Death, Injury Rates Soar in Stressed Gold Mines

Business Day January 30, 2007
Fatalities in the gold-mining sector had worsened, with mining houses seeking to cash in on a robust gold price by revisiting disused parts of their mines, Parliament's minerals and energy affairs committee heard yesterday.

The issue will also be highlighted at next month's indaba on mine health and safety.

The indaba was called by Minerals and Energy Minister Buyelwa Sonjica after the October disaster at AngloGold Ashanti's Tau Tona mine near Carletonville when five mineworkers died in a rockfall.

At the time Sonjica said the number of fatalities in the gold-mining industry was "unacceptable".

Mining Health and Safety Council acting chairman Mthokozisi Zondi told the committee that while there was a 26% drop in mining fatalities in the platinum sector in 2005-06, gold mining's figures worsened.

The council is a tripartite body representing government, labour and employers and is tasked with advising the minister on health and safety matters.

"We have a very old gold-mining sector and are mining areas that are highly stressed," he said.

Acting chief inspector of mines in the minerals and energy department Thabo Gazi said that while the gold-mining sector employed 35% (155165) of all mineworkers, it was responsible for 51% (104 of the total of 202) fatalities in 2005-06 and 56% of all injuries (2324 of 3966).

Gazi said the same regressive trend was evident in the gold sector again in 2006-07. The steady deterioration in the gold sector's fatality performance was undermining the effort to bring SA's safety record in line with international standards set by Canada, Australia and America.

Government's aim was to eliminate all gold-mining deaths by 2013, but this would require a 20% reduction in the fatality rate each year, Gazi said.

The performance in 2005-06 was only a 16% reduction in the fatality rate from 0,25 deaths per million hours worked in 2004 to 0,21 in 2005 because of the gold sector.

All other mining sectors, such as platinum, diamond and coal, had shown an improvement.

Gazi also said that with commodity prices going up, mining houses had revisited dangerous mines. "The improvement in the economy comes at a cost of human lives."

Injury rates had also climbed as the mining industry turned towards mechanisation, he said.

Other challenges facing the inspectorate were the loss of personnel. The department's safety unit lost 75% of its top managers in one year to the private sector.

Rising water levels in some closed mines in Gauteng could lead to disasters in neighbouring mines, Gazi warned.

National Union of Mineworkers national secretary for health and safety Eric Gcilitshana said he was concerned about the slow pace of delivery of family housing units for mineworkers living in single-sex hostels.

At the present rate of delivery it was unlikely the industry would meet its targets to have all workers living in family units or in townships by 2013, he said.

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Power cuts blamed on skills blackout

January 22, 2007
Responsibility for power cuts countrywide last week has been laid at the government's door and pinned on poor management and skills shortages at Eskom.

Iraj Abedian, the chief executive of Pan African Investment and Research Services, said on Friday: "Eskom's power cuts … are a reflection of poor planning by the government 10 years ago. By failing to invest in roads, rail, harbours and electricity, the government failed to anticipate demand. Those at a policy level have to take responsibility."

Mike Schussler, T-Sec's senior economist, said: "If the government is going to be judged on good economic growth, then it must also be judged on the things that have gone wrong."

Several years ago, the need for new power generation capacity was recognised. But the government failed to give Eskom the green light for the investment until late 2004. And by then the situation was becoming critical. Since 1994, Eskom has electrified 3.3 million homes. Schussler said that in the light of the successful electrification programme, more emphasis should have been given to electricity supply.

Given strong economic growth, South Africa now has little room to manoeuvre when it comes to electricity supply. Alec Erwin, the minister of public enterprises, conceded last year that growth had been underestimated and consequently there had been underinvestment in infrastructure in the 1990s. Business Report was unable to get further comment from public enterprises.

Eskom's R97 billion capital expenditure programme, which is only just starting to take off, seems to be too late. Last week Eskom's nuclear power station at Koeberg in the Western Cape and five other power stations failed, leaving the country without sufficient power. Compounding the problem was that several power stations were closed for maintenance. Most of Eskom's plants are reaching the middle of their commercial life of 40 years, meaning extensive maintenance is required.

Eskom said at the weekend that it had enough electricity to meet the full national demand as power stations were now operating again and the probability of power cuts today was slim.

Schussler said: "Unplanned outages suggest there are operational management problems and skills shortages."

