Department of Mineral Resources and Energy (DMRE) Strategic Plan 2020 - 2025

1.1 Constitutional Mandate 19

1.2 Legislative and Policy Mandates 20

1.3 Institutional Policies and Strategies Related to the Five-Year Planning Period 22

1.4 Relevant Court Rulings 25 Part B: Our strategic focus

2.1 Vision 27

2.2 Mission 27

2.3 Values 27

2.4 Situational Analysis 28 Part C: Measuring our performance

3.1 Strategic Context 60

3.2 Alignment with the 2019–2024 Medium Term Strategic Framework 80

3.3 DMRE Strategy Articulation Map 82

3.4 Institutional performance information 85 Annexures to the Strategic Plan Annexure A: District Development Model 105 Annexure B: Energy Cluster Strategic Responses to MTSF 106 Annexure C: Mining Cluster Strategic Responses to MTSF 110 Annexure D: Policy and Regulatory Cluster Strategic Responses to MTSF 114 Annexure E: Technical Indicator Descriptions (TIDs) 117 S t r a t e g i c P l a n 2 0 2 0 – 2 0 2 5 << 1 2 >> D e p a r t m e n t o f M i n e r a l R e s o u r c e s a n d E n e r g y L ist of F igures Figure 1: Global growth projections 28 Figure 18: Annual exploration budgets by commodity (US$M) 41 Figure 2: World trade, industrial production and the manufacturing PMI 29 Figure 19: Contribution of mining to the South African economy 42 Figure 3: Manufacturing PMIs for select countries/region 29 Figure 20: Growth in mining output by sub-sector in 2019 43 Figure 4: Real GDP growth in Africa, 2020 30 Figure 21: South Africa’s share of African exploration budgets 2000–2017 43 Figure 5: Contributors to negative growth in GDP in Q3 31 Figure 22: Junior miner licences’ in South Africa (2017) 44 Figure 6: South Africa’s annualised GDP growth in 2019 31 Figure 23: Mining industry health and safety performance 44 Figure 7: Lower output recorded by most manufacturing sub-sectors 32 Figure 24: Global power capacity by source in the Stated Policies Scenario 47 Figure 8: Mining output 32 Figure 25: Renewable energy – total primary energy demand by category and region 49 Figure 9: Unemployment rate in South Africa 33 Figure 26: Nuclear energy production across the globe 49 Figure 10: South African employment rate 33 Figure 27: Final consumption by fuel, sector Sub-Saharan Africa Figure 11: Summary of South Africa’s Economic overview 34 (excl. South Africa) 50 Figure 12: Top 40 capital velocity (%) compared with capital expenditure Figure 28: Change in energy demand and average annual GDP growth (US$BN) 36 rate by region in the Stated Policies Scenario, 2018 –2040 51 Figure 13: World exploration trends 2018 37 Figure 29: Natural gas resource discoveries, demand and production in Figure 14: 2019 Annual exploration budgets by region (US$M) 37 selected countries in Africa 51 Figure 15: Annual diamond production – million carats 38 Figure 30: South African primary energy mix 52 Figure 16: Top 10 business risks in the mining and metals sector 40 Figure 31: DMRE organisational structure 57 Figure 17: Annual budget trends 40 S t r a t e g i c P l a n 2 0 2 0 – 2 0 2 5 << 3 A bbreviations 4IR Fourth Industrial Revolution EMP Environmental Management Plan AHTR Advanced High-Temperature Reactor EPP Electricity Pricing Policy AEMFC African Exploration Mining and Finance Corporation ETDP SETA Education, Training and Development Practices SETA AMD Acid Mine Drainage EV Electric Vehicle B-BBEE Broad-Based Black Economic Empowerment EWSETA The Energy and Water Sector Education Training Authority BW Bid Window EY Ernst & Young CCGE Combined Cycle Gas Engine GDP Gross Domestic Product CCGT Combined Cycle Gas Turbine GHG Greenhouse Gas CCS Carbon Capture and Storage GTL Gas-to-Liquid CCUS Carbon Capture, Utilisation and Storage GTP Geoscience Technical Programme CEF Central Energy Fund GUMP Gas Utilisation Master Plan CGS Council for Geoscience GW Gigawatt CHIETA Chemical Industries Education and Training Authority GWe Gigawatt Electrical CIO Chief Information Officer HDSA Historically Disadvantaged South African COGTA Cooperative Governance and Traditional Affairs HELE High Efficiency Low Emission COP Conference of the Parties HR Human Resources CPA Communal Property Association IAEA International Atomic Energy Agency CRU Communal Rental Units IDC Industrial Development Corporation CISF Centralised Interim Storage Facility IDP Integrated Development Plan CS Corporate Services IDZ Industrial Development Zone DBSA Development Bank of South Africa IEA International Energy Agency DEA Department of Environmental Affairs IEP Integrated Energy Plan DIRCO Department of International Relations and Cooperation iGAS South African Gas Development Company DMRE Department of Mineral Resources and Energy IGR Intergovernmental Relations Framework Act DoE Department of Energy IMF International Monetary Fund DPSA Department of Public Service and Administration INEP Integrated National Electrification Programme DRC Democratic Republic of Congo IPCC International Panel on Climate Change dti Department of Trade and Industry IPP Independent Power Producers dtic Department of Trade, Industry and Competition IRP Integrated Resource Plan DWS Department of Water and Sanitation Li-ion Lithion-ion 4 >> D e p a r t m e n t o f M i n e r a l R e s o u r c e s a n d E n e r g y LNG Liquid Natural Gas PV Photovoltaic MES Minimum Emission Standards PwC Pricewaterhouse Coopers MHSC Mine Health and Safety Council REIPPPP Renewable Energy Independent Power Producer Procurement MHSI Mine Health and Safety Inspectorate Programme MMPD Mining, Minerals and Energy Policy Development RR Research Reactor MoU Memorandum of Understanding S&P Standard & Poor’s MPR Mineral and Petroleum Regulation SADC Southern African Development Community MPRDA Mineral and Petroleum Resources Development Act SADPMR South African Diamond and Precious Metals Regulator MQA Mining Qualifications Authority SANEDI South African National Energy Development Institute Mt Megaton SAPS South African Police Service MTSAO Medium Term Strategic Adequacy Outlook SARB South African Reserve Bank MTSF Medium Term Strategic Framework SARS South African Revenue Service MW Megawatt SCA Supreme Court of Appeal MYPD Multi-Year Price Determination SDT State Diamond Trader NCOP National Council of Provinces SEMAs Specific Environmental Management Acts NDP National Development Plan SET Science, Engineering and Technology NEES National Energy Efficiency Strategy SFF Strategic Fuel Fund NEMA National Environmental Management Act SHS Solar Home Systems NERSA National Energy Regulator of South Africa SLP Social and Labour Plan NMOG National Macro Organisation of Government SMME Small, Medium and Micro Enterprises NNR National Nuclear Regulator SMR Small Modular Reactors NRWDI National Radioactive Waste Disposal Institute SOE State Owned Enterprise NSP National Strategic Plan SOP Standard Operating Procedures ODG Office of the Director-General SSF Strategic Stock Fuel PASA Petroleum Agency of South Africa TWh Terawatt-hours PBMR Pebble Bed Modular Reactor WEF World Economic Forum PMI Purchasing Managers' Index WEO World Economic Outlook POA Programme of Action WiE Women in Energy PPP Public Private Partnership WSP Workplace Skills Plan PSETA Public Service Education and Training Authority S t r a t e g i c P l a n 2 0 2 0 – 2 0 2 5 << 5 E x ecutive A U T H O R I T Y ’ S S tatement The existence of the Department of Mineral contribution of industry sectors and enable them to create and processing of the DMRE’s regulatory frameworks Resources and Energy (DMRE) is premised economic benefits for the country which are accelerated will be accelerated to enable these interventions. This growth and job creation. includes the enablement of industry to invest in the on its vision of becoming a leader in the energy supply mix through self-generation. The IRP2019 transformation of South Africa’s economic Energy security promotes economic growth, development, decision indicates that the Nuclear New Build Programme growth agenda through the sustainable and social equity through expanded access to energy must commence immediately, adding 2 500 MW to the development of the mining and energy services that are sustainable and contribute to the grid, as this is a no-regret option in the long term. The sectors. reduction of pollution and mitigation of the effects of DMRE will commence immediately with procurement global climate change. The Integrated Resource Plan 2019 processes to ensure the security of energy supply, and is This vision will be operationalised by focusing on (IRP2019) is the leading policy framework for addressing considering Small Modular Reactors (SMRs) to take into regulating, transforming and promoting the mining and the short- to long-term challenges that the country faces, account the pace and scale that the country can afford. energy sectors; providing affordable energy for growth and provides much needed policy certainty in the area Furthermore, the market will be tested for robust costing and development; and ensuring that all South Africans of energy security and affordability. IRP2019 formulates and funding options towards nuclear generation. The derive sustainable benefit from the country’s mineral specific interventions to address electricity infrastructure development of the roadmap for the 2 500 MW Nuclear wealth. For the execution of its mandate, and to enable development, based on least-cost electricity supply and New Build Programme will commence soon while an the achievement of its vision, the DMRE is supported by demand balance, taking into account security of supply oversight monitoring plan for the Koeberg Life Extension various entities whose mandates and operating models and protection of the environment. IRP2019 identifies Programme is being developed. culminate in the ability of the DMRE to make a sustainable the preferred generation technologies required to meet contribution to the Medium Term Strategic Framework expected demand growth up to 2030. Cleaner coal technologies, including Carbon Capture, (MTSF) imperatives. Utilisation and Storage (CCUS), will improve coal’s The DMRE has translated the provisions of IRP2019 into its sustainability as a primary energy source. Renewable Energy forms an integral part of the economy and the responses to the challenges that the energy sector faces. energy will be explored beyond Bid Window (BW) 4 and energy sector is a key enabler for the attainment of Inadequate energy supply will be addressed in the short- buyer matters will be resolved through the creation of a national policy imperatives such as those expressed in the term by accelerating energy efficiency rollouts. Generation state-owned, special-purpose vehicle. National Development Plan (NDP). South Africa needs to capacity with short lead times and self-generation options grow its energy supply to support economic expansion will be enabled through systematic regulation. The development of the gas market as an alternative and, in so doing, alleviate supply bottlenecks and supply/ source of energy will be pursued to meet limited and demand deficits in energy-dependent industries such For medium- and long-term outcomes, the various IRP2019 depleting gas supplies. Exploration for gas fields will be as mining and manufacturing. This will increase the technologies will be implemented; while the updating increased, and relationships will be forged with other 6 >> D e p a r t m e n t o f M i n e r a l R e s o u r c e s a n d E n e r g y African countries for supply and market access. A just countries, thereby supporting regional electricity impact on mining beneficiation and skills development transition to a low carbon-emitting economy will be interconnection, including hydropower. In addition to that could hinder progress to improve the country’s facilitated by integrating various work streams that this generation option to provide clean energy, regional manufacturing capability. relate to transitioning to a low carbon-emitting energy development drivers are compelling, especially given that mix as per IRP2019. currently there is very little energy trade between these To create access to minerals for beneficiation, the countries due to lack of infrastructure. The potential for necessary licensing conditions need to be created. The sustainability of the energy distribution industry intra-SADC trade is huge as it could open up economic Section 50 of the Mineral and Petroleum Resources will be improved by reviewing the regulatory framework trade. Naturally, concerns have to be addressed about Development Act (MPRDA) will be revisited to help and industry structure, as well as introducing regulations the risks associated with a project of this nature. South increase domestic beneficiation. Licensing turnaround to improve the National Energy Regulator of South Africa does not intend to import power beyond its times will be addressed by reviewing and strengthening Africa’s (NERSA) Regulatory oversight on infrastructure reserve margin from a single source, in order to de-risk relevant legislation. maintenance. The foremost outcome of the DMRE’s dependency on this generation option. initiatives will be increased availability of energy, and With regards to exploration activities, the Council for a wider electricity reserve margin. The actions will The mining industry is critical for the economic growth, Geoscience (CGS) will fast-track the implementation of increase infrastructure investment, much of which job creation and transformation objectives of the country. the Geoscience Technical Programme (GTP) by 2021, relies on regulatory certainty and the sector’s economic South Africa’s Mining Charter is aimed at increasing to catalyse investment in exploration. The goal is to transformation. These actions collectively will boost investor certainty and distributing the industry’s ensure that long-term funding sustains the impact of employment and additional investment prospects, as well wealth more equitably. A lack of investment in mining, the geosciences in South Africa. as meeting the requirements for lower carbon emissions, together with poor economic performance, has adverse which will contribute to economic growth. implications along the mining and minerals value chain. Focusing on the concentration of petroleum and minerals, it will be necessary to encourage partnerships between With regard to imported hydropower, South Africa has Research in mining is critical to support targeted outcomes, emerging junior miners, and conduct a review of the entered into a Treaty for the development of the Grand and the DMRE will pursue options to expand the mandates Petroleum Bill to encourage inclusive, equitable and Inga Hydroelectric Project in the Democratic Republic of the respective State Owned Enterprises (SOEs) to competitive exploration. The requirement for an optimal of Congo (DRC), with some of the power intended support this research. This will contribute to an increase in legislative framework for petroleum will be addressed for transmission to South Africa across DRC, Zambia, the competitiveness of the South African mining industry, by expediting the legislative processing framework, Zimbabwe and Botswana. This is in support of IRP2019 enabling the country to be accessible to and compete in specifically the process involving the National Council Policy Position 9 which states that South Africa must regional and global markets. Investment in research is of Provinces (NCOP) and the National Assembly. support strategic power projects in neighbouring also required to address the lack of innovation and the S t r a t e g i c P l a n 2 0 2 0 – 2 0 2 5 << 7 E x ecutive A uthority S tatement ( continued ) Transformation will be addressed by enforcing compliance frameworks will be enforced to address fatalities, injuries The DMRE will continue to contribute to the development with relevant legislation. Once successful, this response and diseases, while research will be intensified to improve of a transformed, diversified and sustainable minerals will be evident in the minerals and petroleum sectors health and safety in the mining sector. The security and and energy sector, contributing to economic growth reflecting the country’s demographics. The DMRE is safety of women in mining in relation to gender-based by the enablement of energy security and affordability, committed to ensuring regulatory and legislative certainty violence is a high priority, with a long-term timeline, and and environmentally sustainable mining industries. The through several channels, including the development will be guided by the implementation of guidelines and DMRE will promote transformation of the mining and of comprehensive legal guidelines aligned with the directives to create a working environment conducive energy sectors, pursue regulatory and structural reforms, objectives of the MPRDA (e.g. optimal exploration, and to women in mining. as well as carry out policies and programmes to support substantial and meaningful participation by historically the achievement of its contribution to the MTSF targets. disadvantaged South Africans). Policy certainty is an ongoing request from investors and businesses and provides the most significant opportunity In conclusion, we have an abiding commitment to serve To create access to minerals for beneficiation, the to attract investment to the country. Policy certainty our people with diligence, as well as to manage the necessary licensing conditions need to be created. creates a business environment which is conducive to resources that have been placed at our disposal in Section 50 of the MPRDA will be revisited to increase commitment and investment in the country over the short- a manner that genuinely serves their interests. The domestic beneficiation. To reduce licensing application and the long-term periods. In recent years investment foundation has been laid for the DMRE to play its part in turnaround times, relevant legislation will be reviewed has been highest in capital-intensive sectors such as the implementation of the commitments made. and strengthened. Capacity, in terms of human resources mining and quarrying, transport, storage, communication, will be increased and licensing processes and timelines electricity, gas, and water. These are all sectors currently will be reviewed. These interventions are also aimed at experiencing levels of policy uncertainty, emphasising increasing economic participation, ownership, access the importance of stabilising South Africa’s regulatory to resources and opportunities, and wage equality for frameworks to attract and sustain investment. women, youth and persons with disabilities. The DMRE will lead and facilitate enabling policy and With regards to mine health and safety, a review of regulatory interventions required to ensure that the Executive Authority for the Department of Mineral legislation, and DMRE-led facilitation between the mines energy and mining sectors make meaningful contributions Resources and Energy   and communities, will reduce the negative impacts of to national objectives and MTSF targets. mining on communities. Compliance with legislative 8 >> D e p a r t m e n t o f M i n e r a l R e s o u r c e s a n d E n e r g y A ccounting O fficer ’ s S tatement Introduction The following table summarises the six departmental »» Manage, co-ordinate and monitor programmes and The Department of Mineral Resources and Energy (DMRE) programmes as articulated in the start-up structure. projects focused on access to minerals and energy was established in June 2019 through the merger of the resources Department of Mineral Resources and the Department of The purpose of the reconfigured start-up structure of »» Manage the nuclear industry Energy (DoE) into a single department, the Department the DMRE is to ensure the optimal utilisation and safe »» Ensure the Corporate Support function is rendered of Mineral Resources and Energy. exploitation of mineral and energy resources through »» Provide internal audit services the execution of the