mining together - CacheFly

Annual Report 2006 – 2007

Contents

Structure of the Chamber . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Inside front cover

Chamber members . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2

Chief Executive’s review . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3

Communications . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .6

Economic overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .10

Economic policy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .25

Environment policy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .41

Health . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .49

Labour policy and labour relations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .56

Legal issues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .64

Safety . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .68

Sustainable development . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .71

Skills development . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .75

Financial statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .81

Abbreviations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Inside back cover

mining together

Chamber of Mines of South Africa Annual Report 2006 – 20071

Chamber of Mines of South Africa

mining togetherThe mining industry today does not function in isolation. Overall strategies and decisionstake place through consultation within the tripartite structures and involve business, govern-ment and labour.

This is realised in such forums as the Mine Health and Safety Council, Business Unity SouthAfrica, the Growth and Development Summit, Nedlac, the Joint Implementation on PrioritySkills Acquisition and the Mining Qualifications Authority where business, government andlabour engage in sometimes vigorous debate on the future of the mining industry in SouthAfrica.

These interlocking forums ensure the overall health of the industry for the benefit of all SouthAfricans.

Annual Report2007

Chamber of Mines of South Africa

mining

About the Chamber

The Chamber of Mines of South Africa is a voluntary membership, private sectoremployer organisation founded in 1889, just three years after gold was discoveredon the Witwatersrand.The Chamber is an association of mining finance companiesand mines operating in the gold, coal, diamond, platinum, lead, iron ore, antimonyand copper mining sectors.

The Chamber exists as the principal advocate of major policy positions endorsed bythe mining employers and represents these to various organs of South Africannational and provincial governments and to other relevant policy-making and opinion-forming entities, both within South Africa and abroad. The Chamber alsoworks closely with the various employee organisations in formulating these positionswhere appropriate.

To facilitate this, the Chamber provides strategic support and advisory input to itsmembers. It promotes interaction among mine employers to examine and deliberatepolicy issues and other matters of mutual concern to define industry-level stances.Consultation and co-operation within the Chamber system occur on a voluntarybasis and do not encroach on the managerial prerogatives of individual mines andmining groups.

A range of professional resources is maintained to support the policy review andadvocacy functions and to equip the Chamber to render advice to its members.Specialist areas of expertise include mine health and safety, skills development, sus-tainable development, communications, environmental management, economics andindustrial relations.

The chief policy-making body of the Chamber is the Executive Council, aided by theGold Producers’ Committee and the Collieries’ Committee. The principal committeesin turn draw on the input of various expert committees and working structures.

Cham

ber of Mines of South A

fricaA

nnual Report 2007

business

labour

government

together

Structure of the Chamber

Chamber Management

Gold Producers’ Committee

Executive Council

Collieries’ Committee

Sam Coetzer Zoli Diliza Godfrey GomweJeff Gerard Terence Goodlace Robbie Lazare Vincent Maphai

Warwick Morley-Jepson

Ras Myburgh

Graham Briggs

Sipho Nkosi David Noko Nico Pienaar Tony Redman Bernard van Rooyen Herman Wenhold Andre Wilkens

Terence Goodlace Robbie Lazare Alwyn Pretorius

Ayanda Bam Jeff Gerrard Wayne Isaacs Rowan Karstel

Pieter Scheepers Wilco Uys Ernst Venter Riaan van der Merwe

Niks LesufiEnvironmentalAdviser

Fazel RanderaHealth Adviser

Sietse van der WoudeSafety & SustainableDevelopment Adviser

Roger BaxterChief Economist

Sibongiseni DlaminiCommunicationsAdviser

Jeanette Hofsajer-van Wyk Information Services

Elize StrydomIndistrial RelationsAdviser

Vusi MabenaSkills DevelopmentAdviser

Peter AnscombeLegal Adviser

Ralph HavensteinVice-president

Lazarus ZimPresident

Bernard SwanepoelVice-president

Frans BarkerSenior Executive

Peter BunkellExecutive Manager:Chief Executive’s Office

John WinsonExecutive Manager Financial & Admin. Services

Zoli DilizaChief Executive

AbbreviationsABET – Adult basic education and training

ART – Antiretroviral therapy

ASGISA – Accelerated Shared Growth Initiative for South Africa

BEE – Black economic empowerment

BUSA – Business Unity South Africa

Capex – Capital expenditure

CCMA – Commission for Conciliation, Mediation and Arbitration

COR – Certificate of registration

CPIX – Consumer price index

CSIR – Council of Scientific and Industrial Research

DEAT – Department of Environmental Affairs and Tourism

DME – Department of Minerals and Energy

DPE – Department of Public Enterprises

DWAF – Department of Water Affairs and Forestry

EAC – Education Advisory Committee

EIA – Environmental Impact Assessment

EIA – Energy Information Administration

EPC – Environmental Policy Committee

EU – European Union

Fe – Iron

FET – Further education and training

FOB – Free on board

FOR – Free on rail

FTS - Flow through shares

GDP – Gross domestic product

GFCF – Gross fixed capital formation

ICMM – International Council on Mining and Metals

IDEX – International Diamond Exchange

IFR – Industries Forum on Radiation

IMF – International Monetary Fund

IUCN-SA – The South African chapter of the World Conservation Union

JIPSA – Joint Implementation on Priority Skills Acquisition

JSE – Johannesburg Securities Exchange

MEM – Mine Environmental Management

MEPF – Mine Employees Pension Fund

MIASA – Mining Industry Associations of Southern Africa

MHSC – Mine Health and Safety Council

MOSH – Milestones on Occupational Safety and Health

MPF – Mineworkers Provident Fund

MPRDA – Mineral and Petroleum Resources Development Act

MQA – Mining Qualifications Authority

NBI – National Business Initiative

NCCC – Nations Framework Convention on Climate Change

NEMA – National Environmental Management Act

NEM:AQA – National Environmental Management: Air Quality Act

Nepad – New Economic Partnership for Africa’s Development

NGO – Non-governmental organisation

NNR – National Nuclear Regulator

NQA – National Qualification Framework

NRF – National Research Foundation

NSA – National Skills Authority

NSDS – National Skills Development Strategy

NSP – National Strategic Plan

NUM – National Union of Mineworkers

OHS – Occupational health and safety

USGS – United States Geological Survey

PDA – Personal digital assessments

Pgms – Platinum group metals

PMA – Precious Metals Act

RBCT – Richards Bay Coal Terminal

REACH – Registration, Evaluation and Authorisation of Chemicals

SADC – Southern African Development Community

SAEON – South African Environmental Observatory Network

SAMBF – South African Mining and Biodiversity Forum

SANAC – South African AIDS Council

SAPIA – South African Petroleum Industry Association

SAPS – South African Police Service

SAQA – South African Qualifications Authority

SETAs – Sector Education and Training Authorities

SIMRAC – Safety in Mines Research Advisory Committee

SPC – Sector Partnership Committee

UASA – United Association of South Africa

UNECA – United Nations Economic Commission for Africa

US$ – United States dollar

VCT – Voluntary counselling and testing

WISA – Water Institute of Southern Africa

WRC – Water Research Commission

YoY – Year-on-year

Chamber membersFinancial corporations

Anglo American Corporation plc.

Barrick Africa

Coal mining

Anglo Operations Limited, Anglo Coal Division

Delmas Colliery

Exxaro Resources Limited

Ingwe Collieries Limited

� Douglas Colliery Limited

� Khutala Mining Services (Pty) Limited

� Optimum Colliery Limited

Kangra Group (Pty) Limited

Sasol Mining (Pty) Limited

Tweewaters Fuel (Pty) Limited

Umcebo Mining (Pty) Limited

Xstrata Coal South Africa

Diamond mining

De Beers Consolidated Mines Limited

Namakwa Diamond Company

Trans Hex Group Limited

Gold mining

African Rainbow Minerals Limited

AngloGold Ashanti Limited

Gold Fields Limited

� Beatrix Mining Company Limited

� Driefontein Consolidated (Pty) Limited

� Kloof Gold Mining Company Limited

� South Deep Gold Mine Limited

Harmony Gold Mining Company Limited

� Elandsrand

� Harmony Free State

� Harmony Freegold

� Harmony Randfontein

JCI Gold Limited

Platinum mining

Anglo American Platinum Corporation Limited

Impala Platinum Limited

Lonmin Platinum Limited

Base metals/minerals & exploration companies

ASA Metals (Pty) Limited

BHP Billiton (SA) Limited

Delta Mining (Pty) Limited

G & W Base and Industrials (Pty) Limited

Imerys South Africa (Pty) Limited

Kumba Iron Ore Limited

Mvelephanda Resources Limited

Randgold and Exploration Limited

Rand Ridge Mining

Vametco Mineral Corporation (Pty) Limited

Other members

Corobrick (Pty) Limited

Deilmann-Haniel GmbH

Murray and Roberts (Cementation) (Pty) Limited

RUC Holdings

Shaft Sinkers (Pty) Limited

Associations

Aggregate and Sand Producers Association of South Africa

Clay Brick Association Limited

SA Association of Mining Contracting Companies

South African Diamond Producers’ Organisation

Suspended operations

City Deep Limited

Consolidated Main Reef Mines and Estates Limited

Crown Mines Limited

mining together


The continued success of the mining industry depends,among other issues, on the collaboration and commitment ofits alliance partners. The Chamber of Mines believes that topursue its lobbying and advocacy functions, it can achievemore by working with government, labour and other stake-holders, hence our theme for this year's Annual Report is'mining together'.

During the year under review the industry experienced anumber of challenges, including wage negotiations; the pos-sibility of compensation claims by mining companies forproperty deemed to have been expropriated by the introduc-tion of the Mineral and Petroleum Resources DevelopmentAct (MPRDA); changes to the environmental regulatoryframework; environmental legacy issues; skills shortages; andhealth and safety issues. However, the shared commitmentby Chamber members, working together to augment andstrengthen relations, and the ongoing collaboration with gov-ernment and labour made it possible to deal successfullywith a number of the major issues, some of which couldhave had adverse consequences for the industry.

The year under review saw the expiry of the two-yearwage agreements of 2005, which led to the 2007 wage nego-tiations beginning in June in respect of the gold and coal sectors.Following several meetings, a two-year wage agreement was signedon 30 August 2007 for the gold sector and on 07 September for thecoal industry.

Whilst on the issue of employment and employees, I mustexpress the Chamber's ongoing commitment to ensuring that it isitself appropriately staffed, and that it addresses transformation andemployment equity issues within its own organisation. Our chiefwage negotiator and Industrial Relations Adviser, Elize Strydom, isone of a group of senior and influential women employed by theChamber.

Another potentially contentious area was the period of extensiveprescription in respect of the right to claim compensation for expro-priation that began in May 2004 and was to have run for a periodof three years. Because of the expiry date of 30 April 2007, theChamber held high-level discussions with the Department ofMinerals and Energy. An agreement to extend the period of exten-sive prescription applicable to compensation claims for propertyexpropriated as a consequence of the commencement of theMPRDA was reached. The Chamber submitted its proposed amend-ments and made oral submission to the Portfolio Committee onMinerals and Energy. Some outstanding provisions are still of majorconcern to the industry, but the Chamber is confident that furtherhigh-level meetings with appropriate stakeholders will yield positive results.

Co-operation with stakeholders isalso being conducted on theAccelerated and Shared GrowthInitiative of South Africa (ASGISA). TheChamber participates in this pro-gramme, which aims to increase theeconomic growth rate of the country to6% by 2009. An increase in the growthrate will mean added capacity to dealsuccessfully with major national policyimperatives such as job creation,poverty alleviation and transformation.Of considerable concern is the fact thatthe existing growth rate is concentratedin the non-tradable sectors of the econ-omy such as construction, finance andretail. The supply side, which includesthe tradable sectors like mining, agricul-ture and manufacturing, continues togrow much slower than the rest of theeconomy. Contributors to this scenarioare the volatile currency; a slow rate ofmining investment; shortcomings ininfrastructure; and regulatory con-straints, mainly environmental and min-ing licensing. productive engagements

mining together


Zoli Diliza, Chief Executive of the Chamber of Minesof South Africa

Chief Executive’s review

between the Chamber and relevantstakeholders are well advanced in find-ing workable solutions to these problems.

The continued decline in investmentand the slow growth rate in miningprompted the Director-General ofMinerals and Energy to establish a high-level task team on mining investment.In June 2007, a comprehensive reportwas presented at a workshop at theDevelopment Bank of Southern Africawhere it was agreed that the regulatoryand infrastructural constraints and theimpact of the volatile exchange rate hadplayed a role in the decline of mininginvestment in the country. There hassince been a steady increase in realfixed investments in late 2006 and thefirst six months of 2007. Solutions con-tinue to be sought to address the infra-structural impediments.

Infrastructural problems are particu-larly deleterious in the coal sector. Oneof the issues is road transportation ofcoal. The Chamber is facilitating co-operation between the coal miningindustry and the Mpumalanga Provinceto find ways to ameliorate damage tothe roads caused by the road transportof coal for export and energy produc-tion.

Mining operations are relativelyenergy intensive and the major energycarriers are electricity and diesel fuel.The increase in electricity demandexperienced by the country is of con-cern as generation reserves are inade-quate at less than 10%. An electricitysupply shortage problem was experi-enced at the beginning of 2007, whichaffected a number of mining operations.The Chamber is aware of some of themeasures that are in place to alleviatethe problem. These include, the intro-duction of a gas turbine in the WesternCape and other energy planningprocesses that are being established.The Chamber advocates that the plan-ning strategy by the disparate role play-ers be linked to address not only thelong-term, but also the immediate needsof the country.

The production of electricity andoperational activities of all heavy

industries, including mining, have environmental side effects thatare a severe challenge for the country. There are sometimes diver-gent views between the regulator and the mining industry on theimplementation of aspects of the MPRDA and the administration of,and amendments to, the National Environmental Management Act(NEMA) by the Department of Environmental Affairs and Tourism.The Chamber is concerned about duplication of the environmentalimpact assessment requirements in both the MPRDA and NEMA. Itbelieves that one streamlined process co-ordinated by theDepartment of Minerals and Energy should be developed.

Additional environmental concerns are the legacy issues, suchas those affecting the Wonderfontein Spruit catchment area and theLoskop Dam catchments. The Chamber continues to engage withthe Department of Minerals and Energy, the Department of WaterAffairs and Forestry, the National Nuclear Regulator, the miningcompanies and other stakeholders such as environmental NGOs, inan effort to address these contentious and often emotive issues andto provide expert advice.

Also on the environmental front are the difficulties with regardto the requirements for financial provisions for mine closure thathave not yet been resolved. A workshop was held in August 2006between the Chamber's members and the Department of Mineralsand Energy. Although the department continues to work 'within thecurrent legislation', the Chamber is hopeful that the proposedamendments to the MPRDA will address some of its concerns onpremature closure.

In its continued commitment to engage with government, theChamber organised a visit to Mponeng gold mine for the Ministerof Minerals and Energy, Ms Buyelwa Sonjica, in April 2007. Theengagements with the minister and the mine visit were most pro-ductive. Both the Chamber and the Minister recognise the need formore visits to take place so that Minister Sonjica is comprehen-sively exposed to all sectors of South Africa's world-class miningindustry.

Subsequent to a meeting with the Chairperson of the WaterAffairs and Forestry Parliamentary Portfolio Committee, Ms ConnieSeptember, in May 2007, the Chamber co-hosted a visit toRandfontein Estate mines by this Committee and the GautengDepartment of Water Affairs. The visit to the Randfontein Estategold mine presented an opportunity for the Committee to obtain anappreciation of the water management challenges faced by themining industry and the efforts undertaken to address them.

In its quest for a safe and healthy working environment themining industry, along with government and labour, continue tolook for solutions to achieve zero fatality and injury targets. Themining industry is aware of the need to reduce its accident rateand to this end a resolution was taken at the 2007 Health andSafety Summit where it was agreed that Chamber members shouldmove beyond sharing and working together on the adoption ofbest practices.

In line with these efforts, the Chamber has developed aSustainability and Transformation Report aimed at presentingcredible and balanced information on the industry's sustainabilityand transformation performance. This report is the only sector

mining together


report of its kind in South Africa and one of the few being pub-lished internationally.

Another challenge faced by the industry is findings of the inves-tigation into the risks from large seismic events commissioned bythe Chief Inspector of Mines. The Chamber established a workinggroup of experts from mining companies to review the findings andrecommendations of the report and the results have been forwardedto the Chief Inspector of Mines.

Closely related to ongoing efforts to create a safer working envi-ronment are interventions aimed at maintaining the health andphysical well-being of all employees. The HIV/AIDS pandemic con-tinues to be a major concern for the industry. The 2007 – 2011National Strategic Plan, which is a product of extensive consulta-tion with all stakeholders, has articulated milestones to be achievedin the next five years. The Chamber welcomes any efforts that willease the impact of the disease as it affects both the people of ourcountry and the economy.

Another people-related problem facing South Africa and themining industry is the skills shortage and, in particular, the shortageof artisans. As South Africa witnesses increased infrastructuraldevelopment, the demand for artisan skills increases. The Chamberengages in forums that address national skills development andtraining issues and these engagements are aimed at positioning themining industry as a vital role player in shaping legislation and policy implementation strategies.

Apart from its liaison with stakeholders at home, the Chamberalso interacts with international role players that are important tothe business of mining. Through its co-operation with theInternational Council on Mining and Metals and Eurometaux, theChamber was instrumental in influencing the European Union'slegislation on the Registration, Evaluation and Authorisation ofChemicals (REACH), which, without the Chamber's well-consideredlobbying and advocacy programme, could have had severe implica-tions for the mining industry in South Africa and the rest of theAfrican continent.

When the Secretary-general of Eurometaux visited South Africathe Chamber organised a workshop for its members to:

� clarify the final text of the REACH legislation and the specificrequirements and compliance timelines relevant to SouthAfrican mining companies

� clarify steps to be taken by companies towards REACH compli-ance

� clarify available support � present a report on the progress of different commodities

towards REACH compliance.

Moving to liaison in Africa, the Chamber continues to host theSecretariat of the Mining Industry Associations of Southern Africa(MIASA), an association of the six chambers of mines (Botswana,Namibia, South Africa, Tanzania, Zambia and Zimbabwe) operatingin the Southern Africa Development Community (SADC).

During the period under review, two former ChamberPresidents, Con Fauconnier and Barry Davison retired as did GaryRalph, a member of the Chamber's Executive Council. Their

immense contribution to the industry,especially during the challenging and capricious process ofthe drafting of the Mineral andPetroleum Resources Development Act,is immeasurable. Although they areretiring from the industry, the Chamberwill still seek their wisdom in address-ing some of the challenges in the indus-try particularly in 2009 when progressrelating to requirements contained inthe mining Charter will be assessed.

The Chamber also lost both its vice-presidents: Ralf Havenstein and BernardSwanepoel, who resigned as chief exec-utives of Anglo Platinum and HarmonyGold respectively. Their valuable sup-port and contribution to the industrywill be missed.

Dr. Vincent Maphai, the Chairmanof BHP Billiton South Africa has takenover as a Chamber Vice-president and Iam positive that with his experience theChamber will continue to contributepositively to the good health and vitalityof the mining industry as well as theeconomy.

In conclusion, I would like to reiter-ate my ongoing commitment, and thatof the Chamber, to extensive collabora-tion with all mining industry stakehold-ers. I believe these interactions will, inthe long run, provide continuous oppor-tunities for the country and ensure thatthe mining industry maintains its world-class reputation, which it so clearlydeserves.

Mining industry stakeholders haveincreasingly come to appreciate thatadversarial engagements are not thecorrect processes required to shapemutually beneficial outcomes. By utilis-ing existing, and introducing new, plat-forms of engagement we have come toa common understanding that isfounded on the principle that better out-comes are only possible through co-operation and collaboration and thatmining together for the good of thecountry is the solution. We remaincommitted to working closely with gov-ernment and labour in various forumsand ensuring that these structures areused effectively for the benefit of theindustry and the country.

mining together


mining together


Communications

Effective communication is vitally important as it can have a pro-found impact on the image and the success of any organisation.The Chamber, in its advocacy and lobbying role with government,labour and other stakeholders relies on information, transparencyand candour – important ingredients if it is to remain the recog-nised, authoritative voice of the mining industry in South Africa.The Chamber must ensure that it is clear and knowledgeable whenimparting information. This means that in its communicationendeavour the Chamber must accurately identify the tools andactivities that are most appropriate in communicating key messagesto its stakeholders.

The Chamber’s reputation depends on its ability to create andnurture relationships with its stakeholders. In keeping its stakehold-ers informed, it engages in multi-channel communication thatinvolves a range of flows of information and, where necessary, anupgrade of its current communications technology and network sys-tems to enable effective communication. The Chamber is fullyaware that the type of communication channel used needs to beappropriate to the message being conveyed and that barriers tocommunication can arise from choosing an inappropriate method.

The Chamber’s communications service is responsible for devel-oping and disseminating strategic messages to external audiences,and for gathering the information that needs to be related. TheChamber is proactive in keeping members of the public, govern-ment and all other stakeholders informed of the organisation’sactivities on behalf of the mining industry in the economic andsocio-economic spheres, on health, legislation and safety issuesand in the area of the environment, skills development, and sus-tainable development.

Publications

The Chamber publishes a wide range ofbooks, reports and newsletters that con-tain information related to its lobbyingand advocacy role. These publicationsare used to inform and interact with theChamber’s different audiences.

‘mining’ – the Chamber’s flagship publication

This quarterly publication continues togrow exponentially and has proved tobe a huge success in promoting greaterglobal awareness of mining activitiesand opportunities in South Africa. Itcovers a range of mining related issuesand impartially analyses the state of themining industry in South Africa.Over 3 500 copies are distributedlocally and abroad to carefully selected

investment analysts, financiers, and pol-icy and decision makers in governmentsand elsewhere.

Issues covered range from legislationand empowerment, environmental sus-tainability, beneficiation, silicosis, tuber-culosis, small-scale mining, safety, minewater and acid drainage, and skillsdevelopment.

Mining News

Mining News places special emphasison reaching mines, and mine employ-ees and their families. It also encour-ages miners to contribute to thepublication since their perspective andenergy is vital to the success and futureof the industry.

Contained in this monthly newspa-per is relevant information that is ofinterest to the industry’s workforce. Theinformation empowers employees tobecome better informed and responsi-ble partners in the economic prosperityof the mining sector in South Africa. Thenewspaper has also become a usefulteaching tool in adult basic educationand training (ABET) classes.

mining together


One of the many stories covered by Mining News during the year: The FlyingDoctor and Health Outreach Service sponsored by De Beers

Website

Communications services maintains theChamber’s website and offers web serv-ices for the other Chamber departments.The website (www.bullion.org.za orwww.chamberofmines.org.za) provideslinks to a host of important sources, forexample, service and equipment suppli-ers, international and local mininghouses, newspapers, and the miningresearch community.

Communications will continue toextend the range of the website to pro-vide up-to-date information forinvestors, market analysts, researchersand other interested parties.

The Chamber is aware that technol-ogy can benefit the organisation if usedcorrectly. As a result it has started work-ing towards upgrading and improving itswebsite for enhanced functionality andeasy navigation.

Compendium

This monthly newsletter contains infor-mation on the latest regulatory develop-ments relevant to decision makers and

stakeholders in the mining industry; skills development and theenvironment; economic issues that impinge on the mining industry;and health, safety and sustainable development strategies.

Facts & Figures

Facts & Figures provides statistical data as well as comment andanalysis of the data. It is published annually in both hard copy andon the Chamber’s website. It is an invaluable source of mining dataand statistics on the industry in South Africa, bringing together gen-eral mining industry information and product-specific data from ahost of sources, including Statistics South Africa, the MineralsBureau, the South African Reserve Bank, the mining houses andgovernment departments.

Stakeholder engagement

Government

In September 2006, the Chamber organised a visit to the Chamberfor the minister of minerals and energy, Ms Buyelwa Sonjica, and adelegation from her department. The minister first attended presen-tations at the Chamber that focused on the objectives and workingsof the Chamber, the status of the mining industry and a selection ofissues currently confronting the industry. The visit was a huge suc-cess and the minister accepted an invitation to visit one of themines in the near future.

The highly successful visit to Mponeng gold mine, which the

mining together


Mining’s social responsibility – ‘When expediency meets social responsibility’, Dec. – Feb. 2006/07. This story was just one ofthe many in-depth articles covered in the Chamber’s flagship publication

Chamber subsequently arranged, took place in April 2007. TheChamber’s chief executive, Zoli Diliza, accompanied the minister.She requested that a follow-up visit to the Rand Refinery bearranged for her. The Chamber is currently working on this request.

Parliamentary portfolio committees

The Chamber’s chief executive and his delegation gave a presenta-tion in February 2007 to the Select Committee on Economic andForeign Affairs at Parliament. The presentation focused on theobjectives and workings of the Chamber and the status of the min-ing industry. After the presentations and interactions with the selectcommittee, Zoli Diliza extended an invitation to the chairperson,Ms Mntwanambi, and the rest of the committee members to visitthe mining industry and acquaint themselves with mining opera-tions.

The same invitation was extended to the portfolio committee onwater affairs and forestry after a meeting with its chairperson, MsSeptember.

The chairperson accepted the invitation and in May 2007 theChamber and the Gauteng Department of Water and EnvironmentalAffairs jointly organised and hosted the visit by the portfolio com-mittee to the Randfontein mine. The Chamber made presentations

to the committee and the site visithelped committee members appreciatethe water management challenges facedby mining companies.

The discussions were on a range ofwater management issues and the chal-lenges facing the mining industry.

Media relations

The Chamber maintains links with themedia through media briefings, mediaconferences, interviews and informalcontacts. The year under review waschallenging as issues of wage negotia-tions, the environment, investmentopportunities and safety, amongst oth-ers, took centre stage. The Chamberresponded swiftly and effectively to pos-itively manage perceptions while ensur-ing that messages contain substancerather than ‘hype’ and are unambiguous.

mining together


mining together


Economicoverview

Introduction

Robust global economic growth, coupled with rapid economicdevelopment in China, low international stock levels and slowgrowth in the supply of many minerals continue to provide positivefundamentals for the mineral markets. By the end of June 2007, theglobal commodities boom had been running for 68 months andwas up by 281% in United States dollar terms. It has lifted theglobal mining sector with continued improvement in mineral saleslevels, exploration expenditure, investment and growth.

However, the global mining industry has struggled to grow sup-ply to match demand as a number of constraints have affected thesector, including shortages of skills, delays in the delivery of equip-ment, infrastructure and transport problems, and regulatory con-straints.

The hollowing out of exploration in the lean years of the 1990scombined with long lead times to bring projects to fruition and ris-ing costs are challenging the global industry.

The South African mining sector has begun to take advantage ofthe boom with investment and mineral sales turning around posi-tively in 2006 and early 2007. The lagged production response tothe decline in investment in 2004 and 2005 manifested in slightlylower local production in 2006. In the first half of 2007 productionstarted to recover. This should help ease pressure on the currentaccount of the balance of payments and support higher economicgrowth.

Robust global economic growth

According to the International Monetary Fund (IMF), world eco-nomic growth accelerated to 5.4% in 2006 from 4.9% in 2005.This growth is considerably higher then the 4.1% trend achievedover the past decade and is indicative of global growth brought

about by China’s industrialisation, otheremerging Asian economies and Brazil.Industrialisation in these countries islikely to be materials intensive, which isencouraging for the market fundamen-tals of most minerals.

China achieved a growth rate of10.7% in 2006. Chinese economicgrowth surged by a further 11.5% in thefirst half of 2007 on the back of contin-ued high investment levels combinedwith strong export growth. Indian indus-trialisation also bodes well for growth inmineral demand.

A key risk to world economicgrowth is the possible impact of rapidlyescalating crude oil prices, which willfuel inflation, force central banks toraise interest rates and increase the costof consumption growth in certain coun-tries. The IMF expects global economicgrowth to slow from 5.4% in 2006 to4.9% in 2007 and 2008.

The continuing commodities boomand positive market fundamentals haveresulted in a healthy global miningindustry. Total revenue for the top 40mining companies increased by 37% toUS$249-billion in 2006, capital invest-ment increased by 32% to US$37-billion and most of the industry’s finan-cial indicators improved. Copperaccounted for 32% of total sales atUS$68-billion, followed by coal at14%, iron ore at 14%, other metals at11%, gold at 9%, nickel at 5%, alu-minium at 5% and platinum at 5%.Europe and North America accountedfor 37% of total revenue with Chinaand India both at 8%.

Operating expenses of the top 40mining companies were up by 23% in2006 owing to higher material, energy,labour, transportation and contractorcosts. Delivery delays for plant andequipment have had a major impact onproduction volumes and unit operatingcosts.

