1. Presentation to SCOPA and PPC (Mineral Resources) on the Auditor General’s report on Rehabilitation of Derelict and Ownerless Mines. 1 st September 2010

2. 2 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

3. 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 3

4. 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. 4

5. 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. 5

6. 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. 6

7. 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 7

8. 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 8

9. 9 AUDITOR GENERAL FINDINGS AND RESPONSE BY DMR ItemSummarised findingsResponse 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 effortsThe approved National Strategy provides for a framework for implementation, from which an implementation plan has been developed.

10. 10 AUDITOR GENERAL FINDINGS AND RESPONSE BY DMR ItemSummarized 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.

11. 11 AUDITOR GENERAL FINDINGS AND RESPONSE BY DMR ItemSummarized findings Response 6.3Organizational 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

12. 12 AUDITOR GENERAL FINDINGS AND RESPONSE BY DMR ItemSummarized 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

13. 13 AUDITOR GENERAL FINDINGS AND RESPONSE BY DMR ItemSummarized findings Response 6.5Budgeting 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.

14. 14 AUDITOR GENERAL FINDINGS AND RESPONSE BY DMR ItemSummarized findings Response 6.6Communication and coordination: No clearly defined internal and external communication channels The implementation plan developed outlines a clear framework of communication (both internally and externally).

15. 15 AUDITOR GENERAL FINDINGS AND RESPONSE BY DMR ItemSummarized findings Response 6.7Use 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

16. 16 AUDITOR GENERAL FINDINGS AND RESPONSE BY DMR ItemSummarized findings Response 6.8Use 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.

17. 17 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

18. 18 CLUSTERS OF MINES POSING A HIGH ENVIRONMENTAL RISK – HIGH PRIORITY SITES RegionCommoditiesPathway(s) [1] [1] Comments Asbestos minesAsbestosA, SWHigh risks due to adverse health impacts Witwatersrand gold basin from the Free State to Evander) Gold, uraniumA, SW, GWHigh 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, GWHigh risks due to arsenic, AMD and uranium content. Gold occurring in the greenstone belt in Limpopo Gold, antimonyA, SW, GWHigh risks due to AMD and the presence of antimony and, in some cases, mercury Coal mines in Mpumalanga CoalA,SW, GWHigh risk due to land subsidence, AMD and spontaneous combustion Copper minesCopper, tungsten, molybdenum, bismuth SW, GWWater related risks due to the presence of bismuth – Medium Risk Pegmatites in Northern Namaqualand Many commoditiesA, SW, GWRisks are primarily due to radioactive components or bismuth – Medium Risk [1] A = Air SW = Surface Water GW = Ground Water

19. 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 19

20. 20 END THANK YOU