presentation to the select committee on economic and foreign affairs mzolisi diliza, chief...
TRANSCRIPT
Presentation tothe Select Committee on
Economic and Foreign Affairs
Mzolisi Diliza, Chief Executive,Chamber of Mines of South Africa
7 February 2007
Chamber of Mines of South Africa
22
Outline of presentation
1. The importance of mining to the economy
2. Background to the Chamber of Mines3. The importance of tripartite co-
operation 4. Some challenges facing the industry.
33
1. Importance of mining to the economy
Gross Domestic Product (GDP): Directly: 6.2% of GDP Including indirect contribution: 16%
Exports: R105-billion in export earnings 30% of total merchandise exports Including beneficiated mineral products: over
50% of exports 60 different minerals are mined – exported to
over 100 international destinations
44
Important provider of jobs
Mining employees:
450 000
Wage bill = R36-billion
55
Important provider of jobs
Mining employees:
450 000
Dependants: 5 million
66
Important provider of jobs
Associated industries:
150 000
Mining employee
s: 450 000
Dependants: 5 million
77
Importance of mining (continued)
Energy: 93% of electricity generation via coal power plants About 30% of liquid fuels via Sasol’s use of coal
Investment: 12% of fixed investment (direct and indirect) At R1-trillion, 33% of the market value of the JSE Empowerment deals of R30 billion in 2006
Complementary role in deep rural areas: Remittances Clinics, schools, community centres Development projects Financial infrastructure TEBA Development, TEBA Bank
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2. The Chamber of Mines
Vision: To achieve a policy, legislative and governance framework, which is widely supported and which will allow the mining industry to convert as great a part of the country’s abundant mineral resources into wealth for the benefit of South Africa.
A private sector body, fully funded by private companies
Founded in 1889
99
Some principles supported by the Chamber
Emphasis on addressing historical legacies
Need for transformation to ensure a more inclusive and participative economy: Mining Charter developed on tripartite basis
Unions are important stakeholders Importance of participating in economic
tripartism Importance of dealing responsibly with an
important national resource.
1010
Chamber transformation
2006
Black persons in management and professional (COM)
40%
Women: total management and professional (COM)
47%
Women: total employment (COM)
52%
Women: total employment (12 major mining companies)
7%
1111
Chamber representation Chamber members account for 90% of
the country’s mineral production and 89% of employment
Chamber approach is fully mandate driven through numerous technical policy committees representing members
Research backing for Chamber views an important priority.
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How the Chamber operates
− President: Lazarus Zim− Vice-presidents:
Ralph Havenstein Bernard Swanepoel
− COM CE: Mzolisi Diliza− Other CEOs
ExecutiveCouncil
Final mandate
on major issues
How the Chamber operatesExecutiveCouncil
Policy committees • Company experts
• Environment, labour relations, skills development, health, safety, etc.
13
Gold and coal
principals
1414
The advocacy role of the Chamber
Government, Parliament, Parastatals Member of Business Unity South
Africa (BUSA) International role Chamber not a service organisation
(exception of collective bargaining for gold and coal).
1515
Future of Gold Mining
HIV/AIDSCommittee
Tripartism in theMining Industry
Minerals & MiningDevelopment Board
Mine Health andSafety Council
3. Tripartite co-operation
Sector PartnershipCommittee, Social
Plan, etc
Mining Summits (past and future)
SustainableDevelopment
issues
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4. Some challenges facing the industry
Health & SafetyIssues
Chamber of MinesSkills devl.
Issues
EconomicIssues
EnvironmentalIssues
Labour relations
Issues
SustainableDevelopment(SD) Issues
• Compliance with the
Minerals Act
•Compliance with Mining Charter
•Beneficiation
TransformationIssues
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• Drop in mining investment
• Input cost pressures
– Energy– Transport– Water
• Royalties.
Some challenges facing the industry
Health & SafetyIssues
Chamber of MinesSkills devl.
