Presentation to SCOPA and PPC (Mineral Resources) on the Auditor General’s report on Rehabilitation of

Derelict and Ownerless Mines.

1st September 2010

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PRESENTATION OUTLINE

• Findings of the Auditor-General’s report

• Root Cause

• Corrective action taken by the DMR’s to date

• The national strategy for the management and rehabilitation of derelict and ownerless mines

• Budgeting and allocation of funds

• Concluding remarks

Findings of the AG

Strategic Planning

Absence of an approved strategy to inform and guide rehabilitation programme;

Lack of rehabilitation policies and procedures;

Rehabilitation progress very slow.

Information System

D & O database not integrated into the departmental information system

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Findings of the AG (Cont.)

Organisational Capacity and Structure

Did not support the departmental objective

for the rehabilitation programme;

Inability to conduct site inspections and monitoring of projects;

Delays in the implementation of projects.

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Findings of the AG (Cont.)

Evaluation & Adjudication of Bids

Several bids had to be re-advertised leading to delays in the implementation of projects;

Budgeting & Allocation of Funds

Lack of criteria for the allocation of funds to projects;

Decrease in the funding levels and spending

Insufficient funding for rehabilitation.

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Findings of the AG (Cont.)

Communication & Coordination

Lack of formal communication between the internal and external stakeholders

Rehabilitation not part of the GTT agenda.

Use of Consortium as Project Managers

Lack of proper project sign off, action plans to deal with outstanding issues on

projects;

Lack of oversight over external contractors.

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Findings of the AG (Cont.)

Use of MINTEK as Project Manager

Failure to inform AG and National Treasury of the deviation from Treasury Regulations 16A6.4

Lack of specialised skills within MINTEK

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ROOT CAUSES

Historically there has been no legislative

measures to manage the impacts of mining on

environment; The magnitude of the problem was not known; Detailed research had to be conducted to

establish the extent of the problem Strategy had to be informed by research

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AUDITOR GENERAL FINDINGS AND RESPONSE BY DMR

Item Summarised findings Response

6.1.1 (a)

Lack of an approved national strategy

The national strategy for the rehabilitation of derelict and ownerless mines has been approved (Dec 2009) and is currently being implemented.

6.1.1

(b)

Ineffective rehabilitation efforts The approved National Strategy provides for a framework for implementation, from which an implementation plan has been developed.

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AUDITOR GENERAL FINDINGS AND RESPONSE BY DMR

Item Summarized findings

Response

6.2.1 (a)

Lack of integrated information system

The existing database on derelict and ownerless mines represents preliminary research work, aimed at accurately delineating the extent of derelict and ownerless mines in South Africa. The integration of derelict and ownerless database with the principal mining database in the department is subject to completion of the derelict and ownerless mines audit.

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AUDITOR GENERAL FINDINGS AND RESPONSE BY DMR

Item Summarized findings

Response

6.3 Organizational capacity and structure:

• Lack of capacity in DMR

• The rehabilitation of derelict and ownerless mines as well as the existing mines were previously located within the Mineral Regulation Branch of the DMR, with limited capacity.

• The function of rehabilitation of derelict and ownerless mines has been with policy and research units of the DMR

• A Rehabilitation Oversight Committee was established in December 2009 to ensure that all the rehabilitation programmes are effectively and efficiently managed and implemented

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AUDITOR GENERAL FINDINGS AND RESPONSE BY DMR

Item Summarized findings

Response

6.4 Evaluation and adjudication of bids

• Ineffective evaluation and adjudication of bids

MINTEK has been appointed to programme manage the rehabilitation programme.

The mandate given to MINTEK includes the procurement process

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AUDITOR GENERAL FINDINGS AND RESPONSE BY DMR

Item Summarized findings

Response

6.5 Budgeting and allocation of funds to projects:

• Lack of procedures for allocation of

funds

The current annual allocation for rehabilitation of derelict and ownerless mines is grossly disproportionate to the requisite first order estimated budget of R30 billion (excluding inflationary escalation). This budget allocation is being utilised to continue with research work on which the rehabilitation programme is premised, while also being used to rehabilitate prioritised (high risk) sites of asbestos.

The departmental procedures for allocation of funds have to date been utilised.

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AUDITOR GENERAL FINDINGS AND RESPONSE BY DMR

Item Summarized findings

Response

6.6 Communication and coordination:

• No clearly defined internal and

external communication channels

The implementation plan developed outlines a clear framework of communication (both internally and externally).

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AUDITOR GENERAL FINDINGS AND RESPONSE BY DMR

Item Summarized findings

Response

6.7 Use of consortium as project manager:

• Lack of capacity,

• Lack of proper budget preparation

and monitoring

All the findings have been addressed in items 6.3, 6.4 and 6.5 above

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AUDITOR GENERAL FINDINGS AND RESPONSE BY DMR

Item Summarized findings

Response

6.8 Use of Mintek as Project Manager:

• Lack of notification of the Treasury and AG in respect of Treasury

Regulation 16A6.4

• Lack of broad spectrum of relevant skills for rehabilitation programme

Procedures have been put in place to ensure that the AG and NT are notified in respect of relevant Treasury Regulation.

The ROC will ensure that the availability of requisite skills would be confirmed during the evaluation process prior to the appointment of a contractor.

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STRATEGY - PROPOSED PROGRAMMES FOR MANAGING D&O MINES

Scheduling and Prioritisation

• Risk based prioritisation,

• Rehabilitation potential – is efficient rehabilitation possible or is

further research and investigation required.

• Impact of rehabilitation

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CLUSTERS OF MINES POSING A HIGH ENVIRONMENTAL RISK – HIGH PRIORITY SITES

Region Commodities Pathway(s)[1] Comments

Asbestos mines Asbestos A, SW High risks due to adverse health impacts

Witwatersrand gold basin from the Free State to Evander)

Gold, uranium A, SW, GW High environmental risks due to uranium content and Acid Mine Drainage (AMD).

Gold mines occurring in the greenstone belt of Mpumalanga

Gold, silver, arsenic

A, SW, GW High risks due to arsenic, AMD and uranium content.

Gold occurring in the greenstone belt in Limpopo

Gold, antimony A, SW, GW High risks due to AMD and the presence of antimony and, in some cases, mercury

Coal mines in Mpumalanga

Coal A,SW, GW High risk due to land subsidence, AMD and spontaneous combustion

Copper mines Copper, tungsten, molybdenum, bismuth

SW, GW Water related risks due to the presence of bismuth – Medium Risk

Pegmatites in Northern Namaqualand

Many commodities A, SW, GW Risks are primarily due to radioactive components or bismuth – Medium Risk

[1]A = Air

SW = Surface Water

GW = Ground Water

Budgeting and allocation on funds

• The current liability is estimated at more than R30b

• The department currently has a budget of R50million per annum

• Projects are currently funded in line with the ranking and priotisation system

• Treasury will be approached to request additional funding going forward

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END

THANK YOU