Minerals and Energy South Africa

Death, Injury Rates Soar in Stressed Gold Mines

2007-01-31T11:01:00.000-08:00

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.

Power cuts blamed on skills blackout

2007-01-26T23:10:00.000-08:00

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.

Gloomy Picture of Winter of Discontent

2007-01-26T23:08:00.000-08:00

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.

inister to address electricity supply challenges

2007-01-26T22:44:00.001-08:00

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.

Cape could be force to dissolve RED1

2006-12-23T12:02:00.000-08:00

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.

Energy Minister slams Cape Town's Red1 withdrawal

2006-12-23T12:01:00.000-08:00

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.”

SA poised to embark on nuclear route for power

2006-12-23T12:00:00.000-08:00

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.

Why SA is so energy inefficient

2006-11-27T12:56:00.000-08:00

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.

SA’s own JR Ewing

2006-11-18T14:49:00.000-08:00

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.

Mbeki vows action on Iraq oil scandal

2006-11-16T02:08:00.000-08:00

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.

Russians calls off big SA trade meeting

2006-11-16T02:05:00.000-08:00

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."

The problem with ANC Inc

2006-11-10T15:41:00.000-08:00

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.”

Called to account on diamond taxes

2006-11-09T02:44:00.000-08:00

Minerals and Energy Minister Buyelwa Sonjica is to be called to account to parliament's watchdog committee on public finances for her department's failure to act against diamond exporters who have not paid taxes.

Themba Godi, chair of parliament's standing committee on public accounts (Scopa), said Sonjica would be summoned to appear before the committee.

Auditor-General Shauket Fakie gave the committee a brief account of his attempts to recover the money owed after Scopa had asked him to look into the matter.

Godi said the then-minister, Lindiwe Hendricks, had been given a confidential memo in February in which the auditor-general detailed the legal steps that might be taken to recover money lost through an exemption given to some diamond producers and exporters.

The memo had been written after a meeting attended by Fakie, the SA Diamond Board, the minerals and energy department, and the Treasury.

Scopa became aware of the huge decline in revenue collected on diamond exports when it reviewed the diamond board's report for 2003/04.

"The loss to fiscus was a huge amount of money and not less than R1-billion," Godi said.

"Those who illegally avoided payment of tax should pay."

No action had been taken by the department.

"Scopa cannot take decisions and these fall by the wayside," Godi said. He declined to name those who had dodged tax.

Scopa would express its frustration to Sonjica. "It's almost a year later and there has been no movement."

South African mines forfeit billions

2006-11-09T02:08:00.000-08:00

South Africa’s mining industry was forfeiting R5 billion ($680 million) to R10 billion ($1.35 billion) a year in fixed investment because companies could not invest in projects without legal title, said Chamber of Mines president Lazarus Zim.

He said at the chamber’s annual meeting that almost all respondents in a survey undertaken by the chamber in July had expressed concern about regulatory constraints affecting investment in the mining sector.

Respondents had highlighted delays in issuing new or converted mining rights, additional red tape in interpreting the empowerment requirements of the mining charter, the capitalisation of environmental trust funds and delays in processing water rights.

Another major issue was the logistical constraint on rail and port infrastructure.

Although mineral prices rose to record highs over the past 12-18 months, investment in mining had fallen almost a third between the first quarter of 2004 and the first quarter of this year, Zim said.

The industry’s employment had dropped by more than 20,000 jobs in the past two years.

Zim said South Africa’s mining sector had not enjoyed the same benefits as the rest of the world from the phenomenal commodities boom of the past few years, which had seen global gross mining revenue up 25%, at $222 billion, and net profit up 59% at $45 billion.

In Australia, pretax profits in the mining sector rose 95% last year, compared with a 12% increase in South Africa. Capital investment in Australia surged by more than 34% last year, while real fixed investment in South Africa’s mining sector declined 16.5% last year and 18.6% in 2004.

Minerals and energy department deputy director-general for mineral policy and investment promotion Abiel Mngomezulu said the decline in mining investment in South Africa was not attributable to a single factor, such as regulation.

The major contributor to South Africa’s mining sector for many years was gold, but for many years gold mines had been getting deeper. Investments by local gold companies in deepening their existing mines was not enough to offset the overall decline in investment in the sector.

Both foreign and local gold miners would prefer to invest in countries where gold deposits were shallower and quicker to access, Mngomezulu said.

Investment in exploring for diamonds and platinum group metals in South Africa had grown, but not sufficiently to offset the decline in investment in gold. Jobs in the gold sector had been contracting particularly between 1986 and 2000-01, but in 1986 the Minerals and Petroleum Resources Development Act had not been promulgated, Mngomezulu said.

Another factor that complicated comparisons between South Africa and other countries, such as Canada, was the exchange rate. Companies operating in South Africa were not necessarily enjoying the same mineral prices in local currency as those operating elsewhere.

Zim said South Africa’s mining industry was a major contributor to the national economy, contributing 16% of gross domestic product, 50% of merchandise exports, 12% of the country’s fixed investment and 20% of formal-sector employment. Last year, the industry employed 442,000 people on average and paid R36.4 billion ($5 billion) in wages and benefits. Mineworkers had about 5-million dependants.

“Instead of being in an investment drought, South African mining sector investment should be particularly buoyant,” he said.

The Chamber of Mines was hoping to find a solution to the industry’s concerns about trying to get appropriate compensation for mining rights that were lost through the implementation of the Minerals and Petroleum Resources Development Act.

Under the act, implemented two years ago, “old order” rights to mine, which were held in perpetuity, were replaced by, among other aspects, only 30-year-tenure, even if rights were converted to “new order” rights.

“For mining companies to approach the courts to resolve this issue would not be ideal,” Zim said at the chamber’s AGM.

The deadline for claims is April 30 next year. Mining companies were concerned that it might be impossible to assess the value of the rights that were lost by that date against the value of the rights they acquired under the act, or might acquire in future, he said.

But Webber Wentzel Bowens partner Peter Leon said if a company decided that it wished to pursue compensation, there was no alternative but to file a claim through the courts.

A simple letter to the minerals and energy department would not be sufficient. Not every company would want to file a claim for compensation but management should consider carefully whether there was a fiduciary duty to do so on behalf of shareholders, he said.