Despite an ongoing recruitment drive, the utility is still short staffed. On its website Eskom is advertising for 80 skilled staff and has invited general applications for engineers, technicians and quantity surveyors. Other skills it needs include construction, commercial and legal contracting. Eskom now employs 31 458 people, down from about 46 000 in 1991.

Abedian said Eskom had never had to manage a fine balance between maintenance and coping with the unpredictable. For many years Eskom had surplus capacity, which led it to mothball power stations and enter into profitable export contracts with other African countries. Exports represent about 3 percent of total electricity generated.

Abedian said: "So they are learning on the run. This is a poor reflection on management. The management of existing facilities needs to be a lot more nuanced and sophisticated. Eskom does not have that capacity."

In the year to March, Eskom spent R543 million on training.

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Gloomy Picture of Winter of Discontent

January 26, 2007
WITH power utility Eskom's power stations reaching the end of their commercial life, and the planned new generating capacity expected to be built only from next year, energy analysts have warned that SA could be plunged into rolling blackouts this winter.

Last week's devastating power outages and the previous power failures in Cape Town are signs that SA faces a massive power crisis.

A US-based utility cost-management consulting firm, NUS Consulting, says projections show that this year's winter is "going to be the worst it has been ever".

"If there are any weaknesses in the system, it will show itself during this winter," says NUS Consulting's GM in SA, Stephan Dolk.

"This is because most new generation projects are only coming online from 2008 onwards -- nothing in time for this winter."

He says Eskom's spare capacity, estimated at about 8%, was not adequate to meet the country's growing demand.

A spare capacity of about 10%-15% is considered an ideal minimum level internationally. Dolk believes SA will be at a precarious 2% next year.

"If anything goes wrong -- which is why you have spare capacity -- the knock-on affect will be substantial."

But Public Enterprises Minister Alec Erwin is confident that SA "will not be plunged into darkness".

Finance Minister Trevor Manuel told news agency Bloomberg that the power outages that hit the country last week would not have a negative impact on the country's economic growth rate. He said estimates by business organisations of lost production "were overcooked".

Eskom also says it has contingency plans to counter the possibility of widespread power interruptions.

To this end, the company has budgeted R97bn to build new generating capacity in the next four years.

Short-term projects involve bringing back to service three power stations that were mothballed in the 1980s.

Two gas-fired power plants will also be launched next year.

To its credit, Eskom had foreseen the potential power shortfall about 10 years ago. It said it had projected that its peaking capacity would run out this year, followed by its base-load capacity in 2010. Peaking capacity is electricity available during hours of huge demand, either in the morning or evenings, while base load refers to the power available around the clock.

But government policy at the time prevented the parastatal from building new power stations. Government wanted to privatise Eskom and let the private sector build new generating capacity.

It was only in 2004 that government reviewed its policy and allowed Eskom to start building new generating capacity. But analysts say it was too late to avert the looming power crises.

In terms of the policy, Eskom is now responsible for generating 70% of SA's energy needs, while independent power producers will provide the rest.

"Considering the dire need for additional capacity and the 10-year lag time for bringing new generating stations into production, the question becomes not whether blackouts will occur, but when and how frequently," NUS says.

Organised business and opposition political parties have warned that prolonged power outages will have adverse consequences for the economy.

They warned that SA's cheap but erratic power supply could also thwart the country's attempts to lure foreign direct investments.

The minerals and energy department says the power failures -- caused largely by lack of investment and poor infrastructure maintenance -- cost the economy between R2,6bn and R8bn a year. The department estimates the backlog on infrastructure maintenance at R5bn.

Eskom says the cause of last week's outages was the "higher-than-expected demand for electricity" this summer.

The sweltering heat sweeping through the country has led to a steep rise in the use of air conditioners, putting pressure on the national grid.

The rise in electricity demand happened as Eskom had taken some of its power stations out of service for scheduled maintenance.

The situation was worsened by the tripping of a turbine in one of the two units at the Koeberg nuclear power station in Cape Town.

Eskom's MD of transmission, Jacob Maroga, said at the time that the company had experienced unplanned outages of 4600MW due to technical problems at the power plants.

"This is 3000MW higher than was anticipated for this period," said Maroga.

The Democratic Alliance says it has asked the National Energy Regulator of SA to investigate the cause of the recent power failures.

