Chairperson
Members of the Diplomatic Corps
Members of the Press
Ladies-and Gentlemen

In keeping with the stewardship agreement that we, as Government entered into, with the people of South Africa in 1994, I am pleased to have this opportunity to report back on the results achieved in terms of the mandate that the electorate gave to us. Accordingly I shall, within the time allocated to me, merely focus on several key issues of delivery and implementation.

Our advertisement which reads Minerals and Energy, lifeblood of our economy" is a clear statement of our vision. As a Department we are committed to creating an environment which will promote the generation of wealth and jobs, maintain investor confidence and narrow the gap between the rich and the poor. Towards this end we have developed two policy documents namely, The White Paper on Energy and The White Paper on a Mining and Minerals Policy which were adopted and launched at the end of last year.

My task today will be to demonstrate that much has been translated into visible benefits for our people.

From an energy perspective, we heard President Mandela in his Parliamentary address endorse our spectacular success with electrification. The number of households with electricity has risen from less than 31% in 1994 to 63% of households being connected to the National Grid. The National Electrification Programme expects that in spite of the existence of problems in respect to the closing of the housing backlog and the rapid rise of informal settlements, the level of grid electrification will be in the order of 72% of households by the year 2000.

Government recognises the importance of alternative electrification strategies, for they add value to the life of poor communities in remote rural areas. It needs to be said that it is with this ideal in mind, that my Department has established a renewable energy unit the development objective of which is to ensure that all our communities are given secure access to a balanced mix of alternative energy resources, and at reasonable cost. This purpose is a noble one, for it seeks to satisfy the basic energy needs of our people and at the same time it promotes the effective utilisation of South Africa's vast alternative resources.

The majority of our people in South Africa live in rural areas. We as a Department have embarked on several programmes to supply energy to rural areas. These are:

The Rural Schools Electrification Programme is an RDP-initiated programme that is co-ordinated by my Department and managed by Eskom. The programme relies on donor funding from inter alia Holland and the EU. It is one of the successful RDP-programmes, and already provides electricity to schools in the rural communities where there are often no other public services whatsoever. More than 2000 communities have already been served in just over eighteen months of implementation. The programme aims to electrify 16 400 non-grid schools and 7500 grid schools over the next five years.

To date 1700 (1344 non-grid, 356 grid) schools have been electrified. Approximately 1,2 million children have now received electrification for study purposes after hours. This also enables children to use other educational media such as videos and television sets. An amount of R120 million has been used on this programme.

A total of 497 clinics were electrified between 1994 and 1998, of which 102 were grid electrified, while 395 were nongrid. Two hospitals were also electrified in the same period. Electrification provided opportunities for refrigeration of vaccines and other medicines, since 148 vaccine distribution centres were connected in the same period.

In Folovhodwe a village deep in the rural areas of the Northern Province we have, in conjunction with the Bavarian Government co-funded the establishment of a solar village which entails the electrification of 3 schools, provides 582 solar home systems and 2 solar water systems. I have personally visited this village when the electrification of the first school was completed.

In Maphethephethe in KwaZulu-Natal, we have initiated and funded the development of a community based solar home systems project. More than 30 households now have truly operational solar home systems and a 100% payback rate has been recorded.. Twenty computers were donated to the project to enable the children in the village to develop computer skills. My Department is greatly encouraged by the success of this project. It is hoped that the experience gained will be used in large-scale Solar Home Systems (SHS) projects.

When diesel or petrol water pumping systems break down or run out of fuel the people dependent on these systems for their water supply, experience untold suffering and frustration in accessing clean drinking water. It is an indisputable fact that it is the women in particular who bear the brunt of this suffering as they are forced to walk long miles in search of water. It is for this reason that the renewable energy-driven, low maintenance water pumping systems are needed more than ever. In 1996, we piloted a project, which showed that water pumping systems are likely to be more cost-effective than diesel water pumping systems. It was found that one solar driven or Photovoltaic (PV) water pumping system could economically service up to about 1000 people in a village.