Leon doubted the industry could settle the matter through negotiation or assurances from the department because the law was quite specific on the procedures to be followed to avoid prescription of claims, he said.

Implats still confused

2006-11-07T09:22:00.000-08:00

The world's second-biggest platinum producer, Impala Platinum, was “disappointed” in the Minister of Minerals and Energy Buyelwa Sonjica's recent comments wherein she indicated displeasure with the progress that the company was making in converting its old-order mining rights to the new regime.

“We are disappointed in her comments, and don't really understand why Sonjica singled us out,” Implats executive director Cathie Markus said in a telephonic interview with Mining Weekly Online late last week. “We are a bit unsighted on the matter.”

South Africa's mining legislation, introduced in 2004, places all previously-held rights under the custodianship of the State, and miners have to meet strict ownership, social, environmental and employment thresholds in order to convert these rights to licences under the new regime.

At a presentation last month to confirm that platinum-miner Lonmin had been successful in converting its rights, Sonjica specifically mentioned the world's two biggest platinum miners, Anglo Platinum and Implats, saying that she was not pleased with the progress of their compliance. Anglo Platinum had refused to give comment on the Minister's criticism.

In interviews with various Department of Minerals and Energy officials since the Minister's statement, officials have stressed that Sonjica was not in any way personalising the conversion issue, but that she was genuinely concerned about the lack of progress being made by the two platinum giants, which lodged their conversion applications ahead of Lonmin's.

Anglo Platinum was currently seeking legal recourse against the DME over issues relating to their their applications for new prospecting rights.

“She was just saying that we're waiting for you,” a DME official said. “It's not up to us as to whether or not we can grant a conversion; the company has to comply, it's as simple as that.”

The official went on to add that the only issues the DME had with Implats were around compliance, but would not give further details as to where Implats did not comply.

Seeking further clarity on this issue from the DME, Mining Weekly Online spoke to mineral regulation deputy director-general Jocinto Rocha, who explained that Sonjica was not personally criticising the two platinum giants, but was simply urging them to up the tempo of their compliance.

“The ball is not in the DME's court; they must comply to get their conversions,” he said.

Implats had applied for the conversion of its Marula operations to the new-order rights in October 2004, and its Impala rights conversion in March last year, and has yet to receive either.

The DME director-general Sandile Noqxina had earlier this year said that the DME planned to reduce the period the Department took to process conversion applications to close to the 12 months allocated for the issuing of new rights, but highlighted because of its complicated nature it would probably take longer.

However, longer-time frames in the conversions were not seen to be major issues, as miners had up to 2009 to comply.

Markus explained that Implats had looked at the various aspects of the DME's requirements for rights conversions, and had had numerous discussions with various officials from the department, but said that it was a process, and she could not be drawn on when Implats hoped to receive its conversions. And neither could the DME be drawn on when the conversions might come through.

Tension over issuing of mining licences

2006-11-02T05:00:00.000-08:00

If accusations levelled at the department of minerals and energy about its lack of capacity and tardiness in issuing mining and prospecting licences are true, the government must be held accountable for lost investment opportunities for the industry over the medium to long term.

The Chamber of Mines has done research that shows that the regulatory regime, including mining, environmental and water licences, has curtailed investment in the industry.

This has been countered by Jacinto Rocha, a deputy director-general in the department, who has pointed to, among others, the R4.7 billion Gold Fields investment in South Africa.

Minister Buyelwa Sonjica and her director-general, Sandile Nogxina, deny the department has delayed the issuing of new licences.

The industry disagrees. Nogxina said the delays were caused by mining companies not properly completing the paperwork that goes with the application.

The threat by Australian junior diamond mining company Tawana Resources to retrench staff if it does not get mining rights soon is a stark example of a mining company potentially deciding to pull out because of the new rules.

Tawana's move also highlights the tensions building up between the government and the mining industry, which is made up of local and international players. These stem from the implementation and interpretation of the Mineral and Petroleum Resources Development Act.

The government wants the mining industry to change and is using the new law and the industry charter to drive this.

However, it is up against an industry that over the past 100 years has been used to getting its own way.

And one must not mistake grudging acceptance of a new order with enthusiastic acceptance of the constraints that it imposes.

Job loss blackmail

2006-11-02T04:40:00.000-08:00

Minerals and energy minister Buyelwa Sonjica accused Australian junior diamond producer Tawana Resources of "blackmail" by threatening to retrench employees in South Africa if her department did not issue a mining right to the company's Kareevlei Wes project.

"They are trying to blackmail us and to yield to them… It is totally unacceptable," said Sonjica.

Tawana Resources yesterday said recent guidelines announced by the department of minerals and energy indicated that it took 12 months to process mining right applications.

The mining right application was being attended to, but the company said the process was slower than expected.

Department official Futhi Zikalala said Tawana was granted two prospecting rights earlier this year, one in May and the other in October.

The company made another application for a prospecting right application in April.

"In view of the longer-than-anticipated [based on department of minerals and energy guidance] time taken for the mining right to be processed, the company has notified its South African employees that they will be retrenched at the end of November if, as now anticipated, the mining right has not been approved prior to that time.

Re-employment priority will be given to current employees when the mining right has been approved," said the company.

Tawana holds a 74 percent stake in the Kareevlei Wes project near Kimberley and empowerment group Seven Falls the remaining 26 percent. The company has diamond projects in South Africa, Botswana and Australia.

Zikalala said there were perceptions that the department was exceeding the six-month and 12-month statutory periods for issuing prospecting licences and mining rights, respectively.

However, Zikalala said that hiccups with social and labour plans had proved to be the biggest stumbling block in issuing of licences.

Department director-general Sandile Nogxina said there was a tendency by the mining industry to justify delays in processing licences applications.

The department has been criticised for not employing sufficient skilled people to assess and process the huge volume of license applications since May 2004.

Mining companies often submitted applications that were incomplete, Nogxina said.

"People must be honest about delays. We can't process applications willy nilly," Nogxina said.

There were those that were resisting the process and transformation, he added.

The department had received a total of 6 938 applications since May 2004.

The department had received 5 454 new prospecting licence applications, of which 1 926 had been granted.

Out of a total of 733 applications for new mining licences, 174 had been granted.

A total of 374 applications for the conversion of old order prospecting licences had been submitted, of which 299 were approved.