An earlier investigation by the energy regulator into the six major power outages in Cape Town last year found negligence, inadequate maintenance and the failure to adhere to licence conditions as the "root causes" of the rolling blackouts.

Eskom, however, denied any wrongdoing on its part.

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inister to address electricity supply challenges

January 26, 2007
Buyelwa Sonjica, the minerals and energy minister, has announced that her department will hold an Energy Summit in three months to address major electricity supply challenges in the country. Sonjica made this announcement while she addressed the switch-on ceremony at Mhlaba village in Limpopo. She expressed concern over the recent power outages and that half of the country's rural population still did not have access to electricity.

It was a different scenario in Phugwani village. The village is still without electricity. Life is still centred around collecting firewood. The villagers can neither watch TV nor listen to radio...recharging a cellphone means a long travel to neighbouring villages. They tried to raise their own funds with the promise from municipality that they will be met halfway...this never happened.

Colours Mathonsi, a villager, says: "We paid one thousand rand which must help us when it comes to electricity but up to so far nothing happened, no communication even people from the municipality they do not come here so we decided to take back our money."

More than 3 million household remain to be electrified before the government's unreal accessibility of electricity deadline of 2012. The minister says this figure is unacceptable and need to be addressed urgently. "We are also going to call an energy summit in April this year where we will be looking at all these challenges, says Sonjica.

While government battle to undo the imbalances of service deliveries of the past many will hopefully wait for their turn.

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Cape could be force to dissolve RED1

The City of Cape Town is threatening to liquidate its subsidiary regional electricity distribution company RED1 if the National Energy Regulator of SA (Nersa) extends a supply and distribution licence to the company.

The stalemate over who will control the city's supply and distribution of electricity from January 2007 is expected to be broken in Pretoria on Friday, with a decision by Nersa's licensing committee.

Nersa board secretary Sandile Ntanzi said the board would make a decision based on arguments put to it at public hearings late last week, as well as legislation.

The city has pulled out all the stops to get its licence back, hiring senior counsel to tell Nersa that it could not pump R10-million a year into RED1 while the supporting legal framework was not in place.

In its submission, the city said it could be forced to dissolve RED1 if Nersa found in favour of extending RED1's temporary licence, which it has held since July, 2005.

Eskom, EDI Holdings and RED1 argued in favour of RED1 retaining the licence for another six months.

But the city, as its shareholder, said it had not given RED1 permission to apply for an extension in the wake of developments that meant REDs could not be established as municipal entities.

Mayoral committee member for finance Ian Neilson said on Monday that the city did not want to comment on its back-up plan, should it fail in its bid this week.

He said the city would not comment until the final decision had been made.

This comes amid a scathing attack from Minister of Minerals and Energy Buyelwa Sonjica over the city's intimations that it wanted to pull out of the country's pilot electricity restructuring deal.

Sonjica said that if the city chose to withdraw from the process, it would not stop the restructuring of the rest of the industry.

The city conceded in its arguments to Nersa that the delay in establishing RED1 was not of RED1's making.

The distributor could not receive a transfer of city staff and assets and become fully functional because there was clarity neither on its status nor on the legal framework.

The city said that it would take time for legal processes to be put in place to make REDs public entities and that, while this happened, control over the supply and distribution of electricity should be handed back to the city.

Council last week gave mayor Helen Zille the mandate to call a meeting of the RED1 board to discuss the issue.

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Energy Minister slams Cape Town's Red1 withdrawal

Minerals and Energy Minister Buyelwa Sonjica has criticised the City of Cape Town for dissolving the pilot regional energy distributor (Red1), saying the city's decision constituted a “serious threat” to the country's restructuring process.

This comes as the city, last month, said that it wanted to withdraw from Red1's activities.

The licence is due to expire at the end of December, but the State electricity-distribution company EDI Holdings has requested that the licence be extended.

At public hearings into the licence conditions for the project, held in Pretoria on Thursday, the City of Cape Town argued that the temporary licence of Red1 should not be extended and that it should, instead, be transferred back to the city.

Sonjica, however, said in a statement that the City of Cape Town's decision was of grave concern to the national government and urged the city to reconsider its decision.

“By saying it will 'have nothing further to do with the (restructuring) process', the city is slamming the door in the face of thousands of indigent people who have a right to expect an ongoing improvement in their quality of life - which includes the provision of affordable basic services such as electricity,” she said.

