Budget Vote 31 delivered by the Minister of Minerals and Energy, Ms Buyelwa Sonjica, MP, at National Assembly, Cape Town

Madame Speaker
Colleagues
Honourable members
Ladies and gentlemen

Introduction

When the people of South Africa bestowed upon us the mandate to govern this country, the first step was to initiate the relevant reforms which would enable us to successfully affect the mandate of good governance and government. The time has now arrived for us to successfully implement the policies we have so far formulated which were mainly aimed at redressing the imbalances of the apartheid past.

Honourable members, during this, my maiden budget vote speech as the Minister of Minerals and Energy I would like to affirm that as a cadre of the African National Congress (ANC) I will continue the legacy left by my predecessors of advancing the mining and energy sectors to greater heights. Commitment to this legacy is more pressing today than ever to holistically address some of the issues highlighted by President Mbeki in his State of the Nation address (SONA) of 2007, where he reminded us of our key challenges which included intensifying the fight against poverty, addressing the challenges of the second economy, providing of basic services and the reducing of the cost of doing business in South Africa.

The Department of Minerals and Energy (DME) is responsible for key sectors in the South African economy and therefore is well placed to heed the call made by President Mbeki and drive South Africa towards a sustainable energy supply and mineral wealth that is shared by all her people. Madam Speaker, 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 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

Madame Speaker, 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.

By the end of October 2007 we would have introduced a piece of legislation that will mandate provision of energy data and the use of healthy, safe, energy efficient and energy friendly appliances. A key aspect of this piece of legislation will be the creation of entities that will promote energy efficiency, renewable energies, energy planning and environmental protection. These plans will have minimal impact unless all consumers take a conscious decision to use energy efficiently.

Energy efficiency will be key in our comprehensive strategy aimed at ensuring security of energy supply. On Friday, 1 June I will launch an Intensive Multi Media Energy Efficiency Campaign in partnership with the Department of Public Enterprises (DPE), Eskom and other state organs. The campaign will target ordinary households and industrial consumers with a view of influencing prudent consumer behavioural pattern without negatively impacting on the economy.

We are confident that this intervention will yield enormous benefits in the form of overall reduction in energy demand, promote energy security, contribute towards environmental conservation and savings for individual households.

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 REDs as public entities managed through the Public Finance Management Act and regulated by Nersa. I have taken note of what South Africans have been saying about the process and would like to reassure all stakeholders that the proposed legislative framework will accommodate all the concerns that have been raised.

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 and 700 schools and also improve the quality of supply in preparation for the 2010 FIFA World Cup and beyond.

However, our rallying cry "a better life for all" is not a hollow promise. There can never be a better life if we don't have electricity in our health facilities and our children continue to study in the dark! 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 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. 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 set the regulatory framework on two counts: for using a more energy efficient carrier like LP Gas as a demand side management initiative in the face of the peak electricity supply crunch that we are currently experiencing and for an appropriate pricing mechanism for LPG. It is unacceptable that LPG is priced as a leisure energy carrier, when there might be an opportunity to utilise it to substitute traditional carriers like biomass and paraffin. We have over years made noises that we thought would trigger an appropriate market solution but the price of LPG 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 other 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. Safety and our commitment to peaceful uses will always guide our beneficiation programme. Technology transfer and localisation of manufacturing will be mandatory on any procurement of nuclear power plants and equipment. Nuclear Energy Corporation of South Africa (NECSA) will be central in implementing uranium beneficiation strategy.

The expanded nuclear programme is expected to result in the development of a nuclear energy industrial complex, which will lead to the creation of jobs in the nuclear sector. This envisaged energy complex will be anchored on uranium beneficiation and power plan manufacturing infrastructure. In line with this anticipated need and the objectives of the Joint Initiative for Priority Skills Acquisition (JIPSA), I launched the South African Young Nuclear Professionals Society which is aimed at boosting the potential skills' pool in this critical sector. 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 has identified current and future supply constraints. It has formulated possible strategies and options to deal with these issues. The initial indications are pointing at the need for investment by State-owned entities in pipelines, storage and handling facilities. The findings have however pointed to inefficiencies emanating from the industry practices, especially in port and railway operations. Changes in the industry operation will result in the capacity of rail infrastructure being more than doubled and the port capacity increased by a factor of three. PetroSA, the implementing agency of Central Energy Fund (CEF) (Pty) Ltd, will invest in the development of the requisite energy infrastructure network. The findings of this task team have also informed the contents of our integrated energy Master plan that will be released in June this year.

Last year we started with the licensing of petroleum activities. We have received over 12 500 applications to date, mostly in the last week of the conversion period which closed on 17 September 2006. 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. Drawing from our experiences in the processing of mining licences, we ensured that our implementation plans are geared towards preventing any possible backlogs.

Biofuels

The draft biofuels strategy served before Cabinet last year and was published for public comment. We have just completed an extensive public consultation process. The final strategy will be concluded before the end of the financial year.

Integrated Energy Centres Programme

As part of our efforts to ensure access to energy by all South Africans, the Department in collaboration with municipalities, Total South Africa, Sasol and other stakeholders 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. Underlying this is a strong social responsibility aimed at ensuring sustainable energy supply and a wealth that is shared by all our people, job creation and capacity building. 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 and recent geopolitical and technological developments indicate 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. The summit would also deliberate on climate change issues as well as energy challenges facing the South Africa and Africa in general.

