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7 February 2007

Chamber of Mines of South Africa. Presentation to the Select Committee on Economic and Foreign Affairs Mzolisi Diliza, Chief Executive, Chamber of Mines of South Africa. 7 February 2007. Outline of presentation. The importance of mining to the economy Background to the Chamber of Mines

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7 February 2007

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  1. Chamber of Mines of South Africa Presentation tothe Select Committee on Economic and Foreign AffairsMzolisi Diliza, Chief Executive,Chamber of Mines of South Africa 7 February 2007

  2. Outline of presentation • The importance of mining to the economy • Background to the Chamber of Mines • The importance of tripartite co-operation • Some challenges facing the industry.

  3. 1. Importance of mining to the economy Gross Domestic Product (GDP): • Directly: 6.2% of GDP • Including indirect contribution: 16% Exports: • R105-billion in export earnings • 30% of total merchandise exports • Including beneficiated mineral products: over 50% of exports • 60 different minerals are mined – exported to over 100 international destinations

  4. Important provider of jobs Wage bill = R36-billion Mining employees: 450 000

  5. Important provider of jobs Mining employees: 450 000 Dependants: 5 million

  6. Important provider of jobs Associated industries: 150 000 Mining employees: 450 000 Dependants: 5 million

  7. Importance of mining (continued) Energy: • 93% of electricity generation via coal power plants • About 30% of liquid fuels via Sasol’s use of coal Investment: • 12% of fixed investment (direct and indirect) • At R1-trillion, 33% of the market value of the JSE • Empowerment deals of R30 billion in 2006 Complementary role in deep rural areas: • Remittances • Clinics, schools, community centres • Development projects • Financial infrastructure • TEBA Development, TEBA Bank

  8. 2. The Chamber of Mines Vision: To achieve a policy, legislative and governance framework, which is widely supported and which will allow the mining industry to convert as great a part of the country’s abundant mineral resources into wealth for the benefit of South Africa. A private sector body, fully funded by private companies Founded in 1889

  9. Some principles supported by the Chamber • Emphasis on addressing historical legacies • Need for transformation to ensure a more inclusive and participative economy: Mining Charter developed on tripartite basis • Unions are important stakeholders • Importance of participating in economic tripartism • Importance of dealing responsibly with an important national resource.

  10. Chamber transformation

  11. Chamber representation • Chamber members account for 90% of the country’s mineral production and 89% of employment • Chamber approach is fully mandate driven through numerous technical policy committees representing members • Research backing for Chamber views an important priority.

  12. How the Chamber operates Executive Council • President: Lazarus Zim • Vice-presidents: Ralph Havenstein Bernard Swanepoel • COM CE: Mzolisi Diliza • Other CEOs Final mandate on major issues

  13. How the Chamber operates Executive Council Gold and coal principals Policy committees • Company experts • Environment, labour relations, skills development, health, safety, etc. 13

  14. The advocacy role of the Chamber • Government, Parliament, Parastatals • Member of Business Unity South Africa (BUSA) • International role • Chamber not a service organisation (exception of collective bargaining for gold and coal).

  15. 3. Tripartite co-operation Future of Gold Mining Sustainable Development issues Minerals & Mining Development Board Tripartism in the Mining Industry Mining Summits (past and future) Sector Partnership Committee, Social Plan, etc HIV/AIDS Committee Mine Health and Safety Council

  16. 4. Some challenges facing the industry Transformation Issues • Compliance with the • Minerals Act • Compliance with Mining Charter • Beneficiation Sustainable Development (SD) Issues Economic Issues Chamber of Mines Skills devl. Issues Environmental Issues Labour relations Issues Health & Safety Issues

  17. Some challenges facing the industry Transformation Issues Sustainable Development (SD) Issues Economic Issues • Drop in mining investment • Input cost pressures • Energy • Transport • Water • Royalties. Chamber of Mines Skills devl. Issues Environmental Issues Labour relations Issues Health & Safety Issues

  18. Some challenges facing the industry Transformation Issues Sustainable Development (SD) Issues Economic Issues Chamber of Mines Skills devl. Issues Environmental Issues Labour relations Issues Health & Safety Issues • Financial Provision for mine closure • Climate change, biodiversity • Water resource management

  19. Some challenges facing the industry Transformation Issues Sustainable Development (SD) Issues Economic Issues Chamber of Mines Skills devl. Issues Environmental Issues Labour relations Issues Health & Safety Issues • Health & Safety : Milestones • Integration of Health & Safety Laws • Integration of Compensation • Systems • HIV/AIDS

  20. Some challenges facing the industry Transformation Issues Sustainable Development (SD) Issues Economic Issues Chamber of Mines Skills dev Issues Environmental Issues Labour relations Issues Health & Safety Issues • Bargaining council for mining industry • Provident Fund • Accommodation • Women in mining

  21. Some challenges facing the industry Transformation Issues Sustainable Development (SD) Issues Economic Issues Chamber of Mines Skills dev Issues Environmental Issues Labour relations Issues Health & Safety Issues • Skills shortages • Learnerships and apprentices • Adult literacy • MQA

