vote 32 mineral resources budget and provincial budget 2011/12 lwazi mahlangu parliament research...

VOTE 32MINERAL RESOURCES BUDGET

AND PROVINCIAL BUDGET

2011/12

Lwazi Mahlangu

Parliament Research Unit

22 March 2011

1. Contextual Background

2. Vote 32: National Budget

3. Provincial Budgets

4. Key Issues for Consideration by Parliament

Overview

• South Africa (a world leader) boasts an abundance of mineral resources, producing and owning a significant proportion of the world's minerals

• The state is custodian over the country's mineral resources and ownership, access and opportunity to the country's mineral resources are regulated by the Minerals and Petroleum Resources Development Act of 2002

• 90% of the platinum metals on Earth, 80% of the manganese, 73% of the chrome, 45% of the vanadium and 41% of the gold.

• Precious metals contributes 65% to the country's mineral export earnings

• The country supplies about 80% of the world's platinum • Mining industry is also South Africa's biggest employer, with around

460 000 employees and another 400 000 employed by the suppliers of goods and services to the industry

1. Contextual Background

• NGP sets a target of 5 million by 2020. Mining sector projects 140 000 jobs by 2020 and 200 000 by 2030 (averaging 15 556 per annum till 2020)

• 40 000 jobs were lost during the crisis

SA's share of world reserves & production

Transformation• 70% of the mining industry's labour force is black, while less than 5% of

managerial positions are held by black people. • Future targets in the mining industry the transfer of 26% of mining assets to

black-owned companies, and ensuring that 51% of future mining projects are controlled by black-owned firms.

Role Players and other developments

• BHP Billiton• Anglo American Plc (subsidieries include Anglo Platinum, Anglo Coal, Impala

Platinum and Kumba Iron Ore) • De Beers • Rio Tinto• Tata Steel (carbon ferrochrome)

Cont.

2. Vote 32: National Budget

Programme

BudgetNominalRand change

Real Rand

change

Nominal % change

Real % change

R million 2010/11 2011/12 2012/13 2013/14 2010/11-2011/12 2010/11-2011/12

Administration 223.7 247.9 0.0 274.6 24.2 12.8 10.82 % 5.74 %

Promotion of Mine Safety and Health 142.1 147.5 157.5 170.1 5.4 - 1.4 3.80 % -0.95 %

Mineral Regulation 212.4 160.4 171.0 175.4 - 52.0 - 59.3 -24.48 % -27.94 %

Mineral Policy and Promotion 417.7 480.4 520.3 558.7 62.7 40.7 15.01 % 9.74 %

TOTAL 995.9 1 036.2 848.8 1 178.8 40.3 - 7.2 4.05 % -0.72 %

Summary

Overall Budget• Department received R1.0 billion, which is 0.21 per cent of the total

appropriation by vote in the 2011/12 financial year • 56.7% allocated for current payments • R438.4 million or 42.3% allocated to Transfers and subsidies• 1% allocated to Capex

Programmes of the Department R (Million)

Percentage• Administration 247.9 23.5%• Promotion of Mine Safety and Health 147.5 14.2%• Mineral Regulation 160.4 15.5%• Mineral Policy and Promotion 480.4 46.4%

TOTAL 1 036.2 100.0%

3. Provincial Budgets

Eastern Cape

Province

• The provincial economy is dominated by the export-led automotive-sector manufacturing and by the tertiary sector. This makes our economy especially vulnerable to international market fluctuations.

• During the year 2010/11, Coega appointed 82 interns, supported 53 intern placements with consultants, and trained a total of 6 826 people.

• R34,9 million allocated to LED projects was directed towards the establishment of sustainable industries and settlements in the under-developed rural parts of the province. Unfortunately, due to non-compliance on the part of local municipalities, much of this money has not been disbursed.

• Loan funding extended by the ECDC secured a further 1 700 jobs, primarily in the OR Tambo Region. The bulk were in the Services and Manufacturing sectors, with 704 and 385 jobs respectively.

• High Impact Priority Projects at the ECDC being proposed, with R113 million worth of projects being piloted, R362 million worth of projects undergoing scoping, and R2.03 billion worth of projects under implementation.

• Mining exploration accounts for a further R1.5 billion of pipeline projects. The job potential of these projects is estimated to be around 4 500.