We have developed a range of projects utilising renewable energy options such as Central Bakery Charging Systems, Biogas Technology Systems, and Climatic Conscious Building Design. In all these projects our objective and purpose have always been to seek out ways to enhance the lives of those disadvantaged people living in rural areas.

Still within the ambit of the energy sector, I should mention that Government is set to restructure the liquid fuels industry in a phased manner and to ensure that those participants who are newly established and previously disadvantaged become fully competitive in a deregulated environment. My Department is currently seized with the task of developing an implementation strategy for our Energy White Paper. This strategy, will not only set out time frames for the process of change in the Industry, but will also define the modalities for the management and implementation of such change.

Government has given the issue of safety and health on the mines a high priority. A mine medical inspectorate has been established with the duty to ensure that mine management adheres to health and safety standards. Employers can be fined up to R 200 000 for failure to adhere to health and safety standards in the mines. I am happy to say that the Department has responded in a most appropriate manner with regard to the mine disasters at Rovic Diamonds, Middelbult Colliery and at Deelkraal Gold Mine In my capacity as Minister of Minerals and Energy I directed that inquiries be held in terms of the Mine Health and Safety Act. The positive spin off for the Department has been that the recommendations made, will assist he industry in reducing the possibility of similar types of accidents occurring again in the future.

A study of mine accidents statistics points to the fact that fatalities have decreased by 11% from 415 during 1997 to 370 during 1998. With regard to injuries there has been a 14.5% decrease. Although we must admit that any death or injury is one too much, our task to gradually lower fatalities by proper risk management is paying off.

Now I will focus on the third area of our business, Minerals Development and talk about the huge role that the industry plays in attracting much needed investments into the country.

Perhaps the most important aspect from 1994 to date has been the increase in investment in the local minerals industry. While gross domestic fixed investment t-y the minerals industry amounted to R5,0 billion in 1993, this already increased to R6,4 billion during the year of the first democratic elections in South Africa in 1994. Each subsequent year has witnessed a further increase up to R9,2 billion in 1997.

Even expressed in real terms (that is allowing for inflation as represented by the producer price index), investment grew by 14,2 per cent from 1994 to 1997.

By December 1998, investment in mineral-related projects to which funds were already committed amounted to R57,8 billion, to be spent over the next few years. Of these, 60,7 per cent were for primary minerals (19,0 per cent for coal and 16,7 per cent for gold), while projects for processed minerals constituted the balance of 39,3 per cent. Further projects representing a potential investment of R38,1 billion were being evaluated, of which 51,8 per cent was for primary minerals (21,2 per cent for gold), and the balance of 48,2 per cent for processed minerals.

By far the greatest proportion of investment will be derived from local sources, while only a small fraction will be from foreign sources.

The minerals industry's contribution to South Africa's gross domestic product (GDP) increased from R30,5 billion in 1993 to R83,2 billion in 1994 and by 1997 amounted to R41,2 billion. Unfortunately data for 1998 is not yet available, and will only be available from late March 1999.

Mining Companies are required by the Treasury and Financial Requirements to pay royalties to the State. The scale of these royalties varies from commodity to commodity. It must be emphasised that the royalties so collected are very significant and confirm the mining industry as an important contributor to the South African economy.

There has been a huge increase in royalties collected, notwithstanding the problems experienced by the industry in the last four years due to retrenchments, downscaling and a decrease in the gold price.

The greatest increase has been in the royalties collected from minerals other than precious stones. For the periods 1995 to 1996 and 1996 to 1997 these royalties more or less doubled. From 1997 to 1998, royalties took a giant leap. Indications for 1998 to 1999 are that this trend is bound to continue.

The strict application of the rule that no permits / licences are issued unless all unpaid royalties are paid in full assists the Department to increase the effectiveness of the royalty collection system.