Red1 was granted a licence under the conditions that it negotiated an operating and transitional plan for transfer agreement and a service-delivery agreement. These agreements contained a number of conditions that, if not met by year-end, would terminate the agreement. During the 18 months of the validity of the licence, there was also a delay in asset, staff and customers transfer from the city to Red1.

“We do not believe that it is correct for the city to write off Red1 as 'a shell' when it, in fact, is responsible for the delay in transferring staff and resources to the new entity and thereby creating uncertainty and consternation to this important national project of electricity distribution industry restructuring,” Sonjica commented.

“If the City of Cape Town chooses to move in the opposite direction to that of the entire nation, we will continue to ensure that, in the best interests of the nation, the electricity distribution industry restructuring does not stop, with or without their participation.”

South Africa aims at restructuring the R35-billion-a-year electricity distribution industry into a number of regional electricity distributors (Reds), which will see Eskom Distribution and 187 municipalities transferring all their assets, liabilities, obligations, staff and rights to the Reds, in a bid to make electricity distribution more streamlined, resulting in a more efficient service, with improved infrastructure maintenance. Six Reds will be established, anchored in the six metropolitan areas, including Johannesburg, Tshwane (Pretoria), Ekurhuleni (East Rand), eThekwini (Durban), Port Elizabeth and Cape Town.

Municipalities, however, argue that the six Reds will interfere with their right to administer electricity distribution - one of their key functions in terms of the constitution, but the Department of Minerals and Energy said that it was not trying to violate the role of the municipalities.

Sonjica reiterated that one of the cornerstones of the restructuring process was the principle that local government should retain the power to apply municipal surcharges on electricity sales. “It is therefore incorrect for the City of Cape Town to insinuate that the creation of Reds will result in revenue loss for municipalities, the contrary is in fact true.”

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SA poised to embark on nuclear route for power

Government was poised to make a decision on a “significant” nuclear energy programme as part of the country’s investment in new electricity generation capacity, Minerals and Energy Minister Buyelwa Sonjica said yesterday.

She was addressing a two-day meeting of African energy decision-makers who belong to the executive committee of Powering Africa: The Nuclear Option.

The aim of the conference was to develop an understanding about how nuclear power could be developed and used on the continent.

Apart from the Koeberg nuclear plant, SA is also developing the pebble bed modular reactor technology for its power generation and Eskom is examining the feasibility of building another conventional nuclear plant.

Sonjica said governments had to provide leadership to facilitate the use of nuclear technology.

They had to make sure, she said, that “clear and unambiguous policies are developed which will create an enabling environment for the exploitation of this energy source. SA is busy developing its own strategy at the moment”, Sonjica said.

The minister said that Africa possessed significant uranium resources which not only should be beneficiated but also used to generate energy.

“This is going to require deliberate and calculated planning on the part of the leaders of the continent. We will require strategic partnerships from those who have extensive nuclear programmes.

“A nuclear programme requires extensive infrastructure and huge investment in skills.

“I believe that for this continent it may be beneficial for regional approaches to be adopted in building this infrastructure.”

Sonjica said the National Nuclear Regulator of SA was engaged in preliminary discussions with its Nigerian counterparts to establish a regional nuclear and radiation safety regulatory forum.

The aim of the forum would be to strengthen regulatory frameworks and infrastructure and harmonise safety standards in the region, she said.

The minister acknowledged public concern over radioactive waste management, which she said was the “Achilles heel” of nuclear energy but said the government was serious about dealing with it.

Government is in the process of finalising a draft law to give effect to the provisions of the radioactive waste management policy and strategy published last year.

A radioactive waste management fund is expected to be finalised by March 2008.

Also, Sonjica announced that SA had submitted its accession to the joint convention on the safety of spent fuel management and the safety of radioactive waste management to the International Atomic Energy Association.

While SA was a signatory to the Non-Proliferation Treaty, it also believed that concerns over proliferation should not be used to prevent other countries from benefiting from nuclear technology.

Africa in particular needed nuclear energy, Sonjica said.

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Why SA is so energy inefficient

South Africa is energy inefficient because we don’t value our carbon resource sufficiently.

There are a number of perspectives that, together, make up the picture. One perspective deals with process efficiency -- a technological issue -- another with the structure of the economy -- how much of our economy is fundamentally energy-hungry.