Some Facts and Figures

• IDC (has a 10% stake) in Kalagadi Manganese - committed a R3.5 billion towards the implementation of the Kalagadi mining project (BEE company)

• Kalagadi Manganese is in the process of establishing an integrated operation encompassing mining, ore processing (sinter plant), as well as a smelter. The total capital outlay to implement the project is estimated at R11 billion.

• The mining and ore processing operations are located in the Northern Cape Province, while the smelter operation will be located in the Coega IDZ in the Eastern Cape. (production of the first sintered product in July 2012)

• Shareholders have committed to fund R4.5 billion. A further R6.5 billion will be raised from the various Developmental Finance Institutions and commercial banks.

• In addition, a 320,000 tons per annum ferromanganese alloy production facility is to be constructed at Coega in the Eastern Cape. Ferromanganese is an essential ingredient in the production of steel, a commodity expected to show good growth in the next decade.

Mining Issues/Facts

Budget Allocation

Eastern Cape

Individual allocations to programmes and entities 2011/12

(‘000)

Programme 1

Administration 160.63

Programme 2

Economic Development 53.60

513.90

EC Development Corporation 255.17

EC Gambling & Betting Board 31.19

EC Liquor Board 32.33

East London Industrial Development Zone 141.61

Programme 3

Environmental Affairs 66.11

209.71

EC Parks and Tourism Agency 141.56

Transfers to Municipalities 2.04

Total 884.24

Free State

Province

• Free State Provincial economy is performing below national average.

• Growth in 2010 in the provincial economy was 1.9% and it is projected at 2.4% in 2011.

• The province’s major contributions to the provincial economy come from finance, real estate and other business services.

• Boasts of the largest gold-mining complex - the Free State Consolidated Goldfields, with a mining area of 32 918 hectares.

• About 82% of the province’s mineral production is derived from gold mining, with gold mines also supplying silver and considerable concentrations of uranium

• Twelve gold mines operate from the towns of Welkom, Virginia and Odendaalsrus in the province and roughly 30% of South Africa’s gold is obtained from this region, ranked fifth in the world in gold production.

Some Facts and Figures

• Unemployment increased from 21.9 % in Q4 2008 to 24% Q4 2010

• Need to work more closely and decisively with the private sector to expand and develop production and the value chain in the agriculture, mining, manufacturing, tourism, trade and services.

• In mining in the province (Welkom) must take advantage of the current favourable increase in commodity prices.

• Large deposits of coal and the country’s largest deposits of bentonite are also found in the Fezile Dabi district. This bituminous coal is converted into petrochemicals at Sasolburg.

Cont.

Budget Allocation

Budget Allocations (R Million) 2011/12

Equitable share amounting 17.50

Conditional Grants amounting to 5.00

Own Revenue amounting 0.72

Total 23.22

Departmental Allocations

Departmental Allocations 2011/12

Office of the Premier 0.221

Provincial Legislature 0.203

Department of Local Government and Traditional Affairs 0.378

Department of Agriculture and Rural Development 0.519

Department of Public Works 1.2

Department of Sports and Culture and recreation 0.479

Department of basic Education 9.5

Provincial Treasury 0.201

Department of Health 6.8

Department of Economic Development, Environment and Tourism 0.39

Department of Human Settlements 0.988

Social Development, 0.802

Department of Police, Roads and Transport 1.5

Total 23.2

KwaZulu Natal

Province

• In 2009, the provincial economy shrunk by 2.24% with devastating effects on employment.

• The number of discouraged work-seekers increased from 183 000 in the Q12008 to 495 000 in Q32009. (170% increase)

• MTEF estimates of provincial economic growth 3%- 3.5% falling short of required RSA 7% p.a for a prolonged period.

• The mining and quarrying sector accounts for less than 2% of provincial gross domestic product (PGDP) but the province’s mineral sands and beneficiation plants are important to the nation’s minerals sector

• KwaZulu-Natal is home to two aluminium smelters (in Richards Bay), three steel plants, a manganese smelter and four concrete factories.

• Richards Bay Minerals supplies the world with about 25% of its demand. It has extensive ore holdings along the coast and is the largest titanium slag producer in the world.