following functions: »» Ensure the implementation of risk and integrity Subsequent to the merger, a start-up structure for the »» Regulate the petroleum, mining and minerals industry management strategies and compliance with Acts reconfigured DMRE, comprising six (6) programmes, was »» Formulate, maintain and implement integrated and policies developed. These are in line with the objective to develop minerals and energy policies to promote and »» Co-ordinate the development of strategic a mineral resources and energy sector that promotes encourage investment into the mining and energy management, monitoring and evaluation services economic growth and development, social equity and industry »» Ensure sound financial management in the DMRE. environmental sustainability. »» Ensure the health and safety of employees in the mines Programme Programme purpose Administration Provide strategic support and management services to the Ministry and the DMRE Mineral and Petroleum Regulate the mining, minerals and petroleum industry Regulation Mining, Minerals and Energy Formulate and maintain integrated minerals and energy policies to promote and encourage investment into the mining and energy industry Policy Development Mine Health and Safety Ensure health and safety of employees in the mines Inspectorate Programmes and Projects Manage, co-ordinate and monitor programmes and projects focused on access to mineral and energy resources Nuclear Energy Manage the nuclear industry S t r a t e g i c P l a n 2 0 2 0 – 2 0 2 5 << 9 A ccounting O fficer ’ s S tatement ( continued ) Organisational Structure industry, with great potential in the future. For the period In response to government’s priority of education, The Minister of Public Service and Administration (MPSA) 2018 to 2020, an estimated 60 mining projects were in skills development and training, with more focus on has instructed that the DMRE review the start-up the pipeline in exploration, expansion, new mines and initiatives to combat seismic and gravity-induced fall- organisational structure after finalisation of the DMRE processing plants, with an estimated investment value of-ground accidents, the DMRE, in collaboration with Strategic Plan. In addition, the structure needs further of R110 billion and projected employment estimated at the Mining Qualifications Authority (MQA), identified 40 unpacking at the programme level, as functions might 32 000 employees. These attest to the fact that South learners (including the targeted unemployed youth and have changed after the merger and the introduction of Africa is still considered an attractive destination for graduates) to be trained in the fields of rock engineering the Strategic Plan. mining investment. and seismology. The DMRE will embark on the review in partnership with The DMRE has, as a requirement of the National Mineral and Petroleum Regulation Programme the Department of Public Service and Administration Environmental Management Act (NEMA) of 1998, The DMRE, through the Mineral and Petroleum Regulation (DPSA) and, among others, undertake an in-depth analysis developed, reviewed and gazetted the DMRE’s Programme, will continue to improve service delivery of the structure to ensure re-alignment with the mandate Environmental Management Plan (EMP) in 2018/19. levels in the adjudication of licences and permits, in line and strategic priorities of the DMRE. It is envisaged that with the Mineral and Petroleum Resources Development this priority process will form the foundation of HR The need to prioritise women, youth and people with Act (MPRDA) and the Petroleum Products Amendment processes during the next five years. disabilities remains a core mandate. The Mining Charter, Act (PPA). gazetted in 2018 and being implemented, makes it Mining possible for youth, women and people with disabilities Most targets relating to this programme were achieved, In 2018, mining investments in the country totalled over to contribute meaningfully to the economy. except for the number of jobs created through mining. R45 billion, resulting in the creation of about 4 000 jobs. This is due to the mining sector’s performance. Some of the investments made by the sector include The 2018 financial year saw a total of 81 mining fatalities R21.8 billion by Vedanta Resources in the Northern Cape, versus 90 in 2017. This translates into a 10% decrease year- Conflicts between communities living in mining areas Sasol’s R14 billion mine replacement programme at on-year. The platinum sector recorded a commendable are symptomatic of communication limitations that exist Shondoni and Impumelelo in Mpumalanga, and Exxaro’s decrease of 59% in the number of fatalities reported. between all concerned. The DMRE has subsequently R3.3 billion mine investment in Belfast, Mpumalanga. There was a 12% decrease in the number of injuries, from established a Mine Communities and Stakeholder Other investments came from the lead and zinc, coal, 2 669 in 2017 to 2 350 in 2018. In terms of occupational Engagement Unit to enhance and improve collaborations diamond, copper, heavy mineral sands and manganese diseases, a decrease of 3% was recorded, from 4 632 cases between mines, communities and other government sectors. These investments affirm the sector as a sunrise in 2016 to 4 483 cases in 2017. institutions. A stakeholder engagement framework has 10 >> D e p a r t m e n t o f M i n e r a l R e s o u r c e s a n d E n e r g y been designed to assist companies in managing their between the DMRE and mining companies. These will stakeholder relations, especially in communities where focus on the delivery of human settlements, and better they are mining. Engagements with communities will alignment of Social Labour Plans (SLPs) with the Integrated continue to create stability within the mining and energy Development Plans (IDPs) of municipalities. Collaborative industry. efforts with mining companies and municipalities can improve the lives of communities. Petroleum Regulation 100% of the planned target for fuel samples (1 080) was Mining Regulatory Outlook achieved. A total of 1 590 compliance inspections were The mining regulatory outlook has improved tremendously conducted on retail sites, which exceeded the target by following the finalisation of the Mining Charter and the 90 compliance inspections. withdrawal of the Mineral and Petroleum Resources Development Bill from Parliament. This has provided Of the licences issued to entities, 89.18% were at least much-needed policy certainty to the mining industry. 50% owned and controlled by historically disadvantaged The promulgation of the Integrated Resource Plan South Africans (HDSA). (IRP2019) also provided certainty and has been well received by stakeholders. The regulatory framework for Enforcement and Compliance the DMRE continues to be strengthened with current Illegal mining and illicit petroleum trade continue to be work on amending both energy and mineral legislation challenges, depriving South Africans of their benefits instruments. and impacting negatively on the growth of the country. The DMRE continues to work closely with the relevant Transformation and Mineral Beneficiation stakeholders, including law enforcement agencies, to Transformation and mineral beneficiation are not at stem these trades. This process will raise compliance expected levels. South Africa continues to export minerals, levels in all aspects of regulation. and beneficiation remains at a minimum. This is an opportunity to develop internal value chains for better Special Presidential Package economic benefits. This would help mitigate another The DMRE will continue with the revitalisation of serious challenge – that the economy has been shedding mining towns and labour-sending areas, including a jobs. Unemployment must be curbed as it is exacerbating programme aimed at reviving mining towns. The better the illegal mining situation. plan for improving mining towns requires partnerships S t r a t e g i c P l a n 2 0 2 0 – 2 0 2 5 << 11 A ccounting O fficer ’ s S tatement ( continued ) Mining, Mineral and Energy Policy the development of its coal resources for purposes of Transition to Clean Technologies Development Programme power generation. Instead, the planning framework The energy industry’s transition from coal to clean energy The following are key IRP Policy Positions that will be for energy and environment must support a just generation will negatively affect the coal industry in the implemented by the DMRE according to the urgency transition. near future, unless technology is developed to mine required to mitigate specific risks: »» Policy Position 7: South Africa should support the coal in an environmentally-friendly manner, offsetting »» Policy Position 1: Immediately initiate a medium-term development of gas infrastructure. All diesel-fired negative emissions from its production. Renewable power purchase programme to assist with creating power plants (Peakers) should be converted to gas. energy provides both opportunities and threats to the reserve capacity. This policy is required to complement »» Policy Position 8: The nuclear build programme must mining industry. Other than its threat to the coal industry, Eskom’s declining plant performance and to reduce commence immediately, adding 2 500 MW at a pace the emergence of electric vehicles will reduce demand the utilisation of diesel generators. and scale that the country can afford. It is a no-regret for platinum, which is used for catalytic convertors in »» Policy Position 2: The Koeberg Nuclear Power Plant’s option in the long term. combustion engines. design life must be extended by another 20 years. »» Policy Position 9: South Africa must support The necessary technical and regulatory work must strategic power projects in neighbouring countries, Demand for battery minerals such as lithium, cobalt, be undertaken immediately. thus supporting regional electricity interconnection. platinum, vanadium and copper are opportunities. The »» Policy Position 3: Support Eskom financially and These include hydropower and gas, and will enable manufactured batteries will power greener economies legally to comply with Minimum Emission Standards the development of cross-border transmission and transportation, leading to unparalleled opportunities (MES) over time, taking into account the energy infrastructure needed for the regional power pool. for both local and international investors in the platinum security imperative and the risk of adverse economic industry and battery minerals commodities. These impacts. Security of Electricity Supply opportunities need to be managed in a way that will »» Policy Position 4: Convene a team to put together The availability of energy is a clear and immediate ensure the sustainability of the mining industry. It is also a ‘just transition’ plan within a year, in consultation challenge. Eskom remains the sole provider of electricity key to move from a raw export economy to a processing with all social partners. This policy is to help avoid and prices are high in terms of affordability. Reliability and economy. job losses, guide the modernisation of the energy security of supply are not guaranteed, and load shedding sector, and appropriately exploit current resources. is crippling the economy. Unmaintained distribution Energy from Gas »» Policy Position 5: Retain the current annual build assets are also concerning. The clarification and review Gas is an alternate source of available energy, but there limits on renewables (wind and photovoltaic), pending of the Electricity Pricing Policy (EPP) will provide some are no readily-available gas resources or infrastructure in the report on a just transition. degree of direction for Eskom and the National Energy South Africa. A review of the Gas Act is needed for inclusion »» Policy Position 6: South Africa should not sterilise Regulator of South Africa (NERSA). of new technology and new modes for transportation. 12 >> D e p a r t m e n t o f M i n e r a l R e s o u r c e s a n d E n e r g y There is also a need to strengthen bilateral engagements Small Modular Reactor South Africa has the SAFARI-1 Research Reactor, placing with SADC countries that are endowed with gas, such as There is a move towards developing Small Modular it among the largest producers of radioisotopes in the Mozambique and Tanzania. Reactors (SMRs). Unlike traditional nuclear plants of world. It also has strategic capability in the field of research 1 000 MW+, SMRs are less than 300 MW and can be shop- reactor-based isotope production and nuclear medicine, Nuclear Energy Programme manufactured for site assembly. They can be combined the latter at Steve Biko Academic Hospital. At least 10 According to data from the International Atomic Energy in one plant (>6 units) to give higher power in a modular other countries are considering new RRs and Zambia and Agency (IAEA), global energy produced by nuclear stands manner, and offer a lower plant capital investment cost Nigeria already have firm plans for new RRs. at 396 GW, but only 2 GW is produced in Africa – by South per unit. SMRs are flexible – both in deployment and Africa. Egypt is developing 5 GW capacity and there are load following – and are suited for remote deployment The demand for radioisotopes and other applications is projects of unreported sizes in Kenya, Ghana and Nigeria. in Africa. They also have lower grid requirements, which increasing and demand currently outstrips supply. RRs are By 2050, global supply from nuclear could be as high as are again suited for African countries with small grids. essential building blocks for a nuclear sector, including 750 GW, of which Africa could contribute 15 GW. training and development, and scientific research. The Currently there are more than 50 SMR designs under replacement of the SAFARI-1 Research Reactor, which Nuclear and Greenhouse Gasses development, yet only three are being realised. Argentina’s has demonstrated over 50 years of safe operation, is a Nuclear is rated as a clean energy and a solution to reducing 25 MW CAREM, an integral light water reactor, is 70% key and strategic project. greenhouse gas (GHG) emissions. The International Panel constructed. China’s 210 MW HTR-PM, a high temperature on Climate Change (IPCC) reports that in terms of grams gas cooled reactor, is in the commissioning stage. Russia’s Nuclear Waste of CO2 per kWh, nuclear only produces 12 grams. This 70 MW KLT40s, a floating reactor, is being tested and It is very important for South Africa to demonstrate is lower than coal (820), natural gas (490), solar (27) or towed. South Africa was a world leader in SMR through sustainable nuclear waste management. Solutions for hydropower (24). its Pebble Bed Modular Reactor (PBMR) or Advanced management of spent nuclear fuel vary. South Africa’s High-Temperature Reactor (AHTR). Best case delivery of approach is currently to use onsite wet storage, as well as Nuclear can help meet the Paris Conference of the Parties SMRs (according to vendor estimations) is 2025. Expected a Transient Interim Storage Facility. A Centralised Interim (COP) agreement – COP 21 requirements. France operates delivery for commercial availability of SMRs is post 2030. Storage Facility has been commissioned and will be 58 nuclear power plants and is already in compliance with operational in 2025, and a Deep Geological Repository the Paris Agreement. An increased share of nuclear in the Research Reactors is planned for 2065. energy mix will reduce carbon emissions significantly. Research Reactors (RRs) are used for science, engineering, medicine, palaeontology, and numerous other applications. S t r a t e g i c P l a n 2 0 2 0 – 2 0 2 5 << 13 Mine Health and Safety »» More will be done around sector transformation Farm Dweller Houses Policy Mining disasters have decreased over the past decade. towards the youth, women, persons living with Other polices such as farm dweller and un-proclaimed A mining disaster is defined as an incident in which five disabilities and small-scale mining. areas are linked to the Suite of Supply Policy and bulk (5) or more people die. Total occupational diseases in the »» A just transition to low-emitting sources of energy infrastructure. All these policies provide guidance in mining sector have also declined and there has been a is required, as is an investigation into the cost terms of how electrification projects should be funded decrease in the overall fatality frequency rate, though and benefits, in terms of resource sterilisation; by the DMRE through its implementing agencies such platinum-related fatalities are up from a low in 2016. environmental protection; and competing sectors. as Eskom and the municipalities. The Programme will provide supporting research for South Africa has improved its safety level when compared policy development and coexistence. Un-proclaimed Areas Policy to international peers, including Canada and the USA. While the focus is on addressing the traditional backlog, South Africa’s fatality rate improved by 75%, while Integrated National Electrification Programme the DMRE also has to ensure that funding for electrification Australia improved by 67% and the USA by 50%. Canada Through the Integrated National Electrification Programme, of new households is made available. Due to various achieved 100%. But these markets have considerably the DMRE is responsible for assisting municipalities and factors, there are a number of un-proclaimed and informal less-complicated mining sectors than South Africa, Eskom with funding for implementation of electrification settlements which municipalities wish to electrify as part which has some of the world’s deepest mines. The DMRE projects; to reach universal access to electricity by 2025. of the programme. The Un-Proclaimed Areas Policy looks is examining practices in markets such as Australia and at such areas and sets out guidelines with criteria to be the USA, towards achieving a zero harm goal. Beyond reaching universal access to energy for all and followed in providing funding for them. addressing the electrification backlog, it is vital that Programmes and Projects Programme policy guidelines are in place that will be adhered to Non-grid Electrification Policy Through the Programmes and Projects Programme, the when implementing electrification projects through the The electrification programme is not able to ensure DMRE has numerous challenges to contend with. Among Integrated National Electrification Programme (INEP). The grid electrification to remote rural areas in the short these, the following are listed: electrification policies are summarised below. or medium-term. Non-grid electrification is seen as an »» Energy distribution infrastructure rehabilitation interim solution. The Non-Grid Electrification Programme is required for effective delivery of the Integrated Suite of Supply Policy is designed to temporarily give deep rural communities National Electrification Programme (INEP). Strategies The Suite of Supply Policy covers all project categories access to limited electricity until such time as grid in place include handling this through municipalities such as bulk infrastructure and household connections, connections are possible. Solar Home Systems (SHS) are and Eskom. which includes electrification of domestic households, given to households as part of the Non-Grid Electrification »» Inadequate energy supply is a top concern, prompting informal settlements, farm dweller houses, Communal Programme. the pursuit of energy efficiency, embedded generation, Property Association (CPA) and Communal Rental and alternative energies. Units (CRU). 