1 1

PRESENTATION TO PORTFOLIO COMMITTEE ON MINING OF 2009 /

10 ANNUAL REPORT

12 OCTOBER 2010

22

Presentation Outline1. Introduction

1. Financial performance- An overview of the audit report - An overview of the Audit Committee report- Annual Financial Statements, including notes thereto

- State of Financial Management systems Report on Financial misconduct and measures taken

Efficiency savings and productivity gains.

Supply chain management.

Information Technology – Making better use of technology

3. Non Financial Performance Informationi. Programme 1: Administrationii. Programme 2: Mine Health & Safetyiii. Programme 3: Mineral Regulationiv. Programme 4: Mineral Policy & Promotion

4. Closure / Discussion33

INTRODUCTION

1. Mine Health and Safety Act

2. Council for Geoscience Act

3. Derelict and Ownerless Mines Strategy

4. Service Delivery Environment

5. Emerging Issues

44

An overview of the audit report

Audit opinion Qualified audit opinion issuedBasis for qualified opinion Completeness of receivables for departmental

revenue (R25m) could not be verified This is related to disclosure note 26 (page 189) Although the department prepares AFS on

modified cash basis, such disclosure notes are necessary as part of the preparation for migration into accrual basis of accounting

55


Root Cause Lack of a comprehensive debtors system Skills gapsManagement action plan• New debtors system to be developed as part

of the new system – BAS to be used in the interim

• Monthly workshops with regional offices to review registers

• Additional staff with Financial background to be appointed in all regional offices

66


Emphasis of matter This matters are not a qualification but are

intended to draw the readers attention to such matters due to their importance.

Matters reported are: Basis of reporting - this is a standard

paragraph for all national departments – No further action is required in this regard.

77


Irregular Expenditure – expenditure that was incurred without

adhering to the internal delegation of authority, e.g. services rendered prior to approval by the relevant authority

These were picked up the internal controls established by the department

All cases were evaluated and condoned by the Accounting Officer during the year

88


Restatement of previous financial year figures.

Changes effected on prior year’s reported figures These changes were either made as a result of a query

from the AG or initiated by Management The intention is to align prior year’s figures to the

current for comparability. One of the major causes for these adjustments is

change in reporting framework, e.g. disclosure of minor assets.

99

An overview of the audit report Material under-spending of budget

Although the amount appears significant it only represents 2,9 percent of the total budget – which is below the materiality threshold set by National Treasury

The under spending was primarily caused by delays in finalising contracts for non-grid service. These contracts were signed towards the end of the financial year

Approval was granted by National Treasury for the roll over of the funding to the 2010/11

1010


Potential unauthorised expenditure due to accruals exceeding saving

Of the R22.2 m accruals disclosed, R20.4 m relates to the DPW disputed invoices.

There was no deliberate intention to withhold invoices

At year end DPW had not submitted a revised invoice on the confirmed amount

Performance Information

1111

Overview of the Audit Committee The Audit Committee comprised of 3 independent

members The Committee met 6 times during the period under

review (required minimum is 4 meetings) The Committee approved its reviewed charter in terms of

the PFMA and Treasury Regulations The work of the Audit Committee was conducted in line

with the approved charter and covered

- Review of the effectiveness of Internal

controls

- Evaluation of Financial Statements

- Effectiveness of the Internal Audit function A process of appointing the members of the DMR Audit

Committee following the split has been finalised

1212

APPROPRIATION STATEMENT FOR 2009/10

PRGRAMME

2009/10Final Budget

R'000

2009/10ActualR'000

VarianceR'000

2008/9Actual R’000

1. Admin 250,216 249,253 963 226,023

2. MHS 138,717 138,543 174 118,822

3. MR 158,164 150,596 7,568 125,180

4. MPP 73,776 73,724 52 58,318

5. HCEP 56,973 56,925 48 44,199

6. ENCE 338,936 334,070 4,866 262,575

7. Associated 3,665,222 3,541,605 123,617 2,894,889

Total 4,682,004 4,544,716 137,288 3,730,006

1313

Analysis of variances

The overall under spending by the Department was R137,288 million which is 2.9 % of the budget.

The main reason for the under spending was the delay in finalising contracts for the non-grid electrification programme – roll over approved in this regard

An under-spending of 0.4% under programme 1 relates to outstanding lease payments and accommodation charges payable to the Department of Public works.