The above excludes amounts paid directly to the Department of Finance as royalties payable in respect of tax assessments.

The total value (local sales plus exports) of South Africa's primary minerals amounted to R50,2 billion in 1993, increasing to R53,5 billion in 1994. By 1998, the value increased to about R66,8 billion.

The value of exports of primary mineral sales, which contributes more than a third to total export earnings for all goods, improved from R40,3 billion in 1993 to R42,8 billion in 1994, further increasing to an estimated R54,1 by 1998. However, expressed in dollar terms, primary mineral export earnings declined from $12,1 billion in 1994 to $9,8 billion in 1998. This was largely due to a decline in the gold industry, which contributes significantly to our minerals export earnings. This was, however, to a certain extent compensated for by an increase in dollar earnings for processed minerals from $1,4 billion in 1994 to $2,7 billion in 1998.

The gold mining industry has been undergoing a structural decline and experiencing serious job losses as a consequence of a number of factors, which include: the declining price of gold, diminishing ore reserves on some of the marginal mines, restructuring of companies and individual work places, declining productivity and increasing costs of production. This has been of grave concern to Government, given the social, economic and environmental consequences in the wake of the restructuring, rationalisation and mine closures.

The recent surge in retrenchments on the gold mines prompted the establishment in February 1998 of a Gold Crisis Committee in which Government, the National Union of Mineworkers and the Chamber of Mines have representation.

The GCC process has resulted in the conclusion of several agreements between organised labour and business which incorporated the following measures related to job savings: transfers, replacements of contractors and extended leave.

Agreements have also incorporated the following measures to avoid compulsory retrenchments voluntary separation natural attrition, medical repatriation, transfers and early retirements.

In addition, the aforementioned task teams are investigating other alternatives to retrenchments.

The latest updated statistics of the GCC, show that since the formation of the GCC some 33 489 jobs in the gold mining industry have been notified to the GCC as being at risk. Of those jobs, estimates are that 7 869 jobs were saved through extended leave arrangements, transfers and replacement of contractors. Present negotiations could save a further 4 930 jobs through the process of employing other alternatives. Other measures such as early retirement, voluntary separation, natural attrition and medical repatriation have, although not saving jobs, avoided the compulsory retrenchment of further employees. The statistics further show that thus far 1 887 compulsory retrenchments have been implemented.

The promotion of small-scale mining is one of those activities within the Department where we have made phenomenal strides.

The traditional lack of technical and financial facilities available to the small-scale mining sector has tended to result in its development by operators who do not have adequate capital to evaluate potential reserves and to develop these to their full potential.

Poverty and unemployment, due to social imbalances in the past, led to widespread exploitation of small deposits on a subsistence basis, where such activities were and still are characterised by a complete lack of capital.

In many cases the miners are driven purely by a need to survive and, because they cannot satisfy regulatory requirements, tend to conduct unregistered illegal operations.

There is a need to assist small-scale miners to exploit mineral deposits on a sustainable basis to ensure that their economic potential can be fully realised while adequately and simultaneously taking into account health, safety and environmental requirements.

Due to the illegal nature of many small-scale mining activities, an accurate quantification of the problem cannot be made.

The Department is already aware of some 1700 illegal operations around the country. Considering that many could still be undetected, the extent of the problem could extend to 3 000 or more operations.

With a view to addressing this problem the department has adopted a two pronged approach. This entails the following strategies:

• An immediate-term assistance approach aimed at facilitating solutions on an ad hoc basis, in order to assist where possible, while at the same time gaining a grassroots understanding of the constraints facing small-scale miners. This entails the provision of legal and technical advice including how they should prepare environmental management plans, as well as how they can structure themselves into corporate trusts.
• A long-term strategy aimed at developing an appropriate policy environment and development framework to promote the development of this sector on a sustainable basis.

The intention is not to perpetuate poverty by merely legalising unacceptable mining practices, but rather to transform this sector into one that offers healthy business opportunities to those who in the past did not have access thereto.