14 >> D e p a r t m e n t o f M i n e r a l R e s o u r c e s a n d E n e r g y Bulk Infrastructure Policy to secure private sector investment for the development Energy Efficiency Strategy Before an electrification project is implemented, it is of new electricity generation capacity, thereby giving Energy efficiency has tremendous potential to boost crucial that there is bulk infrastructure to supply the effect to the policy decision to diversify South Africa’s economic growth and avoid greenhouse gas emissions, area with electricity. Bulk infrastructure is one of the energy mix, which was articulated in the 1998 White but the global rate of progress is slowing – a trend that categories outlined in the Suite of Supply Policy. All Paper on Energy Policy of South Africa. has major implications for consumers, businesses and bulk infrastructure projects such as the building of new the environment. Energy Efficiency 2019 examines in substations, installation of new high and medium voltage The REIPPPP was also designed to contribute to broader detail the reasons for this recent deceleration in efficiency lines, and upgrading and refurbishment of electrical national developmental objectives such as job creation, progress and also includes a special focus on the ways networks must be outlined to ensure a reliable electrical social upliftment and economic transformation, primarily in which digitalisation is transforming energy efficiency infrastructure when implementing electrification projects. through broadening of economic ownership. The IPP and increasing its value. Office was established with a mandate to implement this Mixed Developments Policy programme and achieve its broader objectives. The South African Government released the first National Mixed developments refer to a development where an Energy Efficiency Strategy (NEES) in 2005. This strategy area is developed and has a component of fully subsidised Gas Utilisation Master Plan aimed to respond to the increasing demand for energy RDP houses, social housing (crus), or partially and fully The Gas Utilisation Master Plan (GUMP) covers the alongside a growing commitment to improve resource bonded houses (Low Cost, GAP, BNG). Such developments development of gas pipeline infrastructure for South use and reduce South Africa’s national environmental are done by developers in partnership with government. Africa, to connect South Africa with African countries footprint. The NEES set an overall reduction target in Since these types of developments are increasing in endowed with vast natural gas resources. energy intensity of 12% by 2015, and sectoral energy number, this policy was created to address the types of intensity improvements as follows: industry and mining such developments. The GUMP is a roadmap for the development of a gas (15%), power generation (15%), transport (9%), commercial economy. It analyses the potential and opportunity for and public building sector (15%), and residential (10%). The Renewable Energy Independent Power the development of South Africa’s gas economy and sets The NEES derived its mandate from the White Paper Producer Procurement Programme (REIPPPP) out a plan of how this could be achieved. One of the key on Energy Policy (1998) which was revised in 2011. A The Renewable Energy Independent Power Producer objectives of the GUMP is to enable the development of National Energy Efficiency Action Plan was developed Procurement Programme (REIPPPP) was established indigenous gas resources and to create the opportunity in 2012 describing the implementation of the strategy. by the DoE in conjunction with National Treasury and to stimulate the introduction of a portfolio of gas supply the Development Bank of Southern Africa (DBSA) at the options. The demand from the Gas-to-Power Programme The Energy Efficiency Target Monitoring System was end of 2010. The REIPPPP is one of the South African will provide a market for a potential supply of gas. It established in 2014 to monitor progress made towards Government’s urgent interventions to enhance the will also provide long-term gas demand sinks for future meeting the original targets (based on a year 2000 country’s power generation capacity. Its main objective is indigenous gas supplies. baseline). The results of the analysis, which relied to a S t r a t e g i c P l a n 2 0 2 0 – 2 0 2 5 << 15 large extent on existing data, confirmed that significant Fisheries and Forestry (DEFF), the Department of Public progress had been made between 2000 and 2015 in Works and Infrastructure (DPWI), the Department of improving energy intensity, exceeding the targets for Science and Innovation (DSI), the Department of Trade, most sectors. The improvements in energy intensity reflect Industry and Competition, the Department of Transport a combination of autonomous change, technological (DoT) and the National Treasury. Accounting Officer for the Department of advancements, and deliberate interventions to improve Mineral Resources and Energy energy efficiencies. Conclusion I wish to extend my sincere appreciation to the Minister, The post-2015 NEES aims to build on these achievements, the Portfolio Committee on Mineral Resources and Energy, stimulating further energy efficiency improvements departmental entities and the broader mining and energy through a combination of fiscal and financial incentives, industries. Lastly I wish to thank Team DMRE and sector’s a robust legal and regulatory framework, and enabling many stakeholders for their ongoing engagement and Accounting Officer for the Department of measures. The strategy has been framed to complement the support. Mineral Resources and Energy policies and strategies of the Department of Environment, 16 >> D e p a r t m e n t o f M i n e r a l R e s o u r c e s a n d E n e r g y O fficial S ign - O ff It is hereby certified that this Strategic Plan: »» Was developed by the Management of the Department of Mineral Resources and Energy under the guidance of Minister Gwede Mantashe »» Takes into account all the relevant policies, legislation and other mandates for which the Department of Mineral Resources and Energy is responsible »» Accurately reflects the impact, outcomes and outputs which the Department of Mineral Resources and Energy will endeavour to achieve between 2020 and 2025. Branch: Corporate Services Branch: Minerals and Branch: Programmes and Official Responsible for Approved by Petroleum Regulation Projects Planning Mr SG Mantashe, MP Executive Authority Branch: Corporate Services Branch: Minerals and Branch: Nuclear Accounting Officer Petroleum Regulation Branch: Mine, Health and Branch: Mining, Minerals and Chief Financial Officer Accounting Officer Safety Inspectorate Energy Policy Development S t r a t e g i c P l a n 2 0 2 0 – 2 0 2 5 << 17 PA R T A O ur M andate 18 >> D e p a r t m e n t o f M i n e r a l R e s o u r c e s a n d E n e r g y 1 . 1 C onstitutional M andate The Constitution of the Republic of South Africa, 1996 (the Constitution), along with iii) Section 155(7) in Chapter 7 (Local Government), which, specifies that “… national the Bill of Rights, is the legal foundation of a democratic South Africa. It sets out the government has the legislative and executive authority to see to the effective rights and duties of South African citizens and defines the structure of its government. performance by municipalities of their functions in respect of matters listed in All laws of the country must be consistent with the Constitution, which further requires Schedules 4 and 5, by regulating the exercise by municipalities of their executive that all spheres of government work together to address poverty, underdevelopment, authority referred to in Section 156(1).” marginalisation of individuals and communities and other legacies of apartheid and iv) Chapter 2 (Bill of Rights), Section 24.1, which specifies that “Everyone has the right discrimination. In this light, all government institutions, entities and municipalities to an environment that is not harmful to their health or well-being; and to have ultimately derive their mandate from the Constitution. the environment protected, for the benefit of present and future generations, through reasonable legislative and other measures that: prevent pollution and Primary Mandate ecological degradation; promote conservation; and secure ecologically sustainable On 29 May 2019 the President announced the appointment of, amongst others, the development and use of natural resources while promoting justifiable economic Minister of Mineral Resources and Energy in terms of Chapter 5 (The President and and social development.” National Executive), Section 91(2) and 93(1) of the Constitution. The appointment of v) Section 22, which enshrines freedom of trade, occupation and profession: “Every the Minister of Mineral Resources and Energy necessitated the re-configuration of the citizen has the right to choose their trade, occupation or profession freely. The Department of Mineral Resources and the Department of Energy into the new merged practice of a trade, occupation or profession may be regulated by law.” Department of Mineral Resources and Energy (DMRE). vi) Section 217, which requires that: “When an organ of state contracts for goods and services, it must do so in accordance with a system which is fair, equitable, transparent, The DMRE derives its primary mandate from the Constitution and in particular: competitive and cost effective.” i) Part B of Schedule 4 of the Constitution, which specifies “electricity and gas reticulation” as functional areas of concurrent legislative competence. Chapter 7 As we ensure the provision of various forms of minerals and energy and manage the (Local Government). utilisation thereof, we also have to ensure that people’s right to an environment that is ii) Section 156(1), which specifies that a “municipality has executive authority in respect not harmful to their health or well-being, an environment protected for the benefit of of, and has the right to administer the local government matters listed in Part B of the present and future generations through reasonable legislative and other measures,

Schedule 4 and Part B of Schedule 5.” is observed. S t r a t e g i c P l a n 2 0 2 0 – 2 0 2 5 << 19 1 . 2 L egislative and P olicy M andates The following legislation regulates the mineral resources and energy sector and reflects furnishing of certain information regarding petroleum products; the rendering of the legislative measures that the DMRE has instituted to execute its obligation: services of a particular kind or standard in connection with petroleum products; the licensing of persons involved in the manufacturing, wholesaling and retailing of 1.2.1 The National Energy Act, 2008 (Act No. 34 of 2008) prescribed petroleum products; the transformation of the South African petroleum and This Act is the enabling legislation that empowers the Minister to ensure that diverse liquid fuels industry; and the promulgation of regulations relating to such licences and energy resources are available in sustainable quantities and at affordable prices in the matters incidental thereto. South African economy to support economic growth and poverty alleviation, while also taking into account environmental considerations. In addition, the Act provides for 1.2.4 The Central Energy Fund Act (Act No. 38 of 1977), as amended energy planning; for the increased generation and consumption of renewable energy; This Act provides for the payment of certain moneys into the Central Energy Fund (CEF) contingency energy supply; the holding of strategic energy feedstock and carriers; and for the utilisation and investment thereof; the imposition of a levy on fuel and for adequate investment in appropriate upkeep and access to energy infrastructure; the utilisation and investment thereof; the control of the affairs of the Central Energy measures for the furnishing of certain data and information regarding energy demand, Fund (Proprietary) Limited by a board of directors; for the keeping of records of all supply and generation; the establishment of an institution to be responsible for the transactions entered into for account of the CEF or the Equalisation Fund and of certain promotion of efficient generation and consumption of energy; and energy research other transactions; the investigation, examination and auditing of the books, accounts and all matters connected therewith. and statements kept and prepared in connection with the said transactions; and the submission of a report to Parliament relating to the said investigation, examination and 1.2.2 The Electricity Regulation Act, 2006 (Act No. 4 of 2006), as amended auditing. It also provides for matters connected with the Act. This Act establishes a national regulatory framework for the electricity supply industry and makes the National Energy Regulator of South Africa the custodian and enforcer 1.2.5 The Nuclear Energy Act, 1999 (Act No. 46 of 1999) of the national electricity regulatory framework. The Act provides for licences and This Act provides for the establishment of the South African Nuclear Energy Corporation registration as the manner in which generation, transmission, distribution, trading and Limited (a public company wholly owned by the State); defines its functions, powers the import and export of electricity are regulated. The Minister, in terms of Section and financial and operational accountability, and its governance and management by 34(1), is furthermore empowered to make determinations for the establishment of a board of directors; stipulates the composition of the board and appointment of a Independent Power Producers (IPP) for the purpose of greater competition in the chief executive officer; defines its responsibilities, including the implementation and electricity generation sector so as to increase the supply of electricity. application of the Safeguards Agreement and additional protocols entered into by South Africa and the International Atomic Energy Agency in support of the Nuclear 1.2.3 The Petroleum Products Act, 1977 (Act No. 120 of 1977), as Non-Proliferation Treaty acceded to by the country, regulation of the acquisition and amended possession of nuclear fuel and certain nuclear and related material and equipment, as This Act provides for measures in the saving of petroleum products and an economy well as the importation and exportation thereof, and certain other acts and activities in the cost of distribution thereof, and for the maintenance of a price thereof; the relating to that fuel, material and equipment in order to comply with the international 20 >> D e p a r t m e n t o f M i n e r a l R e s o u r c e s a n d E n e r g y obligations of South Africa; and prescribes measures regarding the discarding of 1.2.12 The National Energy Regulator Act, 2004 (Act No. 40 of 2004) radioactive waste and the storage of irradiated nuclear fuel and other related matters. The National Energy Regulator Act, 2004, provides for the establishment of a single regulator to regulate the electricity, piped-gas and petroleum pipeline industries and 1.2.6 The National Nuclear Regulator Act, 1999 (Act No. 47 of 1999) matters connected therewith. This Act provides for the establishment of the National Nuclear Regulator to regulate nuclear activities. It prescribes its objectives and functions and the manner in which it 1.2.13 The Abolition of the National Energy Council Act, 1991 (Act No. 95 is to be managed. It regulates staff matters, safety standards and regulatory practices, of 1991) and the protection of persons, property and the environment against nuclear damage This Act provided for the abolition of the National Energy Council; the transfer of powers, and matters connected therewith. assets, liabilities, rights, duties, obligations and staff of the Council to the Minister; and for matters incidental thereto. 1.2.7 The National Radioactive Waste Disposal Institute Act, 2008 (Act No. 53 of 2008) 1.2.14 The Electricity Act, 1987 (Act No. 41 of 1987), as amended This Act provides for: the establishment of the National Radioactive Waste Disposal This Act was repealed by the Electricity Regulation Act, 2006, with the exception of Institute to manage radioactive waste disposal on a national basis; its functions and Section 5B that provides for the funds of the Energy Regulator for the purpose of the manner in which it is to be managed; regulation of staff; and matters connected regulation of the electricity industry. therewith. 1.2.15 The Liquid Fuel and Oil Repeal Act, 1993 (Act No. 20 of 1993) 1.2.8 The Petroleum Pipelines Act, 2003 (Act No. 60 of 2003) This Act repealed the Liquid Fuel and Oil Act, 1947 (Act No. 49 of 1947) and the Liquid This Act provides for the establishment of a national regulatory framework for petroleum Fuel and Oil Amendment Act, 1960 (Act No. 17 of 1960). pipelines; a Petroleum Pipelines Regulatory Authority as the custodian and enforcer of the national regulatory framework; and matters connected therewith. 1.2.16 The National Environmental Management Act, 1999 (Act No. 107 of 1999) 1.2.9 The Petroleum Pipelines Levies Act, 2004 (Act No. 28 of 2004) This Act has a direct impact on legislative and other measures to reduce carbon emissions, This Act provides for imposition of levies by the Petroleum Pipelines Regulatory Authority improve energy efficiency and mitigate the impact of generation/refinement and the and matters connected therewith. use of energy on the environment. 1.2.10 The Gas Act, 2001 (Act No. 48 of 2001) 1.2.17 The Mineral and Petroleum Resources Development Act, 2002 (Act This Act provides for the orderly development of the piped gas industry; establishes a No. 28 of 2002) national regulatory framework and a National Gas Regulator as the custodian and enforcer This Act makes provision for access to and sustainable development of mineral and of the national regulatory framework; and provides for matters connected therewith. petroleum resources and matters connected therewith. 1.2.11 The Gas Regulator Levies Act, 2002 (Act No. 75 of 2002) This Act provides for the imposition of levies by the National Gas Regulator and matters connected therewith. S t r a t e g i c P l a n 2 0 2 0 – 2 0 2 5 << 21 1 . 3 I nstitutional P olicies and S trategies R elated to the F ive - Y ear P lanning P eriod 1.3.1 The Integrated Resource Plan »» Policy Position 6: South Africa should not sterilise the development of its coal The Integrated Resource Plan (IRP) is a legal instrument for South Africa’s energy resources for purposes of power generation. Instead, the planning framework for generation. Contemplated under the Electricity Regulation Act, the IRP is designed to energy and environment must support a just transition. help meet the forecast annual peak and energy demand, with an established reserve »» Policy Position 7: South Africa should support the development of gas infrastructure. margin. It achieves this through the management of supply-side and demand-side All diesel-fired power plants (Peakers) should be converted to gas. resources over a specified future period and is driven by a set of predetermined objectives: »» Policy Position 8: The nuclear build programme must commence immediately, »» Ensure the security of South Africa’s energy supply adding 2 500 MW at a pace and scale that the country can afford. It is a no-regret »» Minimise the cost of South Africa’s energy supply option in the long term. »» Minimise water usage related to energy supply »» Policy Position 9: South Africa must support strategic power projects in neighbouring »» Reduce CO2 emissions from power generation. countries, thus supporting regional electricity interconnection. These include the INGA Hydropower Project in the Democratic Republic of Congo (DRC) and gas projects Of particular importance to the DMRE’s strategic planning process, as stated previously, in Mozambique, and will enable the development of cross-border transmission are the following Policy Positions, ranked according to the urgency required for mitigation: infrastructure needed for the regional power pool. »» Policy Position 1: Immediately initiate a medium-term power purchase programme to assist with creating reserve capacity. This policy is needed to complement Eskom’s Cabinet approved the Integrated Resource Plan 2019 – including its policy recommendations declining plant performance and to reduce the utilisation of diesel generators. – in 2019. IRP2019’s implementation is under way, in line with section 34 of the Electricity »» Policy Position 2: The Koeberg nuclear power plant’s design life must be extended Regulation Act. by another 20 years. The necessary technical and regulatory work must be undertaken immediately. 