According to the Australian FinancialReview, large haul trucks are taking 25months from order to delivery versushistoric lead times of only three months.

mining together


European UnionAdvanced economies

USAWestern hemisphere

WorldNewly industrialised Asian economies

Africa: Sub-SaharaMiddle East

Central and Eastern EuropeCIS

IndiaDeveloping Asia

China

0 2 4 6 8 10 12

Average 2002 – 20062007/2008 projected

Real GDP growth, average of the past five years

Source: IMF

mining together


The South African mining sector in 2006:

� accounted for 7% of gross domestic product (GDP) directly, although the indirect multiplier effects take the contribution to

about 18.4% of GDP in total. The industry’s contribution to GDP fell by 0.7% mainly because of the declines in investment

recorded in 2004 and 2005, which manifested in lower overall mining production in 2006. The indirect multipliers include

backward linkages (e.g. transport, professional services, etc.), forward linkages (e.g. electricity generation) and the induced

effect via mining generated incomes

� directly accounted for 6.5% of total fixed investment and for 9.1% of the total private sector investment versus 6.3% and

8.7% respectively in 2005. If the multiplier effect is taken into account, mining helped generate about 16% of total invest-

ment in the economy. The reason for the rise in the contribution of mining is the encouraging recovery in real mining invest-

ment that grew by 14.5% in 2006 following declines of 20% in 2004 and 13.2% in 2005

� continues to act as a magnet for investment in South Africa. As at 29 December 2006 the mining sector accounted for R1.6-

trillion, or 31.2%, of the value of the Johannesburg Securities Exchange. About R15.6-billion was paid to investors in the

form of dividends. The mining sector contributed substantially to the JSE being ranked in the top 20 stock exchanges world-

wide

� contributed R140-billion to South African exports, representing 32.3% of the country’s total merchandise exports and

accounting for 25.2% of the country’s total foreign exchange earnings. If beneficiated minerals are added to primary minerals

(e.g. ferro-alloys, steel, chemicals, catalytic converters), then the sector accounts for just over 50% of merchandise exports.

In terms of foreign exchange earnings per unit of GDP, mining generates the most foreign exchange of the economy

� concluded R24-billion worth of empowerment deals, making the resources sector the largest contributor to black economic

empowerment (BEE) deals by value for the second year in a row according to BusinessMap (around R21-billion in BEE deals

were concluded in 2005). Over the past 11 years a total of R91-billion worth of empowerment deals have been concluded

in the resources sector making it the largest contributor to empowerment by value (versus financial services, which has con-

cluded R61-billion in deals thus far)

� moved about 100 million tons of bulk commodity ores for export on the rail system and thus was the dominant user of the

country’s railways and ports. The 100 million tons of bulk commodity exports represents 54% of the whole of Transnet’s vol-

ume of transport in 2006

� directly employed an average of 458 600 workers in 2006, against 444 132 in 2005. It is estimated that another 152 800

workers are employed in associated industries that either supply products to, or use products from the mining industry.

Around five million people are directly dependent for their daily subsistence on mine employees

� accounted for 6.3% of those employed in the non-agricultural formal sector of the economy and 8.1% of the total private

sector of non-agricultural employment in 2006. If the multiplier and induced effects of the industry are used, the contribu-

tion to employment as a result of mining rises to about 20% of total non-agricultural formal sector employment in South

Africa

� paid R40-billion in wages and benefits to employees, which accounted for about 5.4% of the total compensation paid to all

employed people in the country in 2006. This contributed substantially to domestic demand in the economy

� paid R16.2-billion in direct taxes and a major portion of indirect taxes to the fiscus in 2006. Mining direct taxes accounted

for about 12.4% of total company tax (and secondary tax on companies) paid to government

� was the world’s largest producer of platinum group metals (pgms), gold, chromium, ferrochrome, vanadium, manganese and

vermiculite. The industry was also a major supplier of aluminum (world rank 9), antimony (7), coal (5), ferromanganese (4),

ferrosilicon (6), iron ore (7), manganese ore (2), nickel (9), phosphate rock (10), silicon (8), titanium minerals (2), uranium

(11) and zirconium (2)

� accounted for a substantial amount of the supply and demand for energy. The industry consumed 31 800 gigawatt hours –

15.3% of Eskom’s local electricity sales, whilst 112 million tons of coal was mined and used for electricity generation, which

accounted for about 93% of the electricity produced in the country. The mining industry used about 762 million litres of

diesel in 2006, or 9% of the total amount of diesel used in the country in that year. About 43.7 million tons of coal was first

mined and then used in the manufacture of synthetic fuels and accounted for about 37 % of local liquid fuel supply. This

represents an annual saving of foreign exchange of more than R30-billion annually.

Global explorationexpenditure trends

According to the Metals EconomicsGroup, exploration expenditure grew by45.8% to a record US$7.1-billion in2006. Latin America attracts 24% ofglobal exploration expenditure with a230% increase between 2003 and2006. The second largest recipient ofexploration expenditure is Canada witha 19% share. Africa (outside of SouthAfrica) grew by 239% between 2003and 2006 and now accounts for 11.7%of global exploration expenditure. Thisreflects the improvements in explorationand mining regulatory systems estab-lished in many African countries.

Unfortunately, South Africa’s shareof global expenditure grew by a moremodest 139% and the country accountsfor less than half of the share of the restof Africa. South Africa’s explorationexpenditure increased by 46.9% in2006, almost the same rate of growth asglobal exploration expenditure.

The South African mining industry

The South African mining sector beganto recover in late 2006 and first half of2007. Higher dollar prices and aslightly weaker exchange rate translatedinto a 34.3% increase in the value ofmineral sales to R195.6-billion in 2006.Real fixed investment improved by14.8% to R14.2-billion.

Unfortunately, the improvement ininvestment was insufficient to compen-sate for the declines that had takenplace in 2004 and 2005 with the resultthat production fell by 1.5% in 2006.The increase in mining investment wasparticularly clear in the second half of2006 and had its genesis in the weakerrand exchange rate coupled with high-level engagement between government,labour and industry on ways to addressregulatory and infrastructural constraints

mining together


04.1

1.20

01

24.0

2.20

02

16.0

6.20

02

06.1

0.20

02

26.0

1.20

03

18.0

5.20

03

07.0

9.20

03

28.1

2.20

03

18.0

4.20

04

08.0

8.20

04

28.1

1.20

04

20.0

3.20

05

10.0

7.20

05

30.1

0.20

05

19.0

2.20

06

11.0

6.20

06

2006

.10.

03

23.0

1.20

07

15.0

5.20

07

0

50

100

150

200

250

300

350

400

450

Gea

ring

rat

io

Ret

urn

on c

apita

l

Net

pro

fit

Ret

urn

on e

quity

Effe

ctiv

e ta

x ra

te

EBIT

DA

mar

gin

0

5

10

15

20

25

30

35

40

45

% o

r ra

tio

2003 2004 2005 2006

PriceWaterhouse Coopers survey of top 40 mining companies’key indicators

Economist’s All Metals Index, US$ terms over the current commodity bull phase

2003 2004 2005 20060

1000

2000

3000

4000

5000

6000

7000

8000

South Africa

Rest of Africa

Australia

Canada

Latin America

Pacific/SE Asia

United States

Rest of world

Metals Economic Group – global exploration expenditure trends,2003 – 2006

and the volatile rand.

Total mining production was up0.9% year-on-year in the first half of2007 and if gold mining is excluded theincrease was 1.9%. With large increasesin capital expenditure in the year toJune 2007 for the whole sector,prospects for an improvement in thevolume of production are good. Theopening up of more mining face under-ground in the gold sector should helpslow the rate of decline in gold produc-tion.

The fall off in mining productionduring 2006 meant there was no com-mensurate volume response to thehigher prices. The turnaround in thesector during 2006 was reflected in thelabour figures with the number ofemployees in the sector rising by 3.3%to 458 600.

The increase is mostly attributable tothe growth in the pgm sector. Miningaccounted for 6.3% of total non-agricul-tural formal employment and 8.1% oftotal private sector non-agriculturalemployment. In 2006, R39.6-billionwas paid in wages and benefits to mineemployees and this accounted for 5.4%of the total compensation paid to allformally employed people in SouthAfrica.

Contribution to GDP

Despite a 14.8% improvement in realfixed investment in the sector in 2006,the declines in real fixed investment of20% in 2004 and 13% in 2005 resultedin a lag in mining production in 2006.The outcome of the decline in produc-tion of 1.5% fed through to a 0.7%drop in mining GDP to R68.5-billion in2006 real terms.

The contraction in mining GDP in2006 has to be seen in the context of a5% real economic growth for the coun-try as a whole. Mining productiondecreased in 2006 mostly as a result ofa 7.5% fall in gold production, a 1.3%drop in coal production and a 1% fallin diamond production during the year.The declines in production from these

mining together


J

J

J

JJ

J

J

J

J

J

JJ

J

J

JJ

J

J

J

JJJJ

J

J

JJJJ

J

J

J

J

J

JJ

J

J

JJJ

J

2004 2005 2006 2007-15

-10

-5

0

5

10

15

20

25

30

% Y

oY in

crea

ses

J Total Non-gold

J J

J J

JJ

J

JJJ

J J

J

JJ

J

J

J

J

JJ

JJ

JJJ

2001 2002 2003 2004 2005 2006 2007-15000

-10000

-5000

0

5000

10000

15000

20000

-40

-30

-20

-10

0

10

20

30

40

R'm

at c

onst

ant 2

000

pric

es

YoY

% g

row

th r

ate

Real mining GFCF

J YoY growth rate in mining GFCF

Real mining fixed investment on a seasonally adjusted real termquarterly basis, and the YoY growth rate in real mining GFCF

Growth rates in South African mining production

areas was not offset by a modest improvement in platinum produc-tion, a 3.4% growth in iron ore production and a 9.6% increase inbuilding materials production in 2006. Even when the gold sector isexcluded from the production numbers, the non-gold sector’s pro-duction declined by 0.3% in 2006.

At a nominal level, the mining sector still accounted for around7% of GDP or R120.2-billion in 2006. If the indirect multipliereffects are taken into account, then the overall contribution of min-ing to GDP is estimated to be 18.4%. The indirect multipliersinclude forward linkages, such as electricity generation and liquidfuels production; backward multipliers include suppliers and theinduced effect via mining generated incomes. Mining accounted for6.5% of total fixed investment and 9.1% of total private sector fixedinvestment in 2006. The mining sector continues to be a key com-ponent of the Johannesburg Securities Exchange and accounted for31.2% or R1.6-trillion of the value of the exchange at the end of2006.

Mineral sales and exports

The 6.4% depreciation in the rand exchange rate to R6.77/US$ in2006 and a rise in US$ commodity prices resulted in the value ofSouth African mineral sales increasing by 34.3% to R195.6-billionin 2006. The improvement in mineral sales was driven by a 98.3%increase in nickel sales to R7.8-billion, a 91.9% improvement incopper sales to R5-billion, a 70.4% increase in pgm sales to R65.5-billion, a 38.6% increase in gold sales to R37.4-billion and a 32%increase in iron ore sales to R9.9-billion. The strong growth in pgmsales further entrenched them as the top mineral category in thecountry and sales are now equivalent to both the gold and coalsectors combined. The top three minerals accounted for 72% of thecountry’s total mineral sales in 2006.

Total primary mineral exports increased by 33.6% to R140-billion in 2006. This accounts for 32% of total merchandiseexports. If secondary beneficiated minerals, such as ferro-alloys,steel, chemicals, plastics and catalytic converters are added, thenthe South African minerals complex accounted for just over 50% oftotal merchandise exports in 2006.

Coal

Coal provides about 70% of South Africa’s primary energy needs,with 93% of the country’s electricity and 37% of local liquid fuelproduction sourced from coal. It furnishes the basis for a worldclass electricity sector – one of the cheapest electricity sources inthe world. South Africa’s 2006 run-of-mine coal productionincreased by 2% to 312.5 million tons.

Total saleable coal production fell by 0.1% to 244.8 milliontons in 2006. Despite lower saleable production levels, the totalrevenue earned by the industry grew by about 5% year-on-year andamounted to R37.7-billion in 2006 of which R21.5-billion was rev-enue from export earnings. These numbers make coal the secondlargest component of the South African mineral sector by sales andthe third largest mineral export. The coal mining sector accountedfor about 1.2% of GDP directly (3% if the indirect multipliers areadded), 4.8% of merchandise exports, employed 57 777 workersand paid these workers R7.2-billion in salaries and wages in 2006.

World hard coal reserves and production

Total world hard coal reserves were 479 billion tons at the end of2006 (BP Energy Statistics for anthracite and bituminous coals). TheUnited States is the largest hard coal reserve holder with 24.1%,followed by India at 19%, China at 13%, the Russian Federation at10.3% and South Africa at 10.2%. If lignite and sub-bituminouscoals are added to hard coals then total reserves are about 909 bil-lion tons, of which South Africa has a 5.4% share.

Coal continues to be the world’s fastest growing hydrocarbon.

World hard coal production increasedby 8.8% to 5 370 million tons.Production increases recorded in Chinawere up 11.4% to 2.5 billion tons,Indonesia up 20.7% to 169 milliontons, Kazakhstan up 16.5% to 92 mil-lion tons and India up 7.3% to 427 mil-lion tons.

Global consumption (hard coal, sub-bituminous and lignite) rose by 4.5% to6.2 billion tons. The Asia-Pacific regionaccounted for nearly 90% of the growthin global consumption and 80% ofglobal production rise. Chinese coalusage grew by 8.7% and Chinaaccounted for more than 70% of thegrowth in global coal use. Consumptionin the United States declined for the firsttime since 2002. Elsewhere, coal usagerose by 3.5%, well above the 10-yearaverage.

The global energy market

High levels of economic growth and theindustrialisation of China, India andother Asian economies means that thereis continued expansion in the demandfor primary energy and in particular forgenerating electricity. Coal accounts forabout 25% of primary energy supply.This share is likely to rise to 30% by2030 as requirements double.

South Africa is a world leader in theproduction of synthetic fuels from coalvia Sasol. While global efforts arefocused on reducing greenhouse gasesand limiting the carbon footprint ofenergy generation and consumption;large strides in the development ofclean coal technologies and carbonsequestration will keep coal as a relevantand reliable source of primary energy.

World primary energy consumptiongrew by 2.4% to 10 878 million tons ofcrude oil equivalent in 2006. Accordingto the BP World Energy StatisticalReview coal provided 28.4% of theworld’s primary energy in 2006, com-pared to crude oil at 35.8%, natural gasat 23.7%, hydroelectric power at 6.3%and nuclear energy at 5.8%. Oil wasthe slowest growing fuel at 0.7%growth, while coal was the fastest at

mining together


4.5% growth compared to a decadeaverage of 2.8%. Although oil remainsthe world’s leading energy source, it haslost market share to coal and naturalgas in the past decade. Coal dominatesin the Asia-Pacific region, while naturalgas dominates in Europe and Eurasia.The Asia-Pacific region accounted fortwo thirds of global energy growth.

Global electricity production rose by4.2% to 19 027.7 terawatt-hours in2006. The European Union (EU) grewits electricity generation by 2.3% from1%. Electricity generation amounted to5 234.1 terawatt-hours, which repre-sents a 27.5% stake in world electricitygeneration. Production rose by 1.6%,which is lower than 10-year average of2.8%. The use of coal in the EUincreased by 3.1% in 2006. Asia grewits electricity generation by 8.5% to 6424.6 terawatt-hours, which is a 33.8%market share. The Asia-Pacific regionaccounted for about 70% of globalgrowth in usage and 60% of the pro-duction increase. Consumption of coalwent up 7.0% and the regionaccounted for 58% of global consump-tion. Production rose by 7.9% and theAsia-Pacific region accounted for 58.5%of total coal production. China, as themain driver of the Asia-Pacific market,contributed 39.4% of global produc-tion. Consumption followed the growthtrend as China accounted for 38.6% ofthe global total and recorded a growthrate of 8.7%.

World seaborne thermal coal market

The world seaborne hard coal marketcontinued its strong upward momentumand grew by 5.7% to 815 million tonsin 2006. Australia continues to domi-nate the world seaborne hard coal tradewith a 28.3% share followed byIndonesia 15.8%, the RussianFederation 11.3% and South Africa at8.5%. According to the (EnergyInformation Administration) EIA statis-tics, Japan is the largest importer of hardcoal with a 21.7% share followed byKorea at 9.8%, Taiwan at 7.8% and the

United Kingdom at 6.2%.

The rise of the coal mining sector is reflected in continuedstrong growth in the world seaborne market for thermal coal. Asanxiety mounts about the security of oil and gas supplies, countriesare falling back on coal. At the same time the steel boom has cre-ated a great need for coking coal.

Demand for imported seaborne thermal coal in the Asia-PacificBasin remained strong during 2006, with import tonnages growingby over 8% for the third consecutive year. The majority of the Asia-Pacific region’s demand growth is fuelled by China and India, sup-ported by growth from the traditional North Asian markets of Japan,Korea and Taiwan. Growth in Chinese demand for thermal coalpushed domestic Chinese coal prices above import prices. As aresult, not only did Chinese thermal coal exports decline by around11% or 6.5 million tons in 2006, but coastal utilities furtherincreased their import requirements, resulting in imports fromAustralia and Indonesia to China increasing by over 130% or sevenmillion tons in 2006. India faced a similar shortfall of domestic

mining together


China

USA

India

Australia

South Africa

Russia

Indonesia

Poland

Kazakhstan

Colombia

Rest of world

0 500 1000 1500 2000 2500

20052006

USA (24%)

Canada (1%)

Colombia (1%)

Kazakhstan (6%)

Poland (3%)

Russian Federation (10%)

Ukraine (3%)South Africa (10%)

Australia (8%)

China (13%)

India (19%)

Other (2%)

Global hard coal reserves, end 2006

Source: BP

Source: IEA

World hard coal production, 2005 and 2006

thermal coal that resulted in an increase of approximately 15% inimports. Thermal coal demand into the major markets of Japan,Korea and Taiwan increased by an estimated 2% over 2005 levels,as new coal-fired power stations were commissioned. China’s shiftto reducing exports of thermal coals and increasing imports for thecoastal generators has had profound ripple effects in the seabornemarket, with Australian port bottlenecks causing more SouthAfrican coal to be exported to Asia. Lower Chinese thermal coalexports to the Asian region provide opportunities for other majorexporters to grow exports into Asia.

Coking and PCI (pulverised coal injection) coals are key compo-nents of steel fabrication and make up about 12% of total globalhard coal consumption. Global steel production forecasts continueto show growth in Brazil, Russia, India and China. Construction ofnew integrated blast furnaces in Brazil and India in particular, willcontinue to drive demand for imported coking coal whilst furthergrowth is also forecast in Japan, Korea and Taiwan as new cokemaking capacity comes on line.

Production and sales

South African run-of-mine production increased from 306.3 milliontons in 2005 to 312.5 million tons in 2006. The coal discard rateincreased from 24.6% in 2005 to 27.7% in 2006. Saleable produc-tion decreased by 0.1% to 244.8 million tons in 2006. Total coalsales revenue amounted to R37.7-billion, of which local sales wereR16.2-billion and export sales R21.5-billion in 2006. Around 53%of South Africa’s coal production emanates from opencast mineswith the underground mining methods of bord-and-pillar, stopingand long-walling accounting for the rest. The top five companies:Anglocoal, BHP Billiton, Sasol, Exxaro and Xstrata coal accountedfor 90% of total saleable production in 2006.

The domestic market

Total domestic consumption increasedby 2.2% from 172.6 million tons in2005 to 176.4 million tons in 2006.Despite lower production levels, thetotal revenue for domestic coal grew toR16.2-billion in 2006. Electricity gener-ation used 108.7 million tons, whichaccounted for 62% of total local con-sumption. Average received prices fromEskom increased by 7.7% in 2006owing to inflation related adjustmentscoupled with changes in quality mixand delivery. Synthetic fuels consumed43.7 million tons (25% of local sales)and steel fabrication 5.7 million tons.Domestic merchants used 8.4 milliontons.

Coal exports

Although local export tonnages wereconstrained by a combination of railbottlenecks and mine production dis-ruptions during the first half of the yearunder review, these were partially offsetby improved volumes during the secondhalf, owing to a stable performancefrom the rail network and the recoveryof export production. Total 2006 exportvolumes fell by 3% to 68.9 million tons.European coal demand decreased con-siderably during 2006, mainly becauseof a milder winter. South Africanexports to Europe declined by 5.2 % in2006. However, coal still constitutes76% of South Africa’s export marketshare.

Exports to the Middle East increasedby 8.4% in 2005 to 7.1 million tons in2006 – a growing share of total SouthAfrican exports. Indian imports fell dur-ing 2006. India and Pakistan make upmost of South Africa’s Asian exportdemand market with the result thatAsian imports fell from 4.1 million tonsin 2005 to 3.1 million tons in 2006.

The first half of 2007 has seen arecovery in South African coal exportsto Asia, as China withdraws coal tradi-tionally used for the export markets tosatisfy local demand. In this period

mining together


2000 2001 2002 2003 2004 2005 2006 20070

10

20

30

40

50

60

70

80

mill

ion

tons

Europe

Far East/Asia

Middle East

Americas

Africa and other

South African thermal coal exports by destination – 2007 is1H2007 annualised

Source: SACR

South Africa exported 4.9 million tonsto Asia with 3.9 million tons going toIndia.

Local and export coal prices

The average coal price received in thedomestic market increased by 7% toR92/ton free on rail (FOR) in 2006. Theaverage price of coal increased by 7.7%to the electricity sector and 6.6% to thesynthetic fuels industry in 2006. In thatyear local export coal achieved an aver-age price of R312/ ton free on board(FOB) – a modest 5.5% increase from2005. In the first half of 2007, on ayear-on-year basis, local prices hadrisen 11.4% to R101/ton FOR whileexport prices had improved by 18.3%to R330/ton FOB.

Export facilities

The Richards Bay Coal Terminal (RBCT)is the world’s largest single export coalterminal, with a current annual capacityof 72 million tons. It exported 66.5 mil-lion tons in 2006, which is a 3.9%decline compared to 69.2 million tonsin 2005. The decline was mainlybecause of production disruptions andderailments in the first half of 2006.

RBCT accounts for more than 96%of South Africa’s total exports. It hasembarked on an expansion programmeto bring capacity to 91 million tons ayear by the end of the first half of 2009.Allocation of the increased capacity hasalready been earmarked and a rise inexport volumes will depend on theinternational demand for coal, the abil-ity to produce sufficient export qualitycoal and on Transnet’s freight expansionprogramme.

The Matola Coal Terminal experi-enced a 4% export decline in 2006compared with 1.15 million tons in2005. The terminal did not achieve itsset target of between 1.4 and 1.5 mil-lion tons for the year because of railconstraints. The Durban BulkConnections Terminal was the only ter-minal to have increased exports during

2006 – exporting 1.36 million tons in 2006 compared with 0.75million tons in 2005.

Diamonds

The total global production of natural diamonds in 2006 fell by3.5% to 171.2 million carats. Despite the decline in production thevalue of global mine production increased by 2.3% to approxi-mately US$13.1-billion in 2006. Growing global demand com-bined with falling supply provided for positive fundamentals in thediamond market in 2006 and 2007. South Africa’s diamond pro-duction declined by 2.6% in 2006, but the value of diamond salesremained constant at US$1.5-billion.

The local diamond mining industry accounted for an estimated0.4% of GDP directly (or 1% if the indirect multipliers are added),accounted for 2.3% of total merchandise exports, employed 20 115workers and paid R2.1-billion in wages in 2006.

Diamond supply by country

The production of gem quality diamonds decreased by 0.5% to91.3 million carats while the production of industrial quality dia-monds declined by 6.8% to 79.9 million carats. Gem quality dia-monds comprise 53.3% of total diamond production. Despite thedrop in production, the total value of production increased by2.3% to US$13.1-billion. Botswana remains the largest producer byvalue with a 25.2% share, followed by Russia at 17.6% and SouthAfrica, Canada and Angola joint third at 11.5%.

South Africa’s share of the value of global production fell to15.4 million carats, which resulted in its share of total productionvalue falling to 11.5%. In rand terms the value of South African dia-mond sales is R10.1-billion – down from the R10.2-billion in 2005.

One of the main reasons for the drop in local production is the

mining together


Russia (17.6%)

Botswana (25.1%)

DRC (5.3%)

Australia (3.8%)

South Africa (11.5%)

Canada (11.5%)

Angola (11.5%)

Namibia (6.9%)

Other (6.9%)

Source: De Beers

World natural diamond production by value, 2006 – US$13.1-billion

4.7% decline in output from the Venetia mine. Unfortunately,improvements in production from Finch, Kimberley and the Oaksmines were insufficient to compensate for this.

The small-scale alluvial diamond mining sector continues to bechallenged by regulatory constraints.

Global diamond demand

The International Diamond Exchange (IDEX) estimates that thevalue of polished diamond production reached about US$18.7-billion in 2006. This means that the global diamond cutting andpolishing industry added only US$5.2-billion to the value of mineproduction. It is estimated that the value of retail sales of diamond

jewellery was about US$68.5-billion in2006, up from US$62.4-billion in 2005.

The United States remains the largestsingle market for diamond jewelleryand accounts for 49.6% of theUS$68.5-billion in retail jewellery valuefollowed by Japan at 14.8% and Europeat about 12%. The Asia/Pacific marketcontinues to exhibit strong growth andnow accounts for 6.4% of the total.

Almost 89% of the world’s diamondsby value are cut and polished in coun-tries that have no diamond mine pro-duction (India, United States, Belgium,Israel, Thailand and China), with Indiaalone accounting for 57.9% of theworld’s cutting and polishing.

Gold

Continued improvements in the under-lying fundamentals of the internationalgold market resulted in the gold pricereaching its second highest averageannual level of US$604 an ounce com-pared to the record US$614.50 anounce achieved in 1980. The gold priceaveraged US$659 an ounce in the firsthalf of 2007 and is set to reach anannual record high.

Declines in new mine supply andsales, combined with higher producerde-hedging and growing investmentdemand provided solid fundamentals.Global risk factors, the increasingattractiveness of gold as a store of valueand jewellery, the weakening US dollarand the global commodities boomserved to support the gold market.

2006 was characterised by animprovement in the rand price, consoli-dation in the sector and greater focuson costs and productivity issues. Therand gold price continued to improve inthe first half of 2007 and a number ofcompanies announced further brown-fields expansions in South Africa. Therate of decline in local gold productionslowed to half the level of declinerecorded in 2005. The 62% increase incapital expenditure (capex) to R5.9-billion in 2006, which continued in the

mining together


Bot

swan

a

Rus

sia

Ang

ola

Can

ada

Sout

h A

fric

a

Oth

er

Nam

ibia

DR

C

Aus

tral

ia

Bel

gium USA

Thai

land

and

Chi

na

Isra

el

Indi

a

0

10

20

30

40

50

60

Share of mine production

Share of polished diamond cutting

The diamond pipeline 2006

US$13.1bn US$13.5bn US$18.7bn US$18.5bn US$68.5bnSource: IDEX

Mine

production

Rough sales

Cutting centres Retail

Rough sales tocutting centres

Value of pol-ished from

local production

Value of diamond content inretail sales

Retail sales ofdiamond jewellery

Source: IDEX

Share of global diamond production vs share of global value ofpolished diamond production, 2006

increase in China’s production. Central bank sales were marginallyup.

Higher prices translated into lower demand. Total demand fellby 5% in 2006 mainly as a result of the 427 ton decline in jewelleryoff take, despite the rise in gold mine producer de-hedging, whichrose by 287 tons. Implied investment demand remained reasonablyrobust at 388 tons while coin demand rose by 16%. Gold producerde-hedging remained an important component of demand andreached a record 161 tons in the second quarter of 2007. In thesecond half of 2007, demand for gold for jewellery fabricationstaged a comeback and grew by 23%, with India accounting forover 70% of this gain.

The balance between the fabrication demand for gold and newmine supply has remained in deficit since 1988 and this has meantthat around 835 tons a year of above surface gold holdings havebeen added to the supply equation to satisfy demand. The gradualright sizing of official sector, above ground stocks continues to sup-port the gold market. The continued reduction in the mining sec-tor’s propensity to hedge forward, when combined with increasedresearch into possible industrial uses for gold and improved market-ing of gold jewellery, also supports positive market dynamics.

Gold price

2006 brought a welcome improvement in the rand gold price withthe spot price rising by 44.6% to R131 323 a kilogram as a result ofthe 35.8% improvement in the US$ gold price and the 6.4% depre-ciation in the rand exchange rate to R6.77/US$. The improvementin the rand price in particular went a long way towards providingthe resources for the improvement in capex. Capex increased by61.9% to R5.9-billion in 2006.