A number of successes have been achieved, such as:

• The opening of IKWEZI COLLIERY near Delmas in June 1997 which heralded the establishment of the first wholly black-owned coal mining company.
• The permitting of OTR Mining Ltd in the Northern Province, whose business is based on providing managerial support and infrastructure to small-scale miners on a co-ordinated basis.
• The facilitation of a cooperation agreement between EYETHU MINING TRUST and MIMCO to ensure infrastructural and technical support for small-scale mining activities in Barberton.
• The permitting of SHISA COAL at the old Magdalena colliery near Newcastle, where the new company absorbed artisanal miners into a professionally managed mining operation.

The most important result of this interim approach, however, was the grassroots knowledge gained with regard to the actual constraints facing small-scale miners. Besides the aforementioned cases, such knowledge was gained from routine assistance provided to a number of small scale mining companies

In anticipation of the recently released policy, the Department already formulated a National small-scale mining development framework.

This development framework, which co-ordinates the activities of regional regulatory authorities with science, technical and financial support institutions, is aimed at providing the support services necessary to overcome the constraints facing small-scale miners and to promote the sustainable development of the small-scale mining sector.

The various service-providing institutions, co-ordinated by my department are already assisting this sector on a committee basis. These institutions include:

• The DME (Coordinator)
• The Council for Geoscience
• Mintek
• The CSIR- Miningtek
• The South African Diamond Board
• Khula Enterprise Finance
• Ntsika Enterprise Promotion
• The Industrial Development Corporation
• The Minerals and Energy Policy Centre

The constitution of this structure, currently referred to as the NSC, and the provision of funds with which the NSC will provide services are close to finalisation. The support framework envisages that costs incurred will be recovered once projects are implemented. The piloting phase can be commenced as soon as April 1999.

The establishment of new black owned mining companies such as Africa Rainbow Minerals introduced a new management approach to the gold mining industry, cutting high overhead costs and thereby turning around loss-making shafts into profit-making entities. This has resulted in the preservation of a number of jobs in the mines.

The IMCC meeting of 12 February 1998 adopted and approved the restructuring model of Alexkor as proposed by the Sectoral Task Team . The restructuring model proposed by the Sectoral Task Team accommodated the proposals of the Restructuring and Transformation Committee. Furthermore, the model was based on the guidelines defined by the meeting of the Ministers of Minerals and Energy and Public Enterprises with the Deputy President.

The following are the key elements of the restructuring model:

1. Government will retain mineral rights ownership and those mineral rights currently owned by Alexkor will revert back to the state;
2. Government will retain 100% equity ownership of Alexkor for an interim period to be defined by the restructuring Implementing-team;
3. In the interim period a management contract will be awarded by competitive tender to a qualifying company(ies);

• the management contractor will be paid an annual fee and any additional incentive whether by profit sharing or equity acquisition has been left partially to market response in the tendering process.

4. Alexkor will be divided into two distinct companies: Alexander Bay Trading (ABT) to take charge of all non-core business activities, and Alexander Bay Mining (ABM). For the purpose of the management contract ABM would also be divided into various business units which could be contracted to one or more companies.
5. Provision has to be made for the current 30% after tax contribution to Alexkor Development Foundation to be converted into equity for the community.

A restructuring Implementing Team chaired by the DME (comprised of DME, OPE, NUM, UASA and Alexkor Board) manages the implementation of the IMCC restructuring strategy whilst the Northern Cape Government chairs an Implementing Team (comprised of National and Provincial Government, labour, communities and Alexkor management) dedicated to the restructuring of non-core assets.

The IMCC will in due course, make a decision on the final recommendation made by the Implementing Team on the successful bidder for the management contract.

I take great pride in reflecting the progress that my Department has made. It is a long road that we have ahead but I am confident that we will succeed in our endeavour as Government to make South Africa a better place for all who live in it.