1.3.2 Integrated Energy Plan »» Policy Position 3: Support Eskom financially and legally to comply with Minimum The development of a National Integrated Energy Plan (IEP) was envisaged in the White Emission Standards (MES) over time, taking into account the energy security imperative Paper on the Energy Policy of the Republic of South Africa of 1998 and, in terms of the and the risk of adverse economic impacts. National Energy Act, 2008 (Act No. 34 of 2008), the Minister of Mineral Resources and »» Policy Position 4: Convene a team to put together a ‘just transition’ plan within a year, Energy is mandated to develop and publish the IEP in the Government Gazette. The in consultation with all social partners. This policy is to help avoid job losses, guide purpose of the IEP is to provide a roadmap of the future energy landscape for South the modernisation of the energy sector, and appropriately exploit current resources. Africa which guides future energy infrastructure investments and policy development. »» Policy Position 5: Retain the current annual build limits on renewables (wind and The IEP analyses current energy consumption trends within different sectors of the photovoltaic), pending the report on a just transition. economy (i.e. agriculture, commerce, industry, residential and transport) and uses this to project future energy requirements, based on different scenarios. 22 >> D e p a r t m e n t o f M i n e r a l R e s o u r c e s a n d E n e r g y While the IEP focuses on demand for all energy forms across all the economic sectors Taking cognisance of prior drafts of the Mining Charter, the 2018 Charter brings with at a high level, more detailed analysis of different demand growth profiles and supply- it mostly foreseen changes, introducing new targets and measurement criteria aimed side options for the two main energy sub-sectors, namely: electricity generation and at accelerating the transformation progress of the industry, and a degree of alignment liquid fuel supply, are detailed in supporting sector plans. For the gas sub-sector, a draft with certain compliance measures and criteria used in the Broad-Based Black Economic framework which seeks to explore future possible options for the development of a Empowerment Codes of Good Practice (B-BBEE Codes). Increased compliance targets gas market in South Africa is being developed. This approach has been undertaken to are lower and less challenging for right holders to comply with than in the previous enable the differences in each of the sectors to be analysed in detail, taking into account draft and amended Charters. The revised Charter aims to take the next steps in driving the complexities and levels of maturity of each sub-sector. value beyond compliance within the South African mining ecosystem, simultaneously continuing a journey of redressing historic inequalities. The DMRE has published a draft report on the IEP and IRP Assumptions and the Base Case for comments. Supporting annexures, including a report on the detailed scenarios 1.3.4 Mineral Beneficiation for liquid fuel supply are also available on the DMRE’s website for comment. Government has committed to the promotion of local beneficiation through legislation. The Mineral and Petroleum Resources Development Act of 2002 includes provisions The Draft Integrated Energy Planning Report was approved for publishing by Cabinet that will ensure that: (1) the Minister of Mineral Resources promotes the beneficiation in November 2016. Subsequent to the approval, the IEP was widely consulted upon of Minerals in the Republic; (2) If the Minister, acting on advice of the Board and after through public stakeholder workshops which were held in all nine provinces. Substantial consultation with the Minister of Trade and Industry, finds that a particular mineral input was obtained through the workshops and through written submissions. Extensive can be beneficiated economically in South Africa, the Minister may promote such work has been done to address gaps identified in the Draft IEP Report and the final beneficiation subject to terms and conditions as the Minister may determine; and (3) Integrated Energy Plan will be presented to Cabinet for approval. Any person who intends to beneficiate any mineral mined in or outside of South Africa may only do so after written notice and in consultation with the Minister. 1.3.3 Mining Charter Against the backdrop of concerns around the pace of transformation in the mining and The South African Mining Charter of 2004 specifically stipulates that mining companies minerals industry, government published a new Mining Charter aimed at strengthening will be able to offset the value of the level of beneficiation achieved by the company its effectiveness, while taking into account the realities facing the industry. against its HDSA ownership commitments. The Broad-Based Black Socio-Economic Empowerment Charter for the South African The Diamonds Act, 1986 (Act No. 56 of 1986) was amended through the Diamonds Mining and Minerals Industry, commonly known as the Mining Charter, was first developed Amendment Acts, 2005 (Act No. 29 of 2005 and Act No. 30 of 2005). The rationale for the in 2002, and amended in 2010. It served as an instrument through which the Minerals amendments was to increase access to rough diamonds for jewellery manufacturing in and Petroleum Resources Development Act (MPRDA) could fuel transformation in the South Africa; maintain security of supply of rough diamonds; promote the beneficiation industry. Following a further assessment on the effectiveness of the Charter, the most industry in South Africa thus creating jobs; and increase participation throughout the recent review was gazetted in draft on 15 June 2018 (the “2018 Charter”). This 2018 diamond value chain. Mining Charter, alongside the MPRDA and SLP amendments offers an opportunity to improve regulatory and policy certainty, and subsequently investor perception. S t r a t e g i c P l a n 2 0 2 0 – 2 0 2 5 << 23 The Precious Metals Act 2005, Act No. 37 of 2005 provides for acquisition, possession, The programme is funded by the DMRE and will assist government in making well smelting, refining, beneficiation, use and disposal of precious metals. Precious metals informed decisions about shale gas in South Africa. include gold and the platinum group metals. Silver has been excluded from the definition of precious metals. The objectives of the programme are to collect and review new geological information on the Karoo Basin; define an environmental baseline; assess the amount of recoverable gas 1.3.5 Shale Gas mainly from the Whitehill and Prince Albert Formations; cover various geo-environmental The Council for Geoscience (CGS) is embarking on a shale gas research project aimed at impact assessments such as ground water dynamics and possible contamination; and unlocking the unknowns and assumptions about shale gas exploration in the country. monitor potential seismic interference. The project also aims to build scientific skills in the area of shale gas exploration as this is a new concept to the country at large. The CGS Shale Gas Project will serve as a baseline study for future shale gas research and play a vital role in the review of petroleum exploration and exploitation regulations. NEMA regulations will be utilised as a framework in identifying shortfalls of the environmental impacts of the shale gas. 24 >> D e p a r t m e n t o f M i n e r a l R e s o u r c e s a n d E n e r g y 1 . 4 R elevant C ourt R ulings »» The majority of judgments relate to Mineral and Petroleum licensing matters, given by the High Court in relation to the enforceability of the Mining Charter and the the volume of applications processed annually in these sectors in terms of the interpretation of the ownership element, has resulted in further litigation to establish Mineral and Petroleum Resources Development Act 28 of 2002 and the Petroleum legal certainty on government’s regulatory authority to achieve transformation in Products Act 20 of 1977. the minerals and mining sector. »» The Sabie and Resilient judgments, relating to bulk electricity disconnections by Eskom »» The Baleni judgment, which is currently on appeal to the SCA, deals with the question for non-payment by the Thaba Chweu and Emalahleni municipalities respectively, of whether consent is required from traditional communities where mining rights are subject to an application for leave to appeal. These matters are not opposed by have been granted by the Minister to land occupied by them. the Minister and Department. »» In the Treasure the Karoo and Another matter, the Regulations for Petroleum Exploration »» The Coal Transporters Forum matter is subject to an application by the Forum for and Production was declared invalid and set aside by the SCA. Authorisation of shale leave to appeal to the Supreme Court of Appeal (SCA). The matter is opposed by 33 gas exploration, which involves hydraulic fracturing, will only be possible once new respondent parties, including NERSA, Eskom and the IPPs. regulations have been promulgated under NEMA. »» The Chamber of Mines matter, in which a declaratory order was handed down S t r a t e g i c P l a n 2 0 2 0 – 2 0 2 5 << 25 PA R T B O ur strategic focus 26 >> D e p a r t m e n t o f M i n e r a l R e s o u r c e s a n d E n e r g y 2 . 1 V ision 2 . 2 M ission A leader in the transformation of South Africa through economic growth To regulate, transform and promote the minerals and energy and sustainable development in the mining and energy sectors. sectors, providing sustainable and affordable energy for growth and development, and ensuring that all South Africans derive sustainable benefit from the country’s mineral wealth. 2 . 3 V alues The service delivery approach of the DMRE is guided by its value system that is summarised in the table below: Batho-Pele Represents a DMRE that is service orientated, strives for excellence in service delivery, commits to continuous service delivery improvement for (Sotho for “People the achievement of a better life for all, and seeks to include all citizens through services and programmes. First”) Represents our moral principles as reflected by the Code of Conduct for Public Servants, i.e. what we understand, know about and mean when Ethics we resolve what is right and what is wrong. Represents a facet of moral character and denotes positive, virtuous attributes such as integrity, truthfulness and straightforwardness along Honesty with the absence of lying, cheating or theft. Represents consistency of actions, values, methods, measures, principles, expectations and outcomes and is regarded as the honesty and Integrity truthfulness or accuracy of one’s actions. Accountability Represents the acknowledgment and assumption of responsibility for our actions, decisions, policies, administration and governance. Represents workers who enjoy considerable work autonomy and are commonly engaged in creative and intellectually challenging work that Professionalism requires impressive competence in a particular activity. Ubuntu Represents our interconnectedness and our approach that is open, available and affirming of others. My Public Servant – My Represents public servants at the centre of delivering quality services to the citizens in line with the dictates of the Constitution of the Republic Future (We belong, We of South Africa. care, We serve) S t r a t e g i c P l a n 2 0 2 0 – 2 0 2 5 << 27 2 . 4 S ituational A nalysis The situational analysis is segmented into components that reflect developments in 4 a Global, African, Sub-Saharan/SADC and South African context, in order to provide 3.3 3.4 a holistic picture of the external economic and environmental factors that affect the 2.9 DMRE. The analysis includes an external overview considering key elements of the 3 PESTLE framework, as well as an internal analysis that reflects on past organisational performance. 2 2.4.1 Analysis of the External Environment 1 Economic Context – Global According to the Industrial Development Corporation (IDC) Economic Overview of Q3, 0 2019, the global economy is in a synchronised slowdown, with economies generally 2019 2020 2021 experiencing a moderation in their growth performances1 (Figure 1). Global growth is projected to rise from an estimated 2.9% in 2019 to 3.3% in 2020 and 3.4% for The US Federal Reserve lowered its policy rate by 25 basis points each at its August, 2021—a downward revision of 0.1% for 2019 and 2020 and 0.2% for 2021 compared to those in September and October meetings2. The European Central Bank, in turn, has limited room the October World Economic Outlook (WEO). The downward revision primarily reflects negative to utilise interest rates in support of growth and, therefore, announced the resumption surprises to economic activity in a few emerging market economies, notably India, which led to of its quantitative easing programme for an indefinite period. a reassessment of growth prospects over the next two years. In a few cases, this reassessment reflects the impact of increased social unrest. Economic activity and business sentiment are weakening in the face of uncertainty. Several key economic variables are reflecting the deteriorating economic, trading, investment As a result, growth in global industrial production is stagnating, with contractions and risk environments. Relatively subdued inflationary pressures and moderate growth are recorded in Europe. The situation has led to a sharp decline in sentiment levels among underscoring the accommodative monetary policy stances being maintained by central banks manufacturers in advanced economies, as can be seen in the Figures 2 and 3. around the globe. Figure 1: Global growth projections3 1 IDC – Economic Overview 2019 2 https://www.imf.org/en/Publications/WEO/Issues/2019/07/18/WEOupdateJuly2019 3 World Economic Outlook 2020 (International Monetary Fund) 28 >> D e p a r t m e n t o f M i n e r a l R e s o u r c e s a n d E n e r g y 6.0 12.0 Notes: Trade and industrial production: 3-month moving Notes: A reading above 0 indicates expansion in manufacturing PMI: deviation form 50-point mark 5.0 average % change (y-o-y) 10.0 output Manufacturing PMI: Index point deviation from A reading below 0 indicates a contraction in output Percentage/Index point 4.0 50-point mark 8.0 6.0 3.0 4.0 2.0 2.0 1.0 0.0 0.0 -2.0 -1.0 -4.0 -2.0 -6.0 2013 2014 2015 2016 2017 2018 2019 2013 2014 2015 2016 2017 2018 2019 Trade Industrial production Manufacturing PMI USA UK Eurozone China Source: IDC, compiled using CPB and Bloomberg data Last data point is August 2019 Source: IDC, compiled using Bloomberg data Last data point is October 2019 Figure 2: World trade, industrial production and the manufacturing PMI Figure 3: Manufacturing PMIs for select countries/region S t r a t e g i c P l a n 2 0 2 0 – 2 0 2 5 << 29 Economic Context – Africa account deficits and unsustainable debt. Dependency on a few export commodities The African Development Bank’s African Economic Outlook for 2019 showed that the to spur growth and vulnerability to volatility in commodity prices has impeded most continent’s general economic performance continues to improve. Gross domestic product African economies from sustaining high growth. Countries have to move to a higher reached an estimated 3.5% in 2018, about the same as in 2017 and up from 2.1% in growth path and increase the efficiency of growth in generating decent jobs. 2016. Africa’s GDP growth was projected to accelerate to 4.0% in 2019 and 4.1% in 2020 (Figure 4). But even this growth is not sufficient to address persistent fiscal and current Economic Context – Sub-Sahara and the SADC Region Sub-Saharan Africa is facing a slight moderation of its growth prospects. Robust performances from several of its non-resource intensive economies should counterbalance 10 the subdued growth outcomes of the larger economies, specifically South Africa, Nigeria India and Angola5. The pace of economic expansion in the region is expected to gather 8 momentum from 2020 onwards, but the downside risks are high due to an uncertain China external backdrop that is impacting on commodity markets. Headwinds on the external 6 front are weighing down on economic activity,6 alongside the slow pace of reforms, Percent Emerging and deveoloping countires including Africa severe weather-related shocks, Ebola epidemics, as well as rising security and political 4 Africa tensions in parts of the region. 2 The International Monetary Fund (IMF) lowered its growth estimates for Sub-Saharan 0 Africa to 3.2% in 2019, from 3.4% previously. A moderate pick-up to 3.6% is projected for 2020 on the back of some improvement in the performance of the region’s largest -2 economies – namely Nigeria, South Africa and Angola - as well as a general strengthening 2013-14 2015 2016 2017 2018 2019 2020 in domestic demand. Investment activity is expected to gradually recover in various (projected) (projected) (projected) countries. However, the external environment is becoming less supportive of industrial Source: African Development Bank statistics and International Monetary Fund. commodity markets, both in price and volume terms. As such, it poses significant The 2019 Outlook shows that macroeconomic and employment outcomes are better when downside risks to the export performance of resource – intensive economies as well industry leads growth4. Key challenges faced by the African economy include: Unemployment as future investment activity. and underemployment; Underinvestment in infrastructure; Fiscal crises; Political change; and Climate change. Amid rising fiscal constraints, debt vulnerabilities remain high in several Sub-Saharan Africa economies. The number of countries already in debt distress (such as Mozambique, Figure 4: Real GDP growth in Africa, 2020 Sudan, Zimbabwe) or at high risk of getting into such a position (such as Zambia, Ethiopia, Ghana) continues to expand, according to the latest World Bank estimates. 