1414

Analysis of variances Mine Health and Safety branch reflected an

under-spending of 0.1% which is due to vacancies within the branch.

The under-spending of R7.5 million under Mineral Regulation branch is attributable to delays in contracts and subsequent payments for projects aimed at rehabilitating ownerless and derelict mines of which R5 million was approved for roll over.

The under spending on Electricity and Nuclear branch can be attributed to payments that were not disbursed due to delays in finalising agreements

1515

TREND ON UTILISATION OF FUNDS

Economicclassification 2009/10 2008/09 2006/07 2005/06

Compensation of Employees 403,323 330,089 290,561 246,154

Goods and services 263,475 269,408 277,222 254,665

Payment for capex 48,690 18,855 7,470 6,804

Transfer and subs 3,828,303 3,111,061 2,366,512 2,099,917

Theft and losses 924 593 5,602 135

Unspent 137,288 56,235 27,570 27,425

TOTALS (BUDGET) 4,682,004 3,786,241 2,974,937 2,635,100

% Under Spending 2.9% 1.48% 0.93% 1.04%

1616

Analysis of unspent funds• Under spending has been consistently below

3% for the last three years .• The increase in unspent funds for the year

under review is attributable to the following : • R82 million non-grid electrification transfers

that did not realize however contracts already concluded

• The funds appropriated for working for energy project (R5m)

• The R5m relating to Rehabilitation of ownerless and derelict mines

• Roll over application has been made to National Treasury for the above

1717

Click to edit Master subtitle style

Analysis of variance in Statement of Financial Performance

Item 2009/10 2008/9 Variance % variance

R’000 R’000 R’000

Compensation of employees

Basic salary 259,530 207,803 51,727

25

Periodic payments 1,526 2,950 (1,424)

(48)

Pension 33,503 26,771 6,732

25

Goods and services

Venues and facilities 5,454 11,239 (5,785)

(51)

Advertising 2,829 16,009 (13,180) (82)

Communication 19,875 17,207 2,668 15.

Analysis of the Statement of Financial Performance

Item2009/10 2008/9 Variance

% variance

R’000 R’000 R’000

Travelling

67,458

79,317 (11,859)

(14)

Operating leases 34,231

19,413 14,818

76

Financial transactions in assets and liabilities

925

593 332

55

Tangible capital assets

Buildings and other fixed structures 26,917 3,978 22,939 577

Machinery and equipment 20,467

12,565

11,133

88

Software and other intangible assets

1,306

2,312 (1,006)

(44))

1919

Statement of Financial Performance: Variance analysis

The staff cost increased in relation to the increase in staff numbers (1272 vs.1169)

The G & S cost is relatively low compared to 2008/9 owing to cost containment measures implemented during the year under review. The related costs include, travelling, venues and facilities, advertising and catering.

Tangible capital assets increased significantly owing to acquisition of furniture and servers for new building

Intangible capital assets decreased as only security related software were acquired during 2009/10

2020

Statement of Financial Performance: Variance analysis

Increase of 23% in transfers represent new funds appropriated for Demand Side Management project (R250m), Working for Energy and Renewable Energy Finance Subsidy Office (REFSO) @ R5m apiece

Financial transactions in assets and liabilities went up by 56% and account for R925 thousand mainly written off for car accidents and ex-employees debts.

2121

Analysis of variances: Statement of Financial Position

Item 2009/10 2008/09 Variance %varianceR’000 R’000 R’000

Current Assets

Cash and cash equivalents 192,279 127,225 65,054 34

Prepayments and Advances 5,902 19,133 (13,231)

(224)

Receivables 14,580 29,674 (15,094 (104)

Current Liabilities

Voted Funds to be surrendered 137,288 54,105 83,183 61

Revenue to be surrendered 74,344 115,158 (40,814) (55)

2222

Analysis of variances: Statement of Financial Position

Item 2009/10 2008/09 Variance %varianceR’000 R’000 R’000

Net Assets Recoverable Revenue 1062 844 218 21

2323

Analysis of major variances : Statement of Financial Position

The asset base increased by 24% from last year attributable to bank balance (R158m) for payments projected to disburse at year end , late revenue payments (R33m)

Prepayments and advances went down by 224% due to rehabilitation of ownerless and derelict mines projects that were concluded during the 2009/10 financial year.