  22. Some challenges facing the industry Transformation Issues Sustainable Development (SD) Issues Economic Issues Chamber of Mines Skills dev Issues Environmental Issues Labour relations Issues Health & Safety Issues • Framework for responsible • mining • Gold theft • REACH

  23. HIV/AIDS • Major national issue • Huge impact on mining industry • Substantial in-roads and interventions • Provision of antiretrovirals • 40% – 45% of people in the industry needing treatment are receiving it • 94% of HIV positive employees return to work

  24. Safety • Employee safety: our major concern • We deeply regret fatalities and injuries • 2005 – best ever improvement in safety (16%) • 2006 - below 20% improvement objective • High level task team appointed • One fatality is one fatality too many

  25. Skills development • On average 4.5% of payroll spent on skills development • Industry contributes about R15m per annum to Minerals Education Trust Fund for tertiary mining education • Bursaries in mining: • Companies: 700 (R40m) • MQA: 837 (R50m)

  26. South Africa • Profits increased by 12% only • Real fixed investment declined by 16.5% (and 18.6% in 2004) Australia • Pre-tax profits increased by 95% • Capital investment surged by more than 34% Commodities boom and lost investment opportunities • SA did not take full advantage of commodities boom • Global exploration expenditure increased by 43% but only 27% in South Africa between 2003 and 2005 An Australian comparison (2005)

  27. Some possible reasons • Strong Rand (especially in 2003 and 2004) an important reason • Transport: • Logistical constraints in rail and ports compounded the problem • Industry & Transnet agreed initiatives to overcome logistical inhibitors; • Transnet spending R37-billion to upgrade infrastructure in the Waterberg area

  28. Chamber capital investment survey What are the issues? • Issuing of new or converted mining rights • Interpretational differences of Mining Charter, empowerment requirements and Social and Labour Plans • Capitalisation of Environmental Trust Funds • Delays in processing water licences

  29. Programme of action to address problems • Increasing efficiencies is top priority for DME • Industry is addressing shortcomings with applications, e.g. incomplete applications, lack of transparency on some BEE deals • Joint investigation into investment constraints and solutions • Continuing discussions.

  30. Good news • Positive developments in recent months: • 2495 new prospecting licences granted (94% finalised within time frame, i.e. either granted or refused) • 341 mining rights granted (65% finalised) • 1025 permit applications granted (84% finalised) • Transparency on progress with applications • 8.3% increase in investment between Q3 2005 and Q3 2006

  31. Royalty concerns • Significant improvements in second draft of Royalties Bill are welcomed • However, proposed two-tier system of royalty rates is a concern: • Lower rate for refined product • But has serious cost consequences for bulk commodity producers, esp. iron ore and coal.

  32. MPRDA and prescription • Industry concerns about prescription of claims • Window ends on 30 April 2007 • Compensation claims could become unenforceable • Difficulty in assessing value of rights • Urgent solution required • On-going discussions with the DME to find solutions • The resolution of Legal Proceedings Against Certain Organs of State Act (ILPA) set a good precedent • Urgency of passing legislation before 30 April 2007!

  33. An invitation • Chamber and mining industry would like more interaction with Parliamentary structures • Visits to mines to obtain hands-on information should take place regularly • Chamber is willing to carry a portion of the cost of such visits

  34. Members of the Chamber of Mines Diamond mining De Beers Consolidated Mines Ltd Namakwa Diamond Company South African Diamond Producers Organisation Trans Hex Group Ltd Platinum mining Anglo American Platinum Corporation Ltd Impala Platinum Ltd Lonmin Platinum Ltd Ridge Mining Small, medium & emerging operations ASA Metals (Pty) Ltd Aggregate & Sand Producers Association of South Africa Clay Brick Association G & W Base and Industrial Minerals (Pty) Ltd Imerys South Africa (Pty) Ltd Mvelephanda Resources Randgold & Exploration Ltd Vametco Mineral Corporation (Pty) Ltd Other members AngloGold Ashanti Health Services (Pty) Ltd BHP Billiton (SA) Ltd Cementation (Africa Contracts) (Pty) Ltd Corobrik (Pty) Ltd RUC Holdings Ltd Shaft Sinkers (Pty) Ltd Suspended operations City Deep Ltd Consolidated Main Reef Mines & Estates Ltd Crown Mines Ltd Financial corporations Anglo American Corporation of South Africa Ltd Gold mining African Rainbow Minerals (Gold) Ltd AngloGold Ashanti Ltd Armgold/Harmony JV Ltd Gold Fields Ltd Beatrix Mining Company Ltd Driefontein Consolidated (Pty) Ltd Kloof Gold Mining Company Ltd Harmony Gold Mining Co. Ltd JCI Gold Ltd Placer Dome Western Areas JV Coal mining Anglo Operations Ltd, Anglo Coal Division Eyesizwe Coal (Pty) Ltd Ingwe Coal Corporation Ltd Douglas Colliery Ltd Khutala Mining Services (Pty) Ltd Optimum Colliery Ltd Kangra Group (Pty) Ltd Kumba Resources Ltd Kuyasa Mining (Pty) Ltd Sasol Mining Tweewaters Fuel (Pty) Ltd Xstrata Coal

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