4 African Development Bank – 2019 African Economic Outlook 5 Sub-Saharan Africa Regional Economic Outlook: Recovery Amid Elevated Uncertainty 6 African Development Bank – 2019 African Economic Outlook (https://www.afdb.org/en/knowledge/publications/african-economic-outlook 30 >> D e p a r t m e n t o f M i n e r a l R e s o u r c e s a n d E n e r g y Economic Context – South Africa The drop in consumer sentiment was mirrored by a steep fall in confidence among The South African economy finds itself under renewed pressure. Growth is estimated retailers, to the weakest level in 20 years. Ratings agencies have become increasingly to have moderated in Q3 2019, based on preliminary data for several key economic concerned with South Africa’s worsening fiscal metrics and poor growth performance, as variables. The output of the manufacturing and mining sectors has fallen, while retail well as with the enormous risks posed by Eskom. Although Moody’s kept the sovereign trade sales are exhibiting modest growth. South African households remain under rating unchanged at Baa3 on 1 November 2019, as anticipated, it altered the outlook considerable strain, affected by high levels of indebtedness, an uncertain economic from “stable” to “negative”. The agency has indicated that it requires more clarity on environment and poor employment prospects. Consumer confidence fell sharply to a how government plans to address the widening budget deficit and the steep rise in reading of -7 points in Q3 2019, the lowest in about two years (Figures 5 and 6). debt. S&P Global, which had already placed the sovereign rating two notches into sub- investment territory in November 2017, issued a stark warning of a possible further downgrade at its ratings review meeting on 22 November 2019.8 6 2 3.4 1.6 1.6 3.0 3.2 3 2.8 2.6 1.5 1.4 1.3 1.4 1.1 1.1 0 1 0.9 0.9 -0.3 -0.5 -0.6 0.7 -3 -2.7 0.5 -2.7 0.1 0.1 0 -6 0 17/1 17/2 17/3 17/4 18/1 18/2 18/3 18/4 19/1 19/2 19/3 Jan 2017 Jul 2017 Jan 2018 Jul 2018 Jan 2019 Jul 2019 Source: www.tradingeconomics.com, Statistics South Africa Figure 5: Contributors to negative growth in GDP in Q33 Figure 6: South Africa’s annualised GDP growth in 2019 7 Source: Stats SA 8 IDC Economic Outlook 2019 S t r a t e g i c P l a n 2 0 2 0 – 2 0 2 5 << 31 Manufacturing output dropped by 3.8% in Q3 2019 implying a contraction of 0.2% (year-on-year) for the period January to September 2019, as shown in Figure 7. Growth in manufacturing output by sub-sector: Jan–Sep 2019 Growth in mining output by sub-sector in 2019 (Jan–Sep) 4 40 3 30 2 1 20 % Change (y-o-y) % Change (y-o-y) 0 -1 10 -2 0 -3 -4 -10 -5 -6 -20 g es g g s tic ts ry ry s io en es al er s r pe en el M Co l er s ls e or ld rin ve in in uc ne ne t tri to al t ck PG a al ia ro e Go tu ra th tin as ra d m t Co em Ni at m n ac g clo pr pl prod ac hi ac hi ip us in g in p in er Ch Iro uf be d nd nd qu nd in m ag m m nd an er m lm TV te ri M lic an lic g an d sa ra al nd ca sa he al M al in m an er be in sa tri or ot et et ild al d ile ap ub m sp rm -m Bu To Fo Te al ec Tr d t o xt d, p l, r al lic et El an an he on W ica et M re Ot rn oo em No ni tu he Ch n- Fu Ot m r Source: IDC, compiled using Stats SA data Source: IDC, compiled using Statistics South Africa data On the production front, lower output from mining and manufacturing bears testimony to the Mining production fell by 1.7% (year-on-year) over the period January to September 2019, mainly difficult operating and trading conditions facing these two important sectors of the economy. Weak due to sharply lower output in sub-sectors such as gold and iron ore mining. Excluding gold, the demand conditions domestically and increasingly challenging global markets, accompanied by mining sector’s performance was slightly better at +0.5% (Figure 8). The poor performance of higher costs of doing business (due particularly to electricity tariffs,) and policy-related concerns, the mining sector has considerable implications for many supplying and supporting industries among others, have affected production activity. across South Africa’s economy. Figure 7: Lower output recorded by most manufacturing sub-sectors Figure 8: Mining output 32 >> D e p a r t m e n t o f M i n e r a l R e s o u r c e s a n d E n e r g y Operational challenges and financial constraints at Eskom, higher electricity tariffs and Economic pressure on South Africa exacerbates the unemployment challenge. An declining demand in a low-growth environment have affected the performance of the estimated 519 000 people entering the labour market in the 12 months to Q3 2019, electricity sector. and 5 000 jobs having been lost on a year-on-year basis, the unemployment rate rose to a new record high of 29.1%, with 6.7 million people unable to find work (Figure 9). Key challenges facing the South African economy include: »» Insufficient employment creation South Africa’s employment rate continues to drop, with Stats SA’s latest figures showing »» Substantially worse fiscal metrics the employment rate at 42.4%. The official employment rate has been on a steady decline »» Eskom remains the single-largest risk factor in the last three (3) years. The economy’s labour absorption capacity is insufficient to »» Sovereign ratings under considerable threat. accommodate all new entrants into the labour market, as can be seen in Figure 10. 43.74 29.0 29.1 43.54 43.5 43.3443 43.3 43.3 27.0 27.0 27.0 27.6 27.5 43.1 43.1 43.1 27.2 27.1 26.7 26.7 26.5 42.5554 42.4446 42.4 Jan 2017 Jul 2017 Jan 2018 Jul 2018 Jan 2019 Jul 2019 Jan 2017 Jul 2017 Jan 2018 Jul 2018 Jan 2019 Jul 2019 Source: www.tradingeconomics.com, Statistics South Africa Source: www.tradingeconomics.com, Statistics South Africa Figure 9: Unemployment rate in South Africa Figure 10: South African employment rate S t r a t e g i c P l a n 2 0 2 0 – 2 0 2 5 << 33 Macro-Economic Outlook for South Africa Mining Industry Analysis Structural challenges and subdued demand conditions domestically, along with a The mining and metals industry is recovering from one of its most difficult periods in slowing global economy, are expected to weigh on South Africa’s economic performance decades. Market volatility and a downturn in commodity prices have created a new in the short to medium term. Real GDP was expected to increase by only 0.6% in 2019. normal, where cost cuts, automation and operational efficiency are vitally important. The IDC view is that the pace of growth is likely to remain modest over the next three The analysis has been broken down into the Global, African, Sub-Saharan/SADC and years. South Africa’s worsening fiscal metrics and poor growth performance are of major South African contexts, in order to provide a holistic picture of the challenges that are concern. The enormous risks posed by Eskom, the widening budget deficit and the linked to the mining industry. steep rise in debt have increased the risk for further downgrade by ratings agencies. Mining Context – Global Rising State borrowing costs have the potential to affect key infrastructure investment According to the World Economic Forum (WEF), the mining industry has been facing a and negatively impact on both domestic primary and secondary economic sector number of sector-specific issues related to regulation, geopolitical risk, and legal limits output. However, improvement in business and investor confidence is emerging, as on natural resource use. Shareholder activism and public scrutiny have created additional evidenced by the commitments made by local and foreign entities at the Second South challenges10. According to the WEF the following trends will shape and determine the Africa Investment Conference, hosted by President Cyril Ramaphosa on 6 November mining and metals sector in future: 2019. Investment pledges of R371 billion were made, with the potential to create 1. Transition to a low-carbon economy – Countries must decarbonise their energy 412 000 direct employment opportunities over the next five (5) years in various sectors systems by the middle of this century. The transition from fossil fuel based energy of the economy. The President has reiterated government’s commitment to address key systems to low emission energy provides a great opportunity for the mining sector. structural impediments to growth, and to create a more investor- and business-friendly 2. Access to new resources – Automation and digitalisation will result in more targeted economic environment. A summary of performance is reflected in Figure 11 below. and efficient mining, which could further be enhanced through technological breakthroughs in areas such as in situ leaching. Mining jurisdictions with higher perceived risks may see increasing levels of interest from investors. Fiscal metrics (% of 3. New ways to finance mining – As mining companies try to limit risk, novel financing SA economic growth: GDP by 2022/23): Investment pledges at and production models will become more common. Alternative financing solutions + 0.6% in 2019 South African Investment have been developed such as royalty and metal stream agreements that reduce Budget deficit: 5.9% Conference 2019: + 1.3 in 2020 Gross loan debt of the burden on mining companies’ balance sheets. To spread the risk of new capital- government: 71.3% intensive projects, these financing solutions are likely to continue to grow. R371 billion (IDC forecasts) (National Treasury) 4. A social contract for mining – Creating real benefits for communities near mine sites will be key to the success of new projects. Obtaining the ‘licence to operate’ from local communities has been a challenge for the mining industry in recent years. Figure 11: Summary of South Africa’s Economic overview 9 9 Source: IDC Economic Overview, November 2019 10 https://www.weforum.org/agenda/2019/03/seven-trends-shaping-the-future-of-the-mining-and-metals-sector/ 34 >> D e p a r t m e n t o f M i n e r a l R e s o u r c e s a n d E n e r g y 5. Big data and mining – Data transparency to aid the mining industry’s relations with The following are listed as the mining commodities of the future: stakeholders. Collecting and processing massive amounts of data will be essential »» Lithium, it may be argued, is the most prominent mining commodity of the future, for mining companies as they digitise and automate their operations. because it is the key component of lithium-ion (Li-ion) batteries. Commodity analysts 6. The geopolitics of mining – Mining companies must navigate rising geopolitical risk predict global demand will double by 2030. Mining companies are searching for and economic protectionism. A growing resistance to globalisation and free trade is new mining projects in order to take advantage of the bullish future of lithium. altering politics, and directly affecting the mining and metals sector. Policymakers in Exploration budgets of mining companies in search of new mineral deposits will list mining jurisdictions are increasingly trying to enact local content laws and regulations lithium high on the exploration list and countries that have potential mineralisation which require minerals to be processed before they are exported. of such a commodity will attract global exploration investment. 7. Modern mining workforces – Maintaining an open dialogue will be essential as mining »» Graphite is another commodity that has seen increased demand because it is used companies try to revamp their employee base. Constantly evolving technologies as anodes in batteries. Due to this surge in demand synthetic graphite electrodes and business models will require mining company employees to develop new skills. have increased tenfold in price. The sector will have to increasingly compete with the IT sector to attract top talent »» Cobalt prices have quadrupled, creating a global supply deficit in 2018. 90% of from universities in order to drive its digitisation and automation processes. cobalt is produced as a by-product, which makes it dependent on other minerals. But this reality makes cobalt deposits one of the most desirable mineral deposits Commodities of the Future in the world. The demand for future mining commodities will be influenced by changes in industrial »» Nickel is increasing in demand due to the large quantities required for Electric needs, driven by consumer choices and environmental concerns. But most importantly Vehicle (EV) batteries. Only high-grade nickel is used in EVs in order to keep the the changes driving technology will enable society to mitigate environmental challenges charge over long distances, but only around half of the world’s supply of nickel is and transition to a green economy. Deloitte identified the commodities of the future, in of the right grade for such use. Demand for nickel sulphides (battery-grade nickel) its report, tracking the trends 2018: The top 10 issues shaping mining in the year ahead. is expected to increase by 50% to three million metric tonnes by 2030 according Deloitte’s list of commodities for the future is primarily those commodities used in the to the Deloitte report. Experts predict that nickel in car batteries could increase to production of lithium-ion batteries. 80% from the current 33%. »» Copper demand will increase as the demand for electrification and hence the need The world is driving the reduction of carbon emissions in order to mitigate climate change for copper wiring increases. According to Mining Technology, around 28 million by reducing dependence on fossil fuels. This has led to increased use of renewable energy tonnes (Mt) of copper is used annually, 75% of which is used for wiring. Demand for sources in many sectors and other developments such as electric motors in automobiles copper is set to grow beyond current levels in the future, driven by EVs that contain rather than combustion engines. As a result, battery technology has become increasingly four times as much copper as combustion engines cars. Furthermore, renewables important, leading to a sharp increase in the production of batteries. such as photovoltaics are five times more copper-intensive than conventional power generation from thermal plants and nuclear. S t r a t e g i c P l a n 2 0 2 0 – 2 0 2 5 << 35 While the future is bright for the above commodities, the reality is that other mining »» Iron ore will also be impacted by the global drive to recycle, but due to its strength, commodities will be replaced. Coal and iron are two of the mining commodities that will steel is widely used and demand remains strong. The World Steel Association come under pressure and mining of these commodities is likely to reduce into the future: estimates that by 2030, 1.9 billion metric tonnes of steel will be needed to meet global »» Coal is one of the commodities that drove the industrial revolution and its continued demand. At the same time, recycling initiatives are expected to ramp up globally importance in many countries’ fuel mixes is not in doubt. But the realities of climate and iron ore demand will be negatively impacted by this. To drive this reality home, change and the global response will negatively affect future demand. As the world the US already produces around 70% of its steel from scrap metal, thereby reducing commits to the reduction of fossil fuel energy sources, coal is most likely to become its demand for iron ore, according to the Deloitte Report. a commodity of the past. That may not be realised in the short term due to the continued importance of coal in current energy mix of the country. Its future may also be prolonged by adoption of cleaner technologies. Global Mining Trends 200 18% 16% 150 14% 12% 10% 100 8% 6% 50 4% 2% 0 0% 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Capital expenditure Capital velocity Source: PwC analysis *2019 Outlook Using capital expenditure of the Top 40 global mining companies, PwC Mining Outlook demonstrated a five (5) year decline in mining capital expenditures before 2018 (Figure 12). In 2018 capital expenditure started to rise again, but from historically low levels. The modest increase in 2018 suggests that mining companies are continuing to proceed cautiously. The PwC analysis further indicates that 48% of spending by these Top 40 companies was on ongoing projects, with relatively few new projects approved or initiated in 2018. Figure 12: Top 40 capital velocity (%) compared with capital expenditure (US$BN) 36 >> D e p a r t m e n t o f M i n e r a l R e s o u r c e s a n d E n e r g y Global Exploration Budgets The global exploration budget for nonferrous metals rose to an estimated US$10.1 and metals such as copper will see widening deficits without additional investment in billion in 2018, representing a 19% growth year-on- year, compared with US$8.5 billion exploration for the mines of the future. As already stated, transition to a low-carbon in 2017 (Figure 13). While data shows that global drilling increased, budgets were still economy provides opportunities, for example the solar industry will increase demand below levels at the peak of the super cycle and were not evenly spread across regions for aluminium, copper, lithium and cobalt multiple times in the next two (2) decades or minerals. S&P Global expected some volatility to persist in exploration in 2019 as as a result of the need for increased battery storage capability and capacity. Therefore uncertainty remained over the sustainability of economic growth between the U.S. exploration activity and budgets will have to respond to this shift, to enable supply to and China (Figure 14). The industry, however, remains short of critical new discoveries, meet demand. 24 4 Nonferrous exploration budget (US$B) Latin America Indexed metals price (1996 = 1) 21 Australia 18 3 15 Rest of World 12 2 Canada 9 Africa 6 1 United States 3 Pacific/South East Asia 0 0 19 19 19 1996 97 98 99 0 40 60 80 0 0 0 0 20 20 20 20 20 20 20 20 20 20 20 20 20 20 00 01 02 03 04 05 06 07 08 09 10 11 12 13 20 10 12 14 16 18 20 22 24 26 00 00 00 00 00 00 00 00 20 20 20 20 2014 15 16 17 18 28 00 00 Data as at Oct. 9, 2019. Source: S&P Global Market Intelligence Global non-ferous exploration budget Annual indexed metals price Figure 13: World exploration trends 2018 11 Figure 14: 2019 Annual exploration budgets by region (US$M) 11 S&P Global Market Intelligence S t r a t e g i c P l a n 2 0 2 0 – 2 0 2 5 << 37 Diamond Mining Additional contributors to the decrease are: Between 2010 and 2016, global production was consistently between 120 million and »» Production is depleting at Argyle in Australia 130 million carats. In 2017, it jumped to roughly 152 million carats and then fell 3% to »» South Africa’s, Venetia Mine is transitioning from open pit to underground mining 147 million carats in 2018. The 26 million-carat production increase in 2017 was the »» Production levels were lowered at Orapa Mine in Botswana largest single-year volume increase since 1986, and it created a surplus that affected the »» These changes will be partially offset by increased supply from several ALROSA entire value chain. In 2019, production is expected to drop an additional 4% (Figure 15). mines in Russia and smaller players in Angola. Y-O-Y change (2017 –18) (2018 –19E) -3% -4% Other 31% Angola -11% South Africa 2% DRC -13% Australia -18% Botswana 6% Canada 0% Russia -5% 2014 2015 2016 2017 2018 2019E *estimated based on company production plans Notes: Only diamonds tracked by Kimberly Process are included. 