Either way, improving energy efficiency will largely rely on energy becoming more expensive. It will allow us to improve our supply-side and demand-side technology, but also encourage us to shift our economy away from energy-intensive industries.

On the structural perspective: while resources are decreasing as a percentage of GDP contributor (mining contributes 7% and 5% of employment), it remains the largest contributor to energy consumption. The mining industry consumes only 6% of the country’s energy, but this compares to 3,8% of energy consumption by the services industry, which contributes 65% of GDP and 52% of employment. The big consumer is the industrial sector at 41% (18% of GDP, 15% of employment), much of which is in minerals processing (still resources, just downstream).

Twenty-seven percent of energy consumption is by transport and 16% by homes. For homes, water heating (a geyser takes about 40% of total home use) and cooking are the biggest consumers (so lightbulbs only account for a small percentage of 16%).

Leaving aside a discussion on technologies (Bush’s solution), here are the other perspectives: our resource-reliance is partly a colonial legacy that we can see repeated throughout Africa by resource- hungry superpowers, first by the old colonialists, then Americans and now Chinese and Indians.

In addition, apartheid left us hideously deformed spatial planning (sprawling townships), self-reliance projects such as Sasol and Iscor and a massive horde of giant low-grade coal power stations that have not been reinvested in in 20 years and 40-year coal contracts limiting the price of coal to Eskom.

Along with preferential rates from Eskom to massive industrial consumers, this leads to the world’s cheapest electricity. A byproduct of this was the cheap and abundant power coming on line in the Eighties, the local solar water heater industry collapsed and is only today reaching its old sales records again. Cheap energy means little incentive to save it.

Demilitarised nuclear expertise led to the pebble-bed modular reactor (PBMR), which this year gets R1,1-billion in funding with not a single megawatt (MW) generated compared to demand-side management’s R600-million budget.

Consider that one of the major differences between South Africa and Asian Tigers is that the tigers did not develop resource-based economies, but service and knowledge economies. Countries (especially in Africa) with much resource wealth continue to suffer human poverty -- the resource curse or Dutch disease.

We are consciously using our cheap energy to get foreign investment. Keeping our energy dirty (coal-based) keeps it cheap. China (the Forum on China-Africa Cooperation), Russia (Putin visit) and Canada (Alcan at Coega) are three countries that have closed deals on aluminium smelters (the most energy-hungry of operations) in South Africa this year. We have no trade strategy besides “we want FDI” and will do anything for it.

What we don’t count is the externality cost: the cost to society that government is not taxing. Sir Nick Stern sets the true cost of a ton of carbon dioxide at $85. At 1,8 tons of CO2 per ton of coal and a coal price of around R100 per ton (R37 or R55 per ton of CO2), the South African price for coal is less even than the current price of an equivalent carbon offset unit (€9 on the European market, according to Point Carbon).

Our economy breathes carbon. Oil is our number one import, coal our number two export. Car sales are growing along with prices and congestion, and the Motor Industry Development Programme is hailed as the government’s greatest success in sector development. We have to sell our carbon (coal and energy-intensive manufactures) to buy other products (oil and cars).

Besides the structural issues mentioned, we have little hydro power or gas that can be converted into electricity more efficiently than coal. Power stations are clustered around Mpumalanga mines and transmitted over thousands of kilometres to coastal cities, leading to significant transmission losses.

There is also little thermal interconnection between industrial processes.

Co-generation is an energy-saving technology that takes heat from one process and uses it in another, either as electricity or sold to a neighbour as steam or process gas. It is only starting to take off in South Africa.

Keeping the cost of energy down makes sense in the context of poverty, although a free basic tariff should address the basic access issues. Distributed energy solutions (bypassing transmission) are not socially acceptable (“if it’s not good enough for city people, it’s not good enough for us”).

The link between poverty and environment is seldom recognised, but instead seen as an area of compromise. Climate issues are seen as an opportunity for horse trading carbon savings for aid and investment.

In general in South Africa, social issues override environmental. To date, in the four years after the World Summit, the environment has not been mentioned in the State of the Nation or budget addresses (which together inform the national programme of action), except in the context of “the business environment” or with reference to tax breaks to environmental NGOs. In fact, even in the 2002 State of the Nation address, the World Summit on Sustainable Development was called a “summit on poverty” with no mention of the environment.

While efficiency makes economic sense, businesses often see it as a social responsibility project. Business spends only 4% of its CSI budget on the environment.