The 36% acceleration in the US dollar gold price in 2006 repre-sented a fairly robust improvement in the price on the basis of good

first half of 2007 has fed through intoincreased underground development,which in turns bodes well for improvedproduction.

While South Africa may possiblylose its position as the world’s largestgold producer as China’s productiongrows, the important issue is that thegold mining sector remains vital to theSouth African economy. The sectoraccounted for R37-billion in sales, isthe country’s second largest export witha share of 8.4% of total exports,accounted for 1.1% of GDP (3% if theindirect multipliers are included),employed 159 984 workers and paidover R12-billion in wages and anotherR11-billion to other suppliers in 2006.

Global supply and demand

According to GFMS the total supply ofgold declined by 5% to 3 906 tons in2006, mainly as a result of a drop inofficial sector sales and the continueddecrease in new mine production.Official sector sales of 328 tons in 2006was 51% lower than in 2005 – the low-est for nine years. Total new mine pro-duction fell by 3.1% to 2 471 tons, withdeclines in production recorded in allthe major developed gold producingcountries. Gold scrap was at its highestlevel in eight years at 1 108 tons.

The fall in global mine production in2006 resulted in the posting of a 10-year low in terms of the volume ofmined production.

South Africa, Canada, Australia, theUnited States and Brazil are experienc-ing declines in production while emerg-ing producers such as China, Peru andIndonesia are becoming more domi-nant. Rapidly escalating costs, delays inthe delivery of capital equipment, regu-latory holdups and in some casesmature sectors all contributed to thedeclines in production by the traditionalproducers.

In the first half of 2007, GFMS esti-mated that gold production had grownby 3% as a result of a recovery inIndonesian output followed by a 20 ton

mining together


South Africa

Canada

USA

Australia

Brazil

Total

Other

Indonesia

China

Peru

-10 -5 0 5 10 15

Decade 1997 to 2006last 5 years

Annual rate of growth (decline) in gold production from keycountries

market fundamentals, a decline in new mine supply, de-hedging bymining companies, strong investor demand and a continued weak-ness in central bank gold sales. Swings in speculator interest werethe discerning factors in relation to short-term moves while jew-ellery demand fell sharply early in 2006, before recovering in thelatter part of the year and resuming growth in the first half of 2007.

Cost pressures

A combination of the still relatively strong rand exchange rate, thedepth of operations and various challenges related to the inputsfrom supply industries meant that cost pressure remained in thelocal industry. This is not a unique gold mining phenomenon andhas been identified as one of the key challenges facing the globalindustry. Cash production costs increased by 7.4% to R78 447 akilogram in 2006 and total production costs a kilogram (excludingcapex) rose by 11.9% to R99 725 a kilogram. Pressure on areaswhere either import parity pricing or administered pricing are inplay, such as steel, water and electricity was brought to bear onpricing. Diminishing gold production also impacted on unit pro-duction costs as certain fixed costs had to be met.

Iron ore

In conjunction with strong global economic growth the interna-tional steel fabrication and steel materials industries are booming.Global steel production surged 9% to 1.2 billion tons in 2006. Theiron ore mining sector has also grown in the past five years.Production increased by 11.9% to 1.5 billion tons in 2006 drivenby large increases in output from China, India, Brazil and Australia.

South Africa is the world’s eighth largest iron ore producer witha 2.7% share. Local iron ore production increased by 4.6% to 41.3

million tons in 2006. The country isnow the fourth largest iron ore exporterin the world, with a market share of 3.5%.

The country’s iron ore mining indus-try is the fifth largest component of thelocal mining sector. It contributed 0.3%directly to GDP (or 0.8% if the indirectmultiplier effects are included), itaccounted for 2% of total merchandiseexports, employed 8 848 employees (upby 18.1% on 2005) and paid R684-mil-lion in salaries and wages in 2006.

World iron ore reserves and production

Global iron ore reserves are about 370billion tons of crude ore with an ironore content of about 180 billion tons(source United States GeologicalSurvey). The largest reserve holder isBrazil with a 23% share followed byRussia at 17.2% and Australia at 14%.South Africa has a 1% share of globalreserves.

World iron ore production increasedby about 9.7% to 1.7 billion tons in2006. The mine production estimatesfor China are based on crude ore ratherthan usable ore, which is normallyreported for other countries. If an ironcontent standardisation is done forChina then total global iron ore produc-tion grew by about 11.9% to 1.5 billiontons of usable iron ore in 2006.

The bulk of the increase in produc-tion came from China, which improvedits production by 36% to 269 milliontons, followed by Brazil, which raisedproduction by 9.4% to 320 million tonsand India where production grew by18% to 172 million tons. Australia’sproduction increased by 7% to 280 mil-lion tons making it the second largestproducer of iron ore in the world. Localiron ore production rose by 4.5% to41.3 million tons in 2006,

Global steel market

The key driver of iron ore productionhas been the 9% growth in world crude

mining together


Venezuela

Sweden

South Africa

North America

Ukraine

Russian Federation

Other

India

China

Australia

Brazil

0 50 100 150 200 250 300 350million tons

20052006

World iron ore production, 2006 (iron content adjusted)

Source: ABARE

steel production to 1.2 billion tons in2006. The leader in steel production isChina, as strong industrial growth con-tinues to support demand. China’s steelproduction grew by 18.8% to 423 mil-lion tons of crude steel in 2006. Chinaproduces 34% of the world’s crude steeland accounts for 30.9% of total steelconsumption meaning that it is becom-ing an increasingly larger exporter ofsteel to the rest of the world.

Iron ore trade

The international seaborne trade in ironore registered huge growth with exportsincreasing by 11.1% to 799 million tonsin 2006. Australia is the largest exporterwith a 31.4% share, followed by Brazilat 31% and India at 12.2%. SouthAfrica’s exports grew by 2.8% to 27.4million tons. With high steel productiongrowth rates feeding into ever-increas-ing demand for iron ore, the interna-tional trade in exports could increase by200 million tons by end 2011.

Iron ore prices

The strong growth in the global produc-tion of crude steel continued to supporthigh prices for most steel making rawmaterials in 2006. This resulted in thebenchmark prices for iron ore fines andlump ore increasing by 19% in 2006.

Continued strong growth in globalsteel fabrication should continue to sup-port iron ore pricing. The strong globalmarket fundamentals translated into a69% increase in export prices to R235 aton for local iron ore exporters in 2005.In 2006, a further 19% price increasewas secured by Australian and Brazilianiron ore exporters and the rand pricerose by 32.7% to R312 a ton. The aver-age price sold in the local marketincreased by 10.8% to R116 in 2006.

Export infrastructure

The agreement reached betweenSpoornet, Kumba Iron Ore and Assmang

to upgrade the Sishen Saldanha railway line will increase exportcapacity by an extra 20 million tons by 2010, which in turn willprovide a total capacity of about 47 million tons. This could almostdouble South Africa’s iron ore exports by 2010.

The strong global iron ore market and higher global pricesenabled the value of iron ore exports to rise by 37% to R8.5-billionin 2006. Despite local sales volumes declining to 12 million tons,the value of local sales actually increased by 9.6% to R1.4-billionin 2006. The total sales value of iron ore increased by 32% to R9.9-billion in 2006.

Platinum group metals

The pgm component of the mining sector is the largest componentof the South African mining industry. Pgm sales, which increased by70.4% to R65.5-billion in 2006 were equivalent to the combinedgold and coal sectors. The sector grew its share of the top threepgm production (platinum, palladium and rhodium) to 56.7% ofglobal new mine supply in 2006 versus 52.8% in 2005.

Positive prices and good fundamentals led to growing invest-ment in the local sector. Pgms accounted for 15.1% of the country’smerchandise exports in 2006. Pgms contributed 2.1% to GDP,employed 168 479 (an increase of 8.7% on 2005) and paid R12.6-billion in wages.

Reserves and production

South Africa has about 87% of the world’s known pgm reserves,with Russia second at 8.3% and the United States third at 2.5%.Local production increased by 1.5% to 307 tons in 2006. SouthAfrica accounted for 56.7% of global new mine supply. The countryis the dominant global producer of platinum (78%) and rhodium(83.7%) while Russia is the dominant supplier of palladium (48%).

mining together


Australasia

Middle East

Africa

Other Europe

Latin America

Japan

CIS

NAFTA

Other Asia

EU 25

China

0 5 10 15 20 25 30 35

% of total

ProductionConsumption

Global steel production and consumption, 2006

Source: IISI

Tightening emission standards in developed countries combined

with positive growth in certain industrial areas, such as chemical

and electrical applications, continue to underpin the pgm market.

However, total demand, excluding scrap, for the three main pgms

recorded a 1.2% decline in 2006. A 6.9% increase in demand for

catalytic converters plus a 5.2% rise in demand for chemical appli-

cations and an 11.9% increase for electrical applications was insuf-

ficient to offset the 23.4% decrease in jewellery fabrication. Whilst

South Africa dominates new mine supply, scrap has now emerged

as the third largest component of supply after South Africa and

Russia with 56.8 tons in 2006.

Demand for pgms for catalytic converters accounted for 63.7%

of total demand, followed by industrial applications at 25.5% and

jewellery at 18.3%.

Pgm prices

The production weighted global pricefor pgms rose by 54.6% to US$901 per3E (average production weighted basketprice for platinum, palladium andrhodium) ounce in 2006. The platinumprice rose by 27% to US$1 144 perounce, the palladium price by 60% toUS$323 per ounce and the rhodiumprice by 121.8% to US$4 555 perounce. In the first half of 2007, theSouth African production weighted bas-ket price of US$1 326 per 3E ounceproduced was 27.5% higher than theaverage global price. The slightlyweaker rand exchange rate led to therand basket price rising by 58.1% toR248 879 per 3E kilogram. Further dol-lar price gains for platinum, palladiumand especially rhodium resulted in therand production weighted basket pricerising to R305 633 per 3E kilogram produced.

Platinum

Total platinum demand (excludingscrap) increased by 2.2% to 237.3 tonsin 2006. Key reasons for this improve-ment include the 10.5% increase indemand for platinum for catalytic con-verters to 130.5 tons and the 10.7%increase in demand for industrial pur-poses to 58.2 tons, which helped offsetthe 18.3% decline in demand for jew-ellery, which fell to 49.9 tons.

A new market for the installation ofplatinum catalytic converters in heavyduty diesel vehicles is developing.Industrial sector growth for platinumwas recorded in areas such as computerhard disks and in the fabrication of LCDscreens. Higher platinum prices haveslowed demand for jewellery fabrica-tion and this has occurred in all majorconsuming regions in the world.

South Africa was the dominant pro-ducer of platinum in 2006 andaccounted for 78% of new platinummine supply. Based on expanding pro-duction, local platinum productionincreased by 3.4% to 164.5 tons in

mining together


1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

0

100

200

300

400

500

600

tons

South Africa

Russia

North America

Others

Scrap recovery

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

0

100

200

300

400

500

600

tons

Autocatalyst : gross

Chemical

Dental

Electrical

Glass

Jewellery

Investment

Petroleum

Other

Platinum, palladium and rhodium demand by use

Source: JM

Platinum, palladium and rhodium supply by source

Source: JM

2006. Declines were recorded in all theother producing regions includingRussia (down by 1.1%), North America(down by 5.5%) and other suppliers(down by 3.6%). One other majorgrowth area has been scrap recovery,which increased by 11% to 26.6 ton in2006.

Much of the increase in the plat-inum price took place in the first half of2006 reflecting constraints on the sup-ply-demand balance, but the marketremained robust for the remainder ofthe year. The platinum price increasedto an average of US$1 242 an ounce inthe first half of 2007.

Palladium

Total demand excluding scrap for palla-dium fell by 6.8% in 2006 to 231.3tons. The main reasons for the declinewas the 30.4% drop in jewellery fabri-cation. Demand for palladium for auto-catalytic converters, excluding scrap,increased by 3.9% to 124.9 tons andelectronics demand rose by 9.8% to33.1 tons. The global palladium marketremained in oversupply in 2006 with44 tons of product added to stockpiles.

Total supply, excluding scrap,declined by 4.1% to 250.7 tons in2006. Production from South Africaincreased by 11.5% to 90.4 tons and anincrease of 8.2% was recorded in NorthAmerican production to 30.6 tons.Russian supply fell to 121.3 tons, whichweighed heavily on the supply equa-tion. Scrap recovery is one of the largestgrowing components growing by 28%in 2006 to 24.9 tons.

In the first half of 2007 the palla-dium price rose to an average US$358an ounce.

Rhodium

Rhodium accounts for 6.3% of total demand of the three mainpgms and grew for the fifth consecutive year to 29.9 tons in 2006.Sales to the automotive sector for catalytic converters continues tobe the key driver, accounting for 87% of total in 2006. Furtherstrong growth in demand for glass fabrication and an averageincrease of 4.5% in industrial uses were the key reasons for theincrease in demand for the metal.

Total new mine supply of rhodium increased by 9.3% to 25.6tons in 2006, meaning that a further 2.2 tons had to be taken out ofstock to accommodate the difference between demand and supply.

South Africa is the dominant supplier of rhodium and accountedfor 83.7% of new mine supply in 2006. The country grew its pro-duction of rhodium by 10% to 21.5 tons in 2006. Russian supplygrew by 5.6% to three tons while production from other countriesgrew by 11.8% to 0.6 tons in 2006. Again scrap recovery was oneof the fastest growing areas of supply and grew by 24.1% to a totalof 5.3 tons in 2006.

The improvement in local supply was a result of expansions inmining capacity and the use of more UG2 ores, which typicallyhave higher rhodium content per ounce of platinum than theMerensky reef.

The rhodium price was extremely volatile during 2006 withdemand outstripping supply and a further depletion of stock. In thefirst half of 2007, the price averaged US$6 049 an ounce.

mining together


B BB B

BB

BB

B B

B

B

B

B

J J J JJ

J

JJ J

JJ

J

J

J

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

1H 2

007

0

200

400

600

800

1000

1200

1400

0

50000

100000

150000

200000

250000

300000

350000

US$

per

3E

ounc

e

Ran

d pe

r 3E

kg

B US$ price 3E J Rand price 3E/kg

South African production weighted pgm price in rand and US$terms

mining together


Economic policy

Investment and economic growth

Over the past 13 years South Africa’seconomic growth rate has continued toimprove to the extent that the economyhas now run into serious capacity con-straints, which act as caps on thegrowth rate. The economic growth ratehas improved from -0.6% just before1994, to 3% GDP growth in the firstdecade of democracy, to an average of5% growth in the second decade. TheAccelerated and Shared GrowthInitiative of South Africa (ASGISA) has agrowth target of 6% GDP by 2009.South Africa is reaping the benefits ofthe hard work that it has done to sta-bilise the macroeconomy, liberalisetrade, target inflation, consolidatenational finances and open the econ-omy to international trade and invest-ment.

High levels of economic growth pro-vide real opportunities for improvingemployment, industrialisation, raisingliving standards and reducing poverty.Doubling the size of the economywould provide important benefits forthese national imperatives. SouthAfrica’s current economic growth of 5%per annum doubles the size of theeconomy every 14 years, while a 6%growth rate would double the economyevery 12 years.

The country is currently growing atslightly above its actual economicgrowth potential (5% versus 4%) andthe result is that capacity utilisation hasrisen in most industries to the extentthat some industries are now short ofspare capacity to guarantee reliablesupply. The only solution to capacityconstraints is increased investment. Realfixed investment is starting to respondto the challenge and grew by 12.8% in2006 and started 2007 with a 16.2%growth rate. Real fixed investment bythe first quarter of 2007 had risen to20.1% of GDP – the highest level sincethe gold induced investment boom of1982.

The private sector accounts for the bulk (70.7%) of gross invest-ment in the economy and posted solid growth of 12.5% in realfixed investment in 2006. Growth in real investment by the paras-tatals jumped to 22.7% in 2006, although these entities account foronly 13.7% of total gross investment. A large portion of fixedinvestment by parastatals is going into areas that have traditionallyhad capex deficits, so the improvement in their gross investment islargely catch-up. More important, if the provision for depreciationis removed from gross investment to arrive at net investment, thenSouth Africa’s aggregate net investment levels are still too low tosupport a sustainable growth rate beyond 4% to 5% a year. Netinvestment by parastatals was negative for eight of the past 13 years– illustrating the extent of the problem.

Growing investment faces a number of challenges. It is at themicroeconomic level that constraints are hampering the investmentefforts of both the public and private sectors. Long delays in theissuance of water use licences and in the processes surroundingenvironmental impact assessments have affected the building ofpower stations, the upgrading of steel fabrication plants anddelayed mining projects. Despite several commitments by govern-ment to reduce red tape and lower the cost of doing business,actual progress has been chequered.

According to the World Bank publication, Doing Business 2007,South Africa ranked 29th out of 175 countries in terms of the easeof doing business. The country scores well in terms of protectinginvestors and has a world ranking of ninth, because of the extent ofcorporate disclosure and corporate governance. The country ranksin the top quartile for the ease of getting credit, but ranks fairlypoorly in a number of areas that are critical to investment, includ-ing the ease of employing workers (87th), paying taxes (74th with38% tax rate), registering a property (60th and costing 8.9% of theproperty value), trading across borders (67th), closing a business(65th), starting a business (57th a – 35 day wait), dealing withlicences (45th, but high cost of 33.5% of income per capita), andenforcing contracts (43th – 600 days to do so).

mining together


1990 – 1993 1st decade ofd

2nd decade ofd

2009 target-1

0

1

2

3

4

5

6

7

% a

nnua

l gro

wth

rat

e

-0.6

3

5

6

South Africa’s improving economic growth performance

mining together


The point is that South African pol-icy makers and regulators need to buildon the country’s strengths and aim toget all the key costs of doing businessinto the top quartile of the global rank-ings. Where legislation and regulationsare not working, such as environmentallegislation, a proper review should bedone and remedial steps taken.

South Africa’s weakexport platform

While South Africa is enjoying its high-est economic growth rate in some time,the improvement is mostly concentratedin the non-tradable sectors of the econ-omy, such as construction, financialservices and the wholesale and retailtrades. Unfortunately, the supply-sidetradable sectors have performed poorly,with agriculture, mining and manufac-turing growing at a much slower pacethan the rest of the economy.

The unbalanced economic growthprofile is creating its own set of chal-lenges as poor export growth has com-pounded the pressure on the currentaccount of the balance of payments.

According to the Harvard-led teamworking on a growth diagnostic onSouth Africa, the country was ranked50th of 56 comparable countries inexport performance (see p 29). TheHarvard team described South Africa’sexport track record from 1960 to 2004as extremely poor and an Achilles heelto the growth prospects of the economy.In the past five years the country’s realexport growth was a mere 3.5% annu-ally, whereas imports grew by 11.4% ayear. This translated into a ballooningcurrent account deficit equivalent to6.5% of GDP in 2006.

This is not to say that the currentaccount deficit is in itself a bad thing.The top import is the machinery andcapital goods category, which impliesthat the fixed capital stock of the pro-ductive business sector is beingupdated. The problem is the vulnerabil-ity the current account deficit creates

1960

1963

1966

1969

1972

1975

1978

1981

1984

1987

1990

1993

1996

1999

2002

2005

0

5

10

15

20

25

30

% o

f GD

P

Private sectorPublic corporationsPublic authorities

Protecting investors

Doing business

Getting credit

Enforcing contracts

Dealing with licences

Starting a business

Closing a business

Trading across borders

Registering property

Paying taxes

Employing workers

0 10 20 30 40 50 60 70 80 90 100

2006 rank2005 rank

J

J

J

J

J

1960s 1970s 1980s 1990s 2000s0

2

4

6

8

10

12

14

16

0

1

2

3

4

5

6

Net

cap

ital f

orm

atio

n as

% o

f GD

P

GD

P gr

owth

rat

e %

Net capital formation as % of GDP

J Average GDP growth rate

Gross fixed capital formation by type of organisation as a percentage of GDP (real money terms)

GDP growth rates versus net investment (to fuel growth)

World Bank ease of doing business – South Africa’s ranking per category (out of 175 countries)

Top quartile

should external circumstances turnunfavourable. If the tradable sectorswere growing at a reasonable pace thenthe country’s economic growth ratewould have improved even further.

A national export strategy

Against this background, it is interestingto note that over the past two decadesthe country’s policy makers have triedto emphasise growing non-commodityexports, rather than adopting a strategyto boost all exports.

There has been limited recognitionby government that the mining sector isthe most important foreign exchangeearner and that a robust strategy ofgrowing mining investment and mineralexports should have been adopted sometime ago. In 2006, the country’s primarymineral exports realised R140-billion or32% of total merchandise exports, ver-sus R105-billion in 2005. If one adds tothis the value of ferro-alloys, steel,chemicals, plastics and so on – second-ary beneficiated products – the value ofprimary and secondary beneficiatedminerals rises to about R240-billion,which is more than 50% of merchan-dise exports. This excludes the R37-bil-lion saved on imports by Sasol’s localproduction of synthetic fuels from coal.

Yet over the past five years mininghas been challenged by a volatile cur-rency, infrastructure shortcomings andregulatory constraints. It is important topoint out that the Chamber and the gov-ernment have engaged on mininglicensing issues and progress has beenmade. Similarly there has been goodengagement between the stakeholderson infrastructural constraints. The resulthas been a 14.8% increase in real fixedinvestment in the mining sector in 2006and the growth in investment is acceler-ating in 2007. Work is taking place toaddress environmental regulatory con-straints.

South Africa needs to adopt a com-prehensive export strategy to link up

with specific sectoral policies, like industrial policy or minerals pol-icy, and look at reducing constraints to investment and growth inthe export sectors. Such an export strategy would also need to feedinto the ASGISA programme.

ASGISA

Government has adopted the ASGISA initiative to accelerate thepace of investment and economic growth. In essence, the pro-gramme is designed to identify and unblock constraints to higherinvestment and economic growth. ASGISA also tackles many of theconstraint issues undermining the growth in exports.

The ASGISA programme is being driven by the Deputy StatePresident. It targets a 6% growth rate by 2009 and investment risingto 25% of GDP from its current 20% level.

Government has actively sought stakeholder input on ASGISA,including a number of meetings between organised businessthrough Business Unity South Africa (BUSA) with the President,Deputy President and ministers from the key economics departments.

mining together


Construction

Finance, real estate & business services

Transport, storage & communication

Wholesale, retail trade, hotels & rest.

Total GDP

Personal services

Manufacturing

Electricity, gas & water

General government

Mining

Agric., forestry & fishing

-2 0 2 4 6 8 10% growth rate

9.9

6.4

6.1

5.6

4.3

3.5

3.2

2.8

2.4

1.6

-0.6

BB

B

B

B

B

J

J

J

J

J

J

H HH

H

H

H

2001 2002 2003 2004 2005 2006-10

-5

0

5

10

15

20

% g

row

th r

ate

on a

ccou

nt a

s %

of G

DP

B Real export growth

J Real import growth

H Current account balance as % of GDP

Sector GDP growth rates in real terms, average 2002 – 2006

Weak growth in SA’s exports combined with strong importgrowth leading to widening current account deficit

mining together


The Chamber has participated in ASGISA through BUSA and con-tinues to play a leading role in the process. Most of the focus inASGISA is on problem solving.

ASGISA identified constraints to growth

Instead of generating a long wish list, government has focused on asmall number of key constraints to economic growth, which if dealtwith decisively, could impact on investment and growth in theeconomy.

The key issues include:

� the volatility and level of the currency � the cost, efficiency and capacity of the national logistics system� shortages of suitably skilled labour amplified by the cost effects

on labour of apartheid spatial patterns� barriers to entry, limits to competition and limited new invest-

ment opportunities� regulatory environment and the burden on small and medium

businesses� deficiencies in state organisation, capacity and leadership.

Countering the agreed set of constraints has involved govern-ment in establishing a set of measures, which include:

� macroeconomic issues – encouraging a more stable and com-petitive exchange rate

� infrastructural programmes� sector investment strategies� skills and education initiatives� second economy intervention� public administration issues.

Key ASGISA focus areas by the Chamber

The Chamber has played an important role in the input made togovernment by organised business. The following areas should bementioned:

� The ASGISA programme earmarks investment of R415-billion forinfrastructure over a three-year, medium-term expenditureframework period. The majority goes to electricity (24%), roads(20.5%) with other key areas such as water (9%), rail (15.2%)and ports (5.5%). The Chamber has engaged the Department ofPublic Enterprises (DPE) on the importance of reliable electricitysupply and has provided input on the restructuring of the elec-tricity industry, on electricity pricing, on the slow pace of envi-ronmental and water permitting and so on. The Chamber hasalso met with the senior strategic leadership of Eskom and goodengagement has taken place on plans and constraints. TheChamber has raised concerns on the lack of a decision oninvestment in a new liquid fuels inland pipeline because of theneed to provide reasonable security of diesel supply to mines.Through the Rail Industry Transport Collaboration Forum theChamber has actively engaged with Spoornet on future plans

and prospects and key areas of con-straint

� The Chamber has played a role inthe BUSA task group on regulatoryimpact assessments. The Presidencyhas now agreed to the merits of theconcept of regulatory impact assess-ments and will start rolling out theprocess to various departments. Thiscould be beneficial if any mining-related policy is first properlyassessed for its impact on invest-ment, employment, transformationand small business

� Currently only 3% of the ASGISApublic sector investment programmeis directly allocated to private andpublic partnerships. While privatesector participation in the actualdevelopment of public infrastructureis good at the contractor level,organised business has expressedconcern that the amount allocatedto such partnerships is small and thismay affect the delivery and runningof certain infrastructure

� The impact of the new infrastructureon administered prices (and ulti-mately on inflation) and on availableskills and services is also an issuethat has been raised with govern-ment.

The Harvard Growth Diagnostic for South Africa

As part of the ASGISA initiative, theNational Treasury, with leading interna-tional and local experts (the panel) initi-ated a two-year research programme ongrowth, which began with a workshopheld at the National Treasury in January2006. Since then, the panel has donepreliminary work on a growth diagnos-tic for South Africa and produced itsfirst set of seven papers covering growthand equity, macroeconomic policy,unemployment, industrial and tradepolicy and crime. In July 2006, thesepapers were discussed in their prelimi-nary form with members of Cabinet.

The Chamber has participated in anumber of meetings with the Harvardteam and has engaged on issues such as

exchange rate policy, industrial policy,South Africa’s poor export performanceand constraints to investment in theeconomy. A number of leading privateand public sector economists haveparticipated in the debates. Theresearch and inputs dovetail with theASGISA process.

Administered prices

Administered prices refer to the price ofvarious goods and services set by gov-ernment or non-financial governmententerprises for public consumption.Administered prices are important to themining sector because of the upwardpressure uncontrolled administeredprices exert on mining operating costs.

The Chamber played a key role inthe administered pricing study that wasbegun at the end of 2006. The projectfocused on administered pricing in thekey areas of rail, ports and water. Theconsultant, Genesis Analytics, has foundit particularly difficult to access anydata from Transnet. In fact Transnetrefused to co-operate despite a requestfrom the DPE. Nevertheless, GenesisAnalytics was able to use interviewswith customers, the extensive interna-tional data that is available and anec-dotal evidence to produce reports onrail and ports that have helped to alertgovernment. Owing to good data avail-ability, the report on water was compre-hensive and completed on time.

The consultant presented the finalreports to a Nedlac meeting in lateJune. The findings will help influencepolicy debates around port and railinfrastructure. The Chamber led thebusiness input and developed the origi-nal terms of reference for the project.

Inputs on economic policy

During the course of the review period,the Chamber played an active role inproviding input and leadership on eco-

nomic issues. It continued to chair the Standing Committee onEconomic Policy in BUSA and via BUSA provided input intoNedlac, the ASGISA process and in the BUSA meeting withPresident Mbeki and Cabinet. The Chamber participated in presen-tations to Parliament on the National Budget and the economicresponse to the budget to the Minister of Finance in NedlacCouncil meetings.

During these processes it was agreed that BUSA needs to com-mission research on the link between the level of corporate taxationin a country and the propensity of investors to invest in a country.The Chamber is playing a role in the BUSA steering committeedeveloping terms of reference for this study.

Promoting and growing investment in mining

Mining provides jobs for about one million people, it is almost afifth of the economy and is by far the largest net earner of foreignexchange. Actual investment in the South African mining sector fellby 20% in 2004 and a further 13.2% in 2005. These declinesshould be seen in the context of the 7.8% average annual growthrate in real fixed investment in mining between 1994 and 2003.Between 2003 and 2005 actual real fixed investment in the sectorfell by R5.4-billion. If one assumes that the real fixed investmentgrowth rate of mining had continued at the 1994 to 2003 annualpace of 7.8% per annum, then the gap in investment in 2005would have been R8.3-billion.