2019 data is a preliminary estimate and is to be updated with 2019 Kimberly data for 2017 and 2018 was adjusted in accordance with production of AGD diamonds (additional 1.4 million carats was accounted in 2017 instead of 2018 to reflect reported real production of 4.4 Mcts instead of 3 Mcts), and data for 2018 was adjusted in accordance with reported production of Debswana mines and Karowe mine (additional production of 0.12 Mcts for Botswana in 2018). DRC is Democratic Republic of the Congo. Sources: Company data; Kimberly Process; expert interviews; publication analysis; Bain and Company Figure 15: Annual diamond production – million carats 38 >> D e p a r t m e n t o f M i n e r a l R e s o u r c e s a n d E n e r g y Investment Attractiveness Index The Investment Attractiveness Index, reflected in the table below, is a composite index that combines both the Policy Perception Index (PPI) and the results of the Best Practices Mineral Potential Index. While it is useful to measure the attractiveness of a jurisdiction based on policy factors such as onerous regulations, taxation levels, the quality of infrastructure, and other policy-related questions that respondents answered, the Policy Perception Index alone does not recognise the fact that investment decisions are often sizably based on the pure mineral potential of a jurisdiction. Score Rank 2018 2017 2016 2015 2014 2018 2017 2016 2015 2014 Africa Botswane* 71.66 63.14 77.62 68.32 75.10 32/83 43/91 19/104 39/109 27/122 Democratic Republic of Congo (DRC)* 54.92 61.51 72.80 59.37 58.38 67/83 51/91 29/104 60/109 67/122 Ethiopia* 45.73 44.35 57.32 64.11 50.76 77/83 81/91 68/104 51/109 89/122 Ghana* 54.91 72.13 75.56 71.27 67.17 68/83 22/91 22/104 31/109 44/122 Mali 62.18 70.74 69.32 50.84 64.70 50/83 25/91 42/104 83/109 51/122 Namibia 56.66 60.67 66.11 69.78 76.37 60/83 54/91 53/104 33/109 21/122 South Africa 65.30 62.06 53.62 58.04 56.49 43/83 48/91 74/104 66/109 74/122 Tanzania 55.04 46.79 60.45 57.46 63.82 66/83 79/91 64/104 69/109 52/122 Zambia* 63.60 59.34 72.78 57.48 75.71 45/83 58/91 30/104 68/109 25/122 Zimbabwe* 56.57 54.32 41.84 41.45 39.07 62/83 66/91 96/104 98/109 112/122 Argentina Catamarca* 68.39 53.91 50.38 42.29 69.14 37/83 67/91 77/104 96/109 41/122 Chubut* 54.83 30.54 31.47 37.75 49.94 69/83 88/91 101/104 104/109 92/122 Jujuy* 52.61 58.57 24.83 49.57 58.92 72/83 59/91 104/104 86/109 65/122 La Rioja* 48.70 46.06 33.94 28.86 41.96 75/83 80/91 99/104 109/109 107/122 Mendoza* 50.15 29.29 35.51 38.51 38.09 73/83 89/91 98/104 101/109 114/122 Neuquen* 31.77 60.00 26.13 45.17 52.02 82/83 57/91 103/104 93/109 86/122 Salta* 54.09 62.51 69.25 56.69 73.71 70/83 45/91 43/104 71/109 32/122 San Juan 55.90 63.21 63.69 54.97 72.78 64/83 42/91 58/104 75/109 35/122 S t r a t e g i c P l a n 2 0 2 0 – 2 0 2 5 << 39 Risks in Mining and Metals Mining Context – Africa The mining industry carries inherent business risks. Ernst & Young (EY) summarised Maintaining an open dialogue will be critical, as mining companies try to revamp their the top ten (10) business risks linked to the mining and metals industry for the year employee base. Constantly evolving technologies and business models will require 2017-2018,12 as illustrated in Figure 16. mining company employees to develop new skills. The sector will have to increasingly compete with the IT sector to attract top talent from universities in order to drive digitisation and automation processes14. re s ntu nt ve on o f energy joi im isati gin g op t 4K a d an an ent M to cem ess e pla ate Ac c ce r oper 3.5K 10 o ur n c e to 8 s e 9 Re lic ion ial isat 7 Exploration budget (US$M) S oc p tim 3K 8 o k st y r is Co tor 7 ula 4 Re g commodities 2.5K 6 rld 1 wo 5 w Transparency Ne r 4 be e 2K Cy etitiv 3 mpeholder return 9 Cohar ital s 2 s ig 1.5K D f ectiveness 1 ef Productivity 1K in 2016 2 01 8 – 0.5K ing 01 k R an 2 7 0 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Up from 2016 Down from 2016 Same as 2016 New to the radar Data as at Oct. 9, 2019. Source: S&P Global Market Intelligence 1 Managing joint ventures 6 Regulatory risk 2 Access to and optimisation of energy 7 New world commodities According to the 2020 S&P Global Market Intelligence, “Africa posted the second-largest exploration 3 Resource replacement 8 Cyber budget decrease among the regions in 2019, as budget was cut by US$156 million year over year. 4 Social licence to operate 9 Competitive shareholder returns The bulk of the budget reduction is in the allocations for late-stage and feasibility exploration, 5 Cost optimisation 10 Digital effectiveness largely due to the progress of some major projects toward production”15 (Figure 17). Figure 16: Top 10 business risks in the mining and metals sector13 Figure 17: Annual budget trends 12 ey.com/miningmetals 14 https://www.projectsiq.co.za/mining-in-africa.htm 13 Ernst and Young (2017–2018) 15 2020 by S&P Global Market Intelligence, a division of S&P Global Inc. 40 >> D e p a r t m e n t o f M i n e r a l R e s o u r c e s a n d E n e r g y Africa’s base metals budgets have fallen the most year-on-year, decreasing by Mining Context – SADC Region US$104 million to US$204 million as reflected in the table below. The region continues to struggle with water shortages and energy constraints, and the fact is that water remains a critical resource for the industry. Often water scarcity Country 2019 budgets 2018 budgets Change (%) is a major issue, although excess and flooding can also impact on mining production. DRC 174.2 269.5 -35 In Africa, scarcity requires that miners need to drive up efficiency of use and use less Burkina Faso 134.2 149.1 -10 of this precious commodity16. The same goes for power, where intermittency and Ghana 100.3 102.9 -3 accessibility can act as major barriers. These challenges are forcing mining operations South Africa 97.4 97.8 -0.4 to innovate, diversify their portfolios and plan for contingencies as they work towards Mali 96.3 99.6 -3 reliability and resilience17. Cote d’lvoire 79.8 101.6 -21 Tanzania 55.2 38.4 44 Mining Context – South Africa Namibia 46.7 35.1 33 South Africa has long been considered a regional and global mining powerhouse, with Angola 35.9 18.2 97 more than 90% of the platinum group metals (table on the next page). South Africa has Zambia 33.3 40.0 -17 been engulfed by a series of political shocks and economic underperformance that have taken a significant toll on its position as Southern Africa’s leader in the extractives industry. Data as at Oct 9, 2019. Source: S&P Global Market Intelligence Amid a backdrop of recession and accusations of corruption, South Africa also faces the challenges associated with an aging mining sector. Against the backdrop of concerns around the pace of transformation in the mining and minerals industry, government has published a new Mining Charter aimed at strengthening its effectiveness, while taking Gold into account the realities facing the industry18. However South African mining industry Base metals remains critical to the economy of the country as demonstrated by statistics from the Other commodities Minerals Council South Africa in the table and Figure 19 that follows. Diamonds PGM Uranium Source: S&P Global Market Intelligence Data as at October 9, 2019 Allocations for diamond exploration increased for the first year since 2013, by US$26M year-on-year 16 https://www.fin24.com/Special-Reports/Mining-Indaba/complex-challenges-affecting-african-mining- to US$85M. The Annual relative exploration budgets by commodity are summarised in Figure 18. industry-expert-20190208 17 Du Plessis, A., 2019. Water as a source of conflict and global risk. In Water as an inescapable risk (pp. 115- 143). Springer, Cham. Figure 18: Annual exploration budgets by commodity (US$M) 18 Deloitte: 2018 Draft Mining Charter S t r a t e g i c P l a n 2 0 2 0 – 2 0 2 5 << 41 South Africa’s contribution to world mineral resources: 2017–2018 Mining matters to South Africa South Africa World Commodity Unit % Direct Direct reserves reserves contribution R350.8bn employment 456 000 of mining to created by people (7%) Antimony GDP mining employed kt 27 1 500 000 1.8 (metal) Chromium Mt 200 000 500 000 40.0 For every job in Direct R91.1bn Indirect mining at least contribution (15% of total employment Gold to fixed private sector created by 2 more jobs t 6 000 57 000 10.5 investment mining are created up (metal) investment) and downstream Iron Ore Mt 770 82 000 0.9 R498.7bn Each mining (66% exported employee Manganese Total primary Economic supports kt 200 000 690 000 28.9 mineral sales sales, 27% dependency (metal) of SA’s total 5-10 exports) dependants Nickel Mt 3 700 78 000 4.7 Remune- Platinum Royalties ration to Group Metals t 63 000 67 000 94.0 paid R7.6bn mining R134bn employees Uranium (metal, up to t 279 100 – 5.2 $US80/kg U) Taxes PAYE paid by Zirconium paid R22.0bn employees R21.0bn minerals kt 14 000 75 000 18.6 (metals) Source: Department of Mineral Resources and Energy, US Geological Survey Figure 19: Contribution of mining to the South African economy 42 >> D e p a r t m e n t o f M i n e r a l R e s o u r c e s a n d E n e r g y South African Mining Sector Analysis Exploration Activity and Expenditure The contribution of the mining sector dropped by 1.7% (year-on-year) over the 2019 Mining companies accept that there is inherent risk involved in the South African period, with lower output in sub-sectors such as gold and iron ore mining being the exploration and mining industry and accommodate this risk in their business decisions. main contributors. The mining sector’s poor performance has adverse implications along According to the Mineral Council SA, in 2017 South Africa accounted for only 1% of total supply chains according to the IDC. The Q4 2019 mining sector output was expected global exploration expenditure while 14% was enjoyed by Canada, 14% by Australia to remain negative due to load shedding and the impact of the low utilisation of iron and 13% by the rest of Africa (Figure 21). and steel (Figure 20). In the long term, South Africa’s mining production is projected to trend around 1.4% in 2021, according to Trading Economics global macro models and analysts’ expectations19. 40 35 Growth in mining output by sub-sector in 2019 (Jan - Sep) 30 40 25 20.3% 20 30 15 8.3% % change (y-o-y) 20 10 10 5 0 0 2000 2017 -10 Figure 21: South Africa’s share of African exploration budgets 2000–2017 -20 One of the key challenges, that has the most significant impact, is regulatory and Other non-metallic Mining Gold Chrome Coal Other metallic Copper Iron ore Nickel PGM Manganese Building material legislative uncertainty. Without a stable framework within which exploration and mining total companies can obtain prospecting and mining rights and the related environmental minerals minerals authorisations, and exercise those rights within an environment (which at the very least gives a sense of security that their significant investments will be protected and will, Source: IDC, compiled using Statistics South Africa data for the duration of the right be certain) investors are extremely cautious when making investment decisions. Figure 20: Growth in mining output by sub-sector in 2019 19 https://tradingeconomics.com/south-africa/mining-production S t r a t e g i c P l a n 2 0 2 0 – 2 0 2 5 << 43 The challenges being faced by the South African exploration and mining industry are »» Labour uncertainty generally summarised into eight (8) key challenges, namely20: »» Health and safety »» The global financial crisis and trade tensions and the impact that this has had on »» Environmental compliance requirements global demand »» Illegal mining operations »» Regulatory and legislative uncertainty »» Community activism. »» Infrastructure, ports, rails, water, roads and electricity Health and Safety 900 Fatalities in the SA mining industry 823 800 300 700 600 250 270 500 247 384 200 220 400 300 200 200 171 166 150 200 127 123 100 85 93 90 30 30 29 100 77 17 11 4 3 1 0 Year-to-date fatalities 112 84 81 73 28 (2019) vs 55 (2018) = 49% improvement eral s ds Co l se es ld Go ro e M PG ad,c sa nd 50 Year-to-date injuries on a ne ston m op s in ga pe lm am an us Ch eral r, z in 1 432 (2019) vs 1 512 (2018) = 5% improvement Di c) st ria ore, re io m in Natu ra 0 m c lg as 2018 du 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 i-p He In n m av (le Iro Se y al et s m Source: DMR Statistics Tables 2017 Base The past ten years has seen significant improvements in health and safety for mine employees. The Minerals Council estimated that the junior mining sector could contribute 230 000 jobs. This resulted in sustainable downward trends in occupational diseases, injuries and fatalities. As (Figure 22). The junior mining sector can significantly contribute to government’s transformation the Regulator of the sector, the implementation of the enforcement measures as contained in goals and the black industrialist programme. Greater collaboration between the sector and the Mine Health and Safety Act, 1996 (Act No. 29 of 1996) remains a key priority. There is concern government is required to give necessary support to junior mining companies. Regulatory about seismic activities in deep-level mines in South Africa that cause falls of ground leading to environment needs to encourage the development of junior mining. mining fatalities and injuries (Figure 23). Figure 22: Junior miner licences’ in South Africa (2017) Figure 23: Mining industry health and safety performance 20 https://www.miningreview.com/industry-insight/challenges-faced-by-the-south-african-exploration-and-mining-industry/ 44 >> D e p a r t m e n t o f M i n e r a l R e s o u r c e s a n d E n e r g y Energy Industry Analysis Issues relating to energy are among the most important and difficult challenges confronting the world today. Providing sufficient energy to meet the requirements of a growing world population with rising living standards will require major advances in energy supply and efficiency.21 Achieving this while mitigating the risks of climate disruption is an even more challenging undertaking. It will require a significant shift in the historic pattern of fossil-fuel use and a major transformation of the global energy system.22 For developing countries, the choice of technology, policy, and economic levers that will be used to transform and expand their energy systems will have profound implications for their growth, international competitiveness, and economic security and prosperity.23 Energy Context – Global According to the World Energy Outlook (2019), the gap continues to widen between: the promise of energy for all and the fact that almost one billion people still do not have access to electricity; the latest scientific evidence highlighting the need for evermore rapid cuts in global greenhouse gas emissions and the data showing that energy-related emissions hit another historic high in 2018; and expectations of fast, renewables-driven energy transitions and the reality of today’s energy systems in which reliance on fossil fuels remains stubbornly high. The gap exists between the calm in well supplied oil markets and the lingering unease over geopolitical tensions and uncertainties.24 A summary of the five categories of transition challenges follows, as outlined by the World Energy Council (2019): 1. Macroeconomic risks 2. Geopolitics 3. Business environment 4. Energy vision 5. Technology. 21 Muhanji, S., Muzhikyan, A. and Farid, A.M., 2019. Long-term challenges for future electricity markets with distributed energy resources. In Smart Grid Control (pp. 59-81). Springer, Cham. 22 http://blogs.worldbank.org/developmenttalk/the-global-energy-challenge 23 Kuzemko, C., Lawrence, A. and Watson, M., 2019. New directions in the international political economy of energy. Review of International Political Economy, 26(1), pp.1-24. 24 World Energy Outlook – 2019 S t r a t e g i c P l a n 2 0 2 0 – 2 0 2 5 << 45 Global Trends: Per Sector World electricity generation by fuel, technology and scenario (TWh) Stated policies Sustainable development Change 2018–2040 2000 2018 2030 2040 2030 2040 STEPS SDS Coal 5 995 10 123 10 408 10 431 5 504 2 428 307 -7 695 Oil 1 207 808 622 490 355 197 -319 -611 Natural gas 2 760 6 118 7 529 8 899 7 043 5 584 2 781 -534 Nuclear 2 591 2 718 3 073 3 475 3 435 4 409 757 1 691 Hydro 2 613 4 203 5 255 6 098 5 685 6 934 1 895 2 731 Wind and solar PV 32 1 857 5 879 9 931 7 965 15 503 8 073 13 645 Other renewables 217 739 1 344 2 020 1 785 3 628 1 281 2 889 Total generation 15 436 26 603 34 140 41 373 31 800 38 713 14 770 12 100 Electricity demand 13 152 23 031 29 939 36 453 28 090 34 562 13 422 11 531 »» Global electricity generation grows by around 55% (14 800 terawatt-hours [TWh]) »» Wind and solar photovoltaics (PV) provide over half of additional power generation between 2018 and 2040 in the Stated Policies Scenario. to 2040 in the Stated Policies Scenario; coal provides just 2% although this varies »» Growth is led by Asia: China alone constitutes 33% of growth followed by India widely by region. at 20% and other developing countries in Asia at 13%. »» The Sustainable Development Scenario sees an even more dramatic transformation. Low carbon technologies provide almost 85% of generation in 2040; 40% of generation comes from wind and solar PV. 46 >> D e p a r t m e n t o f M i n e r a l R e s o u r c e s a n d E n e r g y Global Trends: Power Generation »» Electricity demand grows by 2.1% per year, resulting in over 13 000 TWh more demand in 2040 than today (Figure 24). »» Falling costs and increasing competitiveness of solar PV push its installed capacity beyond all other technologies (IEA outlook to 2040). »» Developing economies account for almost 90% of demand growth. About 530 million people gain access to electricity around the world by 2040, mainly in Africa and developing Asia. »» Nuclear power share decreases, but its output nevertheless rises in absolute terms, with growth in China and more than twenty other countries. »» The share of fossil fuels in electricity supply will fall below 50% in 2040. Coal remains the largest source of electricity, though its share of overall generation declines from 38% to 25%. »» Gas-fired generation grows steadily, maintaining roughly its current share of generation. South Africa’s share of African exploration budgets 2000–2017 (%) 3 500 Historical Projections Solar PV 3 000 Natural gas 2 500 Coal 2 000 Wind GW Hydro 1 500 1 000 Nuclear 500 Other renewables Battery storage Oil 0 2000 2010 2020 2030 2040 Figure 24: Global power capacity by source in the Stated Policies Scenario S t r a t e g i c P l a n 2 0 2 0 – 2 0 2 5 << 47 Global Trends: Oil and Gas »» In the Stated Policies Scenario, China soon overtakes the European Union and »» China overtook Japan to become the largest gas-importing country in 2018. In the cements its position as the world’s largest net oil importer. Stated Policies Scenario, its imports reach the level of those of the European Union »» India’s net oil import requirements more than double between 2018 and 2040 and by 2040. its level of import dependency reaches roughly 90%, one of the world’s highest. »» China’s net imports of coal peak in the next few years but will decline substantially »» The United States becomes a net oil exporter soon after 2020, thanks to the shale towards 2040. China will be overtaken by India as the world’s largest coal importer boom. However the United States also remains a major importer of oil given the in the mid-2020s. configuration of its refineries. Net import (Shaded) and export shares by fuel, region and scenario (%) Oil Natural gas Gas Total 2040 2040 2040 2040 2018 2018 2018 2018 STEPS SDS STEPS SDS STEPS SDS STEPS SDS North America 1 30 43 3 10 12 15 13 31 4 15 11 United States 20 17 39 2 13 14 14 10 17 3 10 7 C and S America 11 30 11 5 10 11 44 20 51 21 24 18 Brazil 16 42 27 29 23 17 90 89 99 18 30 26 Europe 76 76 70 55 67 61 49 61 72 42 40 34 European Union 87 91 89 76 90 85 49 66 72 50 47 39 Africa 49 8 15 33 37 47 29 27 25 45 33 50 Middle East 77 70 73 20 21 23 74 88 76 61 51 47 Eurasia 71 64 55 34 40 39 45 53 42 49 47 34 Asia Pacific 78 86 87 26 43 42 1 5 2 17 27 30 China 70 83 85 43 57 57 6 3 0 18 27 34 India 83 92 92 49 59 74 29 27 38 18 35 38 Japan 100 99 99 74 98 97 99 100 100 87 67 55 World 45 44 45 20 24 26 21 20 20 25 24 21 48 >> D e p a r t m e n t o f M i n e r a l R e s o u r c e s a n d E n e r g y Global Energy Trends: Renewables Global Energy Trends: Nuclear By 2018, most countries in the world had some form of renewable energy targets in »» Nuclear reactors generated a total of 2 563 TWh of electricity in 2018, up from place, and more than 150 countries had definite renewable energy targets in place. 2 502 TWh in 2017. This was the sixth successive year that nuclear generation had risen. (Figure 25). In addition, 45 countries also had policies in place to support the use of »» In 2018 the peak total net capacity of nuclear power in operation reached 402 GWe, biofuels. China’s National Energy Administration raised the country’s renewable portfolio up from 394 GWe in 2017. The end of year capacity for 2018 was 397 GWe, up from standard in 2019 to 35% of electricity consumption by 2030. The European Union’s 393 GWe in 2017. revised Renewables Energy Directive (2018/2001) established a new binding renewable »» Improved operational performance saw the USA’s nuclear sector supply a record energy target of at least 32% for the United States by 2030. The increase in renewable 808 TWh of clean, low-carbon electricity in 2018. capacity in 2018 came mainly as a result of onshore wind expansion. Renewable capacity expansion accelerated in the Middle East, North Africa and parts of Asia, reflecting declining wind and solar PV costs, strong policy support and commitments made under the Paris Agreement (IEA, 2019c). 