Issues
EconomicIssues
EnvironmentalIssues
Labour relations
Issues
SustainableDevelopment(SD) Issues
TransformationIssues
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Health & SafetyIssues
Chamber of Mines
EconomicIssues
EnvironmentalIssues
Labour relations
Issues
SustainableDevelopment(SD) Issues
TransformationIssues
Some challenges facing the industry
Skills devl.Issues
• Financial Provision for mine closure• Climate change, biodiversity• Water resource management
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• Health & Safety : Milestones• Integration of Health & Safety Laws• Integration of Compensation Systems• HIV/AIDS
Some challenges facing the industry
Health & SafetyIssues
Chamber of Mines
EconomicIssues
EnvironmentalIssues
Labour relations
Issues
SustainableDevelopment(SD) Issues
TransformationIssues
Skills devl.Issues
2020
Some challenges facing the industry
TransformationIssues
Health & SafetyIssues
Chamber of MinesSkills dev
Issues
EconomicIssues
EnvironmentalIssues
Labour relations
Issues
SustainableDevelopment(SD) Issues
• Bargaining council for mining industry• Provident Fund• Accommodation• Women in mining
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TransformationIssues
Health & SafetyIssues
Chamber of MinesSkills dev
Issues
EconomicIssues
EnvironmentalIssues
Labour relations
Issues
SustainableDevelopment(SD) Issues
• Skills shortages• Learnerships and apprentices• Adult literacy• MQA
Some challenges facing the industry
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• Framework for responsible mining• Gold theft• REACH
Some challenges facing the industryTransformation
Issues
Health & SafetyIssues
Chamber of MinesSkills dev
Issues
EconomicIssues
EnvironmentalIssues
Labour relationsIssues
SustainableDevelopment(SD) Issues
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Major national issueMajor national issue
Huge impact on mining industryHuge impact on mining industry
Substantial in-roads and interventionsSubstantial in-roads and interventions
Provision of antiretroviralsProvision of antiretrovirals
40% – 45% of people in the industry needing 40% – 45% of people in the industry needing
treatment are receiving ittreatment are receiving it
94% of HIV positive employees return to work94% of HIV positive employees return to work
HIV/AIDS
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Employee safety: our major concernEmployee safety: our major concern
We deeply regret fatalities and injuriesWe deeply regret fatalities and injuries
2005 – best ever improvement in safety 2005 – best ever improvement in safety
(16%)(16%)
2006 - below 20% improvement objective2006 - below 20% improvement objective
High level task team appointedHigh level task team appointed
One fatality is one fatality too manyOne fatality is one fatality too many
Safety
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Skills development
On average 4.5% of payroll spent on On average 4.5% of payroll spent on skills developmentskills development
Industry contributes about R15m per Industry contributes about R15m per annum to Minerals Education Trust annum to Minerals Education Trust Fund for tertiary mining educationFund for tertiary mining education
Bursaries in mining: Bursaries in mining: Companies: 700 (R40m)Companies: 700 (R40m) MQA: 837 (R50m)MQA: 837 (R50m)
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SA did not take full advantage of commodities SA did not take full advantage of commodities boomboom
Global exploration expenditure increased by Global exploration expenditure increased by 43% but only 27% in South Africa between 43% but only 27% in South Africa between 2003 and 20052003 and 2005
Commodities boom and lost investment
opportunities
AustraliaAustraliaPre-tax profits increased by Pre-tax profits increased by
95%95%Capital investment surged Capital investment surged
by more than 34%by more than 34%
South AfricaSouth Africa Profits increased by 12% onlyProfits increased by 12% only Real fixed investment declined Real fixed investment declined
by 16.5% (and 18.6% in 2004)by 16.5% (and 18.6% in 2004)
An Australian comparison (2005)
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Some possible reasons
Strong Rand (especially in 2003 and 2004) an important reason
Transport: Logistical constraints in rail and ports compounded
the problem Industry & Transnet agreed initiatives to overcome
logistical inhibitors; Transnet spending R37-billion to upgrade
infrastructure in the Waterberg area
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What are the issues? What are the issues?