• KZN Sands (an Exxaro subsidiary) is the other major mineral company operating in the uThungulu district. It focuses on smelting ilemnite to produce titanium slag

KZN Facts and Figures

• Northern KwaZulu-Natal’s coalfields are being revived • Miranda Minerals has several projects at different stages of

development focusing on the Klip River coalfields around Dundee and Glencoe.

• Awaiting the results of the EIA on Burnside area and resources of 35.5 million tons have been indicated and inferred. If Burnside is approved, mining is expected to begin in the last quarter of 2011.

• Small scale gold mining in the Umzinto goldfield’s several sites• Carbonates from three large quarries around the Marble Delta

Formation inland from Port Shepstone. – High grade material is used as filler in paint, paper, toothpaste, bread and

plastic; – lower-grade material is used in rubber, glass and fiberglass and – the third quarry provides limestone for the major NPC-Cimpor cement plant

nearby.

Cont.

Human resource training and development– Bursaries - approximately R72 million on external bursaries and R19

million on internal bursaries for the 2011/12 FY

• Learnerships and Internships– Interns and learners should constitute 5% of the total staff

establishment of a department.

• FET Colleges– Continue to offer both the National Certificate (Vocational) and

National Education (NATED) programmes in the FET colleges sector

• Public Service Academy– The academy will receive R50 million from the National Skills Fund

over the next three years for learnerships, apprenticeships and skills programmes in construction, manufacturing and engineering, benefitting public servants and the unemployed.

Job creation initiatives

Budget Allocations

North West

Province

NW - Some Facts

• Main economic sector is agriculture (Province has a comparative advantage in Agriculture) contributing 13% of provincial Gross Domestic Product (GDP)• Mining is the second largest sector in terms of contribution to GDP providing jobs for 18% of the labour force in the province. • North West is the fourth largest provincial contributor to GDP at 5.7% after Gauteng, KwaZulu-Natal and Western Cape. • The province produces 84% of platinum, 46% of granite and 25% of gold in the country.





Total 24.44

North West Budget

Departments Allocations.



Provincial Legislature 0.151



Department of Public Works and Transport 2.83

Department of Sports and Culture 0.433

Department of Education 10.26

Provincial Treasury 0.331



Human Settlements, Public Safety and Liaison 1.489

Social Development, Women, Children and People with Disabilities 0.882

Total 24.44

Limpopo Province

• Limpopo depends largely on mineral resources. It is the primary driver of economic activity after government services

• Mining constitutes 27% of the Limpopo GDP. • The performance of the mining sector is largely influenced by

the demand in the international markets, particularly China and India.

• The province exports iron ore, which constitutes 16% of Limpopo’s provincial exports

• Other substantial mineral reserves include platinum group (chrome, vanadium, nickel and titanium )metals, diamonds, coal, chrome and copper.

• Electricity generation, such as the Matimba power station in Lephalale, is another major economic activity.

• Mittal Steel mines coking coal for its blast furnaces and sells the lower grade coal

About Limpopo.

• Main economic sector is agriculture (Province has a comparative advantage in Agriculture) contributing 13% of provincial Gross Domestic Product (GDP)

• The economic crisis led to - 1.8 % economic growth in Limpopo The economic crisis led to - 1.8 % economic growth in Limpopo

• Jobs were lost a number in the mining sector, partly because of the decline in the demand for mineral resources in the world market

• Unemployment rate declined from 25% to 16% in 2010.(employment in the province is expected to increase in 2011)

• Provision of basic services for the province is at 83.6% for water, 58.9% for sanitation and 81% for electricity.

Analysis

• Expected to create more than 400 000 jobs in the next 9 years as part of contributing to the national target of creating 5 million employment opportunities by the year 2020'.

• 2011/2012 budget allocation with the aim to ward off the negative effects of the crisis on the poor

Limpopo Province

• Bushveld Igneous Complex • Samancor runs Eastern Chrome Mines at Steelport (dimension stone, quartz, sand and clay) • Dilokong Chrome Mine located between Burgersfort and Polokwane.• ASA Metals - a joint venture between the Limpopo Economic Development Enterprise and China’s

Eastern Asia Metals Investment Company. They Produces 39% of the world’s chromite.• The Phalaborwa Complex

- contains large amounts of copper, magnetite (iron ore) and phosphates. The complex also contains the world’s largest deposit of a mica used in horticulture and construction, known as vermiculite.