The department had received 377 applications for the conversion of old order mining licences, of which 48 had been granted.

Zikalala said there were no delays in processing prospecting licences and mining rights beyond the statutory time frames.

Government backs down on electricity plan

2006-10-27T09:19:00.000-07:00

In a further sign of the Mbeki administration’s diminishing hold on policy, it has been forced by Parliament and ANC-run municipalities to back off an ambitious plan to get Eskom to deliver power to many small towns and rural areas.

The move means smaller municipalities will be able to keep the revenue raised from selling power to homes and business consumers, which helps keep many of them afloat.

However, it does not address immediate concerns about many municipalities’ dwindling skills base and their limited ability to invest in ageing infrastructure.

The first concrete signs of a rebellion against the cabinet’s plan came a month ago when Parliament’s minerals and energy committee rejected the proposals, endorsing the original model for six metro-based electricity distributors. This came shortly after the joint standing committee on intelligence slammed a report by the intelligence inspector-general into the hoax e-mail saga, which had been endorsed by the cabinet.

Faced with growing resistance to its electricity plan, the cabinet has now backed down. It announced yesterday that government had adopted an electricity distribution model involving six regional electricity distributors (Reds) and scrapping the highly contested seventh national distributor.

The cabinet’s decision removes any uncertainty which may have existed over the role and shape of the regional electricity distributors.

Earlier this month, government’s plan for the distribution of electricity as contained in the Electricity Regulation Amendment Bill also ran into trouble during public hearings when municipalities and industry players alike rejected the proposed legislation.

The bill sought to give powers to municipalities to determine their tariffs, a move that was seen by the National Energy Regulator of SA as an “emasculation” of its authority. Yesterday, at a post-cabinet media briefing, chief government spokesman Themba Maseko said the proposal to create six Reds as public entities under the auspices of the state-owned company Electricity Distribution Industry (EDI) Holdings had been approved. The Reds would be accountable to the minerals and energy ministry. The next step in the process would be to draft legislation and business plans for the establishment of the Reds.

In response to a question, Maseko said that because the six Reds option had been approved, this meant “by implication” that the plan for a seventh Red “was not approved”. The cabinet was known to have favoured a seventh Red in earlier discussions.

EDI Holdings has welcomed the cabinet’s decision as a “fundamental milestone in the transformation of the electricity sector”.

EDI CEO Phindile Nzimande said: “The cabinet decision removes any uncertainty which may have existed for quite some time over the role and character of regional distributors, and will indeed go a long way in speeding up the process of Red creation in the six major metropolitan centres as the first phase, and later across the entire country.”

Minerals and energy department deputy director-general for electricity and nuclear energy Nelisiwe Magubane said the cabinet’s decision would enable her department to move with speed in funding and establishing the remaining five regional electricity distributors.

Only the Cape Town-based Red exists.

PetroSA has to supply Oilgate documents

2006-10-23T10:39:00.000-07:00

The Democratic Alliance (DA) and state-owned oil company PetroSA settled their "Oilgate" documents dispute, with the DA claiming victory.

Under the agreement -- made an order of the court by Cape Deputy Judge President Jeanette Traverso -- PetroSA has to supply the DA with documents relating to the so-called Oilgate transaction between itself and black economic empowerment company Imvume Management by November 13.

PetroSA also has to pay the costs.

"It is a great day for the fight for transparency and open, accountable governance," DA leader Tony Leon said afterwards.

"It is a good day, too, for a vital piece of legislation that is often abused and misused by the African National Congress [ANC] government to hide and shield from open scrutiny facts and information which pre-eminently belong in the public domain."

The case stemmed from the DA's request in May last year to PetroSA under the Promotion of Access to Information Act for all the documentation relating to the 2002 contract between PetroSA and Imvume.

The Oilgate matter arose out of the December 2003 advance payment by PetroSA of R15-million to Imvume Management to buy oil condensate.

Instead of paying for the condensate, Imvume donated R11-million to the ANC's 2004 election campaign.

This resulted in PetroSA having to pay twice for the oil condensate. The second time the payment was to the primary supplier, Glencore International, to cover the shortfall.

Leon said that by resisting the DA's application for the documents, only to capitulate at the last minute, PetroSA had revealed itself as an enemy of transparency and open, accountable governance.

"It had no good reason to oppose the DA's application and yet it sought to put its own considerable legal weight, recourses and public money behind opposing the DA. To what end? Ultimately, nothing.

"While the DA did win its case today, the South African public has had to wait 18 months, and its money has been used to fund an ill-conceived defence," he said.

Also, if indeed Imvume was established "as an ANC front company, something which both its own behaviour and an analysis of the available facts suggests", the nature of its contract with government should be explored in full detail.

"Was a proper tender procedure followed? Was PetroSA aware of how exactly Imvume intended to use the advance payment it made to the company in December 2003? And what, exactly, was the nature of the relationship between the two entities?

"PetroSA has three weeks to comply with the court's order. Once that documentation is made available to the DA, the DA will, in turn, make it available to the South African public," Leon said.

Director general's report card

2006-10-20T03:53:00.000-07:00

The Minerals and Energy Department operates at the heart of the economy and, at the moment, stakeholders are begging for a bypass.

Crucial applications for new order mining rights are jammed up in Sandile Ngoxina's bureaucracy, and potential legal challenges to the implementation of the new regime are piling up faster than the department can clear them. Meanwhile signs of political meddling in what should be a transparent, technocratic process are all too evident.

The 10-year-old attempt to reform the electricity distribution, or reticulation, network, is going nowhere fast. The Electricity Regulation Amendment Bill is meant to take electricity distribution away from municipalities and put into the hands of Reds (regional electricity developers), but it has run into constitutional circuit breakers, and intense opposition from just about everyone involved.

Plans to remove responsibility for energy efficiency from Eskom and hand it to the Central Energy Fund are also stalled in the face of intransigence from the power giant.

The liquid-fuels sector is a little better managed, with progress in relation to cleaner petrol and diesel despite anxiety from refiners over the costs of the change. But the department has been remarkably limp-wristed in dealing with last year's fuel shortage in the Western Cape, and has made no real progress in breaking Sasol's stranglehold on highveld fuel supply.

A lot more work is needed to drive this engine clean.