The decline in real investment in mining led to the establish-ment of a high-level task team on mining investment by the direc-tor-general of the Department of Minerals and Energy (DME) andsenior industry leadership in November 2006. The investment taskteam was chaired by the deputy director-general of the DME andincluded senior representatives from the Chamber and organisedlabour. A preliminary document outlining the challenges and possi-ble solutions was drafted by the task team and submitted to Cabinetin February 2007.

A further, more comprehensive document was prepared by thetask team and provided to a workshop on mining investment heldon 11 June 2007. This workshop was attended by the DeputyPresident and senior representatives of the Chamber, the SouthAfrican Mining Development Association, government and organ-ised labour. In essence, it was agreed that three key areas were col-lectively responsible for the decline in mining investment, althoughit was also agreed that no single factor was the overarching reason.The three issues include regulatory constraints (environmental andmining licensing), infrastructure constraints (rail, ports and water)and the impact of the volatility of the exchange rate.

The introduction of the Mineral and Petroleum ResourcesDevelopment Act, 2002 (MPRDA), combined with many newrequirements such as the commitments to meeting the MiningCharter objectives, new social and labour plans, and new environ-

mining together


mining together


mental requirements, meant a steep learning curve for industry andgovernment. A substantial number of applications for conversionsof existing rights and for new rights were made to the DME and ini-tial delays were recorded in the granting of rights. These delayswere both administrative and at company level.

Progress has been made to the extent that by the third quarter of2006, the DME was meeting its targets of processing new mineralright applications within 12 months and new prospecting rights insix months. By the end of 2006, the DME was publishing the dataon applications for new rights to provide a proper picture of theprogress being made.

The DME hosted focused sessions for large-scale mining compa-nies to deal with matters around conversion applications.Environmental requirements have complicated the matter as wateruse licences were taking between two to four times as long as therequired period owing to major capacity constraints in theDepartment of Water Affairs and Forestry. Environmental impactassessment processes also delayed approvals of certain mining proj-ects and the expansion at the RBCT and the development of the DeHoop dam.

The leaders of government, business and labour engaged on thechallenges, and good progress has been made. Where issuesremain such as environmental licensing, high-level engagement iscontinuing.

Discussion via the Rail Transport Collaboration forum and directengagement between the mining companies and parastatals havebrought about agreements on the expansion of the RBCT, theCoalink railway line and the Orex iron ore line, and Transnet isexploring other issues such as inland coal terminals. The RBCT willbe expanded to 92 million tons capacity a year as will the Coalinkrailway line. Similarly, Spoornet and the iron ore mining companieshave reached agreement on expanding the Orex iron ore line andport of Saldanha to handle 47 million tons of iron ore exports ayear by 2010. The go-ahead on the development of the De Hoopdam has been given and progress has been made. Additional watercapacity in the Steelpoort area is still needed to enable pgm mining

in that area to reach its full potential.

The Reserve Bank continues to buildup foreign currency reserves that willhelp act as a buffer for the currency andhopefully reduce volatility.

Mining investmentturns the corner

With high-level engagement andprogress in dealing with various chal-lenges, it is clear that the mining sectorturned the corner in the second half of2006. Real fixed investment picked upby 14.8% and has continued to growstrongly in 2007 (up 34.1% in the firsthalf of the year).

The improving operating environ-ment is likely to result in sustained highlevels of growth in real fixed investmentin mining in the short-term. This shouldtranslate into growing production with aconcomitant increase in opportunitiesfor employment, export earnings andtransformation.

Reducing cost pressures

Given that the mining industry is essen-tially a price taker, the players in thesector compete on costs and productiv-ity. South Africa’s small domestic marketand its relative geographic isolationfrom other major competitor centreshave resulted in a relatively poor com-petitive framework in the supply chain.

A large proportion of the goods andservices supplied to mining companiesis provided by monopolistic industriesand parastatals. This is both a blessingand a curse. In the case of the electric-ity industry, the use of world-class tech-nology to burn poor grade coalscoupled with good management meansthat electricity sourced from Eskom isnot only competitively priced, but reli-able and can meet the health and safetyneeds of large-scale mining.

However, this situation has changedin the period under revue. Eskom is

2002 2003 2004 2005 20060

2000

4000

6000

8000

10000

12000

14000

16000

18000

R'm

illio

ns

Real mining fixed investment (gross) for SA

R5.4-billiondifference

Source: SARB

requesting that the National EnergyRegulator approve relatively high tariffincreases. Secondly, the reserve marginhas diminished to way below the inter-nationally accepted average of 15%.The Chamber is pushing hard for gov-ernment to consider specific incentivesfor managing electricity demand (suchas subsidies for solar geysers) to reducepressure on the electricity supply sector.

In the case of the dedicated railfacilities provided by Spoornet to thecoal and iron ore exporters through theports of Saldanha and Richards Bay, thecontractual agreements between theparties have helped to keep annualincreases below inflation over the pastfive years. Spoornet’s general freightbusiness – where freight costs are rela-tively higher than on the dedicatedroutes – the crippling double digitannual price increases recordedbetween 2002 and 2005 have beenreplaced with a system of annual,below inflation increases.

Where price setting by theDepartment of Water Affairs andForestry and the revenue seeking of themunicipalities (for very little addedvalue), upward pressure has beenplaced on water prices. Over the pastfive years water prices to mines haverisen annually by double digit rates,which is nearly twice the average CPIXinflation rate for the same period.

The mining sector is also a largeuser of diesel. The large rise in dieselprices, which are established by theDME on the basis of what it would costto import the refined product equiva-lent, has also impinged on the industry,especially for large opencast operations.

The Chamber has engaged exten-sively with many parts of the supplychain to try to encourage more compet-itive prices from suppliers. It has alsoprovided input into the review of com-petition policy being undertaken by theDTI. The Chamber has held discussionswith various government departmentsand parastatals on the need to have lim-ited import tariffs on products used bythe mines and to have competitive portand rails costs, since these factors help

limit the propensity of supplier industries to set prices at an importparity pricing level.

Beneficiation

The Chamber continues to engage stakeholders on the crucial issueof adding value, or beneficiating South Africa’s minerals. The min-ing sector fully supports the concept of beneficiation. However,some of the key challenges in the beneficiation debate are deter-mining who the key role players are and ways to encourage benefi-ciation.

Government wishes to promote manufacturing beneficiation,however, the mining sector has little control or input into the man-ufacturing sector, which has its own sets of skills, competencies andmarkets. Thus any policy that attempts to place pressure on themining sector to generate manufacturing beneficiation outcomeswill fail. There is increasing acceptance within government thatencouraging manufacturing beneficiation can only be done throughthe provision of an industrial policy-led enabling environment thatfacilitates investment by manufacturers into South Africa.

The reality is that South Africa’s manufacturing sector is underpressure. The sector has shrunk from 22% of GDP in the 1980s to16.4% in 2006. The sector has struggled to compete with the fastgrowing and highly competitive Asian economies. The strong rand,high tax rates, red tape, high logistical costs and poor productivitygrowth have further hampered the sector’s performance. The realproblem for the country’s manufacturing sector is the slow pace ofproductivity growth, which means that the country will continue tolose ground.

In the period 2000 to 2005, real manufacturing value addedgrowth in South Africa was a mere 2.2% – off a low base. Thiscompares to the 10.4% real growth in China, 8.6% in the transi-tional economies, 7.2% in Korea and 6.6% in India. It is evidentthat South Africa’s existing manufacturing environment is not con-ducive to substantial investment or growth. A comprehensive indus-trial policy response is required to minimise red tape, reduce taxrates and lower infrastructure and transport costs. Pressurising min-ing companies will not assist in dealing with any of these issues.

During the review period, the Chamber participated in two plat-inum beneficiation committee studies on downstream and side-stream beneficiation. The studies were mostly funded by theplatinum mining companies and government and included a rangeof interested stakeholders. The research clearly demonstrates thatthe focus of all stakeholders in encouraging further manufacturingbeneficiation has to be at the industrial policy level. The simpleavailability of mined and refined platinum in South Africa does notautomatically guarantee success in platinum manufacturing.

One example of successful industrial policy results is the sharethat South Africa gained in the manufacturing of platinum autocat-alytic converters as a result of the DTI driven Motor IndustryDevelopment Plan.

mining together


mining together


The Chamber has also played a role in the resuscitation of theSector Partnership Beneficiation Committee, where a number ofthese issues are discussed.

Beneficiation offsets in terms of the Mining Charter

One of the themes of the Mining Charter is that of encouragingmining companies to consider facilitating beneficiation via the off-setting mining comapnies’ beneficiation initiatives against theCharter’s ownership requirement. State controlled research organi-sation Mintek was requested by the DME to develop a frameworkagainst which the beneficiation-to-ownership offsets could bemeasured. A number of commodity task teams, established underthe auspices of the Chamber and led by the gold and pgm taskteams have engaged with Mintek and more recently with the DME.

It has been exceptionally difficult to finalise a system for benefi-ciation offsets as the climate available to manufacturing beneficia-tors in South Africa is not globally competitive. Secondly,government proposals on output based measurement fail to definean appropriate role for mining companies in manufacturing benefi-ciation projects. Mining companies can facilitate greater beneficia-tion by providing industry-wide inputs such as gold loans. Theseinterventions may increase beneficiation, but cannot ensure it. Atthis stagethere is no recognition of mining companies’ facilitationefforts – yet this is an area of activity where they can make animpact.

A number of commodity sectors believe that the Charter incen-tives for beneficiation are no longer relevant as the companies willachieve their 26% historically disadvantaged South African owner-ship target anyway. The debate should now shift to creating anenabling environment through industrial policy for manufacturingcompanies, rather than a focus on the mining sector.

BEE and transformation

The period under review marked the third year of the application ofthe Mining Charter. As the Chamber wished to avoid any confusionbetween the status of the Mining Charter and the DTI Codes ofGood Practice, it met with the minister of the DTI and his BEE teamin 2006 and reached agreement that the Mining Charter would pre-vail over the codes in terms of mining licences. In relation to pro-curement, the Chamber agreed to encourage members tovoluntarily comply with the codes.

Diamond export duty

The first draft of the National Treasury’s Diamond Export Levy Billwas published on 11 October 2006 along with the second draftRoyalty Bill. The Chamber had previously facilitated discussionbetween the diamond mining industry and Treasury and sought to

explore ideas on how an export taxcould be applied constructively whilemeeting government’s beneficiationobjectives.

Following the release of the draftMoney Bill, the Chamber’s diamondmembers submitted input to Treasury.After various modifications, Treasurysubmitted the Money Bill to Parliamentin June 2007. On 5 June, the Chamber’sdiamond mining members made sub-missions to the Portfolio Committee onFinance.

Minerals – a blessing or a curse?

Unfortunately, the research paper bySachs and Warner on the so-calledresource curse has become accepted asconventional wisdom despite the ratherdated time series used in the study andthe combination of gas, oil and miner-als into one sample.

The Chamber embarked on a sub-stantial research project to unpack theresource curse hypothesis. In particular,the Chamber’s project focused on theperiod 1990 to 2003 and looked atmining dominant countries only. Theconclusion reached was that there aremany mining dominated developingcountries that have actually seen higherGDP per capita growth than manyresource poor countries. The key differ-entiating factor is good governance. Themain findings were presented to the G-20 Energy and Resources conferenceheld on 18 June 2006 in Banff Canada.

Flow through shares

The idea of South Africa adopting a sys-tem of flow though shares (FTS) to boostthe amount of venture capital availablefor exploration in the country is gainingfavour. Expenditure on exploration overthe past three years has grown at lessthan half the pace of the rest of theworld. Both regulatory constraints and ashortage of locally sourced venture

capital have severely hamstrung thelocal exploration sector. Adopting a FTSsystem could enhance the quantum offunds available to junior resource andBEE companies, which in turn wouldincrease the feedstock of new miningprojects for development. This couldhave major economic, social andempowerment benefits for the country.

In essence, FTS is a mechanism thatallows an exploration/junior resourcecompany to raise funds for explorationand early stage mine development byselling FTS to investors where the taxa-tion benefits of the exploration expendi-tures in the exploration company areflowed through to an investor to writeoff against income tax payable to theState. This allows an investor to receivea 100% tax deduction for the amount ofmoney invested in the FTS and may seean investor realise a rise in the value ofthe FTS if a viable mineral deposit isactually discovered.

The Chamber developed a positionpaper on FTS, including highlighting thebenefits and the Canadian experience.This position paper was submitted toTreasury in November 2006.

Coaltech

The Coaltech 2020 research programmewas formally established in 1999 as apartnership in terms of an agreemententered into by a number of coal pro-ducers, Eskom, the CSIR and theChamber. During 2006, the partnersbecame concerned that they could beheld jointly and severally responsiblefor any damage or injury to persons orproperty occurring as a consequence ofthe application of the results of theresearch. At the same time various proj-ects delivered outcomes that couldresult in commercial products.

The partners concluded that it wouldbe in their best interests if Coaltech2020 became a juristic person so as tosecure optimal benefit from the prod-ucts resulting from its research and toprotect them from any direct liability.Consequently, the partnership was

incorporated as the Coaltech Research Association, a company lim-ited by guarantee in terms of Section 21 of the Companies Act.

The Coaltech partners resolved that an effort should be made toexpand its membership by encouraging smaller coal producers tobecome partners. To this end a special class of membership, enti-tled Coaltech Associates, was established to accommodate smallproducers. Associates participate in selected research areas for anominal annual fee. They have access to all the available informa-tion in those areas. Associates, however, do not have representationon the Coaltech Board. To date three companies have becomeCoaltech Associates.

Research conducted during the year under review includes thetesting of a roadheader imported from China – to evaluate its abilityto cut sandstone – field trials of a passive water treatment system;the development of a new coal pillar formula; the vegetation ofrehabilitated land; and a geophysical survey in the Waterberg coal-field.

Rail gauge The National Department of Transport issued a discussion docu-ment entitled, From Cape Gauge to International Gauge – A PolicyHeritage for Our National Future and Our Children during 2006.The discussion paper outlines the disadvantages of the current Capegauge track width (1 067 mm) of South African and southern Africarailways compared to the advantages of standard gauge (1 435 mm)railways. The paper argues that the benefits of standard gauge rail-ways could justify South Africa converting to standard gauge.

With the exception of two 750 mm gauge railway lines, thecountry’s mainline railway system uses Cape gauge. The systemextends through neighbouring countries into the DemocraticRepublic of Congo, Zambia, Malawi, Tanzania and Angola.

The national railway network comprises 20 324 km of Capegauge railway lines while the Cape gauge network in the rest ofsouthern Africa extends to around 14 900 km.

In addition there is more than 700 km of Cape gauge surfacerailway lines on local mines. These lines are used for on-minetransport of ore and material and are connected to the Spoornetsystem to transport products to customers and material to themines. The mining industry is dependent on rail transport for theconveyance of bulk export products such as coal, iron ore andmanganese ore.

Standard gauge is superior to Cape gauge in many respects. Itallows for loads of up to 40 tons per axle, higher speeds and thedouble stacking of containers. South Africa has an existing railwayinfrastructure that is, in parts, heavily utilised, for example, theWitbank to Richards Bay and the Sishen Saldanha lines. Anychange in gauge on existing alignments will disrupt traffic at con-siderable cost to customers.

The construction of standard gauge lines along new alignmentswill necessitate huge capital expenditure and will only be viablewhere justified by traffic volumes and enhanced capacity.

mining together


mining together


The Chamber adopted the position that:

� a thorough investigation of the benefits of standard gauge rail-ways for South and southern Africa should be undertaken priorto formulating a policy on rail gauge

� existing railways should be operated until they are no longereconomically viable. At that point re-gauging should be consid-ered

� new railway applications should utilise the dominant applicableand economically viable technology, i.e. double-stacked con-tainer trains and high-speed intercity trains

� decisions concerning rail gauge should be based on economicand technical considerations. The rail gauge to be used shouldnot be prescribed.

Coal transport in Mpumalanga

Recently the transport of coal by road, especially in Mpumalanga,has increased dramatically. This is because of a growth in demandfor coal by power stations that cannot be met by the captive col-lieries, and the emergence of a number of smaller collieries wherethe tonnage of coal produced and the shorter life-of-mine do notjustify the construction of railway lines to these collieries.

The increase in road transport is impacting negatively on thecondition of the roads to the point where the deterioration of theroad system in Mpumalanga has reached a critical level. Theprovincial government, being aware of the importance of roadtransport to the mining industry and especially the coal mining sec-tor, decided to address the issue in co-operation with the coal min-ing industry.

The Chamber arranged a meeting between representatives fromcoal producers and Eskom (as the largest coal consumer) and theMpumalanga MEC for transport and members of his staff to con-sider a joint approach to this problem.

The Mpumalanga Provincial Government has also undertakenan investigation of road usage and road damage in the provinceand intends using the information to prioritise the rehabilitation ofthe road network. The provincial government is, however, con-cerned that rehabilitated roads will again be damaged by excessivetraffic.

To overcome this problem the provincial government proposesthat coal transport be confined to predetermined routes. Theseroads will be upgraded to withstand heavy loads. Operators usingother routes for coal transport will be penalised. In addition theprovincial government intends implementing strict measures tocounter overloading.

The Chamber expressed its support for the concept of definedcoal transport corridors in Mpumalanga and proposed to theMpumalanga Provincial Government that:

� a task team, comprising representatives of the Provincial RoadsDepartment, coal producers, Eskom and the MpumalangaFreight Logistics Forum be convened to define the coal transport

routes for the foreseeable future � the coal transport routes be

reviewed annually to allow for geo-graphic shifts in coal production

� the province promote the imple-mentation of the Road TransportManagement System by all con-signors, hauliers and consignees.

The Chamber also proposed to thechief executive of Transnet Rail FreightServices (formerly Spoornet) that coalloading terminals be established atstrategic positions in the Mpumalangacoalfields to provide access to rail trans-port for smaller coal producers.Transnet agreed to consider this pro-posal.

The Mpumalanga ProvincialGovernment appointed a firm of con-sultants to determine the location of allcoal producers in the province and toconduct a preliminary determination ofpotential coal transport routes. Thiswork is at an advanced stage. On com-pletion, a meeting of representatives ofcoal producers and large consumerswill be convened to verify the coaltransport routes.

Gold mining research

An assessment of gold mining researchundertaken during the last decade(excluding private research) reveals thatfew results of real benefit to gold min-ing were achieved. The CSIR perceiveda lack of support from the gold miningindustry for medium and long-termresearch as a major inhibiting factor.This was in contrast to the coal andplatinum sectors that are each support-ing a collaborative research programmeextending over a number of years.

In an attempt to re-invigorate miningresearch, and especially gold miningresearch, the CSIR is developing a pro-posal for a Centre for Novel MiningMethods. The initial focus will be onnarrow, gold-bearing reefs.

The CSIR is aware that such researchcannot take place without the supportand co-operation of the mining industry.

It is also aware that it needs to under-stand and address the needs of theindustry to obtain industry support. Tothis end the CSIR requested theChamber’s assistance in obtaining thesupport of gold producers to assess theirresearch needs.

The Chamber convened a task teamcomprising representatives from its goldproducing members to consider thematter. The representatives confirmedthat there is a need for gold miningrelated research in various disciplinesand identified a number of areas thatcould be addressed.

Since research has already takenplace in most of these areas it was rec-ommended that previous work be inves-tigated first to avoid duplication and tounderstand why results have not beenimplemented and the reasons for fail-ures where implementation was notsuccessful.

An assessment of gold miningresearch undertaken over the last 10years has now been completed and isbeing considered by the gold producers.

Electricity supply

During mid-January 2007, South Africaexperienced a severe short-age of electricity whensome generation unitsfailed while a number wereout of service for mainte-nance. This resulted inextensive load shedding thataffected all consumers,including a number ofmines. Considering theinadequate generationreserve margin in SouthAfrica, further incidents ofthis nature cannot beexcluded in the short term.

Given the critical impor-tance of a continuous, goodquality electricity supply formining operations, the cur-rent situation is of greatconcern to the industry.

A major cause of the current low reserve margin is a Cabinetdecision in 1998 that Eskom should not be allowed to build addi-tional generation capacity except for the recommissioning of plantsin storage. Instead this was to be undertaken by private investors.

The Chamber advised the minister of minerals and energy in2004 of its concerns that the prevailing increase in demand wasdepleting the reserve capacity faster than expected. The Chamberrecommended that Eskom be allowed to tender for the installationof new generation capacity. Should the other tenders not meetexpectations, Eskom would then be ready to commence work onnew generation capacity. Eskom was eventually allowed to proceedwith the planning and construction of new generation capacity.

Eskom has since accelerated the recommissioning of the plantin storage and a number of open cycle gas turbine generators wereinstalled in the Western Cape to deal with peak loads in thatregion. The construction of a new pump storage scheme and a newcoal fired base-load power station have commenced. In addition,Eskom is identifying a site for a new nuclear power station. DuringAugust 2007, the DME announced that it had awarded a contractto a private company for the construction of two open cycle gasturbine power stations.

A further reason for the low reserve margin is the fragmentedand inadequate electricity planning process. Energy planning isundertaken separately by the DME, the National Energy Regulator,the Department of Environment Affairs and Tourism and Eskom.Despite the fact that some people are involved in all four of the ini-tiatives, there is insufficient co-ordination between the planners,and plans are formulated for different purposes.

The plans address mainly the long-term demand, while little orno attention is directed at meeting the short-term demand. Theplans also do not adequately consider the potential of demand side

mining together


Power lines marching into the sunset

mining together


management and energy efficiency to alleviate the electricity short-fall.

Another factor contributing to power interruptions is the delayin the implementation of the envisaged restructuring of the electric-ity distribution industry. Distributors who may lose their distributionbusinesses in that process are reluctant to invest in the refurbish-ment and maintenance of their distribution equipment.Consequently, a number of distribution systems have deteriorated tothe point where they are no longer reliable.

The Chamber has undertaken a number of initiatives to bring itsconcerns to the attention of role players in the electricity supplyindustry. These include meetings with the minister of public enter-prises, the chief executive and top management of Eskom and thechief executive of EDI Holding – the entity responsible for therestructuring of the electricity distribution industry.

Mines have taken initiatives to manage their own electricitydemand. In addition to shifting some load to low demand periods,a number of energy saving measures were introduced. Theseinclude the installation of energy efficient lighting and electricmotors; variable speed drives on electric motors; and improvedcontrol of compressed air and electric rock drills. It was reportedthat during the period from March 2005 to March 2007 25 demandside management projects in the mining industry resulted in savingsof 125.2 MW.

Electricity Regulation Bill

The Electricity Regulation Amendment Bill was introduced inParliament during September 2006. It was intended to amend theElectricity Regulation Act, 2006 by making certain textual correc-tions, inserting a new chapter dealing with electricity reticulationby municipalities, extending the minister’s powers to make regula-tions, and providing for matters connected therewith.

The Chamber submitted comments on the Bill to theParliamentary Portfolio Committee on Minerals and Energy and pre-sented its comments at a hearing of the portfolio committee.

Cabinet has, on several occasions, approved recommendationsfor the restructuring of the electricity distribution industry into anumber of financially viable regional distributors with certainlarge industrial consumers having a choice of electricity supplier.Such recommendations were made by the Electricity RestructuringInter-departmental Committee in 1997 and the ElectricityDistribution Industry Blueprint Report of 2001. The white paperon energy policy of 1998 also stated that government would con-solidate the electricity distribution industry into a number ofregional distributors.

These recommendations and the policy positions taken cameabout because many municipalities were unable to provide satis-factory electricity services at acceptable tariffs to consumers in theirjurisdictions. In addition some municipalities were using incomefrom electricity to subsidise other municipal services.

The Chamber supports the proposalsfor the restructuring of the electricitydistribution industry into a number ofregional distributors because it sees thisas a way to consolidate the industry,rationalise tariffs and improve serviceprovision.

The Electricity RegulationAmendment Bill, however, entrenchesthe right of municipalities to supplyconsumers that use less than 5 000 MWh a year. This erodes the offi-cial policy on the restructuring of theelectricity distribution industry asmunicipalities will have very little rea-son to surrender their electricity under-takings to form regional electricitydistributors.

The Electricity Regulation Act, No. 4of 2006, and the Amendment Bill underconsideration are also silent on the rightof certain industrial customers, i.e.those consuming more than 100 GWh ayear, to a choice of supplier. This wasan important aspect of the ElectricityDistribution Industry Blueprint Report.The omission is causing concern amongindustrial electricity consumers, espe-cially in the mining industry where aconsiderable number of operations con-sume more than 100 GWh a year.

The uncertainty created by theapparent deviation from the official pol-icy positions outlined in the 1998 whitepaper and the Blueprint Report is detri-mental to investment decision makingand retards economic development.

The Chamber argues that legislationshould be drafted in accordance withpolicy. When policies are no longerappropriate, alternate policies should bedeveloped in the accepted manner withstakeholder consultation as set out inthe white paper.

The Amendment Bill also interpretedthe functions of municipalities as envis-aged in the Constitution, namely that: ‘amunicipality has executive authority inrespect of, and the right to administerelectricity and gas reticulation’, as con-noting that municipalities were not tobe subject to licensing and regulationby the National Energy Regulator. Whileit provided for the monitoring of

municipal reticulation by the Regulator,it did not empower the Regulator to reg-ulate this function.

As a result, municipal reticulationcustomers were placed in a muchweaker position vis-à-vis their electricitysupplier than the customers of othersuppliers. This was particularly true forindustrial and commercial customersthat did not have a political voice.

The Chamber recommends that theBill be amended to allow for a greatermeasure of regulation of municipalelectricity reticulation by the NationalEnergy Regulator. It also recommendsthat a provision be included in section28 of the Amendment Bill requiringmunicipalities to establish mechanismsto provide for the participation of retic-ulation customers in the governance ofthe reticulation activities.

In terms of Section 15 of theElectricity Regulation Act, the regulatormay make any licence subject to condi-tions relating to:

� the setting and approval of prices,charges, rates and tariffs charged bylicensees

� the methodology to be used in thedetermination of rates and tariffs thatmust be imposed by licensees.

As a result the regulator has a largemeasure of control over the tariffs set bylicensed electricity distributors. In con-trast, municipalities are required by theAmendment Bill to ensure affordablereticulation services through the settingand structuring of tariffs within anational framework of norms and stan-dards. It merely requires the minister,acting in consultation with the regula-tor, to set national norms and standardsfor reticulation services that mayinclude norms and standards for the set-ting and structuring of charges, ratesand tariffs that relate to reticulationservices, or the use of distributionpower systems used for reticulation,which may include a national tariffframework to be utilised by a munici-pality in determining such charges, ratesor tariffs.

This means that the regulator’s

involvement in municipal reticulation tariffs may be limited to con-sultation with the minister.

The only other control over municipal reticulation tariffs is therequirement of the Local Government: Municipal Systems Act thatmunicipalities adopt a tariff policy reflecting the principles con-tained in the Act. These principles include a provision for sur-charges on tariffs.

The Amendment Bill, if enacted as introduced to Parliament,will afford municipalities a large measure of freedom in settingreticulation tariffs and perpetuate the current use of income fromelectricity reticulation to finance other activities.

The Chamber recommends that the Amendment Bill bereworded to the effect that:

� the minister must set the norms and standards contemplated insection 31 as recommended by the regulator

� that such norms and standards must include norms and stan-dards for the setting and structuring of charges, rates and tariffsthat relate to reticulation services or the use of distributionpower systems used for reticulation.

The Amendment Bill provides an opportunity to rectify a prob-lem created by the wording of the Electricity Regulation Act, interms of which distribution is the conveyance of electricity througha power system operating at or below 132 kV and no person may,without a licence issued by the regulator, operate any distributionfacility. Mines convey electricity from receiving substations to vari-ous points of use through systems that operate at voltages below132 kV. In terms of the Act they will require licences from the regu-lator to do so. The licensing of distribution for own use will imposean undue administrative burden on the consumers as well as on theregulator, without adding any value for either party.

The Chamber recommends that a clause be inserted in theAmendment Bill to amend the Act to exclude any conveyance ofelectricity for private use at or below 132 kV from licencing.

By mid 2007 the Bill had not yet been enacted.

Diesel fuel

Diesel fuel, a major energy carrier in mining operations, is usedmainly for transport purposes in trucks and locomotives. During2005, the South African mining industry consumed 791 Ml ofdiesel fuel (statistics from SAPIA – the South African PetroleumIndustry Association). That amounts to 9.1% of the diesel fuel soldlocally during that year. It also represents a 6% annual increase inthe quantity of diesel fuel consumed by the mining industry.

The quantity by which demand for diesel fuel has grown inlandhas exceeded local supply since 2005. This has on occasion led toconstrained supply.