• Penge FormationIn the south-west of the province, at Thabazimbi, a large iron ore deposit

• Waterberg and SoutpansbergCoal - the Waterberg area is seen as the future of South African coal mining.

• Pietersburg Greenstone Belt• South of Polokwane, was the site of South Africa’s first gold rush in 1871. Silica is mined south of

Polokwane.• Giyani Greenstone Belt and Murchison Greenstone Belt

The Consolidated Murchison Mine (ConMurch) at Gravelotte, just west of Phalaborwa, is the single biggest producer of antimony in the world outside China, producing about 20% of the world’s supply.

• Pretoria GroupAndalusite, a vital component in spark-plug ceramics, is mined near Thabazimbi and at Maroelasfontein in the west of the province. In the area south-east of Chuniespoort in the east are the Havercroft, Annesley and Hoogenoeg deposits. Active companies in the area include Rhino Minerals and Andalusite Resources

Mining Companies

Limpopo Budget





Total 43.84

Job creation 2011/12

Departmental activities will directly create more than 160 000 jobs in the 2011/2012 financial year, and 40% of these jobs will be targeted for the youth.

Jobs to be created 2011/12

Department of Local Government and Housing 36503

Department of Agriculture 7670

The Department of Public Works 3740

Department of Sports and Culture 1502

Department of Education 22242

Department of Safety and Security and Liaison 697

Provincial Treasury 30

Department of Transport 31876

Department of Health 10701

Department of Health and Social Development . 25063

Department of Economic Development, Environment and Tourism 36846

Total 140367

Gauteng Province

• Province has the smallest land area, but contributes over 30% to the economic growth of South Africa.

• GDP- per Region declined by R11.3 billion in 2009 and the growth rate by -1.8% as the economy entered recession.

• Main contributor to GDP-R are finance and business services sub-sectors (over 25%)

• Government, personal and social services sub-sector makes the second highest contributions

• Manufacturing is the third largest contributor to GDP-R• Most headquarters are based in GP (e.g. financial

institutions and manufacturing)

Gauteng Facts and Figures

• Aligned to NGP – Gauteng Employment Growth and Development Strategy has 5 key pillars

– Public infrastructure investment – Industrial Policy – Green Economy – Inclusive Economy Initiatives, and – Social Impact

• R66 million set aside to support labour absorptive sectors with backward and forward linkages. (tooling initiative, foundries, promoting and supporting tourism)

• Address socio-economic infrastructure investments priorities – such as rail, roads, freight, transport, Information and Communication Technology, including the rollout of broadband

• Through the EPWP, GP targets to create 175,000 work opportunities of 100 days each as well as over 88,000 full time equivalents, targeting one individual per household.

• Community Works Programme will generate at least 6 000 jobs in Metsweding, Ekurhuleni and Tshwane (R98 million to fund these job creating opportunities)

• .

Job Creation activities





Total 68.00

Western Cape

Province

• R400 million set aside over the next three years for inner-City regeneration projects that will attract major investment.

• R300 million has been set aside for new roads• R204 million set aside in the two outer years of the MTEF

for new economic development and job creation projects

Job Creation initiatives

Budget Allocations



Provincial Legislature



Department of Public Works 3.2

Department of Community Safety 0.311

Department of Education 13.3

Provincial Treasury



Department of Human Settlements 1.8

Social Development,

Department of Social Development 1.3

Department of Transport/Transport Infrastructure 4.0

Total 38.8

Mpumalanga

Province

• The tabling of Mpumalanga Budget for 2011/12 and hosting of the Post Budget Stakeholder briefing have been postponed to 24 and 25 March 2011 respectively due to unforeseen circumstances.

• For more information, contact: Letshela Jonas on 013 766 4243 / 079 500 0154





Total 29.23

Budget Allocations

Northern Cape

Province

• To be discussed in the next meeting

• Monitor progress with regard to the development of the Beneficiation Strategy (due to be tabled)

• Filling of all vacant posts (National Level) and ensure that Provinces create jobs in the sector identified (aligned to NGP)

• Clarity on the State Owned Mining Company whether it falls under DMR or SOEs

• NGP indicators at provincial level (GDP/Absorption rate/ Education/poverty)

4. Key Considerations

vote 32 mineral resources budget and provincial budget 2011/12 lwazi mahlangu parliament research...

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