3 000 World Electricity United States 2 500 European Union generation China 2 000 India 1 500 World TWh Heat United States European Union 1 000 production China 500 India World 0 Transport United States European Union 1970 1972 1974 1976 1978 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 China India West and Central Europe South America North America 10% 20% 30% 40% 50% 60% 70% East Europe and Russia Asia Africa 2018 Additional market share in 2040 Source: World Nuclear Association and IAEA Power Reactor Information Service (PRIS) Figure 25: Renewable energy – total primary energy demand by category and region Figure 26: Nuclear energy production across the globe S t r a t e g i c P l a n 2 0 2 0 – 2 0 2 5 << 49 Energy Context – Africa African Energy Sector Trends The African continent will become increasingly influential in shaping global energy »» +127% Growth in African energy consumption trends, as a result of the growing urban populations, and energy demand. According to »» 6% Share of global energy consumption in 2040 Africa Energy Outlook 2019, there will be rapid growth in energy demand for industrial »» +54% Growth in African energy production 2040 production, cooling and mobility25. »» 7% Share of global energy production in 2040 »» The share of renewables in the African fuel mix grows from 1% today to 16% by 2040 Energy demand in Africa will grow twice as fast as the global average. With the growing »» Electricity demand almost triples, with renewables becoming the largest source of appetite for modern and efficient energy sources, Africa will emerge as a major force in power generation by 2040 global oil and gas markets26. A critical task for policy makers is to address the persistent »» African energy production as a share of consumption declines from 176% in 2017 lack of access to electricity, and unreliability of electricity supply. to 119% by 2040 (Figure 27). The above challenges negatively impact on the continent’s development. An estimated 80% of sub-Saharan African companies suffered frequent electricity disruptions leading Fossil fuels Electricity Bioenergy 400 to economic losses. Increased electricity needs, especially in sub-Saharan Africa, require a major expansion of the power system. Africa has the richest solar resources in the 300 world, but has installed only 5 gigawatt (GW) of solar PV, less than 1% of the global Mtoe 200 installed capacity27. Key Energy challenges in Africa are: 100 »» Governance and policy frameworks 0 »» Infrastructure and investment 2018 2040 2040 2018 2040 2040 2018 2040 2040 »» Demographics and urbanisation STEPS AC STEPS AC STEPS AC »» Economic growth and industrialisation Final consumption Residential Transport Productive uses »» Affordability: energy prices and fossil fuel subsidies. Demand changes Higher GDP and access Efficiency gains Access and efficiency Figure 27: Final consumption by fuel, sector Sub-Saharan Africa (excl. South Africa) 25 Africa Energy Outlook 2019 26 https://www.iea.org/reports/africa-energy-outlook-2019 27 https://www.iea.org/reports/africa-energy-outlook-2019 50 >> D e p a r t m e n t o f M i n e r a l R e s o u r c e s a n d E n e r g y Developing countries led by Asia, are the main engines of global growth. India, where African Oil and Gas Trends energy demand doubles, is the single largest source of demand growth. China remains the world’s largest energy consumer in this scenario, where energy demand rises rapidly in the Middle East, and per capita consumption is already high today, spurred in part 70 Natural gas production by increased demand for cooling and desalination (Figure 28). Rising incomes and Natural gas demand 2018 (bcm) 60 population growth underpin strong growth in Africa. 50 bcm Algeria Egypt 50 40 1000 10% 30 500 5% Nigeria 20 Mtoe 10 Cote South Africa 0 0% Senegal and Mozambique d’Ivoire Tanzania 0 Ghana Mauritania 0 2 4 6 8 10 12 14 -500 -5% China India Africa Middle South- Japan United European East east States Union Resource discovery 2011–19 (tcm) Asia Coal Oil Gas Low-carbon source GDP CAAGR (right axis) With the exception of Egypt, recent gas discoveries in Africa have been in countries with very small gas markets. Following their recent major gas discoveries, Mozambique and Tanzania Faster economic growth in developing economies is accompanied almost everywhere by rising are at the forefront of this group, but it also includes Senegal and Mauritania (Figure 29). For demand for all fuels and technologies. these countries the first task is to turn discoveries into viable and successful commercial projects. Figure 28: Change in energy demand and average annual GDP growth rate by region in Figure 29: Natural gas resource discoveries, demand and production in selected countries the Stated Policies Scenario, 2018 –2040 in Africa S t r a t e g i c P l a n 2 0 2 0 – 2 0 2 5 << 51 Energy Context – SADC Region Energy is vital to development in Southern Africa. Beyond its use in daily life, fuel and electricity catalyse infrastructure projects that drive both regional integration and economic growth. As the SADC region industrialises on its path to improved human development, energy production and distribution can only increase in importance. The Coal region still faces significant challenges in energy development and usage. Oil Natural gas The Regional Infrastructure Development Master Plan highlights the following issues: Nuclear »» Only 5% of rural areas in the region have any access to electricity Renewables »» Weak infrastructure and foreign commitments inhibit the use of the region’s abundant petroleum and natural gas resources »» Pricing and infrastructure hurdles, such as grid connections, manufacturing, and quality testing, impede development of the region’s renewable energy potential. Energy Context – South Africa Figure 30: South African primary energy mix Coal is South Africa’s key energy source, representing over 90% of electricity generation. A portion of coal also goes to the coal-to-liquid industry to supply liquid fuels. The country’s liquid fuel needs are met by imports of crude oil for local refining capacity and imports of oil-based fuels. Natural gas is very limited in the energy mix with PetroSA’s gas deposit used to produce liquid fuels for the country via its gas-to-liquid (GTL) plant. The other gas source is imports from Mozambique and liquid natural gas (LNG) imports. The IPP programme provides the country’s renewable energy. Nuclear energy is provided by Koeberg in the Western Cape (Figure 30). 52 >> D e p a r t m e n t o f M i n e r a l R e s o u r c e s a n d E n e r g y Top 20 Energy Risks in South Africa The South African Energy Risk Report – 2019 ranked the priority top 20 risks as outlined by energy experts. The risks are categorised into six (6) major risk categories, in alignment with the Institute of Risk Management South Africa’s classification methodology, and highlight energy-specific risks as summarised in the table below. Legend: Economics Environmental Geographical Societal Technological Energy industry No. Risk Risk description 1 Activism and civil Increasing activism and civil disobedience including strikes, leading to a negative impact on operations, security of supply and potentially disobedience costs. 2 Adequate and The non-availability of the right skills in the right numbers leading to inability to take advantage of new opportunities and operate current appropriate skills plant as efficiently as possible. 3 Aligned funding models The inability of financial institutions and other funders to shift towards a more agile and modular energy investment environment, leading to lack of appropriate investment in the sector, a negative impact on transformation, and misalignment with developmental government or project financing. 4 Appropriate policy Unclear energy sector policy (including electricity structure and associated market rules) leading to investment uncertainty and a lack of flexibility and agility to respond to rapid change. 5 Changing customers of The customer of the future will increasingly take charge of their energy supply, leading to a rise in prosumers, declining sales from central the future energy distribution systems, and the introduction of new players and competitors. 6 Economic recession Economic slowdown or recession leading to a decreased demand for energy. 7 Energy affordability Unaffordable energy, leading to a decline in energy for country competitiveness to drive economic growth and impacting on the poor and vulnerable sectors. 8 Energy data availability Lack of a consistent, transparent energy data set for planning short- and long-term decision making, leading to poor decision-making and increased risk. 9 Energy transition The inability of the country to shift (including availability of investment and capital, effective regulation on political commitment, stable readiness institutions and governance, supportive infrastructure and an innovative business environment, human capital, and the ability of the current energy system to accommodate change) leading to a decline in competitiveness and slower emissions decline. 10 Fiscal crisis A fiscal crisis in the country leading to a downgrade of South Africa’s sovereign rating. 11 Governance and Inadequate governance and leadership, resulting in poor decision making and corruption leading to sub-optimal or a complete lack of leadership, including investment decisions, decreasing competitiveness and increasing cost. governance failures and corruption S t r a t e g i c P l a n 2 0 2 0 – 2 0 2 5 << 53 Legend: Economics Environmental Geographical Societal Technological Energy industry No. Risk Risk description 12 Innovative business Lack of innovative business models and agile responses to disruptive forces, leading to financial constraints and a risk of stranded assets. models 13 Investments in Without adequate investment in energy and related infrastructure, increased breakdowns and decreased reliability of supply can be and breakdown of expected. infrastructure 14 National Primary Energy Sub-optimal primary energy mix, leading to a decrease in the security of supply and increased prices. Mix 15 Parochial interests Decision makers and players in the market driving narrow interest and not acting in the best interest of the country, leading to an inability to reach consensus and sub-optimal compromises. 16 Political and social Profound political and social instability in South Africa leading to decreased business confidence and economic impact. instability in the region 17 Price volatility and Significant and short-term changes in price leading to a loss of investor confidence and a decline in country competitiveness. uncertainty 18 Regional energy Lack of coherence in regional energy planning, leading to sub-optimal energy resource utilisation. planning 19 Regulatory coherence Lack of timeous, coherent legislation, regulations, and market rules, leading to barriers to entry for new technologies and players and non- compliance with environmental legislation and/or increased prices. 20 Water quality and Water crisis resulting in an inability to obtain water at the right volumes and quality needed for operations, leading to increased costs and availability negative operational constraints. 54 >> D e p a r t m e n t o f M i n e r a l R e s o u r c e s a n d E n e r g y Environment Analysis ii. Pollution – Pollution of the air, water and soil require millions of years to recuperate. Change to the natural environment is fundamentally driven by population dynamics Industry and motor vehicle exhaust are the number one pollutants. Heavy metals, and economic development. Associated human activities such as agriculture, energy nitrates and plastics are the primary toxins responsible for pollution. consumption and mining, amongst others, exert pressure on the earth28. It is important iii. Biodiversity loss – Climate change is exacerbating biodiversity loss and the causality to understand the relationship between the drivers and pressures that impact on the goes both ways as oceans and forests are important for absorbing carbon emissions. environment. As the earth changes, it brings forth complex challenges that threaten Increasingly fragile ecosystems hold risks for societal and economic stability. For multiple sectors of the economy, human livelihood and the integrity of natural capital. example, storm surges and rising sea levels pose an enormous risk to the >200 There is a profound need to become increasingly aware of the problems associated with million people who depend on the coastal mangrove ecosystems to protect their these changes such as a massive increase in natural disasters, warming and cooling livelihoods and food security. periods, different types of weather patterns, etc.29 All stakeholders need to be aware of the types of environmental problems our planet is facing, the implications for the The above-listed challenges are among the leading environmental challenges that economy and potential mitigation measures. This analysis has been broken down into are linked to the mining and energy sectors globally and locally. The world is very far the Global, African, Sub-Saharan/SADC and South African contexts in order to provide from the emissions reductions necessary to achieve the goals of the Paris Agreement. a holistic picture of the challenges that are linked to the natural environment. Efficiency gains and deployment of cleaner energy sources have not kept pace with rising energy demand in the immediate past according to the IEA Global Energy Report. Global Context Global environmental risks continue to dominate the results of the annual Global Risks African Context Perception Survey, undertaken by the World Economic Forum. In 2020, environmental The African continent has a growing population, rich natural capital and weak institutions. risks accounted for three of the top five risks by likelihood and four by impact. Globally, As a result the continent is subject to some serious environmental challenges, including people are far more concerned about ‘extreme weather’ as a risk. According to the survey, deforestation; water pollution; coal mining pollution; nuclear waste; overfishing; and respondents are increasingly worried about environmental policy failure. The need industrial agriculture etc.31 At the same time Africa still faces significant challenges to minimise our carbon foot print is becoming increasingly clear from the increasing with regards to access to electricity and clean cooking for all, leading to unsustainable number of extreme weather incidents, such as severe drought and flooding. The top harvesting of fuelwood. The transition away from the inefficient combustion of biomass three environmental risks are listed below.30 for cooking in the continent needs to be achieved. In 2015, the Heads of State and i. Climate change/Global warming – Global warming leads to rising temperatures Governments of the African Union adopted Agenda 2063. The Agenda sets out a of the oceans and the earth’s surface causing melting of polar ice caps, a rise in sea vision for “an integrated, prosperous and peaceful Africa, driven by its own citizens and levels and unnatural patterns of precipitation such as flash floods, excessive snow representing a dynamic force in the international arena.” This is closely linked to the or desertification. United Nations’ Sustainable Development Goals. 28 Scoville-Simonds, M., Jamali, H. and Hufty, M., 2020. The hazards of mainstreaming: Climate change adaptation politics in three dimensions. World Development, 125, p. 104683. 29 Lo, A.Y., Liu, S., Cheung, L.T. and Chan, F.K., 2020. Contested transformations: Sustainable economic development and capacity for adapting to climate change. Annals of the American Association of Geographers, 110(1), pp. 223-241. 30 World Economic Forum – Global Risks Report 2020 31 Nalule, V.R., 2020. Mining and the Law in Africa: Exploring the social and environmental impacts. Springer Nature. S t r a t e g i c P l a n 2 0 2 0 – 2 0 2 5 << 55 African governments face several challenges in implementing environmental protection in the chain of using coal to produce electricity pollutes and consumes vast amounts mechanisms. Africa’s development challenges are rooted in past policies and strategies. of water. Together with coal mining, burning coal for electricity generation has several Heavy dependence on natural resources led to resource depletion and environmental serious implications for both water quantity and quality. The overreliance on coal degradation and worsened the exposure of weaker economies to external shocks, contributes massively to greenhouse emissions. The mining industry plays a vital role thereby increasing poverty and reversing social development. It has to be stated, in South Africa’s growth and development. But if mining is not strategically planned though, that Africa has been a minor contributor to global greenhouse gas emissions, and carefully implemented, it has significant negative impacts on biodiversity and and this remains the case to date. According to the IEA, energy-related carbon dioxide ecosystems, in particular on the catchments, rivers and wetlands that deliver water- (CO₂) emissions in Africa represented around 2% of cumulative global emissions. But related services to people. Africa is in the front line when it comes to the effects of a changing climate. Africa’s ecosystems already suffer disproportionately from climate change and the associated 2.4.2 Analysis of the Internal Environment risks to food, health and economic security. All the African country signatories to the Paris Agreement, through their nationally determined contributions, committed to Organisational Structure contribute to the global effort to mitigate GHG emissions (IPCC, 2019). The DMRE was established on 29 May 2019 through the merging of the Department of Minerals and Energy and the Department of Mineral Resources. The intention was to SADC Region better equip and capacitate the DMRE to respond to the strategic objectives derived According to Green Peace, “Sub-Saharan Africa alone could die because of climate change from the NDP, as they relate to the regulation and transformation of the energy and by the end of the century. Unpredictable rainfall patterns, lower crop yields, soaring food mining sectors in the following manner: prices and dwindling natural resources are already causing increased human migration, »» Provisioning of secure, sustainable and affordable energy tension and conflict.”33 Total energy-related CO₂ emissions in North African countries »» The promotion and regulation of minerals and mining. in 2018 were around 490 Mt or 40% of Africa’s energy-related CO2 emissions (1 215 Mt CO₂). South Africa’s energy sector emitted 420 Mt CO₂ with its coal-fired power fleet These are in line with the objective to develop a mineral resources and energy sector responsible for more than half of the country’s energy-related CO₂ emissions and more that promotes economic growth and development, social equity and environmental than three-quarters of the sub-Saharan region’s power sector emissions. sustainability. South Africa Furthermore, the intention was to align the integrated mandate of the DMRE with The South African economy depends greatly on the growth and development of its the strategic priorities of the DMRE identified in the MTSF. The structure is depicted extractive mining sector. As already stated, currently an estimated 93% of South Africa’s in Figure 31. electricity comes from coal. South Africa is also a water scarce country, yet every step 32 Simon, C.A., 2020. Alternative energy: political, economic, and social feasibility. Rowman and Littlefield Publishers. 