The DME embarked on an investigation of the liquid fuels sup-ply system during 2006. The Chamber engaged with the depart-ment and made input into the investigation. The department

mining together


mining together


submitted the Energy Security Master Plan – Liquid Fuels to Cabinetfor approval in April 2007. It recommends that:

� the local production of finished petroleum products be pro-moted, and specifically, that at least 30% of finished productsbe manufactured from indigenous raw materials

� climate change be considered as an important component ofintegrated energy planning and should be incorporated in theenergy modelling process

� global fuel specifications be adopted to ensure that South Africadoes not become a dumping ground for low grade fuels

� there be management of risks associated with obtaining themajor portion of crude oil from only two sources. Thirty percent of all crude consumed should be procured throughPetroSA, and South Africa, through its national oil company,should acquire its own crude vessel

� a policy of limited imports be re-endorsed to promote local pro-duction of liquid fuels

� energy efficiency be strongly promoted in all energy consumingsectors of the economy

� an independent energy planning co-ordinator be considered toco-ordinate planning of infrastructure investments

� large petroleum stocks be kept for the peak demand operationof open cycle gas turbine electricity generators

� approval be given for the construction of a new, appropriatelysized, properly integrated pipeline to be built by Petronet and amaximum of 1c/l security of supply levy be allowed to fundredundancy in the pipeline

� block trains be used to improve Spoornet’s turn-around timesfrom an average of 14 days to a more acceptable global bestpractice of four days for equivalent distances

� the management of the back of port operations be consolidatedunder an independent operator

� oil industry participants be obliged to hold 28 days commercialstock, which will be paid for by consumers of petroleum products

� the approach used by the United States Department of Energyin the form of the energy information administration be adoptedin South Africa.

Water supply

The mining industry in the Rustenburg area of the North WestProvince continues to grow with increasing production at existingmines and the opening of new mines. At the same time coal pro-duction and electricity generation in the Waterberg area ofLimpopo Province is about to increase, boosting the demand forwater in these areas. Preliminary investigations indicate that thecurrent bulk water supply is insufficient to provide for the expectedincreased demand.

The main water source in the area is the Crocodile River(West) catchment that also spans portions of the Gauteng, NorthWest and Limpopo provinces. There are nine major storage dams

in the catchment with very limitedscope for additional dams. Large quan-tities of water are already transferredinto the catchment to augment thelocal water resources. These transfersconstitute close to 46% of the totalwater use in the catchment. The largesttransfer of water is the supply ofpotable water via the Rand Water bulkdistribution system from the UpperVaal to Rustenburg and surrounds.

Water demand management wasconsidered as a first option. However, itwill only have a limited impact, afterwhich additional transfers into the areawill need to be considered. Increasingthe transfers from the Vaal River systemwill necessitate expensive projects thatwill take a long time to complete sincethis system is already supplied by trans-fers from other basins.

Another option is to use waste waterin the Crocodile River (West) catchmentfor mining and industrial use in theRustenburg and Waterberg areas. A cas-cading re-use system appears to be afeasible and preferable option. This willmake the limited potable water supplyavailable for domestic use and ensurethat sufficient water is available for min-ing and industrial use.

The re-use of waste water in the areawill require water treatment facilitiesand a pipeline extending from the vicin-ity of Brits to Lephalale. To bring aboutthe construction of such facilities andpipeline, all the mines and industries inthe areas will need to co-operate toinfluence the Department of WaterAffairs and Forestry and the provincialand local governments involved toagree to the project.

The Chamber expressed support inprinciple for the utilisation of wastewater for mining and industrial use. Aprefeasibility study, funded by aChamber member, is underway.Depending on the outcome, expectedin January 2008, a decision will betaken on whether or not to pursue theutilisation of waste water for mining andindustrial use.

Policy harmonisation in SADC

Following the approval of a frameworkfor the harmonisation of minerals poli-cies by the Southern AfricanDevelopment Community (SADC)Council of Ministers during August2006, the SADC secretariat requestedthe United Nations EconomicCommission for Africa (UNECA) toassist it in developing a multi-year, the-matic programme for the implementa-tion of the mineral policiesharmonisation framework. UNECAcommissioned Mintek to develop anappropriate implementation strategy.

At a meeting of representativesfrom the Mining Industry Associationsof Southern Africa (MIASA) with thedeputy executive secretary of SADC itwas revealed that the implementationof the harmonisation of mineral poli-cies now presents an opportunity forre-establishing the pre-eminence ofthe mining sector in the activities ofthe SADC and for MIASA to resume itsformer close interaction with theSADC.

It is intended to re-establish the erst-while Committee of Mining Ministers.Staff dedicated to the mining sectorhave already been appointed in theDirectorate of Trade Investment Financeand Industry. It is foreseen that MIASAwill be an important role player in thisstructure.

As a first step, a meeting of stake-holders will be convened later in 2007to consider a plan for the implementa-tion of the harmonisation of mineralpolicies.

MIASA

The Chamber continues to host theMIASA secretariat. Representatives ofthe members of MIASA met twice dur-ing the period under review.

In considering initiatives by southern African governments topromote the beneficiation of minerals, it was noted that theChamber of Mines of South Africa had provided a clear argumentthat mining companies have competence in mining, smelting andrefining, but not in the manufacturing beneficiation sector.

The view that the mining sector had control over manufacturingbeneficiation outcomes and should therefore be forced to benefici-ate is incorrect. Measures such as export duties on unbeneficiatedminerals could actually harm the mining sector without benefit tothe manufacturing sector. MIASA therefore adopted the positionthat the mining sector should concentrate on mining and that thedownstream industry must look after beneficiation.

Government decisions on beneficiation must be in the bestinterests of a country and should not include the introduction ofcoercive penalties.

In considering the formation of an association of African miningindustries, there is general agreement that a strong African voice formining is essential. It was decided that the establishment of anAfrican mining association is premature as the mining industry issufficiently organised only in the southern African region. AnAfrican mining association can only be considered when otherstrong regional associations come into being

The director-general of the DME requested MIASA to becomemore involved in the African Mining Partnership (AMP). As a resulta letter proposing ways in which MIASA can contribute to the activ-ities of the AMP was forwarded to the chairperson of the AMP Co-ordinating Committee. In addition MIASA requested an opportunityto present its proposals to the meeting of both the officials and min-isters during February 2007.

MIASA was not given an opportunity to present its proposalsand its delegation was present in the official proceedings only as anobserver. Members, therefore, agreed that MIASA would henceforthnot become involved in the activities of the AMP, but only observedevelopments. In addition only the secretary of MIASA wouldattend AMP meetings.

A MIASA delegation attended the Mines 2006 Sector PartnershipMeeting held under the aegis of the EU-SADC InvestmentPromotion Programme from 29 November to 1 December 2006 inLusaka, Zambia. Promoters and entrepreneurs from the southernAfrican region were given an opportunity to present new businessdevelopment projects in the mining sector to interested interna-tional investors.

The event was preceded by the Mines 2006 Policy DialogueWorkshop on 28 November 2006, which provided an opportunityfor invited representatives from the southern African mining sectorto discuss policy issues. Representatives from MIASA presentedpapers on minerals policy harmonisation and investment issues atthe workshop.

mining together


mining together


Environment

policy

The most challenging issues for the yearunder review were the continuouschanges to the environmental regulatoryframework, the divergence of viewsbetween the regulators and the miningindustry on certain aspects of the imple-mentation of the MPRDA, and the re-emergence of environmental legacyissues as the standard by which theenvironmental performance of the min-ing industry is being equated.

Sustainable development still formsthe basis of the Chamber’s input onenvironmental policy and legislation.The Chamber recognises and promotesthe pursuit of a balance between thefour pillars of sustainable development,namely, social equity, environmentalprotection, economic development andan effective governance framework.

Policy, legislationdevelopment and engagement

The Chamber’s environmental adviser’soffice participates in most initiatives thatdeal with environmental issues of con-cern to the mining industry, and pro-vides expert and specialist input intomany legislative and policy develop-ment processes. The main vehicle forconsidering the mining industry’s envi-ronmental policy options and genera-tion of draft comments and specialistinput is the Chamber’s EnvironmentalPolicy Committee. The committee ismade up of environmental specialistsfrom the mining groups, which collec-tively represent the most senior environ-mental management grouping in themining industry.

In addition to engaging governmentdepartments and parliamentary struc-tures, the Chamber continues its liaisonwith other stakeholders, namely, envi-ronmental non-governmental organisa-tions (NGOs) such as the EndangeredWildlife Trust, Wildlife and EnvironmentSociety of South Africa, and the SouthAfrican chapter of the WorldConservation Union (IUCN-SA).

The Chamber enjoys good working relations with specialist andresearch organisations such as the Water Institute of SouthernAfrica, particularly the Mine Water and the Sludge Managementdivisions, the National Association of Clean Air, Coaltech (theSurface Environment and the Mined Land Research), the WaterResearch Commission, the National Research Foundation, theMinerals and Energy Education Training Institute and the Centre forSustainability in Mining and Industry at the University of theWitwatersrand, the Centre for Environmental Management at theUniversity of North West (Potchefstroom Campus), other tertiaryinstitutions and Standards South Africa’s International StandardsOrganisation’s technical committees.

The Chamber continues to engage government and provide spe-cialist input via its participation on task teams, general and projectsteering committees of projects initiated by the departments of min-eral and energy, water affairs and forestry; environmental affairs andtourism, and trade and industry; the National Treasury; BUSA’sEnvironment Task Group; and public hearings of the parliamentaryportfolio committees on environment and tourism; water affairs andforestry; and minerals and energy.

Department of Minerals and Energy

Environmental management in the mining industry

During the period under review, the Standing Committee onEnvironmental Management in the Mining Industry, under thechairmanship of the DME, which is designed to address issues per-taining to the transparent and consistent application of policiesthroughout the regional offices of DME, did not meet. There is stilluncertainty about the role and continuation of this committee. In2006, it was mooted that the Mining and Minerals DevelopmentBoard would consider re-establishing the committee when it

mining together


Water containment on a mine

mining together


reviews existing structures and finalise the process of establishingits other subcommittees. However, there has been no progress. Inthe absence of this committee, the interaction with the DME is onan ad hoc basis. As a result key areas of disagreement remain unre-solved.

Mine environmental management guidelines

The DME has circulated one of the Mine EnvironmentalManagement (MEM) series for comment. The MEM guideline docu-ment on Mine Closure has been circulated to the Chamber’sEnvironmental Policy Committee members for comment. TheChamber is waiting for the progress report on the other guidelinedocuments in the series. The MEM series’ objective is to facilitatebetter understanding of the meaning and successful interpretationof the Mineral and Petroleum Resources Development Act(MPRDA), especially on environmental management. The guide-lines aim to provide firm guidance on:

� mine closure� environmental decision making and implementation for scop-

ing, environmental impact assessments and environmental man-agement programmes

� environmental management programme monitoring and per-formance assessment.

Financial provision

The Chamber’ chief executive met the director-general of the DMEduring August 2006 to discuss the concerns of Chamber membersregarding financial provision for mine closure. The director-generalinstructed that a workshop be held on 25 August 2006 to facilitatea better understanding of the issues by the DME.

The objectives of the workshop were to present Chamber mem-bers’ concerns around the implementation of the financial provi-sion policy, demonstrate the seriousness and urgency of the matterand recommend a process to resolve the problems identified.Although the DME acknowledged that there are problems, itshowed no sense of urgency in attending to the industry’s concerns,but insisted that it will continue to work ‘within the current legisla-tion’ regardless of the problems.

The Chamber is awaiting a final outcome of the amendments tothe MPRDA to consider the way forward.

MPRDA environmental amendments

The proposed environmental amendments to the MPRDA are aimedat aligning and streamlining the environmental impact assessmentprocess with the National Environmental Management Act to pre-vent duplication. Furthermore, the amendments propose that theminister be empowered to regulate on the apportionment of liabilities where there are a number of contributors to a pollution

impact. At the time of compilation ofthis report, the amendments to theMPRDA were still undergoing parlia-mentary scrutiny. The Chamber willmonitor developments carefully.

Department ofEnvironmental Affairs and Tourism(DEAT)

The Chamber has been engaging withthe DEAT to establish a platform for itsmembers to raise issues of concernaround waste management, air qualityand biodiversity conservation and man-agement.

NEMA Amendments

The minister of the DEAT exemptedmining related activities from the scopeof the new National EnvironmentalManagement Act (NEMA) environmen-tal impact assessment regulations in2006 pending the fine tuning of admin-istrative procedures between the DMEand the DEAT to prevent duplication ofrequirements. A process was embarkedupon in which the two departmentswere to amend their legislation toachieve the stated objective of prevent-ing duplication and a process is nowunderway to align and streamline theenvironmental impact assessmentrequirements of NEMA to take cogni-sance of the amendments to theMPRDA. At the time of compiling thisreport, the NEMA amendments werebeing subjected to parliamentaryscrutiny.

Air quality management

On 11 September 2005, the minister ofthe DEAT published a notice in theGovernment Gazette, which broughtthe National Environmental Manage-ment: Air Quality Act (NEM:AQA) into

effect. Interim administrative measureshave been put in place to bridge therepeal of the Atmospheric PollutionPrevention Act, 1965, and the cominginto force of the new Act. This took theform of the minister requestingParliament to approve a provision forthe old Act to be regarded as a specificenvironmental management Act.Section 7 of the NEM: AQA requiresthat the minister establish a nationalframework for achieving the objectiveof this Act within two years of the dateon which this section took effect.

The department initiated the devel-opment of this framework in 2006 anda first draft document is expected to bepublished for public comment inSeptember 2007.

Furthermore, section 21 of the Actrequires that the minister identify activ-ities that may have a substantial impacton air quality and will require an emis-sion license. The DEAT has appointedAirshed Planning Professionals (Pty)Ltd as consultants to facilitate thisprocess and also set minimum emis-sion limits for those activities requiringa licence.

Various activities including stake-holder communication and a literaturereview of publications on the standardsetting process have taken place. As aresult a proposed final list of activitieshas been provided as an output of thisstandard setting process.

Mining, biodiversity and protected areas

The Chamber has been participating ininitiatives aimed at advancing the man-agement and protection of the country’sbiodiversity and heritage. The SouthAfrican Mining and Biodiversity Forum(SAMBF) was established to pursue thisobjective. Its first successful project wasthe production of the document, AStrategic Assessment of the Status ofBiodiversity Management in the SouthAfrican Mining Industry, which adaptedthe International Council on Mining and

Metals’ (ICMM) Guidance on Biodiversity Management in theMining Industry.

National Committee on Climate Change

The National Committee on Climate Change (NCCC) advises theDEAT on matters relating to climate change, and in particular tothe United Nations Framework Convention on Climate Change,the Kyoto Protocol and subsequent implementation mechanisms.The NCCC meets at least twice a year and is comprised of mem-bers from business (including the Chamber as part of BUSA), allspheres of government, NGOs, the Development Bank ofSouthern Africa and the South African Local GovernmentAssociation.

The committee aims to facilitate participatory processes leadingto the formulation of a national climate change policy position anda national implementation strategy. It is also a platform for keystakeholders to express their concerns on climate change issues.

National cleaner production strategy

The DEAT has developed a national strategy and action plan forcleaner production as part of South Africa’s response to the com-mitments made at the 2002 World Summit on SustainableDevelopment.

A National Cleaner Production Strategy and Action Plan havebeen developed through a broadly participative process. The strat-egy has been sent back to the DEAT by Parliament to considerissues such as financial implications.

A review of the status quo of cleaner production conducted in2004 by the DEAT identified a number of potential barriers anddrivers for the implementation of cleaner production.

The review revealed that South Africa currently has a low levelof awareness of the environmental impacts of production processes,products and services, and lacks capacity for an appropriatedemonstration of the economic and environmental benefits andtechniques of cleaner production.

The lack of financing for cleaner production investment, and thefragmented policy and regulatory framework were also identified ascritical barriers.

To raise the level of awareness of the advantages of cleaner pro-duction in the mining industry, the Chamber participates in cleanerproduction initiatives, such as the National Cleaner ProductionCentre and the Coal Mining Cleaner Production Forum.

The Chamber has produced a publication, Information Pack onClimate Change: Clean Development Mechanism and CarbonFinance, which enables South African mining companies to takenote of the business opportunities created by the CleanDevelopment Mechanism framework. This publication can bedownloaded from the Chamber’s website: www.bullion.org.za

mining together


mining together


Department of Water Affairs andForestry (DWAF)

The Chamber and the DWAF have established liaison mechanismswhereby members of the Chamber’s Environmental PolicyCommittee and the DWAF’s Chief Directorate: Water Use andConservation, discuss issues of mutual concern. Of particularimport to the Chamber is the delay in the processing of water uselicence authorisation applications. Of concern to the DWAF is theproblem that some of the applications do not have sufficient infor-mation to enable the department to reach a decision. The liaisonmechanism is helpful in identifying bottlenecks.

Chamber members remain dissatisfied with the slow progress inthe department in attending to the backlog of applications and withthe new system proposed for considering applications. The DWAFhas appointed professional service providers to deal with the back-log of applications and provide strategic advice to the chief direc-tor: water use and conservation (delegated authority) and providecapacity building for the department.

Waste discharge charge system

The DWAF has developed a pricing strategy that provides a frame-work and detailed implementation proposals for water use. As part

of this strategy, it has structured acharge system for waste discharges, theaim of which is to implement the pol-luter pays principle and to provide adisincentive for water pollution. TheChamber’s Environmental PolicyCommittee reviewed the proposal andwas unhappy with the phased approachto the implementation of the chargesand the lack of ring fencing of some ofthe charges/ levies. Owing to the needfor regulatory adjustments like amend-ments to the National Water Act and thepromulgation of a Money Bill, compo-nents – other than water resources man-agement charge – of the wastedischarge charge system will not beimplemented before 2008.

The Chamber’s interaction with theproject technical team and the depart-ment is ongoing.

Best practice guidelines

The DWAF has developed a series ofbest practice guidelines for use in watermanagement in the South African min-ing industry. These are in line with inter-national principles and approachestowards sustainability. The series ofguidelines deals with DWAF’s watermanagement hierarchy (prefaced withthe letter H), general water managementstrategies, techniques and tools (pref-aced by the letter G) and activities oraspects (prefaced by the letter A). Theseare grouped as follows:

Hierarchy

� H1: Pollution prevention� H2: Minimisation of impacts� H3: Water re-use and reclamation� H4: Water treatment

General

� G1: Storm water management� G2: Water and salt balances� G3: Water monitoring systems� G4: Impact prediction

Activity

� A1: Small-scale mining� A2: Water management for mine

residue deposits� A3: Water management for

Environmentalist measuring grass coverage on a post-closure site

hydrometallurgical plants� A4: Pollution control dams� A5: Water management for surface

mining� A6: Water management for under-

ground mines

The Chamber, in conjunction withthe Water Institute of Southern Africa(mine water division) and the DWAF,has arranged technology transferprocesses for both department officialsand mining industry personnel to facili-tate a common understanding of theguidelines as they will be vital in thewater licensing process.

NNR/IFR

During the year under review, theChamber’s environmental adviser wasnominated by BUSA to serve on theBoard of the National NuclearRegulator (NNR). The Minerals, Energyand Allied Industries Forum onRadiation (IFR), formed to address thesensitive issues of radiation withinSouth Africa’s mining industry, contin-ues to engage and discuss all radiation-related issues with the NNR and advisestakeholders on radiation matters.

The Chamber commissionedChemRad Services in 2003 to decon-taminate and rehabilitate 38 sites con-taminated with, or as a result ofradioactive mine scrap. ChemRadServices has completed the work speci-fied in the agreement on all the sites,with the exception of Gold FieldsScrap/Universal Metals which has beenissued with a Certificate of Registration(COR) by the NNR under the name:MTC Demolition. Two further sites:Donnlee Engineering and TAPEngineering, which have been decon-taminated by ChemRad Services, havebeen issued with CORs.

According to the agreement, theNNR is required to remove the decon-taminated sites from the scope of COR-55 granted specifically for theenactment of the services agreement.The NNR has been issued with a finalreport for each decontaminated site and

an associated Authorisation Change Request requesting that the rel-evant site be removed from the scope of COR-55.

At the time of compiling this report, the NNR had issued docu-mentation removing 29 sites from the scope of COR-55. Of the sixremaining sites, the NNR has audited three and must visit a furtherthree sites.

National Treasury

The Chamber held a number of meetings with a National Treasurysenior official to facilitate a better understanding of the issues sur-rounding the Chamber’s concerns on financial provision. TheChamber also undertook continuous engagement with the NationalTreasury on the draft policy document, A Framework forConsidering Market-based Instruments to support EnvironmentalFiscal Reform in South Africa.

The stated objective of this draft document is to outline the rolethat environmentally-related taxes and charges could play in sup-porting sustainable development in South Africa, and to delineate aframework for the consideration of the potential application of suchtaxes and charges. The paper considers measures that could con-tribute to both revenue requirements and environmental objectives,a number of which concern energy. The draft policy paper notesthat it is important that South Africa’s economy develops in a sus-tainable manner, while addressing the issues of poverty, inequalityand unemployment. The document has not yet been finalised.

mining together


Water purification on a mine

mining together


Engagement with NGOs

The Chamber held a number of meetings with a wide range ofNGOs concerned with environmental pollution caused by aban-doned and derelict mines, as well as operating mines. Of specialconcern to the NGOs was, first, the impact of a century of goldmining on the Witwatersrand gold mining basins resulting in inter-mine water flow regimes and water quality impacts, particularlyradioactivity in the Wonderfontein Spruit.

The Chamber’s Gold Producers’ Committee is supporting a proj-ect to develop conceptual water management strategies for the FarWest Rand basin.

Secondly, the NGOs are concerned about the impact of aban-doned (and some operating) mines on the water quality in theLoskop Dam catchment. In this instance it has been pointed outthat the inability of the DWAF’s water treatment facility inBrugspruit is primarily responsible for the impacts on Loskop Dam.

It is on the back of these issues that some NGOs and academics– who claim to have studied the issues for 20 years – are nowcampaigning for the prohibition of mining in certain areas regard-less of the due process to obtain mining authorisation.

The Chamber has undertaken not to support mining in legallydesignated areas, but to support mining in sensitive areas where adue process of impact assessment has been followed and no fatalflaws identified. This is, however, a contested area that will exer-cise the Chamber for some time to come.

Water Research Commission

The Water Research Commission (WRC) is a research funding facil-ity that also considers projects that may be of interest to theChamber. The Chamber assists the WRC by acting as reviewer ofsome of the project proposals and participates on the project refer-ence groups.

The Chamber has also extended one of the WRC projects onwater interception as a conceptual option for managing water inthe flooded gold mining basins

National Business Initiative

The Chamber continues to co-operate with the National BusinessInitiative (NBI) on the implementation of the Energy EfficiencyAccord that was signed by some of its members during May 2005.The Chamber is a member of the Energy Efficiency TechnicalCommittee that oversees the energy efficient process. The commit-tee developed a monitoring and reporting guideline to assist sig-natories and other stakeholders with the implementation ofenergy efficient projects. Other issues under discussion with theNBI are climate change and sustainable development, and watermanagement.

NRF: SAEON

The National Research Foundation:South African EnvironmentalObservatory Network (NRF:SAEON) isa research facility funded by theDepartment of Science and Technologyand managed by the NRF. TheChamber is serving a second term as amember of the Technical SteeringCommittee of the research facility.

SAEON was created to producereliable and accessible environmentalinformation by monitoring and study-ing long-term environmental changeover large spatial scales. It aims to helpgenerations of South Africans to under-stand their natural environment andhow it is changing over time andspace.

One such study is the projectedscenario of mining activities eventuallyclosing down in Phalaborwa over thenext few decades. The study provides aspecial opportunity to monitor long-term impacts and recovery from suchoperations. The Olifants River flowingpast Phalaborwa is heavily affected bylocal economic activities and humansettlements and has downstream effectsin the Kruger National Park. TheOlifants River is therefore a primestudy site for SAEON’s water theme.

Water Institute of Southern Africa

The Water Institute of Southern Africa(WISA) provides a forum for theexchange of information and views toimprove water resource managementin southern Africa.

The objectives of the institute arethe promotion and application of sci-entific and engineering knowledge andmanagement skills in the planning,design, construction, operation, main-tenance, investigation, research andeducation in the natural and controlledwater cycle. This includes, but is notlimited to, the application of scientific,engineering and management skills to

hydrology, water resources, river man-agement and flood alleviation, recre-ation, water supply and distribution,sewerage, sewage and industrial wastetreatment, disposal and water pollutioncontrol. The Chamber participates inmost WISA divisions and sits on themanagement committee of the MineWater Division.

ICMM

The Chamber is one of 27 national andcommodity association members of theInternational Council on Mining andMetals (ICMM). (An overview of ICMM

and its task forces is provided in the Sustainable Development sec-tion of this report). The Environmental Adviser’s office participatesin the Environmental Stewardship Task Force and the BiodiversityWorking Group, and is a correspondence member of IntegratedMaterials Management Task Force and the CommunityDevelopment Task Force.

The Environmental Stewardship Task Force meets twice a yearduring the ICMM annual meetings. It has deliberated on a widerange of issues, which include overseeing the progress of theBiodiversity Working Group and dialogue with IUCN, the produc-tion of various environment related reports such as the FinancialAssurance Report, and the development of a best practice websiteon tailings management. Other issues covered are: rehabilitationand closure, water, a cyanide code and the review of InternationalFinance Corporation and World Bank environmental, health andsafety guidelines.

mining together


Chrome being poured at Samancor Chrome

mining together


Health

The 2007 – 2011National Strategic Planon HIV and AIDS

The HIV and AIDS epidemics continueto challenge all sectors of society inSouth Africa. Although the rate ofincrease in HIV prevalence has slowedover the past five years, the country isstill to experience a reversal of thetrend. 2006 estimates are that of the39.5 million people living with HIVworldwide, more than 63% are fromsub-Saharan Africa – South Africa aloneaccounts for about 5.54 million HIVpositive people; 18.8% of the 15 – 49age groups is affected (2005). In thisgroup, women are disproportionatelyaffected – approximately 55% of allHIV positive people are women.

The high general prevalence isfuelled by extensive multiple sexualrelations, widespread concurrent sexualpartnerships, transmission in discordantstable couples and an environmentwhere the high background HIV preva-lence makes all sexually active peoplevulnerable to HIV infection.

The impact of class and colour onthe HIV and AIDS rates is best exempli-fied in the Western Cape where surveil-lance data shows the averageprevalence to be 15.7% – the lowest inthe country. However in Khayelitshaand Gugulethu/ Nyanga the registeredprevalence rates of 33% and 29%respectively, are well above the nationalaverage. The Human Sciences ResearchCouncil Household Survey of 2005shows that South Africans living in ruraland urban informal settlements appearto be at highest risk of HIV infection.

The past decade has also providedmore than sufficient evidence of thedevastating impact of HIV and AIDS. Allsectors of society are affected but indi-viduals and families bear the weight ofthe epidemic:

� Mortality rates have increased byabout 79%

� Mortality is higher in women than in

men, but it is in the 25 – 49 age groups that premature deathsare the highest

� Children remain a particularly vulnerable group with high ratesof mother-to-child transmission

� The social impact of ill health on parents, the death of parentsand the subsequent number of orphans increases daily, and insome areas child headed households are becoming the norm.

This reality amplifies the fundamental drivers of the epidemic –the deep-rooted institutional problems of poverty, underdevelop-ment and the low status of women, including gender based vio-lence.

This scenario underscores the central role and importance ofHIV prevention. Unless the country is able to influence the currentepidemic trajectory by reducing the number of new HIV infections,the premature loss of life will continue.

National Strategic Plan

The 2007 – 2011 National Strategic Plan (NSP) is guided byreviews of past plans. It was developed through an inclusiveprocess of drafting, collection and collation of inputs from a widerange of stakeholders.

mining together


Undergoing blood tests in a mine clinic

mining together


Before discussing the NSP, it is important to highlight a few con-clusions from the 2000 – 2005 review:

� All stakeholders embraced the NSP as a guiding framework � The involvement of agencies beyond the Health Department

was broadened and established programmes such as health edu-cation, voluntary counselling and testing (VCT), prevention ofmother-to-child transmission, and antiretroviral therapy (ART)

� Stigma and discrimination remained unacceptably high and adeterrent to the use of services

� Serious capacity deficits remained, especially in disadvantagedrural communities

� Two major weaknesses identified were poor co-ordination bythe South African AIDS Council (SANAC) and the setting ofclear targets within a comprehensive monitoring framework.

The latest NSP has carefully noted the findings of the 2000 –2005 strategic plan and sets out a clear framework for monitoringand evaluation. It includes a preliminary costing and a commitmentto raising the substantial funds that will be needed for its effectiveimplementation.