Eskom runs the nationally subsidised energy efficiency programme and is thus put in the conflicting position of increasing and decreasing its sales volume (but keeping prices steady according to present strategies). This is reflected in the fact that it gives a 100% subsidy for load shifting (which optimises capital use through peak management, but does not reduce emissions), but only a 50% subsidy for energy efficiency projects (which reduce overall consumption).

In the meantime, Eskom closed its own plant performance department, which optimised the efficiency of power stations, almost 10 years ago. The focus was on economic capital efficiency (sweating assets). It hived off the whole institution responsible for R&D as part of its partial privatisation effort (a decision now reversed).

Sasol has a perverse interest in a high oil price and greater coal use.

Government has a tax interest (as the windfall issue reminds us) in Eskom and Sasol. There is also an interest in selling supply solutions (such as the PBMR) rather than savings solutions, despite Thulani Gcabashe’s contention that new energy capacity costs R10-million per mW with savings of only R3-million per mW.

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SA’s own JR Ewing

Brett Kebble was described as the JR Ewing of South Africa – an unscrupulous, charismatic businessman who was almost larger than life.

Killed on Tuesday, September 27, 2005, the mining magnate left behind him a world of shady dealings and political controversy.

He was twice forced to resign as the chief executive of Western Areas mining. In 2000 he was found to have “committed a breach of corporate governance” after a secretive share-buying scheme was exposed. The director of public prosecutions, Bulelani Ngcuka, launched a probe into the matter.

In 2002 Kebble registered JCI on the stock exchange after merging his company with Consolidated African Mines Limited (CAM). At the time he said the Kebbles were “the first to release mines from burdensome management contracts, initiating a period of profound transformation in the South African gold mining industry.”

Kebble added fuel to the fire when Ngcuka was being investigated by the Hefer commission on charges of being an apartheid spy by accusing the national director of “pursuing a private agenda”.

Kebble was found to have donated millions to the ANC’s coffers while simultaneously assisting with the cash-flow of the official opposition, the DA. He said he would “support any political party that upholds patriotic and democratic principles”.

Shock waves were felt around the country as the news broke of Kebble’s death at the age of 41. His lawyer at the time, Willem Heath, as well as a business associate with strong ANC links said they believed his death to have been a “deliberate hit”.

After his death his interests in diamond mining attracted a good deal of attention with his death being likened to that of Hazel Crane, a convicted diamond smuggler who was killed in her car shortly before she was to testify on illegal diamond trading in SA. Kebble was reported to have clinched a diamond-concession transaction in Angola shortly before his death.

It also came to light after his death that millions of rands worth of shares in Randgold & Exploration that he controlled had “disappeared”. In a radio interview with Kebble at the time, a large portion of these shares were said to have been used to finance his Angolan diamond interests.

Kebble’s estate was declared insolvent after his death and most of his belongings, such as cars and antique furniture, were auctioned off to recover business losses.

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Mbeki vows action on Iraq oil scandal

South Africa has completed an inquiry into alleged involvement of its companies in a $1.8 billion Iraq oil-for-food scandal and any breaches of the law will be dealt with by authorities, President Thabo Mbeki said on Wednesday.

Mbeki told parliament the government was studying the report he commissioned last February following a United Nations report linking some 2,200 companies worldwide to a web of illegal payments to former President Saddam Hussein's regime.

The U.N report, released in October 2005, also suggested Saddam's government may have tried to influence politicians in several major countries by giving them favours in a bid to get U.N. sanctions lifted.

South African entities mentioned in the report include private company Imvume and Mocoh Services South Africa, which was linked to holding firm Mvelaphanda Group Ltd.

Mbeki, in a question-and-answer session in parliament, would not be drawn on what action his government was likely to take against any senior officials of his ruling African National Congress (ANC) implicated in the report of his own commission.

"The commission submitted its report on the 6th of November...The government is studying the report and will take appropriate decisions on it in due course," Mbeki said.

"Should an examination of the report reveal any breaches of the law the matter will be taken up by our law enforcement agencies," he said.

Mbeki said South Africa remained committed to ensuring that the U.N. commission's recommendations were addressed with the "necessary urgency".

Opposition leader Tony Leon of the Democratic Alliance said there remained some disquiet over what he called the vague terms of the South African commission.