Electricity bill rejected

2006-10-16T03:05:00.000-07:00

The minerals and energy department will urgently revise the controversial Electricity Regulation Amendment Bill, which was rejected by stakeholders in public hearings. Key electricity consumers, industry and municipalities urged the department to revise the bill’s definition of “reticulation” (distribution), which was considered “unconstitutional, too wide and too restrictive”.

Municipalities argued that the new proposals violated the constitution in as much as they tampered with their right to administer electricity reticulation.

A quick solution to the crisis will help start the delayed restructuring of the R50bn electricity distribution industry.

Government, through legislation, wants to encourage the participation of municipalities in regional electricity distributors.

The cabinet is due to announce this month whether to go ahead with a seventh national distributor.

Government also wants to ensure uniform national regulation and tariff-setting.

Municipalities argued that the bill’s attempt to restrict their reticulation activities to consumers using 5000MWh of electricity a year and the imposition of national regulation was unconstitutional.

The constitution assigns municipalities the function of power reticulation.

Minerals and energy department chief director Ompie Aphane said the department planned to propose a solution which did not divide up the market between municipalities and other electricity distributors on the basis of the quantity of electricity consumed because any such division would be “arbitrary”, he said.

He anticipated coming back with a revised bill “soon”, perhaps in a few weeks’ time.

Sonjica delves into mining decline

2006-10-13T13:26:00.000-07:00

The mining industry has blamed government policies for the 32,7% decline in investment since 2004 that has resulted in the loss of about 20000 jobs.

Minerals and Energy Affairs Minister Buyelwa Sonjica has established a departmental task team to investigate reasons for the decline. However, she was suspicious the industry was using the trend to avoid its charter obligations to bring in empowerment partners as shareholders.

While taking the decline in investment seriously, Sonjica said at a media function yesterday she was also “suspicious”. “Some mining companies are not embracing the charter,” she said.

“I am getting the sense that the industry is using the low investment to avoid their charter obligations. The charter was the outcome of industry-wide consultations, and shareholders should honour their commitments. Some of them are intransigent,” she argued.

Regimes backs down on mining royalties

2006-10-13T06:16:00.000-07:00

A sigh of relief greeted the revised Minerals and Petroleum Resources Royalty Bill, in which Finance Minister Trevor Manuel proposed lowering the amount of royalties that will be levied on mining companies, and introduced breaks for marginal mines.

The treasury yesterday released a revised draft of its Royalties Bill, following the outcry over the initial draft, which was released in 2003.

At the time, analysts railed against the fact that royalties would be calculated on revenue, rather than profit, and about the 8% royalty on unpolished diamonds. Analysts said the high royalties would lead to “substantial earnings downgrades” and a squeeze on margins.

Manuel appears to have taken some of these criticisms to heart as the revised bill drastically cuts the amount of royalties companies will have to pay.

Transforming the electricity sector

2006-10-11T03:02:00.000-07:00

Government’s contentious electricity restructuring programme hit another snag yesterday when the Chamber of Mines, Eskom and major industrial electricity consumers raised serious objections to a bill dealing with reticulation.

This is another hurdle in government’s bumpy, 10-year-old attempt to transform the electricity sector to rationalise supply and harmonise tariffs. Opponents said the bill would not contribute to achieving these goals.

The flood of objections to the draft Electricity Regulation Amendment Bill was heard during public hearings by Parliament’s minerals and energy portfolio committee.

The bill is highly sensitive as it circumscribes municipal electricity provision within specified parameters. It also assigns powers to Minerals and Energy Minister Buyelwa Sonjica to set national reticulation norms and standards while limiting the powers of the National Energy Regulator of SA (Nersa).

Earlier this year, government encountered another obstacle to its electricity restructuring programme when the committee rejected a cabinet proposal for an additional national distributor alongside the six regional electricity distributors.

In terms of the bill, municipalities will be responsible for reticulation to customers using less than 5000MWh a year while Nersa would issue licences for suppliers to consumers of more than this level. Eskom’s existing supplier licence would lapse.

One opponent of the bill was the Energy Intensive Users Group, representing large industrial consumers of electricity.

It said the bill’s definition of reticulation was unworkable as it was “impracticable for two suppliers to operate over the same electrical system”.

The group also said the dual regulation proposed for the minister and Nersa was unworkable as it would cause uncertainty and conflicting responsibilities.

Eskom believed the bill would not establish an optimal regulatory framework. The demarcation of roles was “unworkable”. The utility also said the bill was deficient and could be disruptive as it did not include adequate transitional measures.

Eskom said a consumption- based definition of reticulation was impractical as both reticulation and nonreticulation customers were supplied through common networks. Instead, a voltage-based definition of reticulation should be used, it said.

Chamber of Mines assistant adviser Dick Kruger emphasised the need for legislation to be drafted on the basis of government policy otherwise the uncertainty created would be detrimental to investment.

The South African Local Government Association (Salga) was concerned the bill would prevent cross-subsidisation of residential customers by large industrial and commercial customers.

The Oilgate affair carries on

2006-10-07T04:41:00.000-07:00

When will the public get its Oilgate money back? Almost two years after Imvume diverted R18-million from a state oil contract -- the bulk of it to the ANC -- about R12-million remains outstanding.

After a history of broken promises and stop-start repayments, oil parastatal PetroSA has instructed attorneys to take action against Imvume. PetroSA’s past legal threats have been as indulgent as Imvume’s attitude has been recalcitrant. It remains to be seen whether this time will be different.

Imvume’s debt to PetroSA arose from events that took place in December 2003.

Imvume had asked PetroSA for a R15-million advance on a R65-million payment due to it under a contract to supply the parastatal with oil condensate. The money was not Imvume’s to keep; the entire amount was due to Imvume’s foreign supplier, Glencore.

But instead of paying Glencore, Imvume transferred R11-million to the ANC, which was cash-starved with only months to go before the 2004 general election.

Imvume also paid R50 000 to a brother of Phumzile Mlambo-Ngcuka, then minister of minerals and energy, and R65 000 towards renovations at the home of Social Development Minister Zola Skweyiya.

That January, Imvume helped itself to another R3-million from the balance of PetroSA’s payment. In February Glencore refused to offload the next shipment of condensate unless PetroSA paid it the total amount Imvume had diverted. PetroSA complied immediately, paying the same R18-million twice.