To be transparent and honest, the NSP, in the situational analy-sis section, has identified:

� the populations with higher rates and higher risk of HIV infec-tion

� the essential prevention measures � the essential package of prevention, treatment, care and support

to the identified populations to the scale and magnitude neededto make a difference

� the sources of new infections, as thisis key to priority setting for the pre-vention programme

� new prevention and treatment tech-nologies

� the development efforts to transformsociety.

The plan has noted lessons gainedover the last 15 years and has set ambi-tious targets to reduce the number ofnew HIV infections by 50% and toreduce the impact on individuals, fami-lies, communities and society byexpanding access to appropriate treat-ment, care and support to 80% of allpeople diagnosed with HIV. All ofwhich has to be achieved in the nextfive years.

The interventions needed to reachthe goals of the NSP are structuredunder four priority areas:

� Prevention � Treatment, care and support� Human and legal rights� Monitoring, research and surveil-

lance.

In all the priority areas multisectoralobjectives, interventions and five-yeartargets are identified – a total of 216interventions are proposed. The expec-tation is that all sectors of society willcritically interrogate the NSP, note rele-vant areas applicable to that sector anddevelop sector-specific implementationplans.

Business and HIV and AIDS

In the early years of the HIV epidemic,business was notably cautious in itsresponse and was guided primarily bycareful analysis and monitoring of theepidemic and its impact on the popula-tion and the economy. Since then, how-ever, businesses have becomeincreasingly involved because of:

� increased absenteeism and the lossof employees

� the premature loss of experiencedand skilled employees and thehigher costs of recruitment andtrainingPatient being cared for in a mine hospital

� lower productivity� increasing costs relating to health

funding and death benefits.

Faced with these realities, businesshas had to ensure that HIV in the work-place is managed optimally, i.e. HIV lit-erally has become business’s business.The importance of this must be empha-sised because business is not in thebusiness of healthcare delivery. Threemodels of HIV and AIDS delivery haveemerged in the business sector:

� Employer funded and providedhealth services, e.g. the miningindustry, parastatals

� Health insurance – this is by far thelargest contribution by business.Employees are covered fully for HIVcare and have the choice of health-care provider. The Medical SchemesCouncil introduced HIV and AIDScare as part of the prescribed mini-mum benefits in 2003

� Independent disease managementprogrammes where an external HIVspecialist group is contracted to man-age the HIV and AIDS programmes.

A number of studies have also iden-tified the uneven nature of HIV policiesand programmes in the business sector.The evidence indicates that:

� the large business sector, i.e.employing more than 500 staff, havepolicies, budgets and programmes inplace. It is in this sector that themost innovative HIV programmeshave developed

� in medium sized companies, i.e.employing between 100 and 500people, about 50% have policies,budgets and programmes in place

� small businesses employing between10 and 100 people have major diffi-culties instituting HIV policies andprogrammes.

A 2006 survey conducted in themining industry by the Mining IndustryTripartite HIV and AIDS Committee,indicates the following:

� 70% of workplaces have policiesand programmes in place

� 56% of workplaces have budgets forHIV and AIDS

� 66% of workplaces have education and information pro-grammes

� 50% of workplaces provide VCT, ARVs, treatment for sexuallytransmitted infections and treatment for TB

� 35% of employees live in single sex hostels� 20% carry out periodic surveys on HIV and AIDS.

Larger mines fared much better on all aspects of HIV policiesand programmes, i.e. in the region of 95%.

What is clear from the experiences and studies is that there canbe no ‘one size fits all’ approach to the NSP. In developing a busi-ness sector response, business will need to review and learn fromthe last 10 years of workplace HIV programmes. Increasing accessto HIV programmes will also require short and long term decisionsin the following areas:

� Mandatory health insurance for all employees � Increasing comprehensive HIV programmes through workplace

health services� Partnering with government health services and international

agencies to provide comprehensive HIV programmes � Offering VCT consistently in the workplace (and in the commu-

nity)� Support for home-based care programmes� Support for the training of health professionals and community

health workers� Support for research on HIV vaccines and new drugs.

Important areas of the NSP for consideration by business

On prevention

� Encouraging employees to avoid concurrent sexual partners� Partnering with suppliers to develop or participate in existing

HIV and AIDS prevention programmes� Disseminating messages to reduce stigma� Policy strengthening to promote sexual equity and the social

and economic standing of woman� Promoting and partnering with other sectors, private, public and

NGO on HIV and AIDS� Encouraging normalisation of accommodation for all employ-

ees.

On treatment, care and support

� Encouraging every employee to know his/her HIV status –health insurance or workplace VCT centres

� Introducing wellness in the workplace programmes� Supporting a national health policy on funding the provision of

accessible, efficient and quality healthcare services.

On monitoring, evaluation and research

� Improving monitoring and evaluation systems, and data collec-tion to encourage evidence based healthcare

� Sharing epidemiological and programme data with other sectorsin the private sector and with the Department of Health

� Funding academic and scientific research on HIV and AIDS.

mining together


mining together


On legal and human rights

� Ensuring development of a code of practice to respect the con-stitutional rights of all employees.

The NSP recognises that success against HIV and AIDS requiresmore than gestures and platitudes; it requires a belief that thedesired outcomes can only be achieved through commitment fromand partnerships with leaders, communities, families, government,and health and social service providers. The NSP should be seen asa living and dynamic document.

SANAC has been reorganised to represent all sectors of societyand to take responsibility for the success of the NSP. It is hoped thatwith SANAC leading, all sectors will pull together and rally aroundthe two main identified aims of reducing new HIV infections andmitigating the impact of AIDS.

Tuberculosis

Mining and TB policy

In 1932 the Chamber published the firstof many comprehensive reports on TBin the mining industry. Since then theindustry has undertaken other areas ofresearch and the TB programmes havebeen continually refined and influencedby national and international best prac-tice guidelines and scientific evidenceon TB risk factors.

Today mining health service TB pro-grammes are comprehensive and areconsidered to surpass standards recom-mended by the World HealthOrganisation. The strategic frameworkadopted by mining industry health serv-ices is based on:

� reducing latent TB prevalence –encouragement of prevention, e.g.Thibela study

� reducing TB prevalence – improvingactive case finding

� reducing TB in HIV positive people– offering comprehensive HIV pre-vention, treatment and care pro-grammes

� reducing silicosis prevalence – managing dust at mining operations

� reducing TB transmission in thework and home environments.

TB prevention and care

Mine health services include primary,secondary and tertiary care, emergencycare and occupational healthcare – thelast probably providing the world’slargest occupational medical surveil-lance service for employees. The pre-dominant model of funding andprovision of healthcare in the miningindustry is through the staff modelhealth maintenance organisation, whichis a system of vertical integration wherethe funder has direct and indirect con-trol of the financing, organisation, man-agement and delivery of healthcare.Healthcare in this system is currently

Reduce latentTB prevalence

Preventive therapy

HIV prevention

Reduce institutional TBtransmission

Diagnose HIV withVCT & treat with

HAART

Better dust control

Increase active case finding

Reduce HIVincidence +prevalence

Reduce silicosis

prevalence

Reduced burden ofdisease, healthcareand compensation

costs

Reduce activeTB prevalence

Reduce rate ofTB in HIV+ves

Reduce TBtransmission

BBB B B

BB B B B

B

BBBB

B

BB

J J J J J J J J J J J J J JJ J

J

H H H H H H H H H H H H H H H H H H

1982 1985 1988 1991 1994 1997 20000

1000

2000

3000

4000

5000

B Study workforce J RSA national H USA

Strategic framework for TB control

TB in South African miners – incidence per 100 000 pop/per annum

only available to permanent employeesof a mining company.

Despite research and comprehensiveTB programmes available in the miningindustry, TB remains a major cause ofmorbidity and mortality. The industrycontinues to be faced with large num-bers of employees presenting with TB.TB-HIV/AIDS co-infection rates areextremely high, and evidence showsthat amongst mine employees, as manyas 60+% to 70% of TB patients are HIVpositive. The other major risk factorespecially for the South African goldmining sector, is silicosis, which prima-rily affects the lungs and has long beenknown to be associated with TB.

Many experts have challenged themining model of healthcare as militat-ing against good TB control. The point ismade that in the absence of good pub-lic health services, where the likelihoodof both treatment interruption and treat-ment compliance remains high, evenexcellent TB control programmes willnot have the desired outcomes.

Partnerships

Partnerships in TB care between govern-ment health services and the minehealth services go back to the 1920s.The World Health Assembly of 2000endorsed the establishment of globalpartnerships to stop TB and agreed tothe following targets:

� By 2005: 70% of people with infec-tious TB will be diagnosed and 85%of them cured

� By 2015: the global burden of TBdisease (deaths and prevalence) willbe reduced by 50% relative to 1990levels

� By 2050: the global incidence of TBdisease will be less than one permillion population (elimination ofTB as a global public health prob-lem).

In spite of global efforts, TB contin-ues to pose a threat. An example is thesudden emergence in 2005, in a ruralhospital in KwaZulu-Natal, of a deadlyform of TB associated with HIV/AIDS.

This outbreak illustrates the devastating potential of what is knownas extensively drug resistant TB (XDR-TB). XDR-TB is defined asmulti drug resistant TB (MDR-TB) with further resistance to secondline drugs.

In the light of the epidemics of TB, HIV, AIDS and now XDR-TB,it is all the more important to strengthen partnerships especiallybecause of a medical skills shortage in the country and where thedifferent sections of the national health service are in direct compe-tition for skills.

Impact of legislation on healthcare

Mining is the only industry that continues to both fund and runhealth services for employees. The mining houses take great pridein their massive healthcare infrastructure.

Despite declining figures, mining hospital beds in 1994 consti-tuted just less than 7% of all the acute care hospital beds in SouthAfrica. In addition, the occupational health services run by theindustry collectively constitute one of the largest occupational sur-veillance systems in the world.

Funding challenges

Since 1994, employers have faced challenges in health funding andprovision especially because of the major inequalities in govern-ment health services and mining’s commitment to providing ahealth service based on equity of access to health services, quality,improving health outcomes, sustainable financing, efficiency,greater responsiveness, citizen involvement in decision making, andreducing barriers between health and social care

Healthcare forms part of employee benefit packages, regulatedby conditions of employment – employees should be offered equalchoice and employer financing should be transparent. Equal accessto benefits (including dependents) must be provided. Establishedmining communities require access to a range of services. The newlegislation on mining and minerals binds mining groups to providesocial plans as part of the application for mining licensing.

Milestones and targets on noise and dust

At the 2005 Mine Health and Safety Summit, the urgency of pre-venting occupational injuries and diseases was discussed. The sum-mit unanimously supported a resolution that the Mine Health andSafety Council (MHSC) should develop milestones and targets onfatalities, noise and dust. Targets were agreed upon and attested bythe Executive Council of the Chamber in June 2005.

� By December 2008, 95% of all exposure measurement resultswill be below the occupational exposure limit for respirablecrystalline silica of 0.1mg/m3

mining together


mining together


B B

B

B

B

B

B B

B

B

2005 2006 2005 2006 2005 2006 2005 2006 2005 20060

400

800

1200

1600

2000

0

2

4

6

8

10

12

14

Num

ber

Rat

e pe

r 1

000

Total NIHL cases B NIHL rate

� After December 2013, using current diagnostic techniques, nonew cases of silicosis will occur amongst previously unexposedindividuals (Previously unexposed individual = individualsunexposed prior to 2008, i.e. equivalent to a new person enter-ing the industry at 2008)

� After December 2008, the hearing conservation programmeimplemented by industry must ensure that there is no deteriora-tion in hearing greater than 10% amongst occupationallyexposed individuals

� By December 2013, the total noise emitted by all equipmentinstalled in any workplace must not exceed a sound pressurelevel of 110dB(A) at any location in that workplace (includesindividual pieces of equipment).

Employers in the mining industry, in support of the targets andin keeping with a zero harm policy, have held three employerhealth and safety summits and established Milestones onOccupational Safety and Health (MOSH) task teams in October2006. The MOSH Noise and Dust Task Team’s objective is to formu-late strategies to reach compliance with the milestones and toimprove occupational health. The Leadership Task Team has identi-fied the importance of occupational health leadership, zero harm andcare of people as key areas for intervention in achieving the targets.

One of the major needs identified was the sharing of best prac-tice and information transfer. A decision was taken to establish awebsite containing relevant best practice information on noise anddust that could be shared by the mining industry. The transforma-tion from sharing to adoption and implementation will be accommo-dated by the model developed by the Technology and Best PracticeTransfer Group. The main responsibility of the adoption teams will beto facilitate the adoption and implementation of best practice in theelimination of silicosis and noise induced hearing loss.

Elimination of silicosis

Silicosis is a major threats in the mining industry, especially in thegold sector. The rate of silicosis reported for 2006 is 9.84/1 000

employees in the gold sector. The indus-try is not yet in line with the milestones– with gold reporting more than 11% ofdust samples above the occupationalexposure limits.

Current initiatives to eliminate silico-sis include three major five-yearresearch projects through the MHSCdealing with measurement and report-ing, environmental engineering, andtraining and awareness. The projects areentering their third year with goodprogress to date.

Elimination of noise induced

hearing loss

There has been a noticeable downwardtrend in the number of noise inducedhearing loss cases in the last four years,with gold reporting four cases per 1 000employees, diamonds three cases per 1000 and coal two cases per 1 000. Inthe platinum industry a renewed efforton base lining every employee appearsto have resulted in an increase of up to12 cases per 1 000.

The MHSC has identified a total ofsix projects on noise: training andawareness, new technology for drilling,noise source identification, the quietrock drill, a noise source database andnew technologies associated with othernoise sources.

Noise Induced hearing loss number of cases and rateper 1 000 employees

B B B B

BB

B B B B2005 2006 2005 2006 2005 2006 2005 2006 2005 2006

0

200

400

600

800

1000

1200

1400

1600

0

2

4

6

8

10

12

Num

ber

Rat

e pe

r 1

000

Total silicosis cases B Silicosis rate

Coal Diamonds Gold Other Platinum Coal Diamonds Gold Other Platinum

Silicosis number of cases and rate per 1 000 employees

mining together


Labour policyand labour relations

Collective bargaining

2007 wage review

The Chamber conducts wage negotiations on behalf of its membersin the gold and coal mining industries. In respect of gold, theChamber negotiates on behalf of AngloGold Ashanti, Gold Fieldsand Harmony. The coal companies represented by the Chamber areAnglo Coal, Delmas Coal, Eyesizwe Coal, Kangra Coal, OptimumColliery, Springlake Colliery and Xstrata Coal SA. The three unionsinvolved in the negotiations are the National Union of Mineworkers(NUM), the United Association of South Africa (UASA) andSolidarity.

In the year under review, the unions presented over 60 demandsto the Chamber, including demands for wages to be increased by15% in the case of the NUM and UASA and by 20% in respect ofSolidarity. Many of the demands tabled by the unions had signifi-cant cost implications, including a minimum wage for undergroundemployees, an increase in the minimum medical incapacity benefit,improvements in paid sick leave and paid accident leave, highercontributions to retirement funds, funeral cover, service incrementand numerous special allowances.

The negotiations began on 19 June 2007 with a meeting atwhich the unions motivated for both their gold and coal demands.Separate processes then got underway for the gold and coal sectors.

Gold wage negotiations

The employers tabled various offers and some good progress wasmade on a number of the unions’ demands. Wage increases, how-ever, remained in contention, with the NUM in particular beingunprepared to accept anything less than a double-digit increase.

This resulted in somewhat protractednegotiations culminating in interventionby the Commission for Conciliation,Mediation and Arbitration (CCMA) aftera dispute was declared on 1 August2007. Conciliation meetings were heldon 14 and 22 August. After a lengthysession on the latter date, the unionsaccepted that sufficient progress hadbeen made for them to take theChamber’s offers back to their members.

Amongst other items, the final agree-ment covered:

� a minimum basic wage of R3 000 amonth for entry level undergroundworkers

� a significant increase in the basicwage for entry level surface workers

� a wage improvement of 8.5% forcategory 4 to 8 workers

� a wage offer for all other employeesof 8%, with a special arrangementfor artisans

� an improved wage increment of10% on the wage rates for surfaceand underground artisans

� a new basic wage for rock drillers ofat least R4 000 by July 2008

� an increase in the living outallowance from R1 000 a month toR1 200 by September 2008

� the provision of 84 days paid sickleave over a two-year cycle for allemployees

� the entitlement to 140 days paidoccupational disease leave over atwo-year cycle for employees suffer-ing from pulmonary MDR/XDR TBlinked to risk work

� mine accident leave to be standard-ised at 140 days paid leave over atwo-year cycle, with requests foradditional leave to be dealt withcompassionately at mine level

� an increase in the minimum lumpsum payment for medical incapacityto R10 000, and an inflation linkedincrease in 2008

� agreement on a mechanism toensure that the terms of service ofcontractors are in line with generallyacceptable conditions of service.

The agreement is for two years. Inthe second year (with effect from 1 July2008) wages will be increased by a per-

mining together


The team involved in the gold wage negotiations: back row l – r: IanJacobs, Steve Rickman, Nick Smythe, Frans Barker, Dave Thatcher,Abe Bardinfront row l – r: Mpho Magau, Richard de Villiers, Elize Strydom,Keratilwe Modiga

centage equal to CPIX plus 1% with aguaranteed minimum of 8%.

The wage agreement was signed on30 August 2007.

Coal negotiations

After two negotiating sessions on 26June and 3 July 2007, the unions in thecoal sector declared a dispute with theemployers on 12 July. Two facilitatorswere then appointed by the CCMA.Conciliation meetings took place on 24and 31 July and 3 August. On 3 Augustthe coal companies tabled their full andfinal settlement offers. The NUM indi-cated that it would recommend theoffers to its membership. UASA andSolidarity requested strike notices thatwould entitle them to embark on pro-tected industrial action after giving 48hours notice. Some of the members ofSolidarity did engage in strike action onsome of the collieries. There were vary-ing levels of participation at differentmines, but production at all mines con-tinued.

Bilateral meetings, facilitated by theChamber, took place between theKangra Coal and Springlake Collierymanagement and the leadership of theNUM in the KwaZulu-Natal region.These meetings took place on 3September and both companies revisedtheir offers. The NUM undertook to rec-ommend the revised offers to its members.

The two-year wage agreement forAnglo Coal, Delmas Coal, EyesizweCoal, Optimum Colliery and XstrataCoal SA was signed on 30 August. Theagreement in respect of Kangra Coaland Springlake Colliery was signed on 7September.

The wage increases for category 3 to8 employees was 10% and increases forMiners, Artisans and Officials rangedfrom 7.5% to 9%.

Both agreements provided that in2008 the collieries would increasesalaries and wages with an average ofthe March, April and May 2008increases in the CPIX excluding interest

rates on mortgage bonds plus 1% provided that employees receivea guaranteed minimum increase of 8%, with the exception ofOptimum Colliery, which guaranteed CPIX plus 1.5%.

In addition to wages, the coal agreement dealt with a range ofissues, including:

� a guaranteed R3 000 minimum salary for underground employ-ees on most collieries

� increases to living out and housing allowances� 30 calendar days annual leave� 140 days paid mine accident leave over a two-year cycle� 84 days paid sick leave over a two-year cycle, with a special

dispensation in the case of pulmonary MDR/XDR TB where themine accident leave will be granted once sick leave has beenexhausted

� five paid and four unpaid days of family responsibility leave� a minimum lump sum payment of R10 000 for medical inca-

pacitation or repatriation� options relating to funeral cover � agreement on a mechanism to ensure that the terms of service

of contractors are in line with generally acceptable conditionsof service.

Bargaining council

Discussions with the unions on the possible establishment of a bar-gaining council for the mining industry have been on-going duringthe period under review. At a meeting held on 15 September 2006,it was agreed that the Chamber would prepare a document for con-sideration by the unions setting out all the issues critical to theestablishment of a council. The following issues on which the par-ties must reach agreement were set out in the Chamber’s document:

� The scope of the council� Recognition criteria for membership of the council for unions

and employers’ organisations

mining together


l - r: Deon Bokwana, Obed Molekwa, Frans Stehring, Eric Nwedo, LeighMcMaster and Frans Barker sign the agreement between Kangra Coal andSpringlake Colliery and the unions

� Levels of bargaining and the issues to be negotiated at the vari-ous levels

� How to define small and medium enterprises and best protecttheir interests

� How contractors would be covered� The dispute resolution function of the council� The appointment of an inspectorate to monitor and enforce

compliance with council agreements by non-parties� The extension of council agreements to non-parties� The exemption body and procedure for exemptions from coun-

cil agreements.

The unions submitted a collective response to the Chamber inFebruary 2007, and a number of meetings have taken place. Ofparticular importance has been the discussions relating to contrac-tors. It is accepted by the unions and the Chamber that mining con-tracting companies do not own the mines and are not in possessionof mining right licences. In addition, contracting companies operateacross all commodities and have a presence in most geographicalareas. Revenue earned by mining contracting companies is notdetermined by the sale of minerals or product, but rather as a con-tracted fixed margin outlined in a commercial contract with themine owners. Mining contracting companies also operate in a truecontracting environment where all the projects have defined com-mencement and completion dates. For all these reasons it has beenagreed that contractors should be accommodated in a separate,dedicated sub-council of a mining bargaining council.

Further discussions on a bargaining council will take place inthe latter part of 2007.

Industry retirement and risk benefits

Stakeholders in the industry convened a retirement summit in linewith the provisions of the 2005/2007 gold wage agreement on 29June 2006. Flowing from the summit’s recommendations, the par-ties agreed that it would be appropriate for an independent expertto be appointed to undertake an investigation into the risk benefitssystem of the Mineworkers Provident Fund (MPF) and to developalternative risk benefit models for consideration. A sub-committee,representative of all parties as well as the principal officers of theMPF, the Mine Employees Pension Fund (MEPF) and Sentinel, wasestablished to deal with the appointment of the expert.

The sub-committee felt that this investigation should not dupli-cate actuarial investigations routinely done by retirement funds,including the MPF. The investigation would be more orientatedtowards alternative options and policies than a number-crunchingexercise.

After discussions with the MPF ’s Board of Trustees, which hasagreed to be part of the investigation, an independent actuary wasappointed to:

� compile a status report on the current and projected risk profilesand risk benefit costs of the MPF with the assistance of the resi-dent actuary

� investigate various risk benefit models

� investigate other technical issues,such as possible causes of the under-funded risk benefit pool and the roleof insurance principles.

It is hoped that the outcomes of thisinvestigation will assist the MPF to posi-tion itself to create sustainable solutionsto meet the challenges it is facing, suchas the depletion of the risk reserves.

Women in mining

In line with the provisions of the MiningCharter, the mining companies are pro-moting the employment of women inthe industry. Although progress is beingmade, it is proving to be quite a chal-lenge to meet the target of 10% femaleemployees by 2009.

Underground mining is a harshworking environment, compounded bythe fact that South Africa has the deep-est mines in the world. In addition, it ishistorically a male dominated environ-ment.

Nevertheless, the companies aremaking a concerted effort to attractwomen by making the environment,where they are able to do so, morefemale friendly. Sexual harassmentcodes have been introduced and allemployees have been made aware ofthese. Separate change rooms havebeen built, toilet facilities for womenworking underground have beenerected and women have been affordedsix months maternity leave (two monthsmore than the prescribed statutory mini-mum).

Four of the six months maternityleave is on full pay although the lawdoes not prescribe that such leave mustbe paid. Women have also been givenfive days annual paid family responsibil-ity leave for the first two years after thebirth of a child. In addition, femaleissues are a standing item on theagenda of operations’ equity commit-tees.

mining together


Future sustainability

SPC and implementation structures

The tripartite Sector PartnershipCommittee (SPC), on which theChamber is represented, is a sub-structure of the Minerals and MiningDevelopment Board and has a mandateto support the board in executing itsresponsibilities in terms of the MPRDA.The SPC oversees the activities of itsthree working committees and reportson their progress to the board. The threeworking committees deal with transfor-mation, beneficiation and the promo-tion of the industry.

During 2006, the SPC and its work-ing committees did not function as effi-ciently and effectively as had beenhoped. To ameliorate this situation thesebodies held a strategic workshop on 29March 2007 to identify the major chal-lenges that need to be addressed and todevelop a plan to ensure that the SPCdelivers effectively on its mandate.

A process to re-establish the threeworking committees – now calledimplementation structures – was agreedand was put into effect during the firsthalf of 2007. The implementation struc-tures are developing business plans toguide their future deliberations.

Gold sector project

South Africa’s major gold mining com-panies, trade unions and the govern-ment agreed in 2006 to chart a newcourse for the gold mining sector. Thecompanies that were party to the agree-ment were AngloGold Ashanti, GoldFields and Harmony. The union partieswere the NUM, UASA and Solidarity.Government, through the DME, and theChamber were also closely involved.

The agreement followed a year ofdiscussions in which the partiesexplored ways of working differently toaddress the challenges of the volatile

gold price and exchange rate environment, increasing cost pres-sures, declining reserves and on-going job losses. The discussionscentred on the realisation that in the past their efforts had resultedin insufficient action and that certain objectives in terms of growth,equity and employment had not been achieved.

The following task teams were formed in terms of this project:

� Regulatory and Investment Environment� Productivity Enhancement and Cost Containment� Non-mining Economic Investment.

As far as the Regulatory and Investment Environment task teamis concerned, various issues are being pursued relating to the accel-eration of mining rights and permit delivery, the co-ordination ofenvironmental requirements and the stimulation of exploration. Inthe short-term the task team is likely to make headway on dis-cussing the environmental challenges, the reasons for rejectionsand refusals of new prospecting and mining right applications andaddressing the progress on conversion applications.

The Productivity Enhancement and Cost Containment task teamhas considered a number of possible areas in which collaborationcould take place to improve productivity and co-operation betweenmining companies to contain costs. An initial focus area that hasbeen prioritised is a potential project on skills development. It isbelieved that there is scope for a large-scale collaborative effort inthis area.

In the Non-mining Economic Investment task team thereappears to be a number of opportunities for greater collaborationbetween mining companies on non-mining, value added economicactivity and also to improve the co-operation between Teba and theMining Development Agency. One of the NUM’s demands duringthe 2007 wage review related to the establishment of an integratedmining development agency. The employers support an integratedand efficient development body in the mining industry, and arewilling to fund appropriate projects launched by such a body,where projects are viable and in harmony with the mines’ socialand labour plans and with local development initiatives.

The industry believes that this work should be continued evenafter the withdrawal of the monitor group at the end of 2006. Twofacilitators have been appointed to champion the work of the proj-ect and to drive the collaborative processes forward. The Chamber’sIndustrial Relations Service is providing administrative support forthe gold sector project and its structures. There is considerablepotential for further collaborative effort in the gold mining sector.

Rural development

In terms of the Mining Charter, stakeholders, in partnership with allspheres of government, must co-operate in the formulation of inte-grated development plans for communities where mining takesplace and for major labour-sending areas, with special emphasis onthe development of infrastructure.

Furthermore, the MPRDA requires that companies applying formining licences must file a social and labour plan with their appli-

mining together


cations. These must include details of the company’s projects toadvance the social and economic welfare of all South Africans toensure that a company contributes towards the socio-economicdevelopment of the areas in which it is operating.

The mining companies have contributed millions of randtowards various development programmes, including rural develop-ment projects such as the improvement or acquisition of breedingstock and the modernisation and improvement of farming methods.In terms of the Food for Assets programme, agencies trained 4 800households in sustainable crop production and homestead gardensin Lesotho. Water and irrigation projects focus on training people inborehole maintenance in the rural areas of South Africa and neigh-bouring states. Together with the ComMark Trust, the Chamberfunds a wool marketing and livestock development project inLesotho. Private sector wool traders at 11 shearing sheds serving 60villages have adopted practices that allow farmers to obtain fairmarket-related prices. There have also been major increases in theasset value of the stock of the participating farmers, largely becauseof an increase in reproductive rates and a reduction in mortalityrates.

The Abalimi Phambili (Farmers First) project in the Eastern Capeis also funded by the Chamber, together with a number of otherdonors. The main aim of the project is to increase agricultural pro-duction and to improve the lives of retrenched mineworkers andthe communities where they reside.

In addition, a home-based care service has been introduced inresponse to the incidence of ill-health retirement amongstmineworkers, particularly as a result of HIV/AIDS. This programmehas accelerated enormously and now covers almost 200 000mineworkers in the Eastern Cape, northern KwaZulu-Natal, the FreeState, Lesotho and the Gaza province of Mozambique.