Mining

Honourable members, the commodities boom of 2005 continued into 2006 and as preliminary figures for 2006 indicate, mineral sales grew by 36,7% to R195,2 billion and those of processed minerals grew at a moderate 14,5%. Sadly this strong growth in mineral sales was initially not matched by any meaningful fixed capital investment unlike in other mining countries. 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. As recent as yesterday 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 roadshows 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 namely:

* geographical location of South Africa compared to its competitors in that most of the commodities in South Africa are mined far inland,
* promotion of beneficiation in South Africa when its competitors are eager to continue supplying raw material,
* the advent of democracy has made South African companies more global and therefore they can invest anywhere and are not necessarily limited to South Africa only,
* the regulatory framework and the lack of infrastructure development.

Despite all of this, prospects for job creation in the South African mining industry look very promising based on the sound regulatory foundation that we have laid.

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 will be 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 National Assembly 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.

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. 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.

All these institutions will be in place when the State President promulgates these pieces of legislation which is expected to be not later than August 2007. Honourable members should be aware that the State Diamond Trader will initially open in Johannesburg but with time will move to Kimberly to make Kimberly the real diamond hub of South Africa. I would also like to thank De-Beers for offering the services of Diamdel to the State Diamond Trader and also show appreciation to the Diamond Bourse of South Africa for offering the use of the Bourse as the Diamond Exchange and Export Centre. This shows the co-operative way in which we work in this country in a true public private partnership (PPP).

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

Honourable members, as we celebrate the 10th anniversary of women in mining I would like to introduce to the House a woman who has taken full advantage of this new dispensation. Angelina Nofolovhodwe is a 50 year old woman who only passed standard four (now grade 6), a rural mother of seven and well on her way to becoming South Africa's first self made female mining magnate. Only a few years ago the Limpopo businesswoman was jobless and with grim prospects. Acting on a dream she had of holding gold in her hand, she decided to go into mining in 2002. True to her dream she soon won her first licence for a gold mine but things continued to be tough until 2005. Today she is a happy mother and humble businesswoman who has offices in Sandton and travels the world to hunt for investors and clinch big mining deals for many of her companies some of which are named after her children. She is getting the attention of mining giants from Canada to Zimbabwe.

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 JIPSA, the Council for Geoscience, the 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, economics.

Angelina is not the only person whose life was transformed by the existence of the MPRDA, or who now finds herself presented with opportunities she never imagined possible. 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 and processed, 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". We want to ensure that the communities where these mining activities occur survive beyond the depletion of the ore-body. We expect the mining companies to act as a catalyst for positive change in areas where there could be little opportunities for economic and social development.

Last week 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.

Over this past year I have been privileged to visit a number of housing projects, schools, clinics etc which are initiatives undertaken by mining companies in an effort to fulfil the criteria as set out in the MPRDA. It is truly encouraging to see that some progress is being made in terms of ensuring that the mineral wealth of our country is shared by all our people. However, we still have some way to go. Many of our workers are still forced to live in dehumanising conditions, still forced to live in same sex hostels away from their families with all the social consequences that this presents. We applaud those that have embraced the transformation agenda and take visible steps to voluntarily comply and in some cases exceed the requirements in their quest to improve human dignity. We wish to send a strong message to industry not to doubt our resolve to use means at our disposal to ensure that transformation of this industry take place.

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, the health and safety of all on our mines remain a key concern for us. In line with government's objective of achieving a better life for all South Africans, the Mine Health and Safety Inspectorate is responsible for ensuring that the mining operation's impact on the health and safety of employees and host communities are minimised. For the first time in the history of the South African mining industry, there were less than 200 fatalities recorded in one year.

I am glad to inform you that there has been a significant improvement of rock related fatal accidents over the past year subsequent to the implementation of preconditioning and in stope roof bolting. However, there is an alarming increase in fatal accidents (gold) other than rock related. In response to these seismic and rock related accidents I requested that a mini indaba be held to find a way forward on addressing these issues, this mini indaba will be held on 7 September 2007 in Carletonville.

Illegal mining remains one of the biggest threats to the employee's health and safety at the mines. The DME will continue to work with security forces to develop a strategy of combating this criminal activity.

It is appropriate at this stage to announce that the biennial Mine Health and Safety Council Summit will be held on 5 October this year, in Johannesburg, where the status of occupational health and safety in our mines will be discussed including the progress on achieving the milestones agreed to in 2003.

The Department of Minerals and Energy together with the Department of Labour and the employers are committed to combating the HIV and AIDS epidemic in the mining industry. It is for this reason that the Mining Industry Tripartite HIV and AIDS Committee will observe the 2007 World AIDS Day by holding and event at a venue still to be announced on 1 December 2007.

International co-operation

The fourth African Mining Partnership (AMP) plenary was held in Pretoria in February this year, during which collective efforts by African mining Ministers were further advanced to seek optimal ways of alleviating poverty throughout the continent. During this project-based forum of all African mining countries, specific small-scale mining projects were identified and are currently being evaluated for their respective economic feasibility prospects. There's vast recognition among African Mining Ministers that poverty alleviation is the cornerstone for achieving everlasting peace in the continent and mining projects have a significant role to play. Accordingly, African mining countries also recognise that there's a direct need to harmonise the mining environment across the entire continent in order to optimise benefit for host countries.

During the AMP the Association of African Geological Surveys was launched. Due to close collaboration of these science institutions, the compilation of the Council for Geo-Science geological map for Southern African Development Community (SADC) countries is very close to completion. The map will be published in the 2007/08 financial year.

Due to the commodity boom, Mintek has re-established itself as one of the foremost uranium laboratories in the country and the centre of excellence. It has played a significant role to ensure the development and optimisation of new uranium projects on the African continent.

Conclusion

In conclusion, I would like to thank the Chairperson and members of the Portfolio Committee for their unwavering support, as well as the Director-General and staff of the Department for their loyalty and commitment to their work. I would also like to thank my family for their understanding.

Madam Speaker, 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
30 May 2007