Imvume was close to the ANC. Its boss, Sandi Majali, was described in company literature as “economic advisor” to the party’s secretary general, Kgalema Motlanthe.

Between 2000 and 2002 senior ANC officials, including Motlanthe, treasurer general Mendi Msimang and presidency head Smuts Ngonyama, accompanied Majali on trips to Saddam Hussein’s Iraq. When PetroSA doubled up the R18-million, it got a written acknowledgement of debt from Majali, who promised that Imvume would repay the entire amount in three months.

In July 2004 -- with the entire amount still outstanding more than two months after Imvume’s deadline had passed -- PetroSA instituted action in the Johannesburg High Court. PetroSA’s choice of lawyer was surprising: It used Leslie Mkhabela, a business partner of Majali.

In the condensate contract documentation between PetroSA and Imvume Mkhabela was indicated as Imvume’s legal adviser.

Instead of pursuing the legal course, PetroSA and Imvume entered into settlement negotiations. In August 2004 Imvume made what PetroSA has called a “good intent” payment of R1-million.

According to court papers subsequently filed by Majali, PetroSA CEO Sipho Mkhize agreed in September 2004 that Imvume could repay at a rate of R333 333 a month — interest free. PetroSA has disputed that interest was waived.

Imvume made one such payment, in November 2004, and then stopped paying again. PetroSA, still using Mkhabela as its lawyer, set the matter down for a High Court hearing in April last year. For reasons that are not clear, PetroSA did not persist with the court action.

The scandal was exposed in May last year. By then Imvume had still only paid the R1,3-million, well short even of the interest that had accrued by then. After a public outcry Imvume made two payments of R1,7-million and R3-million that June, bringing the total paid to R6-million.

But as suddenly as the payments had resumed, they stopped again -- until September 2005, after Imvume and PetroSA reached a settlement in terms of which Imvume would repay R500 000 a month, plus interest.

The agreement was made an order of court, meaning that should Imvume fail to comply, PetroSA could move against it for the entire outstanding amount.

Imvume complied until May this year, by which time the total amount paid had reached R10,5-million. The original debt, interest included, has reportedly grown to about R22,5-million, meaning Imvume still owes about R12-million.

Has PetroSA been any more serious this time around about enforcing its rights? Imvume’s latest non-compliance came to light only last week, when PetroSA’s annual report was tabled in Parliament. This was four months after Imvume went into default.

The annual report said nothing about legal action, only that management was “investigating the alternatives to enable the successful recovery of the outstanding debt” and that it was “confident”.

Mkhize said on Thursday that his information was that Mkhabela — still acting for the parastatal in the matter— had handed an order to attach Imvume assets to the deputy sheriff on October 2. The order had not yet been executed and a decision would have to be made whether to speed up the process.

Whether PetroSA’s kid-glove approach to Imvume is now over, remains to be seen.
Imvume attorney Barry Aaron this week confirmed that the company had stopped paying after May. He claimed that this was because a provincial government was in default to a company in the Imvume group.

The Imvume company, Aaron said, had four subcontracts on a relatively new contract with the province. He declined to name the provincial government or the nature of the contract.

Aaron said the provincial government’s default, which ran into millions of rands, was “serious” for the Imvume group. He said Imvume was preparing to ask the High Court for a declaratory order that would have the effect of temporarily excusing its default to PetroSA, based on the failure of the provincial government to comply with its obligations.

Inalienable right to nuclear energy

2006-10-06T10:29:00.000-07:00

Concerns that global tensions over Iran’s uranium-enrichment program may be the first in a series of future crises are spurring governments and private organizations from nuclear supplier countries to step forward with new efforts to limit the spread of nuclear fuel-cycle technology. But it is not clear if the steps will be enough to dissuade additional countries from undertaking activities that could potentially provide critical materials for nuclear weapons.

Several countries have recently expressed an interest in building their first uranium-enrichment or plutonium reprocessing facilities, including Argentina, Australia, Brazil, and South Africa.

Developing countries in particular are jealously guarding what they view as their right to such technologies. The NPT’s basic bargain calls for states to have access to nuclear fuels and technologies for peaceful purposes in return for renouncing nuclear weapons.

Buyelwa Sonjica, South Africa’s minister of minerals and energy, said that any framework on access to nuclear fuel “should not involve any preconditions that would even hint” at forgoing their “inalienable right to nuclear energy” under the NPT. “We should guard against the notion that sensitive technologies are safe in the hands of some but pose a risk in the hands of others,” she said. “States that may decide to pursue domestic sensitive fuel-cycle activities for peaceful purposes and in conformity with legal obligations should not be discriminated against by excluding them from possible benefits that may derive from such mechanisms,” Sonjica added.

SA’s mining industry is foiled

2006-10-03T01:47:00.000-07:00

THE commodity bull run over the past five years has been spectacularly good for the world’s mining industry, leading to the doubling of primary commodity prices, the tripling of metal prices and a staggering $222bn in gross revenues (of which $45bn was net profit) in 2005. Paradoxically, while international commodity prices boomed post-2001, investment in one of the world’s premier mining locations, South Africa, shrank.

Mining’s contribution to gross domestic product (GDP) fell a quarter to 6,2%, while its contri-bution to total fixed investment fell by nearly half, from 11% to 6%. Although conventional wisdom has tended to explain this in terms of a nearly 50% contemporaneous appreciation in the rand/dollar exchange rate, which eviscerated the benefit of higher commodity prices, a 16% depreciation in the exchange rate over the past 18 months has still seen no increase in fixed mining investment. This year alone mining production has slumped 6%.

In a country with, at best, 26% unemployment, this has seen a loss
of 20000 mining jobs over the past two years. What has made the industry’s position even starker is a 24% increase in manufacturing investment, despite rand appreciation, over the same period. Viewed against a current account deficit of 6% of GDP, this clearly has balance-of-payments implications.

Although, until very recently, this was never articulated, the cause of SA’s investment strike is almost certainly the architecture, as much as the poor implementation, of the Mineral and Petroleum Resources Development Act, 2002, which came into force in 2004. Under this act, all mineral resources are placed under state “custodianship” and holders of mineral rights, most of which were previously privately owned, are given no more than five years to convert these rights to the new regime.