Leon pressed Mbeki specifically about senior ANC officials mentioned in the U.N. report notably party treasurer Mendi Msimang, husband of Health Minister Manto Tshabalala-Msimang.

"Is it not a problem Mr President that the commission did not hold public hearings, it did not hear testimony from any witnesses under subpoena...and that key people identified in the report such as the treasurer of the ANC, Mr Mendi Msimang were simply not capable of being subpoenaed before it?," Leon said.

Leon suggested a new commission be established given what he said were the shortcomings of its predecessor.

South Africa sought to have sanctions lifted on Iraq which critics said were taking a grave toll on the civilian population. But Pretoria denied "insinuations that its foreign policy had been compromised by the alleged activities of the few South African companies involved in the oil-for-food programme".

Imvume and Mvelaphanda are headed by Sandi Majali and Tokyo Sexwale respectively, both of whom have close links to the ANC. Both companies have denied any wrongdoing.

The U.N. programme, which began in December 1996 and ended in 2003, allowed Iraq to sell oil to pay for food, medicine and other essential goods. It was aimed at easing the impact of sanctions imposed in 1990 after Iraqi troops invaded Kuwait.

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Russians calls off big SA trade meeting

The Russian government has called off a big meeting with the South African government, which had been scheduled for Pretoria later this month, according to sources in Moscow and Pretoria.

South African sources say the initiative came from Moscow for cancellation of the Intergovernmental Committee on Trade and Economic Cooperation (ITEC). This is the high-level group which meets annually, and is chaired by Foreign Minister Nkosazana Dlamini-Zuma and Russian Minister of Natural Resources, Yury Trutnev. Russian investment in manganese mining in South Africa has been one of the ITEC topics at sessions over the past two years.

The timing of the cancellation comes as the Kremlin has turned negative towards the role of Russian businessmen trying to further their business in southern Africa by positioning themselves between the governments in the two places. This concern, sources in Moscow reported in September, was one of the reasons for the last-minute cancellation of Putin's planned visit to Angola.

In a report issued last week by the Institute of Security Studies in Pretoria, it is charged that there was a trade of political favours and mining licences in South Africa by Victor Vekselberg, the Russian metals and oil magnate. The affair has been reported this week in Moscow by the Kremlin-friendly newspaper, Kommersant.

Kommersant was recently bought by Vekselberg's local rival, metals magnate Alisher Usmanov, who is financially close to the state enterprise enterprise Gazprom. The newspaper is now probing what exactly Vekselberg and his Renova group have been doing in South Africa (SA).

According to the Pretoria report, after receiving favourable treatment by the Department of Minerals and Energy (DME) for award of manganese mining licences in the Kalahari region, Vekselberg promised substantial investment in SA, but then quietly transferred ownership of his SA stakes to a Bahamas-based affiliate of his SA firm.

Asked what funds Renova has invested in SA, and whether they have been transferred to the Bahamian company's balance-sheet, Vekselberg's advisor Andrei Shtorkh did not respond. Renova has also refused repeated requests for confirmation of its spending on the Kalahari licence areas over the past year. There have been public hints from rival manganese miners in the region, including BHP Billiton, that a new mine might upset the current supply and demand balance, and lower prices. There has also been local industry speculation that Renova is looking at various options for unlocking value in the Kalahari concession, and selling it is one option. There is no confirmation that a sale is in discussion.

On September 13, President Vladimir Putin met Vekselberg after both men had returned from the President's visit to Cape Town. During the SA trip, it was announced that Vekselberg would be co-chairman of a newly-formed SA-Russia Business Council. Nicky Oppenheimer is the SA representative. At the time, Vekselberg publicly promised to invest up to a billion dollars in the SA manganese sector. Previous statements by Renova had estimated investment in a new mine and a ferromanganese refinery at around $300 million. With backing from Bateman, Renova has been discussing a South African bank loan for the project.

Putin has rejected an attempt by Vekselberg to preserve his aluminium group SUAL: from a state-ordered consolidation, and at their meeting he warned Vekselberg against exporting capital that, Putin suggested, should be invested in Russia. Since that meeting, it has been announced that Vekselberg's SUAL will be taken over by Russian Aluminium (Rusal).

Also, reports last week indicated that Vekselberg's major oil company TNK-BP has been compelled by the Kremlin to make a back-tax repayment to the government of $1.44 billion. This is the largest government tax claim against a Russian company since Yukos and its owner Mikhail Khodorkovsky were indicted, and convicted, in 2004.