Recoverable expenditure (R7.6m fraud and approximately R1. 9m – land for IPP project).

Notable decrease in long outstanding staff debt (R2.2m vs. R2.7m)

2424

Analysis of major variances : Statement of Financial Position

Total liabilities of R201m(also 24% increase) include R 74 m revenue and R137m of voted funds for surrender

Net assets of R3.2 m include the capitalization reserve (R2.2m) and R1m recoverable revenue

2525

Analysis of variances: Cash Flow Statement

Item 2009/10 2008/09 Variance %variance

R'000 R'000 R'000

Receipts 4,899,148 4,068,731 830,417 17

Net cash flow available from operating activities 113,526 27,808 85,718 76

Net cash flow available from financing activities 218 (17) 235 108

Cash and cash equivalents 192279 127225 65054 34

2626

Analysis of major variances: Cash Flow Statement

The increase in net cash flow available from operating activities is attributable to the increase in unspent funds by 60%. (as explained under unspent funds)

The significant increase in net cash flow from investing activities is due to acquisition of furniture and servers for the new building as well as the improvements made to the new building

2727

Analysis of variances: Disclosure notes

Items 2009/10 2008/09 Variance %variance

R'000 R'000 R'000

Contingent liabilities and contingent assets

367,474

273,800

93,674

25

Commitments

99,002

87,526

11,476

12

Accruals

40,525

13,358

27,167

67

Employee Benefits

42,201

30,241

11,960

28

Lease commitments

368,526

359,464 9,062

2

Receivable for Departmental Revenue

25,567

10,437

15,130

59

Irregular Expenditure 4,203

-

4,203 100

Related Party Transactions 17,600

58,349

(40,749) (232)

2828


Items 2009/10 2008/09 Variance %variance

R'000 R'000 R'000

Key Management Personnel 33,377 24,738 8,639 26

Provisions 10,559 7,847 2,712 26

2929

Contingent Liabilities is made out of legal claims against the department, guarantees issues and interdepartmental payables (unconfirmed balances).

Accruals increased by 67% as a result of R20.4m due to Public works, invoice of which is still awaited

Increase on employees benefits is as a result of leave and performance bonuses due

Receivables increased as a result of uncollected monies due to the department

Irregular expenditure incurred in the current financial year was due to officials not following the departmental financial delegations.


3030

Details of Transfers and Subsidies

Recipient

2009/10

Actual transfer

Purpose of transfer paymentR’000

Assistance to Mines 31,100

Assistance to marginal mines in the form of pumping subsidies and research to prevent ingress of water into underground holdings (CGS:R17.6m and Mining companies R13.5 m)

Council for Geoscience 132,677Core funding in terms of establishing act

Council for Mineral Technology Research 161,108

Core funding in terms of establishing act

South African Diamond and Precious Metals Regulator 39,412


Mine Health and Safety Council 5,118


3131

Transfers and Subsidies

Recipient

2009/10

Actual transfer

Purpose of transfer paymentR’000

Industrial Development Corporation of SA (Small scale mining) 25,058

Small scale mining projects

State Diamond Trader 1,000 Bail out during recession

3232

State of Financial Management systems

Report on Financial Misconduct 4 cases of financial misconduct were reported

during the year. Outcomes of the hearing are: 2 were found guilty,

1 is in progress while the other 1 has already left the Department.

Further action taken - 2 of the cases were reported to the police while the other one was suspended without pay for 3 months and the 4th one is still in progress

3333

State of Financial Management systems

Efficiency Savings and Productivity Gains: Reduction on travel related expenditure and

Catering is attributable to the effective implementation of the cost containment measures introduced during the year

The split of the Department of Minerals and Energy into two, namely the Department of Mineral Resources and the Department of Energy was successfully executed

3434

State of Financial Management systems Supply Chain Management: The SCM component has been fully restructured

and aligned with the SCM Framework requirements. This enables effective implementation of all functionalities and improves productivity.

All SCM Committees as required in the framework have been constituted and fully operational. This enhances internal control measures within the SCM environment

Departmental Internal control systems in place are able to pick up irregular expenditure effectively

3535

Information Technology Management The department has developed a new integrated

information management system The Mine Health and Safety modules have been

completed and rolled out for implementation Currently developing modules for Mineral Regulation

(licensing and compliance monitoring) Some of the benefits of the new system include:

Online submission and processing of applications for prospecting and mining rights

Online checking of availability of farms prior to completing the application forms

Online checking of the status of the application Integration of various processes within the department

for improved efficiency.