The conversion process, however, is nonautomatic, discretionary, contingent upon compliance with the mining charter, as well as time-limited. Moreover, rights granted under the act are far less valuable than the mineral rights which the act expropriates. The act’s ultimate regulator, the minister of minerals and energy, may suspend or cancel rights already granted on a discretionary basis, while no rights may be mortgaged without ministerial consent.

At the end of the act’s transitional period in May 2009, mining companies will be obliged to pay the state revenue-based royalties on rights which they (mostly) previously owned. Benchmarked against the international best practice requirements of security and predictability of tenure in a high-cost, high-risk and long-term industry, the act does not score well, as evidenced by the Fraser Institute’s regulatory survey of 64 mining jurisdictions, which placed SA 37th.

Until a fortnight ago, influenced no doubt by its 2002 clash with the government over the mining charter, the SA mining industry maintained a stoic silence on the subject.

Faced with the fact that in the two plus years that the act had been in force, the minister had granted only 15% of all applications sought, had refused 27% and was “considering” the balance, SA’s Chamber of Mines expressed its “concern” about “regulatory constraints” in the industry, which were caused by “red tape”. As the chamber noted, without either new or converted rights, many potential mining projects could simply not proceed, while large mines would have to retrench workers if their mining rights were not converted. This was an incongruent situation at a time when commodity prices were booming.

SA missing out on commodities boom

2006-10-02T08:20:00.000-07:00

South Africa’s new regulatory regime for its mineral exploration sector is fuelling a decline in mineral production at a time when commodities are going through an unprecedented boom.

The tardy new licensing process, increasing costs and inefficiencies are being blamed for an apparent drop in investment appetite in the country. “It’s a worrying sign,” said Peter Leon, a partner at law firm Webber Wentzel Bowens. “Mining projects, with the exception of PGMs (platinum group metals) are hardly coming off the ground and production is going down.”

Under the new regime, the diamond sector will be hardest hit if government imposes an 8% royalty and removes exemptions now in place on a 15% export tax. Others, government in particular, argue currency effects are a key reason for the lack of mining investment.

“The minerals explorations sector is going through a lull in money terms,” said Abiel Mngomezulu, chief director at the minerals and energy department.

South Africa's double agenda

2006-09-26T23:45:00.000-07:00

Emboldened by Iran’s nuclear program, several nations are asserting their right to enrich uranium. The notable drop in the long-time stigma against nuclear power, and the corresponding increase in nuclear activity, is accelerating what Albert Einstein once termed the world’s “drift toward unparalleled catastrophe” into more like a cruise.

On August 25, South Africa announced it will launch a feasibility study on uranium enrichment. The announcement came three days after a joint bilateral summit between Iran and South Africa, where both nations reaffirmed their right to produce and use nuclear energy.

South Africa will conduct a cost-benefit analysis into the beneficiation of uranium, according to Minerals and Energy Minister Buyelwa Sonjica. Her plans include constructing four to six nuclear reactors that would increase South Africa’s nuclear energy production by at least 5,000 mw.

America already views South Africa as an unreliable ally in the Iranian nuclear crisis. It demonstrated its concern over the issue when it sent an ambassador to Pretoria, South Africa’s capital, on August 24 to encourage South Africa to take a harder line on Iran’s nuclear program. Clearly, that meeting yielded nothing.

The problem with those peaceful purposes lies with what Einstein said about mankind: Man’s modes of thinking have not changed. A look into South Africa’s history shows that a nuclear program intended for peaceful purposes can quickly transform into a deadly weapons program.

In 1957, the U.S. agreed to provide South Africa with its first nuclear reactor and enriched uranium supply. In 1971, the South African government approved research into peaceful nuclear explosions for mining resources. Three years later, the research program transformed into a weapons program for a nuclear deterrent, which produced a nuclear bomb in 1982.

South Africa finally dismantled its program and destroyed its weapons in the early ’90s. But who can say it won’t start up another weapons program if it starts enriching uranium again?

Nations are either warring or preparing for war. It wouldn’t take much of a threat for a nation with the capability to produce a nuclear bomb to start a weapons program. With South Africa in the 1970s, it was the threat of invasion of Namibia by Soviet-backed forces that spurred it to build a bomb. This scenario could be played out in any part of the world.

Nuclear technology is becoming an increasingly common commodity. History proves that what weapons mankind develops, it will use. All that is needed is a trigger.

The multiplying factor making the nuclear danger that much more acute is the possession of nuclear technology by countries with unstable, erratic leaders at their helm.

Too much red tape with nuclear bombs

2006-09-21T08:22:00.000-07:00

This flies in the face of the regime's friendly ties with Iran and the enthusiasm shown by Intelligence for reviviving the nuclear bomb programme from the bad old days of apartheid.

South Africa cannot support "unwarranted restrictions" to countries that have taken the decision to use nuclear energy for peacefully purposes in terms of the Non-Proliferation Treaty (NPT). Minerals and Energy Minister Buyelwa Sonjica said so while addressing to the week-long 50th Regular Session of the International Atomic Energy Agency (IAEA) General Conference in Vienna, Austria.

The conference has been convened to discuss the safety and security of nuclear material and facilities as well as the threat of nuclear terrorism.

Ms Sonjica said the imposition of additional restrictive measures on some NPT member states, while allowing others to have access to those capabilities, only served to aggravate existing inequalities that were already inherent; and undermined one of the central bargains contained in the treaty.

She said there was growing concern that while demands were being made for non-nuclear-weapon states to agree to new measures in the name of non-proliferation, concrete actions towards nuclear disarmament were neglected.

She added that while South Africa was committed to the continuous review and strengthening of measures aimed at preventing the proliferation of weapons of mass destruction, including the IAEA's safeguards system, it believed that real progress in securing the world from the threat of nuclear weapons could only be achieved through concomitant progress in nuclear disarmament.

"It is only through full compliance by all states with their respective legal obligations in the areas of non-proliferation and disarmament that peaceful uses of nuclear energy can thrive for the benefit of all," she said.

South Africa recently announced its intention to study the possible beneficiation of its uranium resources, to meet its long-term energy needs. "We will be methodical in this process and we will do this within the confines of all our obligations," assured minister Sonjica.