Although British Petroleum acquired control of TNK from Vekselberg and two partners in 2003, BP officials have told Mineweb that the latter had signed an indemnity for tax liabilities. BP's senior Moscow executive said: "We have an extensive indemnity covering any activities by TNK prior to the effective date [of the sale]." That date was January 1, 2003. For tax claims before then, "we would be indemnified", the BP executive said.

Overseeing Vekselberg's manganese project was the current SA vice president, Phumzile Mlambo-Ngcuka, who was DME's minister at the time; Lulu Xingwana, who was deputy minister at DME and is now Minister of Agriculture; and DME's director-general Sandile Nogxina. Xingwana and Nogxina have denied wrongdoing. On visits to Moscow they have told Mineweb they encouraged Renova to invest in SA, and have shown no favouritism towards Vekselberg's company.

According to a statement issued by Mlambo-Ngcuka and Nogxina, and reported last Friday by the Mail & Guardian in Johannesburg: "It is only those requirements that are specifically stated in the law that inform the decision to grant, or not, prospecting rights, and diplomatic considerations are not [among] such requirements.... Membership of a particular party is also not a consideration that the law stipulates as far as taking a decision in this respect is concerned."

In response, the Opposition Alliance parliamentary spokesman on minerals and energy, Hendrik Schmidt, issued a public statement, foreshadowing parliamentary questions for the SA government to "establish why, if the Chancellor House-Renova consortium’s application for the most manganese-rich farm sites was indeed submitted two months after all other bidders, the mining rights were eventually awarded to it; and ascertain, if it is indeed so that Chancellor House and its consortium partners were awarded more manganese-rich farming sites than any other applicants, why this was so. If the answers to these and other questions confirm what has been stated in the [Mail & Guardian] reports it would cast great suspicion over any and all relationships between the ANC, the party, its funding and investment vehicles and the state, and a full investigation would have to be launched."

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The problem with ANC Inc

First oil. Now manganese. This week we reveal the second major funding front set up by the ruling ANC. The party is clearly behind Chancellor House, an empowerment holding company that has won a stake in manganese mining rights with a potential value of R1-billion. It is part of a consortium chasing a R26-billion power station tender, and has lesser stakes in many other businesses.

The Oilgate investigation showed how the party’s linked company, Imvume Management, had paid more than R11-million to the ruling party. The manganese has not yet been mined and the project will take some years to come on stream but the party could benefit in amounts that will make the Oilgate millions seem tiny.

No doubt the ANC will attempt to swat the investigation away as it did when we first revealed its oil trades in 2004. The rest of us should not do the same. The ANC’s corporate bent is very worrying. It is corrosive of democracy and of the party itself.

Why? There are many people who will ask what’s wrong with the ANC being in business, maintaining that it is a legitimate political party with a huge and expensive infrastructure.

There is everything wrong with ANC Inc. For one, the party cannot be both player and referee. The ANC, as government, has a huge hand in the economy.

Government spends up to R200-billion on procurement of goods and services. In addition, it controls mineral rights and the granting of mining licences and plays a regulatory or empowering role in vital sectors including broadcasting, telecommunications, infrastructure and the like. For the party to have corporate interests skews the playing field and distorts fair game. Think about it. What chance would other mining companies have if the come up against Chancellor House, a company linked umbilically to the ruling party? It distorts BEE because benefits flow to the politically connected or directly to the party and not to the broad base of beneficiaries envisaged in the laws.

Ultimately, it is market distorting and can cut competition. Take Imvume. It was not necessarily the best company to win oil allocations: it lacked the expertise required in a complex industry. Imvume messed up empowerment in the oil industry, leaving a red-faced Petro SA to pursue the matter through the courts.

The larger corrosion, though, is of democracy. Companies which ally with the ruling party in business enjoy influence over policy. The manganese and oil deals show how foreign policy was used to buttress the ANC’s business forays. This is a key reason why the country needs a party-funding law. With such transparency we would be able to see the links between funding, procurement and policy.

As Judith February and Richard Calland write: “The one time citizens experience true equality is when they cast their vote at the ballot box. Where there is no control over the private funding given to political parties a situation of unfairness and distortion of electoral competition may arise … ultimately undermining the equal value of each person’s vote.”

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