3636

Click to edit Master subtitle style

Programme 1CORPORATE SERVICESPurposeTo enable the Department to deliver on its mandate, by providing strategic management and administrative support to the Ministry and the Department

SUCCESSES Successful implementation of the President’s request to split the

Department of Minerals and Energy into Department of Mineral Resources (DMR) and Department of Energy (DOE).

Successful realignment of Organizational Structure in line with the new mandate of the newly established Departments.

Successful matching and placing Service Level Agreement developed and agreed for to be the

hosting Department for DOE Shared Support Services

Evaluation of MOUs signed with prioritized countries Implementation of the Media and stakeholder engagement plan Compliance Framework developed, approved and implemented Policies , procedures and guidelines approved Development and implementation of the balance score card

implementation plan Completion of the executive leadership development program through

Wits. Improved security measures Continued addressing of issues of transformation regarding vulnerable

groups

CHALLENGES

Change management issues due to the split Capacitating the new Structure Inadequate / lack of funding for the new approved structure Implementation of the Communication Strategy

CORRECTIVE MEASURES

Reprioritization of priorities to ensure a successful Split of the Department

Climate Survey on DMR employees to be conducted Prepare requests for additional funding through MTEF

process for the implementation of the approved organizational structure

To obtain approval of the DMR Communication Strategy

Click to edit the outline text format

Second Outline Level Third Outline Level

Fourth Outline Level

Fifth Outline Level

Sixth Outline Level

Seventh Outline Level

Eighth Outline Level

Ninth Outline LevelClick to edit Master text styles

Second level Third level

Fourth level» Fifth level


Second Outline Level Third Outline

Level Fourth Outline

Level Fifth

Outline Level

Sixth Outline Level







Fifth Outline Level

Sixth Outline Level






Programme 2Mine Health and Safety Inspectorate

Purpose

Execute the Department’s mandate to safeguard the health and safety of the mine employees and people affected by mining activities

ObjectiveReduce mining-related deaths, injuries and ill health through the formulation of national policy and legislation, the provision of advice, and the application of systems that monitor, audit and enforce compliance in the mining sector

4141

Achievements/ Successes

Improved stakeholder relationships: Quarterly meetings in all regions with Unions Quarterly meetings with DoL, DoH and DPP

•Address Health and Safety Risks: Completed Inquiries & Investigations as planned Audits (83%) & Inspections (91%)

•Development of Guidelines: Reviewed existing Guidelines (e.g. Underwater Mining; Emergency Preparedness; and Drawpoints, Tipping Points & Orepasses)

•Review and develop internal policies and procedures: Exams Policy, Medical Appeal Procedure; Inclusion or Non-Inclusion of Fatal accidents in Statistics

•Human Resource Development : 99 Officials completed a course on Risk Management in Mining

97 Officials completed Health & Safety Training (Legal, Inspection, Audit, Investigation and

inquiries)

4242

Safety performance

0

2

4

6

8

10

12

0

2

4

6

8

10

12

RSA Total accidents

Fatality and injury rates per million hours worked2003 - 2010

Linear ()

Linear ()