Issuing of new or converted mining rightsIssuing of new or converted mining rights
Interpretational differences of Mining Interpretational differences of Mining
Charter, empowerment requirements and Charter, empowerment requirements and
Social and Labour PlansSocial and Labour Plans
Capitalisation of Environmental Trust Capitalisation of Environmental Trust
FundsFunds
Delays in processing water licencesDelays in processing water licences
Chamber capital investment survey
2929
Programme of action to address problems
Increasing efficiencies is top priority for DME
Industry is addressing shortcomings with applications, e.g. incomplete applications, lack of transparency on some BEE deals
Joint investigation into investment constraints and solutions
Continuing discussions.
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Positive developments in recent months:Positive developments in recent months: 2495 new prospecting licences granted 2495 new prospecting licences granted
(94% finalised within time frame, i.e. either (94% finalised within time frame, i.e. either granted or refused)granted or refused)
341 mining rights granted (65% finalised)341 mining rights granted (65% finalised) 1025 permit applications granted (84% 1025 permit applications granted (84%
finalised)finalised) Transparency on progress with Transparency on progress with
applicationsapplications 8.3% increase in investment between 8.3% increase in investment between
Q3 2005 and Q3 2006Q3 2005 and Q3 2006
Good news
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Significant improvements in second draft of Royalties Bill are welcomed
However, proposed two-tier system of royalty rates is a concern: Lower rate for refined product But has serious cost consequences for
bulk commodity producers, esp. iron ore and coal.
Royalty concerns
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Industry concerns about prescription of claimsIndustry concerns about prescription of claims Window ends on 30 April 2007Window ends on 30 April 2007 Compensation claims could become unenforceableCompensation claims could become unenforceable Difficulty in assessing value of rightsDifficulty in assessing value of rights Urgent solution required Urgent solution required On-going discussions with the DME to find On-going discussions with the DME to find
solutionssolutions The resolution of Legal Proceedings Against The resolution of Legal Proceedings Against
Certain Organs of State Act (ILPA) set a good Certain Organs of State Act (ILPA) set a good precedentprecedent
Urgency of passing legislation before 30 April Urgency of passing legislation before 30 April 2007!2007!
MPRDA and prescription
3333
An invitation
Chamber and mining industry would like more interaction with Parliamentary structures
Visits to mines to obtain hands-on information should take place regularly
Chamber is willing to carry a portion of the cost of such visits
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Financial corporationsAnglo American Corporation of South Africa Ltd
Gold miningAfrican Rainbow Minerals (Gold) LtdAngloGold Ashanti LtdArmgold/Harmony JV LtdGold Fields Ltd Beatrix Mining Company Ltd Driefontein Consolidated (Pty) Ltd Kloof Gold Mining Company LtdHarmony Gold Mining Co. LtdJCI Gold LtdPlacer Dome Western Areas JV
Coal mining Anglo Operations Ltd, Anglo Coal Division Eyesizwe Coal (Pty) Ltd Ingwe Coal Corporation Ltd Douglas Colliery Ltd Khutala Mining Services (Pty) Ltd Optimum Colliery Ltd Kangra Group (Pty) Ltd Kumba Resources Ltd Kuyasa Mining (Pty) Ltd Sasol Mining Tweewaters Fuel (Pty) Ltd Xstrata Coal
Diamond miningDe Beers Consolidated Mines LtdNamakwa Diamond CompanySouth African Diamond Producers OrganisationTrans Hex Group LtdPlatinum miningAnglo American Platinum Corporation LtdImpala Platinum LtdLonmin Platinum LtdRidge MiningSmall, medium & emerging operationsASA Metals (Pty) LtdAggregate & Sand Producers Association of South AfricaClay Brick AssociationG & W Base and Industrial Minerals (Pty) LtdImerys South Africa (Pty) LtdMvelephanda ResourcesRandgold & Exploration LtdVametco Mineral Corporation (Pty) LtdOther membersAngloGold Ashanti Health Services (Pty) LtdBHP Billiton (SA) LtdCementation (Africa Contracts) (Pty) LtdCorobrik (Pty) LtdRUC Holdings LtdShaft Sinkers (Pty) LtdSuspended operations City Deep Ltd Consolidated Main Reef Mines & Estates Ltd Crown Mines Ltd
Members of the Chamber of Mines