Housing

Single sex hostels still exist in the mining industry, particularly ingold mining. In terms of the Mining Charter, companies must estab-lish measures to upgrade hostels, convert hostels to family unitsand promote home ownership options for mine employees. In2003, the gold companies and the unions concluded a frameworkagreement on accommodation. It provides that 50% of employeesshould be in a position to exercise accommodation options, includ-ing family options, by the end of 2009. In addition, the agreementstates that the parties commit themselves to normalise mining com-munities and allow accommodation options by the end of 2013. Todate, large sums of money have been spent on converting hostelsinto family accommodation or into single occupancy units. Somecompanies have also made land available to local municipalities tobuild low cost housing in the areas of the mines.

Currently, the gold mining companies are affording thoseemployees who opt to move out of the mine hostels and live inaccommodation off the mine premises, a so-called living outallowance of R1 000 a month, which will be increased to R1 200 amonth by September 2008. So far, approximately a third of

employees who have been afforded thisoption, have exercised it.

Few hostels remain in the coal min-ing industry and most employees live inthe towns surrounding the mines.During the 2007 wage negotiations, thecoal companies and unions agreed thatkey stakeholders – the collieries, unionsand government, should exploreoptions on the best way to ensure thatall recipients of housing-relatedallowances can obtain access to sus-tainable home ownership in reasonableproximity to the collieries. This is anissue that will be taken forward in thelatter part of 2007.

The mining industry has co-signed asocial contract under the auspices ofthe Department of Housing that isaimed at rapid housing delivery withinsettlements for the poor. In terms of thesocial contract, the mining industry hascommitted itself to promote support forlocal entrepreneurs involved in housing,to interact with municipalities to ensurethat there is alignment and integrationin the development of towns and hous-ing units, and to improve the standardof accommodation for mineworkers,including the upgrading and conversionof hostels into family units. The socialcontract also provides for the promotionof house ownership, the encouragementof employees to use housing allowancesfor accommodation purposes and formining companies to make land avail-able for housing development and facil-itate access to mortgage loans.

The second plenary session of thesignatories of the social contract tookplace on 24 November 2006. The taskteams established in terms of the socialcontract reported on progress madesince March 2006. The Finance andEconomics task team indicated that thesubsidy framework did not provide fortenures or financing mechanisms otherthan mortgages – an expensive mecha-nism for the target market. It recom-mended that this prescript should berelaxed and that the following alterna-tives should be offered:

� Pension backed lending� Personal loans

mining together


� Installment sales� Rent-to-buy schemes.

The task team also recommendedthat the department should reconsiderthe deposit or savings requirement asthis is unaffordable for the target mar-ket. It was argued that in most instancesthese deposits represent monies bor-rowed at expensive rates from micro-lenders.

The Chamber will continue to par-ticipate in the social contract task teamsand plenary sessions aimed at findingcollective solutions to the delivery ofhousing units, particularly low-costunits.

Other interaction

BUSA and Nedlac

Chamber officials are members ofBUSA’s Standing Committee on SocialPolicy, a forum that also serves as theemployer caucus for the Nedlac LabourMarket Chamber. Chamber officials arealso members of the Nedlac LabourMarket Chamber, with the IndustrialRelations Adviser serving as the busi-ness convener.

A number of issues that impact onthe labour relations arena have beenconsidered, first by employers in BUSAand then in tripartite discussions atNedlac. These include:

Social security and retirement reform

Two government departments havemade proposals about retirement reformand social security. In February 2007,the National Treasury released its sec-ond discussion paper, which, inessence, proposes:

� mandatory participation for allemployees in a national social secu-rity system, up to an agreed thresh-old, providing basic retirementbenefits

� additional mandatory participationin private occupational retirement

funds for all employees earning above the threshold� supplementary voluntary savings.

Late in May 2007, the Department of Social Development pub-lished a discussion document entitled, Social Development: Reformof Retirement Provisions to launch a public consultation process onretirement reform. The department’s view is that a comprehensivesocial security system must be developed based on three pillars.

� A non-contributory system of social assistance providing asafety net for the most vulnerable

� A mandatory contributory system of social insurance coveringall income earners

� A voluntary scheme in terms of which all are free to purchaseadditional cover.

BUSA has held meetings with representatives from both theNational Treasury and the Department of Social Development, andfurther engagement is anticipated. This is necessary because thereare differences between the two discussion papers.

The Chamber has established a social security and retirementtask team to consider the proposals from the National Treasury andthe Department of Social Development and to develop a miningindustry response. The task team’s proposals will be fed into theBUSA task team.

Chapter 6 of the Companies Bill, 2007

The DTI published the Companies Bill, 2007 for public comment inFebruary 2007. Chapter 6 of the Bill, which deals with business res-cue, has important implications for industrial relations. In terms ofthis chapter, a supervisor appointed to develop a business rescueplan for a company in financial difficulties may consult withemployees about the plan before it is submitted to the shareholdersfor consideration. In addition, employees may address the share-holder meeting on the plan. Furthermore, should the plan includeretrenchment, employees are allowed to vote on the plan. Once theplan has been approved by the shareholders and creditors, and itincludes retrenchment, the supervisor must comply with all theretrenchment provisions contained in the Labour Relations Act. It isforeseen that the provisions in chapter 6 could seriously delay theimplementation of a rescue plan.

The Chamber has developed a stance on the Companies Bill,including chapter 6, which has been incorporated into BUSA’s posi-tion paper that forms the basis for business’ current discussionswith the DTI and the other social partners in Nedlac.

Atypical forms of employment

The Nedlac discussions on atypical forms of employment havebeen on-going for some time. Currently, the social partners aredrawing up a document that will form the basis for future negotia-tions. Chamber officials are members of the BUSA task team deal-ing with this matter, and also participate in the Nedlac negotiations.

mining together


Employment service regulations

The Department of Labour has released draft employment serviceregulations in terms of which it intends to implement an employ-ment service system. It has a three-year roll-out plan that will belaunched in November 2007. The intention is for the department’semployment centres to be able to offer access to jobs and to candidates.

Code of good practice on who is an employee

Towards the end of 2006, Nedlac approved the Code of GoodPractice on Who is an Employee. The code was published on 1December 2006 and its purpose is to:

� promote clarity and certainty as to who is an employee� set out the interpretative principles in the Constitution, labour

legislation and international standards that apply to the interpre-tation of labour legislation

� ensure that a proper distinction is maintained between employ-ees regulated in labour legislation and independent contractors

� ensure that employees are protected through labour law and arenot deprived of these protections by contracting arrangements

� assist those applying and interpreting labour law to understandand interpret the variety of employment relationships existing inthe labour market.

Future of the labour courts

Earlier in 2006, the minister of justice and constitutional develop-ment indicated in Parliament that she was in consultation with thejudiciary about the Superior Courts Bill that provides for the fold-ing-in of labour courts into the High Court and the Labour AppealCourt into the Supreme Court of Appeal. Upon learning of thisdevelopment, Nedlac addressed a letter to the minister urging herto engage with the social partners at Nedlac about the Bill as thepartners believe that the labour courts should retain their separatestatus. This meeting took place on 15 May 2007 and furtherengagement is envisaged.

Judicial Services Commission

In terms of current labour legislation, representatives from Nedlacjoin with the Judicial Services Commission to interview candidatesnominated to serve as judges in the labour courts and LabourAppeal Court. A Chamber official represents business in theseprocesses.

Employment Conditions’ Commission

The primary function of the Employment Conditions’ Commission is

to advise the minister of labour on the

provisions of sectoral determinations for

sectors that are not organised and thus

need nationally regulated terms of

employment and minimum wages. In

the year under review the commission

concluded sectoral determinations in

the wholesale and retail, civil engineer-

ing and hospitality sectors. A Chamber

official represents business in these

processes.

Assistance to

Chamber members

In addition to providing a collective

bargaining service, the Chamber assists

members with queries and provides

information on labour related matters,

particularly through its quarterly

Labour Policy Digest, which contains

articles on topical labour policy issues.

It also alerts members to new policy

and legislative developments in the

industrial relations arena and prepares

positions on these issues that are fed

into national debates, either directly on

behalf of the mining industry or

through BUSA.

Through its Labour Policy

Committee and specialist task teams,

the Chamber provides a forum for

industrial relations practitioners in the

mining industry to meet, share informa-

tion and develop policies that will

improve the environment in which the

mining industry operates.

A major project in the year ahead,

which will benefit both Chamber mem-

bers and the unions, will be the up-

dating of the Core Conditions Codes for

Miners and Artisans in the gold and

coal sectors. Both the gold and coal

2007 – 2009 wage agreements reflect

that this must be done within 12

months of the signing of the agree-

ments.

mining together


mining together


Legal issues

Mineral and Petroleum ResourcesDevelopment Act, 2002

Towards the end of 2006 the Chamber held several discussionswith the DME in seeking to resolve concerns arising from the loom-ing deadline under the Prescription Act, 1969 for potential com-pensation claims for property expropriated as a consequence of theMPRDA. The relevant three-year period of extinctive prescriptionapplicable to such claims would end on 30 April 2007 followingthe commencement of the Act on 1 May 2004.

In the light of further high-level discussion during the early partof 2007, an understanding was reached that a Bill containing provi-sions to address the concerns would be introduced in Parliament.

During May 2007, the minister of minerals and energy intro-duced the Mineral and Petroleum Resources DevelopmentAmendment Bill [B10-2007] in the National Assembly. The Billcontains provisions consistent with the understanding that had beenreached with government concerning the extension of the period ofextinctive prescription applicable to compensation claims for prop-erty expropriated as a consequence of the commencement of theAct.

The Chamber’s Annual Report for 2005/2006 mentioned adetailed written submission by the Chamber on a draft Bill toamend the Act. By the end of the 2005/2006 reporting period, afinal version of that Bill had yet to be settled. When compared withthe draft Bill on which the Chamber had commented in 2005, theamendment Bill as introduced in May 2007 contained many newissues. The Bill was referred to the Portfolio Committee on Mineralsand Energy in the National Assembly for consideration. In responseto an invitation from the portfolio committee, the Chamber lodgeddetailed written comments and, during May 2007, made oral sub-missions to the portfolio committee in Cape Town.

Having deliberated on the Bill, and received submissions frominterested parties, the portfolio committee adopted several amend-ments to the Bill. The amended Bill, as adopted by the portfoliocommittee, became available during August and contained a num-ber of provisions of great concern to the industry and on which noopportunity had been given for comment. Among the provisions inquestion were clauses conferring a ministerial power to refuseapplications for the conversion of old order rights into new miningrights; clauses that would extend the Act to cover old mine residuesthat were hitherto owned as movable property; and a provisionremoving the activities of holders of rights, regulated under the Act,from the application of the National Environmental ManagementAct, 1998.

By the end of the period under review, the Chamber wasengaged in further high-level representations to the minister of min-erals and energy in connection with the concerns about the newmatters arising from the portfolio committee’s amendments to theBill.

Second draft of theMineral and PetroleumResources Royalty Bill

In March 2003, the first draft of theMineral and Petroleum ResourcesRoyalty Bill was published for com-ment. The Chamber submitted a memo-randum to the National Treasurycontaining its views on the draft Bill inApril.

In October 2006, the NationalTreasury published a second draft ofthe Bill for comment. Following con-sideration of the second draft Billwithin the Chamber’s Mining Titles andTaxation Committees and by the chiefeconomist of the Chamber, a memo-randum containing the Chamber’s sub-missions on the main provisions of theBill, economic and investment issuesand comments on drafting and techni-cal aspects was submitted to theNational Treasury.

During May 2007, the NationalTreasury announced that it would holda workshop on the second draft of theBill, which would be followed by fur-ther meetings, focusing on particularminerals. It emerged at the workshopthat it was envisaged that a third draft ofthe Bill would be published for com-ment in due course followed by theintroduction, before the end of 2007, ofthe resulting Bill in Parliament. Furtherdiscussions are in progress between theNational Treasury and the industry inconnection with the Bill.

Retirement fund reform

During the year under review, theChamber established a task team toconsider discussion documents releasedby the Department of SocialDevelopment and the National Treasuryon the proposed reform of retirementprovisions and social security. Underthe auspices of BUSA, meetings wereheld with representatives of the depart-

mining together


ment and the National Treasury whopresented their preliminary proposals.

The Chamber is responsible forappointing representatives to serve onthe boards of trustees of the industry’smain retirement funds who will beaffected by such reforms, and is moni-toring developments. At year-end,interaction with government was con-tinuing. Firm proposals from govern-ment are awaited by the businesscommunity.

Corporate law reform

The Chamber participated in the BUSACompanies Bill task team that devel-oped a BUSA submission on a draftCompanies Bill published by the DTIfor comment. BUSA has negotiated withgovernment and labour on several pol-icy matters raised in the submission,which it expects to be reflected in a fur-ther revised draft of the Bill. At year-endthe process was continuing.

VAT

Shortly before year-end, the Chambersubmitted an Advance Value-added Tax(VAT) ruling request for the confirma-tion of the binding effect of the VATruling obtained by the Chamber onbehalf of its members in July 1995. The1995 ruling confirmed that environ-mental trusts operated by members ofthe Chamber were not subject to VAT.Subsequent to the date of that ruling,provisions in the Income Tax Act, 1962regarding the tax treatment of environ-mental companies and trusts wasamended and the MPRDA had beenintroduced, both of which changes inthe law will need to be reflected in theconfirmed VAT ruling. By the end ofthe period under review, the SouthAfrican Revenue Service had con-firmed receipt of the Chamber’s appli-cation and the matter remains inprogress.

Precious Metals Act (PMA)and regulations

The PMA was passed by Parliament in December 2005, but couldnot be brought into force before a Diamond and Precious MetalsRegulator was established and became functional, and before theregulations necessary for the implementation of the Act had beenfinalised and brought into operation.

Draft regulations under the PMA were published in theGovernment Gazette of 30 June 2006. The Chamber submittedcomments on the draft regulations and followed them up with vari-ous meetings with the DME and additional comments covering theperiod up to December 2006. Thereafter, the Chamber was advisedthat the regulations would be redrafted to address all its concerns.Despite various attempts in 2007 to obtain copies of the revisedregulations, the Chamber was unable to do so.

The final regulations were published in the Government Gazetteon 9 July 2007, while a proclamation in a Government Gazette of12 July 2007 determined that the PMA would come into operationon 1 July 2007.

The PMA repeals the Mining Rights Act of 1967 and will hence-forth regulate the possession of and dealing in unwrought, semi-fabricated and refined precious metal (as defined in the PMA).

As far as transitional arrangements are concerned, the PMA pro-vides that authorisations issued in terms of the Mining Rights Act,and valid immediately before the commencements of the PMA,continue in force for a period of two years. The regulations providethat for activities that require authorisation under the PMA, but forwhich no authorisation was required under the Mining Rights Act,applications for authorisations should be lodged within 60 days ofcommencement of the PMA.

Some important activities for which new authorisations will berequired in terms of the PMA include:

� a permit to import any unwrought or semi-fabricated preciousmetal into South Africa

� authorisation to export unwrought or semi-fabricated preciousmetal

� various commercial activities involving semi-fabricated pre-cious metal (as defined in the PMA) particularly involvingsemi-fabricated precious metal from the platinum group ofmetals.

Members of the Chamber identified various concerns with theimplementation of the regulation relating to either uncertainties,issues that are unclear, regulations that are ambiguous, and possibleimplementation difficulties. Meetings have been held with theDiamond and Precious Metals Regulator to discuss these mattersand ongoing interaction with the regulator will be held in anattempt to resolve the issues.

mining together


Regulations under the Explosives Act

The Explosives Act of 2003 was published in the GovernmentGazette on 8 January 2004, but will only be brought into forceonce the regulations to be made under the Act have been finalised.

The Act makes it clear that it does not apply to the use of explo-sives at mines insofar as such use relates to occupational health oroccupational safety and is governed under the Mine Health andSafety Act. The effect of this provision is that the Explosives Act (andits regulations) will still apply to mines insofar as security mattersare concerned and matters that do not relate to occupational healthor occupational safety.

Draft regulations under the Explosives Act were first publishedin 2005. The draft regulations dealt with various issues relating toexplosives, including the delivery of explosives at mines. It wasunclear which of the regulations would apply to the mining indus-try because it was unclear which regulations related to health andsafety matters and which to security matters. The Chamber submit-ted comments to the South African Police Service (SAPS) and heldvarious meetings with the SAPS’ legal advisers to discuss its con-cerns.

Revised draft regulations were again published in theGovernment Gazette on 18 April 2007. The Chamber’s concernshad not been addressed, while the aspect of delivery of explosivesat mines was dealt with in a specific, separate regulation. TheChamber again submitted comments to the SAPS and proposedrevised wording to address its concerns. Apparently a further draftof the regulations will be circulated for comment in due course. Atthe time of writing this had not yet happened.

Control, use and security of explosives on mines

In January 2007, the Chief Inspector of Explosives contacted theChamber to discuss the control, use and security of explosives onmines in the light of the increase in the use of commercial explo-sives for blowing up ATMs (automatic teller machines). TheChamber proposed that representatives from the DME and theSouth African Banking Risk Information Centre – which organisa-tion has a dedicated task team dealing with ATM explosives – beinvited to the meeting. At the meeting the SAPS agreed that it wasimportant for the mining industry to have access to explosives, butemphasised that there had to be strict control over explosives.Various action plans were agreed upon for implementation by thedifferent parties. The action plans relate to the control of explosives;industry awareness; intelligence gathering, sharing and assimilation;assisting successful prosecutions; and public awareness.

During the course of 2007 regular meetings between thesestakeholders have been held and the industry has been actively par-ticipating in this forum.

Product theft

The theft of precious metals and copperfrom mines continues to be a majorproblem in the mining industry.

In addition to various initiatives atmine and at regional level, the industry,through the Chamber and its members:

� participates in the activities of thenational and regional precious met-als forums established between themining industry and the SAPS toaddress the problem of product theft

� participates in the activities of thenational non-ferrous theft combatingcommittee – commonly known asthe National Forum on Copper Theft

� assists the SAPS’ Forensic ScienceLaboratory to establish and maintaina fingerprinting database for pre-cious metals

� participates in the crime combatingforum co-ordinated by BusinessAgainst Crime

� participates in the activities of theSecurity Industry Alliance, an initia-tive in terms of which all the majorrole players in the security industryhave formed an alliance to createcohesion in, and a united voice forthe security industry

� participates, through BUSA, in theactivities of the National Anti-Corruption Forum.

mining together


Thabile Ngcobo, a Gold Fields Business and lead-ership Academy graduate trainee at Newmont’sJubilee open pit operation

mining together


Safety

The Chamber extends its condolences to the families and friends ofthe 199 miners who died in mine accidents during 2006.

The Chamber is committed to a target of zero fatalities andinjuries. More information on the industry’s safety performance andinitiatives is contained in the Chamber’s Sustainability andTransformation Report.

Mine Health and Safety Council

The MHSC is a tripartite body with equal representation fromemployers, employees and government. The Chamber representsemployers on the MHSC, the strategic priorities of which are to:

� support the achievement of the safety and health milestones thatwere agreed to during the 2003 summit

� drive the legislative review process� advise the minister on key issues� promote and facilitate the development of a preventative health

and safety culture � promote and facilitate the development of capacity in health

and safety� ensure the effective and efficient operations of the MHSC office.

Legislation

The MHSC advises the minister of minerals and energy on legisla-tion for the mining sector. After the promulgation of the MineHealth and Safety Act, the MHSC initiated a process whereby allprevious regulatory mechanisms such as regulations, guidelines andcodes of practice were reviewed and new ones developed.Seventy-six topics were identified for this 10-year legislative reviewprocess, which should be completed during 2007.

The Chamber plays an active role in the process and continuesto advocate a performance based, non-prescriptive approach thatemphasises the responsibility of employers to assess and manage allhealth and safety risks. The approach provides flexibility for mini-mum performance standards to be prescribed and the MHSCencouraged the inclusion of such standards in the recent regulatorymechanisms.

During the year under review, the Engineering Council of SouthAfrica released draft regulations to be published under the Councilfor the Built Environment Act. The Chamber supports the objectiveof the regulations to protect workers and the public through theregulation of engineering work. The Chamber is, however, con-cerned that the regulations will impose a considerable burden onthe mining industry in the area of engineering skills where it isalready experiencing difficulties and will have little protection ben-efit for an industry that is already strictly regulated through theMine Health and Safety Act.

The Chamber, in collaboration with the Mine ProfessionalAssociations, agreed to test the draft regulations for the mining sec-tor. Whilst the first phase highlighted many of the difficulties with

the regulations, it did not provide statis-tical answers to a number of questions.For this reason, a second phase wascommissioned, which is expected to becompleted during the coming year.

Research

The MHSC continues to oversee anannual health and safety research pro-gramme of approximately R40-million.The Chamber is an active participant inthe structures that oversee the pro-gramme, including the Safety in MinesResearch Advisory Committee (SIMRAC)and its technical advisory committees.The programme is funded by the indus-try through a levy on companies relatedto their safety and health risk.

To facilitate more focus on the qual-ity of research and the implementationof research findings, the Chamber advo-cated, and the MHSC agreed, to dra-matically reduce the number of newresearch projects for the 2007 – 2008research cycle.

A research improvement plan wasimplemented to raise the quality ofresearch through strengthening allresearch related structures andprocesses. A project, which was pro-posed by the Chamber to review pastSIMRAC research, was completed dur-ing the year under review. The primaryobjectives of this project were to iden-tify research findings that may lead to astep-change improvement and todevelop mechanisms to implement thefindings of future research more effec-tively. The project dovetails well withwork that the Chamber has done duringthe past year on the adoption of bestpractices and research findings.

Programmes on rockfalls and rock-bursts continue as these are the majorrisks facing the mining industry.

Liaison with the DME

During the past year, the MHSC mettwice with the minister of minerals andenergy. The national integration of

mining together


health and safety legislation, health andsafety research and capacity as well asthe effectiveness of mine-level healthand safety committees were discussed.Issues of concern to the minister thatwere not already on the MHSC agendawere incorporated in the MHSC’s strate-gic plan.

Preventative OHS culture

The MHSC approved a communicationpolicy and implementation plan toactively promote occupational healthand safety (OHS) throughout the miningindustry. The policy aims to encourage amore people-oriented approach to com-munication and provides for informa-tion that is targeted at particularstakeholders.

Operational effectiveness and efficiency

As a public entity, the MHSC has tocomply with the Public FinanceManagement Act. A MHSC office hasbeen established as a secretariat toassist the MHSC in fulfiling its statutoryobligations. Employers fund the costs ofthe administration of the MHSCresearch programme through theresearch levy, whilst the State funds theother costs of the MHSC office. TheMHSC received its first unqualifiedaudit report for the period 2005/6.

During the year under review, theMHSC focused on improving its deci-sion making processes. A plan wasimplemented to improve the quality ofMHSC documentation and focus MHSCmeetings on key issues.

Investigation into risks from large seismic events

The Chief Inspector of Mines initiatedan investigation after the seismic eventthat occurred in Stilfontein during 2005.The report on the investigation wasreleased at the end of 2006. From theoutset it was recognised that the

findings and recommendations could have serious implications forthe future of the mining industry, particularly the deep-level goldsector. The Chamber established a working group consisting oflegal, rock engineering and seismology experts from Chambermember companies and DRDGold to review the findings and rec-ommendations of the report.

Seismicity and rockbursts

The minister of minerals and energy called for a mini-indaba onseismicity and rockbursts after the Tau Tona event in which fiveminers lost their lives. In preparation for this event, the Chamberlaunched a study on seismicity and rockbursts. The study will con-sider the level of current scientific knowledge on the risk as well asthe quality of seismicity and rockburst management systems andother challenges related to implementation. The study is expectedto guide the future seismicity and rockburst research agenda andhelp companies to improve the management of the risks of seismicevents.

International health and safety initiatives

The Chamber continues to participate in the health and safetyefforts of the ICMM. The Chamber chairs the working group thatoversees the development of a safety, health, environment andcommunity database. The primary aim of the database is to enablebenchmarking at mine level – something that cannot be donethrough the review of publicly available company reports. Apartfrom the database, the working group facilitates the formulation ofharmonised definitions of performance indicators. During the yearunder review, sufficient safety information was gathered to allowfor the preparation of the first benchmarking reports.

The Chamber participated in a workshop aimed at identifyingkey global health and safety issues. Leadership and cultural issues,benchmarking and information sharing were identified as key gen-eral issues, whilst the elimination of fatalities continues to be thekey safety challenge.

mining together


Miners at Kloof mine are continually reminded that safety is a major priorityat the mine, which has seen an overall improvement of 20% in injuries

mining together


SustainableDevelopment

The Chamber subscribes to the sustain-able development definition of the 1987Brundtland Report, namely, develop-ment that meets the needs of the pres-ent without compromising the ability offuture generations to meet their ownneeds.

The Chamber believes that miningcan make a sustainable contribution tothe development of a nation, a regionand the world.

The Chamber actively engages bothlocally and internationally in pro-grammes aimed at achieving sustainabledevelopment through mining and pro-moting responsible mining.

Conference

The Chamber hosts a biennial sustain-able development conference to pro-vide a platform for the sharing of bestpractices amongst Chamber members. Itremains the premium event of its kindon the African continent.

The theme of the 2007 conferenceis: ‘Delivering on our commitments’.Leading companies will make presenta-tions on the Mining Charter as well ascommitments related to health andsafety, HIV/AIDS, community develop-ment, skills development, climatechange, energy efficiency and water.

Mining industry sustainability and transformation report

At its sustainable development confer-ence, the Chamber will release thethird South African Mining IndustrySustainability and TransformationReport.

The report was prepared usinginternational sustainability reportingguidelines issued by the GlobalReporting Initiative and the MiningCharter – the mining industry’sroadmap to transformation. The report

is the only one of its kind in South Africa and one of the fewreports of this nature published internationally.

The report presents the progress the industry has made on vari-ous commitments and highlights its initiatives to improve delivery.The lack of quantitative, comparable information and the absenceof systems to gather mining industry information make the prepara-tion of a credible report of this kind difficult.

Apart from the information that is available from national insti-tutions such as the DME, the Chamber’s members were surveyedon various key issues. Efforts to improve the completeness of thereport and the accuracy of the information continue.

Responsible mining initiative

In the global market for capital, skills and land, mining has to com-pete with other industries and South Africa has to compete withother countries. Responsible business practices are becoming keydifferentiators in these markets. The Chamber is considering aresponsible mining initiative for South Africa and has reviewed theexperiences of other industries and other mining countries withsimilar initiatives.

National sustainable development initiatives

The DME has launched a Sustainable Development throughMining Programme to fulfil the World Summit on Sustainable

mining together


Vultures are only one of the species that is protected by De Beers. These vultures are to be found on the Diamond Birding Route

Development’s commitment to report on mining in 2010. TheChamber is represented on the sub-committee of the Mining andMinerals Development Board that will oversee this programme.

The DEAT is developing a National Framework for SustainableDevelopment as part of commitments made during the WorldSummit on Sustainable Development. The Chamber is participatingin the process and is encouraging the recognition of existing initia-tives and frameworks.

International sustainable development initiatives

Materials stewardship

At the World Summit on Sustainable Development all countriesrepresented committed themselves to the responsible managementof chemicals including mining products such as ores, ore concen-trates, metals, metal compounds and alloys.

The mining industry, through the ICMM, is developing guide-lines on materials’ stewardship to promote responsible managementof mining products. The ICMM is co-operating globally with theUnited Nations to develop a product management approach that isbased on the principles of sound science and sustainable develop-ment.

This approach includes a globally harmonised system for thehazard classification and labelling of products, which is an essen-

tial part of a globalising world. SouthAfrica fully subscribes to this systemand it is expected that this will beimplemented in South Africa from mid-2008.

The European Union is one of thefirst regions to adopt legislation to giveeffect to the above commitment. Thelegislation is called Registration,Evaluation and Authorisation ofChemicals (REACH) and will affect allmining products exported to the EU.

The Chamber’s previous efforts onREACH focused on shaping the legisla-tion through co-operation with theICMM and Eurometaux.

The Chamber assisted the globalmining industry by advocating require-ments that will protect human healthand the environment from the potentialhazards of mining products, whilst notimpacting negatively on developmentin sub-Saharan Africa.

The legislation has now beenadopted and will be phased in over a10-year period.

The Chamber has subsequentlyshifted its role from policy advocacy toa more low-key support to Chambermembers on REACH and globally har-monised implementation. The Chamberhas indicated in its advocacy effortsthat it accepts that mining products,which may pose a risk to human healthand the environment, will be subject tothe requirements of REACH and theglobally harmonised system.

The Chamber aims to help miningcompanies understand the require-ments by facilitating information shar-ing.

International Council on Mining and Metals

The Chamber is an association memberof the ICMM, a leadership groupfocused on improving the sustainabledevelopment performance of miningcompanies. The sustainable develop-ment framework of the ICMM consists

mining together


Old mine buildings find new life as workshops

of 10 principles, a reporting guideline,

an independent assurance system and

the promotion of good practices.