Mining industry strangled by red tape

2006-09-17T02:39:00.000-07:00

The South African government's regulatory regime is to blame for the local mining industry's inability to attract foreign investment,

Chamber of Mines vice president Bernard Swanepoel said on Tuesday singled out South Africa's regulatory environment as the number-one constraint, another being exchange-rate volatility, which was also limiting the industry's ability to expand.

While the global mining industry was experiencing its “best time in years”, South Africa was falling behind its main Australian and Canadian rivals in the race to attract foreign investment in mining.

Even though Australia historically attracted less mining-related investment than South Africa, Swanepoel said that, since the South African government's enactment of new mining legislation in 2004, the growth in fixed Australian investment had surpassed that of South Africa and that the gap between the two countries was now growing fast.

South Africa's mining industry was being “left behind” in that international mining's gross 2005 revenue had grown by 25% to $222-billion and net profit by 59% to $45-billion - level the local industry was unable to match. At a time when the commodities boom was creating jobs everywhere else in the world, the South African mining industry had lost jobs last year.

Red tape, industry uncertainty and delays in converting 'old order' to 'new order' mining rights were some of the mining industry's main concerns. “Without the rights, we cannot proceed with new projects,” Swanepoel said.

The DME was still processing more than half of the applications for new prospecting rights and should appoint consultants if it could not handle the volume received.

Just pay your tax, profit is your problem

2006-09-13T23:59:00.000-07:00

outh African officials are consulting further behind the scenes about a long-delayed mining royalty law that would hit the junior mining sector especially hard, industry officials said on Tuesday.

Treasury officials in South Africa, the world biggest producer of gold and platinum, previously said they planned to release a new draft of the royalty bill in July for public comment, but nothing has appeared.

"Instead of rushing it out to get a draft in public, it was better to have more (private) consultations," the source, who declined to be named, told Reuters on the sidelines of a mining conference. He gave no further details.

The mining industry was strongly opposed to the new royalty tax when plans were first unveiled in 2003, and has been anxiously awaiting a final version of the bill.

Finance Minister Trevor Manuel has in the past stressed that mining royalties would be based on sales rather than profits and has said legislation was being redrafted to account for concerns among companies.

During a speech at a conference sponsored by the mining ministry, an official a group of small mining firms appealed to not base the tax on revenues.

"We don't have a problem with a royalty, but our concern is how are we going to pay a royalty on gross revenue when we don't even have profits?" said Bridgette Radebe, president of the South African Mining Development Association.

"This gross (revenue) thing is not economic... we don't even have money to build these mines," said Radebe, who is also chairwoman of Mmakau Mining.

Mining companies have been lobbying for the royalty to be based on profits, saying a royalty on sales would hurt less-profitable mines and have a big impact during a mine's start-up phase.

The royalties were due to come into effect in 2009.

Rates as originally proposed run from 1.0 percent for oil drilled in deep offshore waters to 3.0 percent for gold, 4.0 percent for platinum and 8.0 percent for diamonds. At present no royalties are charged.

Fuel might be in short supply, again

2006-09-11T16:06:00.000-07:00

We have learned our lesson. We will not stuff up agian. Yeah sure.

The Moerane commission, which investigated South Africa's fuel-supply crisis suffered late last year, has reported that another supply crisis could emerge in the second half of this year because of scheduled refinery shutdowns.

But Minister of Minerals and Energy Buyelwa Sonjica says she has a task team in place with the industry and hopes this will be avoided.

The minister said at a media conference at Parliament on Wednesday that the commission concluded that the fuel shortage last year resulted "from a convergence of a number of events", but of greater importance "and concern" is that these events exposed "underlying and regulatory weaknesses in the sector".

She and her director general have identified the need for South Africa to build another refinery. Sonjica said an announcement on such a refinery could be made "within a month". The director general declined to say whether this would be a government or a private-sector initiative.

The Moerane commission also said it considered that there is "no legal basis for requiring the oil companies" to compensate consumers for the fuel shortages experienced in December last year. The report stated that "this is because there is no evidence that the allowance for stock holdings included in the basic fuel price can be translated into a commitment by the oil companies to hold these stocks".

During the fuel crisis last year, former minerals and energy minister Lindiwe Hendricks said oil companies were being paid via the basic fuel price to hold stocks, but had failed to do so. It was reported earlier this year that refiners get 3,8c a litre, or about R760-million a year, for storing fuel for 25 days. The Moerane report therefore effectively lets these companies off the hook.

Sonjica said the key concern is that there is insufficient storage capacity for South Africa's fuel stocks. This is a by-product of the strong economic growth of the country.

Underscoring this point, the Moerane report said the major lesson is that the department should review the responsibilities of stakeholders "in relation to security of supply. Government needs to review its policy with regard to strategic stocks." It said further that the oil companies and synthetic fuel plants "should be obliged to hold prudent commercial levels of refined product stock".

The minister warned that the consumer is likely to have to carry the burden of the costs of holding such stocks, while director general Sandile Nogxina acknowledged that there is a lacuna in the regulatory environment concerning commercial levels of stock and it has to be revisited. At present, the state is required to hold 35 weeks of crude oil stock.

The Moerane commission also noted that additional pipeline capacity is "urgently required to supply the inland markets" and recommended that Petronet expedite the development of a new pipeline from Durban to Gauteng.

Meet the _new_ minister

2006-09-11T07:41:00.000-07:00

It seems that South Africa has a new minister of Minerals and Energy. That means that the ministerial report card below does not apply to the current office bearer. The the old Minister of Water Affairs and Forestry becomes the new minister of Minerals and Energy. The old minister of Minerals and Energy is now the Minister of Water Affairs and Forestry. The Deputy Minister of Minerals and Energy, becomes Minister of Agriculture and Land Affairs. All because the Minister of Public Works died. At this point it all becomes too complicated...

Buyelwa Patience Sonjica, South Africa’s Minister of Water Affairs and Forestry, has been appointed by President Thabo Mbeki as Minister of Minerals and Energy. Sonjica was elected to Parliament in 1994, and has served in the first parliamentary Portfolio Committee of Arts and Culture, the Portfolio Committees on Finance, Trade and Industry and Water Affairs and Forestry, as Chairperson of the Select Committee on Child Care Facilities, as an ANC Whip, as Deputy Minister of Arts, Culture Science and Technology, and as Minister of Water Affairs and Forestry.