Injuries

4343

Safety performance

Commodity

Fatalities*

Actual

01/01/2009-04/10/2009

01/01/2010 - 04/10//2010 % change

Total 130 97 -25

Gold 60 47 -22

Coal 9 8 -11

Platinum 37 24 -35

Other 24 18 -25

4444




Fifth Outline Level

Sixth Outline Level









Level Fifth

Outline Level

Sixth Outline Level







Fifth Outline Level

Sixth Outline Level






CHALLENGES

Capacity Building

Compliance Levels monitoring tool

CORRECTIVE MEASURES

Appointment of 19 Learner Inspectors

18 Bursary Students

Training Initiatives with WITS, MQA and IRCA

Implementation of an electronic business management system

Electronic business management system still being developed

4545




Fifth Outline Level

Sixth Outline Level









Level Fifth

Outline Level

Sixth Outline Level







Fifth Outline Level

Sixth Outline Level






CHALLENGES

FOG accidents

CORRECTIVE MEASURES

SIMRAC project on integration of seismic networks has commenced

Specialist Task team has been established to look on FOGs

Quarterly review meetings between Minister, CEOs, Labour

Enhance Rock engineering capacity of the Inspectorate both in H/O and Regions

4646




Fifth Outline Level

Sixth Outline Level









Level Fifth

Outline Level

Sixth Outline Level







Fifth Outline Level

Sixth Outline Level






CHALLENGES

Occupational Health

CORRECTIVE MEASURES

Reviewed TB guideline

Chief Directorate on Health established

Silicosis Roadshows

4747




Fifth Outline Level

Sixth Outline Level









Level Fifth

Outline Level

Sixth Outline Level







Fifth Outline Level

Sixth Outline Level






Programme 3Mineral Regulation

Purpose To regulate the minerals and mining sectors to achieve transformation and sustainable development.

Objective To transform the minerals and mining sectors into one that

competitively contributes to the sustainable development in the country.

4848

Regulation of the minerals and mining sector to achieve transformation and sustainability.

Exceeded the target of granting Rights to HDSA

Monitor and enforce compliance Exceeded the target of conducting inspections

Effectively implement relevant legislation Exceeded the target of conducting industry workshops

Regulation of the minerals and mining sector to achieve transformation and sustainability. Exceeded the target of granting Rights to HDSA

Monitor and enforce compliance Exceeded the target of conducting inspections

Effectively implement relevant legislation Exceeded the target of conducting industry workshops

4949

Challenges Whilst we have exceeded targets in granting rights to HDSA,

not many of these have graduated into Mining Rights. Sale of Rights and dilutions - Some of these Rights could have

been subjected to auctioneering without Ministerial consent Inadequate capacity to conduct compliance inspections Whilst the branch may have succeeded in conducting

inspections, the impact is not felt on the ground, as limited number of Section 93 and 47 have been issued

Whilst the branch may have succeeded in conducting community and industry workshops, the branch experienced an increase in complaints from communities. These complaints though wide ranging, border on non compliance by mining companies on SLP commitments.

Funding (personnel, goods and services)

5050

Corrective Measures

Imposition of a moratorium on lodgement of new prospecting rights, to allow a thorough audit of all rights granted since implementation of the MPRDA

Development of a new electronic system for the lodgement and administration of mining and prospecting applications.

The new system will enable online lodgement of all applications

- transparency built into the system Reduction in timeframes for the processing of applications. Strengthening capacity of Regional offices by re-deploying

Chief Directors, creation of additional Chief Director posts, and additional resources for monitoring and evaluation.

5151




Fifth Outline Level

Sixth Outline Level









Level Fifth

Outline Level

Sixth Outline Level







Fifth Outline Level

Sixth Outline Level






Programme 4Mineral Policy & Promotion

Purpose To formulate mineral-related policies and promote the mining and minerals industry of South Africa, making it attractive to investors.

ObjectiveThrough research, provide relevant information to enhance

global competitiveness, review policies and formulate legislation to achieve transformation and attract new investment into South Africa’s minerals industry..

5252

MINERAL POLICY AND PROMOTIONSuccesses

Mining Summit held with all industry stakeholders

MIGDETT intervention to mitigate job losses Adopted strategy on sustainable growth and meaningful

transformation of mining industry by stakeholders Evaluation of state’s exposure to mining industry – led to

moratorium on disposal of State owned mining assets Mining report towards the country UNCSD report Mining Charter Assessment report completed Minister approved the strategy for rehabilitation of derelict

and ownerless mines

5353

Challenges

Beneficiation strategy

Finalisation of the implementation plan for D & O

mines

Acid Mine Drainage threat

Small Scale Mining Strategy

5454

Corrective Measures Beneficiation Strategy - Broadening consultation within the

government system (Economic Development Cluster) and with stakeholders through MIGDETT

An implementation plan for D & O in process of finalization

AMD threat - Constitution of a comprehensive and pragmatic

stakeholder forum consisting of science councils of the DMR,

DWAE and the DST, academics from universities engaged in

research on water resources and management and the resultant

impacts of mining activities

Reconfiguration of the implementation agent framework for small

scale mining by enhancing the role of the IDC and weaning away

from the CGS

5555

1 1

Documents

annual report

financial misconduct

audit report root causelack

financial background

disclosure notes

health safetyiii

mineral regulationiv

portfolio committee