More good practice guidance docu-

ments were prepared, such as on mate-

rials’ stewardship and others are being

developed, for example, those on HIV and AIDS, TB and malaria.

The Chamber is promoting more work on climate change; the

capacity building of national associations in various mining juris-

dictions; and a mechanism to ensure an effective identification and

response to global policy issues that may affect the mining and

metals industry.

mining together


A father showing his child an invasive species in the veld

mining together


Skills

development

Advocacy and lobbying

Skills Development Unit staff helpedstrengthen the role of the Chamber as aleader in lobbying on behalf of businessin the national arena and on all mattersaffecting the mining industry in educa-tion and skills development.

Chamber personnel led a BUSA del-egation to express its concerns aboutthe ineffectiveness of the National SkillsAuthority (NSA). The Deputy Presidentappointed a Chamber representative toserve on the Technical Working Groupof the Joint Initiative on Priority SkillsAcquisition (JIPSA). The business repre-sentatives at the NSA successfully lob-bied for a critical review of some of thetargets of the National SkillsDevelopment Strategy (NSDS).

Through BUSA, the Chamber lob-bied the minister of education on suchcritical issues as the new role of furthereducation and training colleges and thechallenges for business of implementingthe fundamental unit standards. TheChamber played a key role in influenc-ing the proposals that were developedby the technical working group for con-sideration by the Joint Task Team ofJIPSA chaired by the Deputy President.

Key challenges

The shortage of skills, in particular arti-sans, in a growing South African econ-omy pose a challenge for the miningindustry. The industry realises that asgovernment increases its expenditure oninfrastructural development, the labourmarket will become embroiled in a bat-tle for artisans. The turnover of artisansstarted to increase as the market beganto pay premium salaries for people withsuch skills.

The mining industry also faces achallenge to increase the number ofemployees who are willing to enlist forthe various adult basic education andtraining (ABET) programmes. The uptakeof ABET programmes remains low even

with employee incentives from the Mining Qualifications Authority(MQA). The stakeholders at the MQA committed themselves toencouraging more employees to register for ABET programmes bysigning a statement of intent. The statement of intent outlines therole of each stakeholder in ensuring successful implementation ofABET at company level. Chamber officials played a key role indrafting the content of the statement with the aim of managingunrealistic expectations placed on employers.

The NSA reviewed the progress of the Sector Education andTraining Authorities (SETAs) in achieving the National SkillsDevelopment Strategy and it was clear that less than 40% of thetarget on ABET implementation would be achieved. Chamber offi-cials represented at the NSA influenced the revision of the ABETtarget to include all ABET levels. Even this revision will not achievethe target of 700 000 employed people completing an ABET pro-gramme by 2014.

The NSA could not finalise the National Standard of GoodPractice in People Development. This has led to a further postpone-ment in measuring the extent to which the relevant indicator on theNSDS has been achieved. Business’ representatives on the NSAproposed suspending this indicator for the entire period of NSDS IIwhilst the NSA is developing a standard to be agreed by the socialpartners.

The NSA could not hold its annual National Skills Conferencein 2006. Business representatives at the NSA made critical contri-butions to change the nature and format of the conference to beheld in 2007. The NSA is planning a National Skills Conference ofleaders only, to deal with the following strategic issues:

� Skills development in the context of the first and secondeconomies

� An appropriate SETA landscape for a growing economy� The success and failures of the skills dispensation since 2000.

BUSA and the Chamber will play a leading role at this conference.

JIPSA

Chamber officials continue to represent business in the technicalworking group of JIPSA. In the past year the technical workinggroup finalised a number of project proposals for approval by theJIPSA Joint Task Team. The Chamber participates in the followingprojects regarded as key constraints to the delivery of skills:

� Finalisation of the learning routes towards artisan qualification.The final draft of the learning routes has been approved byCabinet and will soon be released for public comment. Thetechnical working group also proposed that initiatives need tobe instituted to encourage an increase in the number of peoplewho qualify as artisans from the current 6 700 to 12 500 a year.Efforts are underway to persuade the SETAs and the NSF to allo-cate funds for artisan training. The Chamber will submit its ownartisan development proposal

mining together


mining together


� Acceleration of the National Qualifications Framework (NQF)review by the departments of education and labour

� Review of the intake and throughput of graduate engineers ataccredited universities. This proposal led to a special allocationof R2-billion to universities to train graduate engineers

� Finalisation of the critical and scarce skills list and quota num-bers to be submitted to the Department of Home Affairs toaccelerate the issuing of work permits to non-South Africanswith scarce skills

� Support for the improvement of public service delivery withspecific reference to management development in the educationand health system

� Support for the improvement of the school delivery system, withspecial reference to the teaching of mathematics, science andtechnology.

The term of the technical working group was extended for a fur-ther 18 months to enable it to continue to be a catalyst in removingblockages to speedy skills development initiatives.

Education Advisory Committee

The Chamber's Education Advisory Committee (EAC) focuses oncritical implementation issues that affect the mining industry. The

EAC made proposals on such issues as:

� employer mandates for input at theMQA

� mining industry inputs to nationalissues on skills development as dis-cussed at BUSA

� mining industry comments on thenew learnership regulations.

In response to the requirement totrain artisans beyond the needs ofindustry, the EAC set up a task team toinvestigate the capacity of Chambermembers to train beyond their currenthuman resources requirements, as wellas the full cost of such training. TheChamber's Executive Council supportsthe initiative on condition that the NSFcarries the full cost of the training ofunemployed artisans.

The EAC has since proposed theestablishment of the MiningEmployment and Skills DevelopmentAgency to manage and co-ordinate the

Electrical workshop team. Back from left: William Masewu (artisan assistant), Ferdi van Niekerk (electrician), CliveKilfoil (electrician) and Simon Molomo (electrical aid). Front from left; apprentice electricians Lebo Molambo andOniccah van Wyk

training of unemployed artisans. Effortsare underway to get the support of theState and organised labour at the MQAso that funds can be made availablefrom the NSF.

The EAC continues to find ways ofdealing with effective teaching andassessment of the fundamental unitstandards. The Chamber facilitated aworkshop of employers and invitedother stakeholders and the MQA todebate some of the challenges of teach-ing mathematical literacy as part of thefundamental unit standards. A specialistin the development of mathematical lit-eracy unit standards provided insightsinto best practice in teaching mathemat-ics.

The workshop resulted in somecompanies piloting the teaching ofEnglish and mathematical literacy witha number of learners who need thequalifications. The Chamber will con-tinue to assist industry to find solutionsto the challenges of teaching andassessing the fundamental unit stan-dards. In the year under reviewChamber officials participated innational forums where the implementa-tion of the fundamental unit standardswas debated.

PDA data development

The EAC continues to assist with theimplementation of the personal digitalassessment (PDA) by funding it via alevy to all subscribing companies,based on the number of assessors percompany. The PDA project has success-fully loaded a number of unit standardson the system and it is up to companiesto implement the assessment of theseunit standards on the job using thePDA.

The EAC mandated the Chamber totender for MQA funding of the PDA.

In engineering – the assessment datafor the electro-mechanic levels 2, 3 and4 is being developed. Nearly 70 unitstandards for these qualifications havebeen loaded for use with the PDA.

In metallurgy – the ore beneficiation

skills programme is being used as the starting point to develop datafor use with the PDA for assessment. Work is continuing in this dis-cipline.

In the underground hard rock discipline – some work wasbegun but technical expertise is now required to further developthe data for use on the PDA. Such expertise is being sourced.

National Qualifications Framework

The review of the NQF remains critical to the mining industryhence the Chamber's involvement in any debate surrounding theNQF. Through BUSA, the Chamber made its submission on theestablishment of the Quality Council for Trades and Occupations.BUSA is concerned that the council, as proposed by government,will not be aligned to the NQF, which will further promote frag-mentation in the education and training system.

The council will be responsible for quality assurance in non-for-mal education and training structures like SETAs. BUSA agreed thatall occupational directed qualifications need to be linked to theNQF and allow for equivalence, access, progression and transfer-ability. The Chamber will remain alert to all developments on thecouncil and advise the industry.

Higher education

The mining industry was informed about the JIPSA initiative toincrease the intake and throughput of university engineering gradu-ates. This will assist mining companies to create the necessarycapacity for practical training requirements for engineering gradu-ates.

mining together


A lot of the fundamental skills that pupils learn in the course of theirschooling have never before been available to the miners

mining together


The Chamber made a special JIPSA presentation to the TertiaryMining Education Committee to highlight government planning ongraduate engineers against national demands.

This presentation prompted the committee to request theChamber to conduct an investigation on the actual number of engi-neering graduates qualifying per year as well as the role of thecommittee in supporting mining-related engineering graduates. Thisinformation will be submitted to the technical working group aspart of the mining industry contribution to JIPSA.

The need for the various Chamber of Mines’ certificates remainshigh in the absence of new unit standards based qualificationsrequired for people to practice in specified areas of work.

In the past year the Chamber issued 251 certificates in the fol-lowing areas:

� Advanced Mine Surveying – 16� Advanced Mine Valuation – 16� Advanced Rock Engineering – 4� Basic Mine Sampling – 59� Basic Mine Surveying – 29� Elementary Mine Sampling – 27� Elementary Mine Surveying – 20� Mine Environmental Control – 4� Mine Survey Draughting – 7� Radiation Protection Monitoring – 30� Rock Mechanics – 8� Strata Control – Intermediate Certificate in Mine Environmental

Control – 25

Tuition for these certificates is offered by private providers whoare monitored by professional associates. The examinations areadministered by Unisa on behalf of the Chamber.

Further education and training

The mining industry needs to continue to maintain a close link withthe further education and training (FET) colleges to complete someof the occupationally directed qualifications required by the indus-try. Thus Chamber officials facilitated a meeting between industryrepresentatives and Department of Education officials to discuss thevalue and relevance of the new FET curriculum. The discussion ledto the adjustment of the curriculum to meet the needs of the indus-try.

The industry remains concerned about its role in conducting practi-cal training for the new National Certificate: Vocational.

The Chamber participates at national forums like the NationalBoard for Further Education and Training to ensure that further edu-cation and training policies and programmes meet industry require-ments.

The Chamber facilitates appropriate collaboration between FETcolleges and companies. The current college industry partnershipbetween gold mining companies and a few select FET colleges was

broadened to include companies inother commodities. The partnership fur-ther discussed the role of colleges in theteaching and assessment of the funda-mental unit standards.

Mining QualificationsAuthority

The Chamber is the key convener of allemployers on the MQA Board and itsstanding committees. As a convener, theChamber utilises the MQA SystemsCaucus and the EAC to gather contribu-tions to the MQA on such issues as:

� identification of appropriate person-nel to participate in the task refer-ence groups of the MQA

� influencing of any MQA policy forthe benefit of employers.

Chamber officials continue to assistMQA staff in developing the new work-place skills plan forms in line with theSETA grant regulations. The influence ofthe Chamber helped to persuade theMQA to allow companies to submittheir workplace skills plans either elec-tronically or in hard copy. This dualmethod assisted those companieswhose computer systems were not com-patible with those of the MQA.

The phenomenal increase in thenumber of learners registered for vari-ous learnerships put further pressure onthe MQA to reduce the level of grantsto accommodate all learners. Thisreduction in the value of the learnershipgrant meant that employers had to carrythe greater cost of training unemployedlearners.

The MQA reviewed all its discre-tionary grants projects so that it couldeliminate the funding of non-core pro-grammes and re-allocate funds to itscore deliverables. To this end the MQAdiscontinued its funding of trainee lec-turers at the mining engineering facul-ties of universities as well as theExecutive Preparation Programme fornew ownership entrants into the industry.

mining together


Discipline As at July 2006

As at July 2007

Analytical services 42 54Cement Lime and Aggregates 2Diamond processing 27 27Engineering 151 203Jewellery manufacturing 14 38Metallurgy 212 256Underground coal mining 14 27Underground hard rock mining 52 81Surface mining 46 53Occupational hygiene 1 1Occupational safety 4 6Rock engineering 22 53Surveying 10 12Small-scale mining 4 4Small-scale business 1 1Total 600 818

The employer stakeholder grouping

remains committed to ensuring effective

and efficient delivery of the MQA on its

mandate.

All employer representatives who

participate on the board and its various

standing committees continue to strive

for the improvement of governance pro-

cedures and effective delivery of grants

and projects by the MQA.

Employer representatives serve on

the MQA quality assurance teams that

are commissioned to conduct assess-

ment on training providers who aspire

to obtain full accreditation by the MQA.

Learning materials

The Chamber is co-ordinating and delivering MQA learning materi-als through the Learning Materials Development Project. The proj-ect delivers learning material packs for individual unit standardsacross the different disciplines within the sector. The active partici-pation of employers and training providers is a key factor thatensures the continued success of the project. By the end of July2007, 970 unit standards had been allocated to accredited trainingproviders for learning material development across the different dis-ciplines. The MQA has paid just over R16-million to the projectsince its inception. It is through the co-ordinating role of theChamber that progress has been made possible in the developmentof learning materials. The table below shows the progress made onquantities of learning packs approved by the MQA technical reviewgroups by 31 July 2007.

mining together


Financial

statements

Financial statements

Chamber of Mines of South Africa Annual Financial Statements

for the year ending 30 June 2007

The following reports and statements are presented:

Executive Council’s responsibility for financial reporting

Report of the independent auditors

Annual financial statements:

Balance sheet

Income statement

Statement of changes in equity

Cash flow statement

Accounting policies

Notes to the annual financial statements

Executive Council’s responsibility for financial reporting

The Executive Council of the Chamber is responsible for the maintenance of adequate accounting records andpreparation and integrity of the financial statements and related information. The financial statements have beenprepared in accordance with South African Generally Accepted Accounting Practice. The Chamber’s independent,external auditors, Deloitte & Touche, have audited these financial statements.

The annual financial statements are prepared on a going concern basis. Nothing has come to the attention of theExecutive Council to indicate that the Chamber will not remain a going concern for the foreseeable future.

Approval of Annual Financial Statements

The Annual Financial Statements were approved by the Executive Council on 10 October 2007 and are signed ontheir behalf by:

P L Zim M G DilizaPresident Chief Executive

mining together


mining together


Report of the independent auditors to the members of the Chamber of Mines of South Africa

We have audited the annual financial statements of the Chamber of Mines of South Africa which comprise theexecutive council responsibility for financial report, the balance sheet as at 30 June 2007, the income statement,the statement of changes in equity and cash flow statement for the year then ended, a summary of significantaccounting policies and other explanatory notes.

Executive Council Responsibility for the Financial Statements

The executive council are responsible for the preparation of these financial statements in accordance withInternational Financial Reporting Standards, and in the manner required by the Labour Act in South Africa. Thisresponsibility includes: designing, implementing and maintaining internal control relevant to the preparation andfair presentation of financial statements that are free from material misstatement, whether due to fraud or error;selecting and applying appropriate accounting policies; and making accounting estimates that are reasonable in thecircumstances.

Auditors Responsibility

Our responsibility is to express an opinion on these financial statements based on our audit. We conducted ouraudit in accordance with International Standards on Auditing. Those Standards require that we comply with ethicalrequirements and plan and perform the audit to obtain reasonable assurance whether the financial statements arefree from material misstatement.

An audit involves performing procedures to obtain evidence about the amounts and disclosures in the financialstatements. The procedures selected depend on the auditor’s judgement, including the assessment of the risks ofmaterial misstatement of the financial statements, whether due to fraud or error. In making those risk assessments,the auditor considers internal control relevant to the entity’s preparation and fair presentation of the financial state-ments in order to design audit procedures that are appropriate in the circumstances, but not for the purpose ofexpressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating theappropriateness of accounting principles used and the reasonableness of accounting estimates made by manage-ment, as well as evaluating the overall financial statement presentation.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Opinion

In our opinion, the financial statements present fairly, in all material respects, the financial position of the companyat 30 June 2007, and of its financial performance and its cash flows for the year then ended in accordance withSouth African Statements of Generally Accepted Accounting Practice, and in the manner required by the LabourRelations Act in South Africa.

Deloitte & ToucheRegistered auditors

Per AJ ZoghbyPartnerJohannesburg10 October 2007

Balance sheet as at 30 June 2007

2007 2006Notes R R

Assets

Non-current assets

Equipment 1 1 436 862 793 523Inventory 262 000 271 923 Investments 2 8 087 177 7 469 872

9 786 039 8 535 318Current assets

Accounts receivable 3 9 441 140 8 809 793 Administered funds 4 –– 10 173 433 Bank and cash 4 18 651 870 21 313 869

28 093 010 40 297 095Total assets 37 879 049 48 832 413

Funds and liabilities

Funds

Accumulated funds 6 521 247 6 521 247Project funds 5 13 763 671 11 814 197

20 284 918 18 335 444Current liabilities

Funds under administration 4/10 –– 10 171 433 Accounts payable 6 13 746 200 16 761 711 Short-term loan 7 3 847 931 3 563 825

17 594 131 30 496 969Total funds and liabilities 37 879 049 48 832 413

Income statement for the year ended 30 June 2007

Revenue 8 43 386 176 41 438 162Administrative and operating costs 9 (43 034 965) (41 207 695)Surplus before depreciation 351 211 230 467Depreciation (351 211) (230 467)Operating surplus –– –– Project income 5 6 705 708 635 000Project expenditure 5 (4 756 234) (3 546 307)Increase/(decrease) in project funding 1 949 474 (2 911 307)

Statement of changes in equity for the year ended 30 June 2007

Project funds Accumulated funds Total funds

Balance at 30 June 2005 14 725 504 6 521 247 21 246 751Decrease in project funding for the year –– (2 911 307) (2 911 307)Transfer from project funds (2 911 307) 2 911 307 ––Balance at 30 June 2006 11 814 197 6 521 247 18 335 444Increase in project funding for the year –– 1 949 474 1 949 474Transfer to project funds 1 949 474 (1 949 474) –– Balance at 30 June 2007 5 13 763 671 6 521 247 20 284 918

Cash flow statement for the year ended 30 June 2007

2007 2006Notes R R

Cash flows from operating activities:

Net cash (outflow)/inflow from operating activities 12 (12 768 098) 2 196 839

Cash flows from investing activities:

Additions to equipment (1 002 407) (695 592)Disposals of equipment 7 857 ––Investment income 1 544 521 1 355 270 Decrease/(increase) in investments (617 305) 5 139 584

Net cash (outflow)/inflow from investing activities (67 334) 5 799 262

Net (decrease)/increase in cash and cash equivalents (12 835 432) 7 996 101

Cash and cash equivalents at beginning of the year 31 487 302 23 491 201

Cash and cash equivalents at end of the year 13 18 651 870 31 487 302

mining together


mining together


Accounting policies for the year ended 30 June 2007

The principal accounting policies and basis of accounts used are in all material respects consistently applied. The Annual Financial Statements have been prepared in accordance withthe historic basis, except for certain financial instrument that are stated at fair value and these policies conform with South African statements of Generally Accepted AccountingPractice.

Revenue recognitionRevenue represents contributions from members, administration fees and interest income. Contributions are recognised when invoiced and consists of contributions for operating costsand capital expenditure, collected in-line with the yearly approved budget. Administration fees are earned in respect of services provided to associated entities. Interest income isaccrued on an effective yield basis.

Project incomeProject income represents contribution from members for specific projects.

EquipmentEquipment is stated at historical cost less depreciation. Depreciation is calculated using the straight line method so as to write off the cost of each asset less its residual value over itsestimated useful life.

The rates of depreciation used are:Motor vehicles 5 yearsComputer equipment 3 yearsFurniture and fittings 5 years

Investments

Unlisted investments comprise shares in related companies and are stated at cost. Other investments comprise monies invested to fund liabilities and projects that are stated at cost.

Cash and cash equivalents

Cash and cash equivalents comprise cash and short-term deposits. The carrying amount of these assets approximates fair value. Credit risk is limited as the counter parties are financialinstitutions with high credit ratings.

Financial instruments

Financial assets and financial liabilities are recognised on the Chamber’s balance sheet when the Chamber has become a party to contractual provisions of the instruments. Tradereceivables and payables are stated at their nominal value. Trade receivables are reduced by appropriate allowances for estimated irrecoverable amounts.

Retirement benefits

The policy of the Chamber, subject to the rules of the Chamber of Mines Retirement Fund, is to provide retirement benefits for its employees. Payments to the defined contribution fundare expensed as they fall due.

The Chamber of Mines does not have a post-retirement medical aid liability as this liability has been fully funded and was bought out by Momentum Employee Benefits.

Inventory

Inventory consists of gold coins and medallions. Inventory is valued at the lower of cost or net realisable value.

Notes to the Annual Financial Statements for the year ended 30 June 2007

1. Equipment

2007 Cost Accumulated depreciation Net book valueR R R

Motor vehicles 1 059 409 176 303 883 106 Computer equipment 873 851 485 616 388 235 Furniture and fittings 389 345 223 824 165 521

2 322 605 885 743 1 436 862 2006

Motor vehicles 1 283 193 856 367 426 826Computer equipment 618 059 366 882 251 177 Furniture and fittings 283 755 168 235 115 520

2 185 007 1 391 484 793 523 2007Reconciliation of movement:

Motor vehicles Computer equipment Furniture and fittings TotalR R R R

Net book value at beginning of year 426 826 251 177 115 520 793 523 Additions 630 147 266 670 105 590 1 002 407Depreciation 173 867 121 755 55 589 351 211Disposals –– 7 857 –– 7 857Net book value at end of year 883 106 388 235 165 521 1 436 862

2006Reconciliation of movement:

Net book value at beginning of year 142 794 32 266 153 338 328 398Additions 379 045 301 877 14 670 695 592 Depreciation 95 013 82 966 52 488 230 467Net book value at end of year 426 826 251 177 115 520 793 523

Notes continued2007 2006

R R2. Investments

Rand Mutual Assurance Company Ltd 120 206 shares @ R20 (2006: 1 share @ R20 each)Executive valuation R 120 (2006: R 20 )

120 20Term Deposits:

Industry Task Force Radiation fund 267 006 657 862Disaster Relief fund 740 000 740 000Insurance Claim fund 880 000 880 000 Rural Development fund –– 1 638 892Research fund 40 000 79 910HIV/AIDS project 375 765 445 820Parliamentary Liaison fund –– 124 554Future of gold sector 269 500 ––Occupational Lung Disease 520 227 866 803Barnard Jacobs Mellet –– 1 857 638ICMM –– 46 896Sludge Treatment 24 827 27 800 IUCN World Conference 43 677 103 677

Industry Strategy for Occupational Safety 80 347 ––Former Mineworkers Project 4 345 708 ––Development Conceptual Water Strategies 500 000 ––

8 087 177 7 469 8723. Accounts receivable

Accounts receivable – members 8 937 469 7 949 531Accounts receivable – non members 774 314 1 414 416

9 711 783 9 363 947Less: Provision for Doubtful debts (270 643) (554 154)

9 441 140 8 809 793The Executive Council considers the carrying amount to approximate fair value

4. Bank and cash

Administered fund –– 10 173 433

Cash at bank 5 991 093 5 037 721Cash on call 20 747 834 23 746 000

26 738 927 28 783 721Amounts classified under investments (8 087 057) (7 469 852)

18 651 870 21 313 8695. Project funds

Rural Development –– 1 638 892Balance at 1 July 2006 1 638 892Expenditure (1 638 892)Balance at 30 June 2007 ––

Disaster Relief 740 000 740 000

Insurance 880 000 880 000

Research 40 000 79 910 Balance at 1 July 2006 79 910Expenditure (39 910)Balance at 30 June 2007 40 000

Industry Task Force Radiation Fund 267 006 657 862Balance at 1 July 2006 657 862Expenditure (390 856)Balance at 30 June 2007 267 006

General FundOther 500 000 500 000Legal opinion 196 700 196 700 Building repairs and essential maintenance 71 154 596 523

767 854 1 293 223

HIV/AIDS Project 375 765 445 820Balance at 1 July 2006 445 820Expenditure (70 055)Balance at 30 June 2007 375 765

Parliamentary Liaison –– 124 554 Balance at 1 July 2006 124 554Amount received 200 000 Expenditure (324 554)Balance as at 30 June 2007 ––

Future of the Gold Sector 269 500 ––Amount received 400 000 Expenditure (130 500)Balance as at 30 June 2007 269 500

mining together


mining together


5. Project funds continued2007 2006

R R

Former Mine Workers 4 345 708 ––Amount received 4 345 708Expenditure ––Balance at 30 June 2007 4 345 708

Occupational Lung Disease 520 227 866 803 Balance at 1 July 2006 866 803Expenditure (346 576)Balance as at 30 June 2007 520 227

Project funding recovery 4 908 760 4 908 760This amount primarily relates to the recovery from the Chamber’s insurers, of irregular expenditure that occurred in the previous two financial years.(2004: R2 996 364) (2003: R1 803 380).Thisexpenditure has been included in the respective prioryear annual financial statements.Recoveries 4 799 744Other 110 125 2006 legal fees (1 109)

4 908 760Industry Stratification for Occupational & SafetyAmount received 960 000 80 347 ––Expenditure (879 653)Balance at 30 June 2007 80 347

Sludge treatment 24 827 27 800 Balance at 1 July 2006 27 800Expenditure (2 973)Balance as at 30 June 2007 24 827

ICMM –– 46 896 Balance at 1 July 2006 46 896Amount received 200 000Expenditure (246 896)Balance as at 30 June 2007 ––

IUCN World Conference 43 677 103 677 Balance at 1 July 2006 103 677Amount received 100 000Expenditure (160 000)Balance as at 30 June 2007 43 677

Development Conceptual Water Strategies 500 000 –– Amount received 500 000Expenditure ––Balance as at 30 June 2007 500 000

13 763 671 11 814 197

6. Accounts payableAccounts payable – members 3 467 976 2 440 162Accounts payable – non-members 10 278 224 14 321 549

13 746 200 16 761 711 7. Short-term loan

Chamber of Mines Building Company (Pty) Ltd 3 847 931 3 563 825This loan is unsecured, interest free and payable on demand.

8. RevenueContribution from members 37 987 326 36 077 573Interest 1 544 521 1 355 270Administration fees 799 182 859 447 Profit on sale of motor vehicle 126 490 ––Other income 2 928 657 3 145 872

43 486 176 41 438 162

9. Administrative and operating expenditureAuditors’ remuneration 200 000 174 002 – Current year 200 000 174 002– Other services –– ––Staff costs 28 502 781 28 783 253Operating costs 14 332 184 12 250 440

43 034 965 41 207 695

10. Funds under administrationThe Chamber no longer administers and invests surplus funds of associates. This fund ceased at 30 June 2006.

mining together


Notes continued2007 2006

R R11. Restatement

Outstanding cheques have been reclassified from bank and cashto accounts payable. The financial statements of the prior year havebeen restated to reflect the change

Decrease in bank and cash 2 270 841 2 315 645Increase in accounts payable 2 270 841 2 315 645

12. Reconciliation of increase/(decrease) in projectfunding for the year to net cash flow from operating activities:

Increase/(decrease) in project funding for the year 1 949 474 (2 911 307)Adjustment for:Depreciation 351 211 230 467Loss on assets written off –– ––Interest received (1 544 521) (1 355 270)Operating funding/(deficit) before working capital changes 756 164 (4 036 110)

Working capital changes(Increase)/decrease in accounts receivable (631 347) 3 341 814Decrease in funds under administration (10 171 433) (4 068 268) (Decrease)/increase in accounts payable (3 015 511) 6 948 335Increase in loans 284 106 1 144 Decrease in inventory 9 923 9 924

13 524 262 6 232 949

Net cash (outflow)/inflow from operating activities (12 768 098) 2 196 839

13. Cash and cash equivalentsAdministered funds –– 10 173 433Bank and cash 18 651 870 21 313 869

18 651 870 31 487 30214. Financial instruments

The company's non-derivative financial instruments consist mainly of cash and deposits with banks, accounts receivable and payable and loans from group companies.

Currency risk management

The group is not exposed to currency risk, other than the translation of its foreign subsidiaries on consolidation.

Interest rate risk management

The group adopts a policy of regular reviewing interest rate exposure and maintains both fixed and floating rate borrowings.

Credit risk management

Management has a credit risk policy in place and exposure to credit risk monitored on an ongoing basis. Provision is made for specific doubtful debts, and at the year end management did not consider there to be any material credit risk exposure that was not provided against. Reputable financial institutions are used for investing and cash handling purposes.

Fair values

The carrying amounts of the financial assets and liabilities carried on the balance sheets approximate their values at the end of the year.

15. Subsequent events

As at date of signing these financial statements, there were no significant or material post balance sheet events which would require adjustments to or disclosure of in the annual financial statements.

mining together - CacheFly

Documents

Transcript of mining together - CacheFly