Red tape chokes mining

2006-09-07T13:30:00.000-07:00

New legistlation created a gold rush for the 21st century, but it has been derailed by bureaucratic bungling. Everyone and his dog wants to dig for minerals wherever they can, but now they cannot get a licenses to do so, because it's BEE only.

The Department of Minerals and Energy has undertaken to investigate industry complaints that the deluge of prospecting applications received since the promulgation of the Mineral and Petroleum Resources Development Act (2004) had seriously hindered investment in the mining sector.

According to information, accurate on August 23, the Department of Minerals and Energy had received 9 071 mining and prospecting licence applications since the promulgation of the Act on May 1 2004. Of these only about 25% had been successfully granted. Up to 983 had been refused, which means the applicants cannot re-submit and 1 356 had been rejected, which means that firms can re-submit applications.

This, however, is an improvement on last year’s performance. According to Miningmx, this time last year a paltry 2,5% of the 4 424 applications received had been granted. “At some point there was bad planning at the [Department of Minerals and Energy] level,” said Jacinto Roche, Deputy Director General for mineral regulation in the department. “We are now committing ourselves to sticking to time frames.”

“Prospecting is the future, not mining rights,” said Roche. Hundreds of new players have taken advantage of the Act and have been further galvanised by the profitability of the country’s mining sector, despite a widely accepted anecdote in the mining industry that only 10% of exploration activities successfully convert to mining operations. “We’ve even had applications from companies wanting to prospect inside Jo’burg,” said Roche. “People see an open space and they decide to apply.”

But there are increasing concerns in the industry over delays and requirement uncertainties with regards to the Act. Industry sources complain that fixed investment in the mining industry has fallen off considerably in comparison with other mineral-rich countries. While this could also relate to infrastructure bottlenecks and the fluctuating currency, sources said the Act was largely responsible for what was termed an “economic slowdown” in the minerals sector. Exact statistics were not immediately available, but one source from a large mining house said the largest slowdown had been in prospecting because existing players had put some of their operations on ice to deal with the requirements of the Act. There have also been instances where black economic empowerment (BEE) companies had sold their mining or prospecting licences back to established companies -- rather then attract these companies to help them finance projects.

As an example of the influx of applications since the promulgation of the Act in Mpumulanga, Roche said that between 1992 and 2004 -- the year the Act was promulgated -- there were only 800 new applications, whereas in the past two years, the government has received 1 000 new applications.

Read more

BEE deal going belly-up due to government interference

2006-09-07T03:05:00.000-07:00

Poetic justice - another get-rich-quick scheme hatched by a bunch of opportunists falling apart due to the incompetence of the South African regime.

For nearly a year, Kumba, the South African iron ore digger, has been publishing a succession of monotonous announcements about a massive black economic empowerment (BEE) transaction. The latest announcement, issued on Wednesday, once again advised shareholders that “most of the legal agreements and funding arrangements required to implement the transaction have been finalised”. There is still no deal.

Nobody is prepared to be openly candid about the incessant delays. Private sector mining executives have, however, become increasingly vocal – but not in the public domain – about treatment meted out by the Department of Mines and Energy (DME), not least on opaque rules around awarding “new order” mining licences. Some cynics even charge that the DME is on the verge of fully dysfunctional, delaying billions of rands of investment in South Africa’s resources sector. Kumba may be the single biggest disappointment.

While the world has been experiencing the biggest bull market in commodities and metals seen in decades, the South African mining sector has been forced into recession. This has emasculated job creation, hampered economic growth and crimped the formation of precious foreign exchange. By contrast, latest investment data from Australia, another resources-rich country, shows that mining investment rose by 80% year-over-year in the second quarter of this year, and has doubled its share of the Australian economy in the past few years.

In April this year, the-then minerals and energy deputy minister Lulama Xingwana said: “We now have learnt that we have to take all BEE deals with a ‘pinch of salt.’ We are going to microscopically evaluate all the deals.” On May 22, after less than a year as minister of minerals and energy, Lindiwe Hendricks was “swapped” with minister of water affairs and forestry, Buyelwa Patience Sonjica, as part of a cabinet reshuffle.

In June 2005, Hendricks took on the difficult job of replacing Phumzile Mlambo-Ngcuka, who was promoted from mines and energy minister to deputy president, replacing Jacob Zuma. As another part of the recent cabinet reshuffle, Xingwana was moved, but promoted, from deputy minister of minerals and energy to minister of agriculture and land affairs.

Minister's report card

2006-09-05T14:21:00.000-07:00

AWOL
Mandisi Mpahlwa
Minister of Trade and Industry
Mpahlwa kept a low profile when he was deputy finance minister, but he has been practically invisible as Minister of Trade and Industry.

The national Treasury has been quietly bumped from its position at the centre of the debate, and industrial policy has elbowed its way onto the stage, trailing footnotes to development economists like Dani Rodrick.

With Alan Hirsch, a former departmental mandarin, running the economic policy unit in the presidency, perhaps it is not surprising that the things Mpahlwa's department is supposed to manage - such as industrial support schemes and efforts to keep the prices of key input low - are now being touted as the answer to higher growth rates.

So why isn't Mpahlwa evident in the vanguard?

Phumzile Mlambo-Ngcuka has been given custodianship of the Accelerated and Shared Growth Initiative (Asgi, perhaps the most infelicitous acronym in the government's alphabet soup) for what seem largely to be political reasons.

And one of Mpahlwa's two deputies, Rob Davies, is charged with leading the industrial policy side of the plan. He also seems to be doing most of the talking on trade issues.

Has that freed up Mpahlwa to focus on development finance institutions - an area where he has real expertise? Apparently not. While the Industrial Development Corporation ticks along, the National Empowerment Fund, Apex Fund and Khula seem stuck in a period of reorganisation and consolidation.

Has he instead focused on trade negotiations? If so, it isn't clear. This is an area in which South Africa, under that canniest of negotiators, Alec Erwin, had real prestige. As the faltering Doha development round stumbled on in Hong Kong, developing-world leadership came from India, Brazil and China.

Mpahlwa's profile suffers in part because he has one of the least effective communications departments in the Cabinet, but also because his department is under-resourced and not fully recovered from the legacy of its former director general, Alistair Ruiters. Perhaps he has spent the year getting his ducks in a row. We hope so, because next year a good deal more will be expected of him.