in Carletonville to focus on technological solutions in ameliorating the magnitude and the location of seismic events.

Conclusion

In conclusion, I would like to thank the two Chairpersons and members of their committees, namely the Portfolio Committee and the Select Committee for their unwavering support, as well as the Director-General and staff of the Department for their loyalty and commitment to their work, Chairpersons and CEOs of State Owned Entities reporting to the DME for continuing to share my vision. I would also like to thank my family for their understanding.

Chairperson, I request the House to approve my Department's budget of R2.9 billion for the 2007/08 financial year.

Issued by: Department of Minerals and Energy
7 June 2007
Source: Department of Minerals and Energy (http://www.dme.gov/za)