PRESENTATION TO PORTFOLIO COMMITTEE ON DMR 2010 / 11 ANNUAL REPORT 18 OCTOBER 2011

2. PRESENTATION TO PORTFOLIO COMMITTEE ON DMR 2010 / 11 ANNUAL REPORT 18 OCTOBER 2011

3. Presentation Outline 1. Financial performance - Annual Financial Statements 2. Auditor General’s Report - Audit Findings - Report on Material Losses - Report on Accruals 3. Progress on BRRR Recommendations 4. Section 32 Report

4. APPROPRIATION STATEMENT FOR 2010/2011

5. Analysis of variances • The overall under spending by the Department was R1,145 millionwhich is 0.11 % of the budget • The main reason for the under spending relates to the procurement of goods and services whereby orders were raised during the 2010/2011 financial year but delivery thereof and processing of invoices and payments happened subsequent to that. This was mainly on Programme 1: Administration

6. Analysis of variances • Mine Health and Safety Branch reflected 100% spending. An amount of R4.9 million was re-allocated to other Branches to cater for over expenditure • Although Mineral Regulation Branch reflected 100% spending, an amount of R6.2 million was re-allocated to this Branch from other Branches to cater for higher than anticipated expenditure • Mineral Policy and Promotion Branch reflected 100% spending. An amount of R2 million was re-allocated to other Branches for higher than anticipated expenditure

7. TREND ON UTILISATION OF FUNDS

8. Analysis of Unspent Fund • Under spending has been consistently below 3% for the last three years • For the year under review, the unspent funds is attributable to the late receipt of invoices and consequent delay in processing payments • However, this is not a true reflection of the matter as there is a huge gap between the unspent amount and the accrual raised which would have had constituted unauthorised expenditure had payment been done in time.

9. Analysis of variance in Statement of Financial Performance

10. Analysis of the Statement of Financial Performance

11. Statement of Financial Performance: Variance analysis • The staff cost decreased as a result of the split of Department of Minerals and Energy into Dept of Mineral Resources and Dept of Energy. (1,076 vs 1,272) • The G & S cost is relatively low compared to 2009/10 owing to split of Dept of Minerals and Energy. However the operating lease cost increases due to the relocation of the Head Office and some of the Regional offices • The decrease in Tangible capital assets cost is attributable mostly to the leasehold improvements for Trevenna paid in 2009/10

12. Statement of Financial Performance: Variance analysis • Decrease of 88.55% in transfers and subsidies is due to the fact that most of the transfers for the former DME relate to Dept of Energy • Financial transactions in assets and liabilities went down by 94% due to fewer losses written off during the financial year.

13. Analysis of variances: Statement of Financial Position

14. Analysis of variances: Statement of Financial Position

15. Details of Transfers and Subsidies

16. Audit Findings and action plan: 2009/2010 v 2010/2011

17. Audit Findings and action plan: 2009/2010 v 2010/2011

18. Audit Findings and action plan: 2009/2010 v 2010/2011

19. Audit Findings and action plan: 2009/2010 v 2010/2011

20. Audit Findings and action plan: 2009/2010 v 2010/2011

21. Report on Material Losses - Assets: Category and Value

22. Report on Material Losses - Assets: Root Cause and Action Plan

23. Report on Material Losses - Assets: Root Cause and Action Plan

24. Report on Accruals • The R1,1 million unspent funds to be surrendered would not have been sufficient to cover the accrual raised at the end of the year and this seem to be a growing trend. • Records show a trend between accruals and unspent funds for the past two financial periods as follows: 2009/2010: R19,6 million vs R11,5 million (deficit of R8,1 million) 2010/2011: R37,7 million vs R3,8 million (deficit of R33,9 million) • The unauthorised expenditure that would have been incurred by the Department as shown by the deficit above is an indication that there are serious challenges in the allocation of budget for Goods and Services

25. Progress on BRRR Recommendations Recommendation: The Minister needs to ensure that capacity within the department is built and therefore avail/provide for the necessary resources including financial budget DMR Response: Funding problems have always been the challenge as illustrated in the next slide. This has a negative impact on performance as limited funding inhibits achievements of some of the set objectives thereby affecting service delivery

26. Progress on BRRR RecommendationsDMR Response Cont’d

27. Progress on BRRR Recommendations Recommendation: In order to ensure the DMR’s contribution to the process of creating decent jobs and ensuring sustainable livelihood for the people the Minister of Mineral Resources needs to speed up the process of completing the beneficiation and small scale mining strategies

28. Progress on BRRR Recommendations Cont’d DMR Response: • The Beneficiation strategy was adopted as the country’s policy by Cabinet on the 8th of June 2011. -Process of developing implementation plans for the five pilot value chains as outlined in the strategy. -Two value chains are being finalized for presentation to Cabinet - the iron and steel and the energy commodities value chains . -The rest of the value chains will be developed during the next financial . • The small scale mining strategy – Draft strategy has been completed and going through the internal approval processes.

29. Progress on BRRR Recommendations Recommendation: The department should ensure capacity is created to enforce the compliance with legislation DMR Response: The Department has provided for the establishment of a compliance unit under the Mineral Regulation Branch however the posts remain unfunded and the Branch will continue to motivate for the necessary funding

30. Progress on BRRR Recommendations Recommendation: • The Director General should ensure the Committee receives the organogram of the new DMR DMR Response: • A high level organogram and schedule of current vacancies are attached to this presentation

31. SECTION 32 REPORT: EXPENDITURE ANALYSIS Year to date analysis (per economic classification)

32. EXPENDITURE ANAYSIS The Department has, as at 30 September 2011, disbursed R519.1 million which represents 50.10% of the total budget allocation of R1.036 billion for the 2011/12 financial year. This was R64.9 million (11.11%) lesser than the projected expenditure of R583.9 million

33. SLOW SPENDING AREAS • Transfer Payments The year to date transfer payments totalling R42.7 million which mostly includes: • R23 million in respect of IDCSA for Small Scale Mining • R9 million for assistance to mines • R9.3 million in respect of Mintek rehabilitation of ownerless and derelict mines projections were changed during the year

34. SLOW SPENDING AREAS (CONT) 2. Goods and Services The underspending in this category is mainly due to the outstanding payments totalling R6.6.million in respect of office accommodation to the Department of Public Works which accounts for 61.4% of the under spending Other contributing factor are vacancies as a result of the Department’s inability to attract professional bands and the time frame associated with filling of the posts

35. REMEDIAL ACTIONS Fast track the finalisation of the Strategy, MoA and other processes that are prerequisite to the transfer of funds

36. SECTION 32 REPORT: REVENUE ANALYSIS • Year to date analysis

37. REVENUE ANALYSIS • The year to date revenue recoveries mainly consist of prospecting fees and royalty payments which represents 53.37% and 39.09% respectively of the total revenue received totalling R28.9 million • The revenue projections were based on historical information

38. REMEDIAL ACTIONS 1. Underestimated Revenue - The revenue projections were increased during the 2011 AENE and the monthly projections will be adjusted after the 2011 AENE is tabled in Parliament

39. THANK YOU