33 https://www.greenpeace.org/archive-africa/en/campaigns/Climate-change/ 56 >> D e p a r t m e n t o f M i n e r a l R e s o u r c e s a n d E n e r g y The approved start-up structure will be reviewed and aligned with the approved strategic plan to ensure the capacity to deliver on the mandate of the DMRE. In the interim, the Office of the Director-General DMRE has continued to explore and embark on various interventions to improve the efficiency and effectiveness of the organisation within its baseline allocations and Chief Directorate: Directorate: has creatively and innovatively implemented key aspects of an approved Integrated Audit Services Risk and Integrity Management Human Resources Plan to improve its human resources (HR) capacity and capabilities. The following table summarises the six departmental programmes and their purpose: Chief Directorate: Chief Directorate: Office of the Director-General Strategy, Monitoring and Evaluation Programme Programme Purpose Provide strategic support and management services Chief Directorate: Administration Financial Management Services to the Ministry and the DMRE Minerals and Petroleum Regulate the mining, minerals and petroleum Regulation industry Branch: Branch: Formulate, maintain and implement integrated Branch: Mining, Mineral Minerals and Mine Health and Nuclear minerals and energy policies to promote and Petroleum Regulation Safety Inspectorate and Energy Policy encourage investment into the mining and energy Development industry Branch: Mine Health and Safety Branch: Branch: Ensure healthy and safety of employees in the mines Mining, Minerals Programmes and Corporate Inspectorate and Energy Policy Projects Services Development Manage, co-ordinate and monitor programmes and Programmes and Projects projects focused on access to mineral and energy resources Figure 31: DMRE organisational structure Nuclear Energy Manage nuclear industry The purpose of the reconfigured start-up structure of the DMRE is to ensure the optimal utilisation and safe exploitation of mineral and energy resources. S t r a t e g i c P l a n 2 0 2 0 – 2 0 2 5 << 57 Funding of the DMRE programmes remains a key constraint. The budget allocated for these programmes is summarised in the table following. Medium-term expenditure framework Programme 2020/21 2021/22 2022/23 Total MTEF R’000 R’000 R’000 R’000 Administration 642 343 683 222 707 825 2 033 390 Minerals and Petroleum Regulation 574 713 608 694 632 728 1 816 135 Mining, Minerals and Energy Policy Development 993 104 892 571 952 166 2 837 841 Mine Health and Safety Inspectorate 232 694 251 998 261 474 746 166 Programmes and Projects 5 798 115 5 977 685 6 829 685 18 605 485 Nuclear Energy Regulation and Management 1 096 059 1 155 815 1 199 493 3 451 367 Total 9 337 028 9 569 985 10 583 371 29 490 384 The allocations are informed by the challenges identified in this Strategic Plan and considering the following interventions: »» Alignment of budget programme structure with Strategic Plan and Annual Performance Plan »» Reprioritisation of projects within all programmes (branches) »» Explore other funding mechanisms. 58 >> D e p a r t m e n t o f M i n e r a l R e s o u r c e s a n d E n e r g y PA R T C M easuring our performance S t r a t e g i c P l a n 2 0 2 0 – 2 0 2 5 << 59 3 . 1 S trategic C onte x t The strategic context for the DMRE is premised on the problem definition tree concept »» Lack of transformation in the energy sector – The inability of the country to shift which has been developed for each of the three clusters of the DMRE. The overarching (due to lack of availability of investment and capital; effective regulation and political problem statement for each of the clusters is informed by the numerous challenges commitment; stable institutions and governance; supportive infrastructure and and risks identified as part of the situational analysis, for which strategic responses will an innovative business environment; human capital; and the ability of the current have to be articulated. energy system to accommodate change) leading to a decline in competitiveness and slower emissions decline. 3.1.1 Energy Cluster »» Unsustainable sources of energy – Energy is a key risk in South Africa due to its energy intensive nature and low readiness for energy transition. Energy transition Problem Statement readiness is an overall indication of the inability or ability of a country to shift The Energy Cluster is tasked with the responsibility for providing energy security to the the energy sector, including the availability of investment and capital; effective people of South Africa and the economy. An appropriate level of security promotes regulation and political commitment; stable institutions and governance; supportive economic growth, development, and social equity, through expanded access to energy infrastructure and an innovative business environment; human capital; and the services that are sustainable and contribute to the reduction of pollution and mitigation ability of the current energy system to accommodate change. of the effects of global climate change as outlined in the National Development »» High energy prices – Significant and short-term changes in prices leading to a loss Plan (NDP). of investor confidence and a decline in country competitiveness. Energy-dependent industries become challenged and access to energy becomes unaffordable. The country is challenged by inadequate energy supply as a key stumbling block to »» Ineffective institutional arrangements within the sector – Lack of timeous, the achievement of the mandate of the DMRE, which requires that it provides energy coherent legislation, regulations, and market rules leading to barriers to entry for security. This can be demonstrated by the occurrence of load shedding, and the ongoing new technologies and players; non-compliance with environmental legislation; resource constraints that the country’s power utility, Eskom, has been facing. and increased prices. »» Growth and financial sustainability of SOEs – The SOEs are generally experiencing Strategic Considerations depleting cash reserves, reduction in funding streams, and higher operating costs. Inadequate energy supply has its roots in a number of contributory factors: The country’s slow economic growth has weighed heavily on most SOEs resulting »» Lack of investment in and breakdown of infrastructure – Without adequate in a reduction in funding from the fiscus. investment in energy and related infrastructure, increased breakdowns and decreased »» Leadership and governance – Inadequate governance and leadership result reliability of energy supply have occurred. in poor decision making and corruption, leading to sub-optimal or non-existent »» Fiscal crisis and global financial crisis – Ratings agencies have become increasingly investment decisions. concerned with South Africa’s worsening fiscal metrics and poor growth performance, as well as with enormous risks posed by Eskom. 60 >> D e p a r t m e n t o f M i n e r a l R e s o u r c e s a n d E n e r g y Problem statement: Inadequate energy supply Collapse of critical industry Low investor Unemploy- Negative Aging Collapse of sectors Sovereign Poor economic Civil and consumer ment and consequences infrastructure infrastructure (mining, downgrade performance unrest confidence poverty manufactu- ring, telecoms and transport) Inadequate energy supply Lack of Ineffective Lack of Growth and investment Fiscal crisis and Unsustainable institutional Leadership Direct transformation High energy financial in and global financial sources of arrangements and causes in the energy prices sustainability breakdown of crisis energy within the governance sector of SOEs infrastructure sector Delayed Ineffective Limited and Inability to Increasing investment in High electricity energy SOEs liquidity Overlapping depleting gas secure funding debt new energy prices regulatory issues mandates supply capacity framework Energy Lack of Reliance in Pricing of Revenue Dysfunctional Secondary distribution Declining tax Resistance to coherent international petroleum pipelines governance causes infrastructure revenue change legislation and oil supply products capabilities structures rehabilitation regulations Coal Delays in sustainability Customer Low skills meeting the Overlapping Corruption as a source concentration level country’s CO2 mandates of primary risks targets energy S t r a t e g i c P l a n 2 0 2 0 – 2 0 2 5 << 61 Lack of investment in and the breakdown of energy infrastructure, is exacerbated areas: the unbundling of Eskom requires more regulatory attention; the municipal by the challenges that Eskom is facing. Eskom’s operational performance has seriously right-to-supply is not adequately addressed in relevant legislation; and the regulator deteriorated, resulting in: (i) Costly periods of load‐shedding with severe consequences is concerned that the mandate on approval of gas distribution tariffs and adequacy of for the economy; (ii) Significant deterioration of plant availability; and (iii) record levels the Maximum Price Methodology will impact negatively on the industry. of unplanned outages, leading to a cumulative decline in the capacity of power stations (excluding the new build stations) to the lowest levels yet. Although numerous efforts Growth and financial sustainability of SOEs is threatened. Many of the SOEs have have been made to stabilise power supply, operational performance is far from adequate liquidity problems, often citing underfunding and poor performance as key reasons. and a sustained effort is required to restore power station performance to acceptable Several are heavily dependent on their surplus cash. Customer concentration is a levels and to clear the massive backlogs in maintenance. Eskom’s long‐term debt was common concern and challenges, with Eskom in particular, are often cited. There are R441 billion (as at March 2019), up from R255 billion in 2014,34 placing further strain concerns about the development of local production and revenue pipeline capabilities. on the fiscus. The financial sustainability of the South African Nuclear Energy Corporation (Necsa) Ineffective institutional arrangements in the sector manifest in considerable legislative has been at risk. Necsa is focused on developing a turnaround strategy and a business overlaps between different departments and entities. These cause much uncertainty, operating model to ensure its sustainability. Its subsidiary, NTP Radioisotopes, suffered leading to a failure to meet mandates and develop additional revenue streams. A operational setbacks due to non-compliance with regulatory safety requirements. The general sense of lack of strategic focus exists among the entities. As an example, the CEF resulting halt in operations at NTP affected the supply of medical radioisotopes globally. Group indicated that overlapping mandates between CEF entities leads to competition Working closely with the National Nuclear Regulator (NNR) to address the matter, NTP between the entities, and discourages co-operation. Overlapping mandates have managed to return to full-scale operations. made the CEF’s role less clear, for example its designation as state carrier for gas, oil and minerals exploration and production in the new Minerals and Petroleum Bill. The For Pelchem, the fluorochemicals subsidiary of Necsa, there is both a customer CEF also lacks collaboration and partnerships, as well as strategic focus. In the case concentration risk (Columbus Stainless) and a supplier concentration risk (VMC Mine). of PetroSA, overlapping mandates have contributed to the entity’s inability to secure Lack of collaboration and partnerships and lack of a full Board of Directors remain funding for exploration projects, because the Council for Geoscience is also looking for challenges. Pelchem is also affected by the US-China Trade War, and the Rand-Dollar funding for potential exploration projects. exchange rate. Research-centred entities such as MINTEK are struggling to commercialise their research In the case of PetroSA, the reduction in or lack of funding has directly resulted in the loss as a result of overlapping mandates. As a regulator, NERSA also has concurrent and of exploration rights, due to a lack of funds to initiate the project in question. PetroSA overlapping regulatory mandates (with the DoE, NTP and PRASA) resulting in a regulatory is mandated to operate as a commercial entity that creates value for shareholders, and burden for licencees in general, and especially for HDSAs, who must report to more most importantly advances the nation’s objectives in the petroleum industry. These than one entity. NERSA faces several further challenges in the regulatory and policy mandates cannot be achieved without sustainable funding. 34 Roadmap for Eskom in a reformed electricity supply industry. DPE, 2019 62 >> D e p a r t m e n t o f M i n e r a l R e s o u r c e s a n d E n e r g y In the case of National Radioactive Waste Disposal Institute (NRWDI), which is mandated have become unaffordable. There is a limited project pipeline for cash flow generation to manage disposal of radioactive waste on a national basis, there is insufficient funding and a generally constrained fiscal environment. to develop waste management solutions. Based on international best practices, NRWDI needs to develop the Centralised Interim Storage Facility (CISF) to manage high-level There is still no long-term techno-economic solution for the Mossel Bay GTL. Coal is waste. Failure to provide funding for this development would negatively impact all depleting in the current blocks and backwardation is impacting SFF’s business. The CEF waste generators, including the Koeberg Nuclear Power Station. lacks an integrated execution model and culture. Its group portfolio is undiversified, and it faces a customer concentration risk due to Eskom, Transnet and Chevron. The country’s economic status in relation to the global economy has restricted financial security into utilising ‘revolving credit’ from the IDC. However, when an entity is in serious Leadership and governance remain a concern for the entities in the DMRE. financial strain, revolving credit can make the situation worse due to the interest rate Communication and approval lags between SOEs, stakeholders and the Shareholder and payment period. Other SOEs in the cluster have been greatly affected by a decline are common challenges stemming from dysfunctional leadership structures. In order in production, which is directly linked to the financial sustainability of the entity. for an entity to achieve its mandates, it is important to have leadership stability. The leadership has to be accountable for setting a culture of accountability within the entity. Entities in the Research and Regulatory Cluster, especially non-commercial entities that There is a need to urgently appoint leaders within the entities and reduce the number depend on the fiscus, are facing challenges that emanate from decreasing funding. of vacancies at executive level. NERSA, which is mandated to set and approve tariffs and prices, has experienced challenges stemming from Eskom’s late application processes, and the growing debt of The DMRE entities face a challenge with regard to the growing culture of corruption. municipalities to Eskom. Funding and revenue diversification are the main challenges as This is evident at the leadership level, and needs to be addressed urgently, particularly can be seen in the Petroleum Agency of South Africa (PASA’s) battle to unlock revenue given that inadequate stakeholder management has been highlighted as one of the from the fracking project, which could help improve its balance sheet. challenges within these entities. Inadequate adherence to corporate governance directly affects the achievement of planned outcomes. Lack of shareholder support has also The responses to the impacts on the entities that belong to this cluster vary dramatically. been cited as a major challenge. There is a need to develop collaborative relationships MINTEK is considering the revival of the declining ferroalloys sector as a way to increase with all stakeholders to ensure that mandates are realised. The general consensus is revenue. that governance and processes need to be strengthened. The CEF Group wants to resolve the numerous challenges it is currently facing. It is Failure to address the above underlying causes linked to inadequate energy supply concerned about its depleting cash reserves, as well as depleting indigenous feedstock has begun to manifest in a number of realities for the country. Ageing and decaying and litigation regarding the Strategic Fuel Fund’s (SFF) strategic stock. Funding for fossil infrastructure continues to affect South Africa’s energy supply, as demonstrated by load fuel projects is reducing, and there is an inability to become financially sustainable. shedding. Economists at the Efficient Group estimated that the impact of load shedding Mozambique’s gas supply will impact its subsidiary iGAS’ financial sustainability. Gas on South Africa’s economy in 2019 reduced GDP growth by ~ 0.30% in, translating into feedstock for gas-to-liquids (GTLs) has depleted and the costs of (heavy) condensate R8.5 billion35. Ongoing underperformance by the sector continues to have an impact on 35 https://businesstech.co.za/news/energy/361772/how-much-money-eskom-load-shedding-has-wiped-off-the-economy/ S t r a t e g i c P l a n 2 0 2 0 – 2 0 2 5 << 63 South Africa’s mining industry and other sectors exposed to heavy energy volatility, such Nuclear: Koeberg Power Station will reach its end of design life in 2024. To avoid the as manufacturing. Insufficient energy places a restriction on mining and manufacturing demise of nuclear power in the energy mix, South Africa has made a decision to extend growth due to production losses resulting from unpredictable supply. This exposure its design life and expand the nuclear power programme into the future. In line with contributes directly to job losses and inadequate skills investment, which ultimately power system requirements, additional capacity from any technology deployed should aggravate unemployment and poverty, stoking service delivery protests. be done at a scale and pace that flexibly responds to the economy and associated electricity demand, in a manner that avoids tariff shocks in particular. It is the user of IRP2019 Resolutions electricity who ultimately pays. In this regard, as is the case with coal, small nuclear units At a strategic level IRP2019 is the leading policy framework for addressing the short- to will be a much more manageable investment when compared to the fleet approach. The long-term challenges that the country faces. IRP2019 formulates specific interventions development of such plants elsewhere in the world is therefore particularly interesting to address electricity infrastructure development based on least-cost electricity supply for South Africa, and upfront planning with regard to additional nuclear capacity is a and demand balance, taking into account security of supply and the environment requisite, given that a lead time of less than ten (10) years is available for timely decision (minimising negative emissions and water usage). IRP2019 has identified the preferred making and implementation. generation technology required to meet expected demand growth up to 2030. The available options are summarised in the paragraphs below. Natural Gas: Gas-to-power technologies in the form of combined cycle gas turbines (CCGT), combined cycle gas engine (CCGE) provide the flexibility required to complement Coal: Beyond Medupi and Kusile, coal will continue to play a significant role in electricity renewable energy. While in the short term the opportunity is to pursue gas import generation in South Africa in the foreseeable future as it is the basis of the largest options, local and regional gas resources will allow for scaling up within manageable risk installed generation capacity which supplies the largest share of energy generated. Due levels. Exploration to assess the magnitude of local recoverable shale and coastal gas are to the design life of the existing coal fleet and the abundance of coal resources, new being pursued and must be accelerated. There is enormous potential and opportunity investments will need to be made in more efficient coal technologies (High efficiency in this respect and the Brulpadda gas resource discovery in the Outeniqua Basin of low emission (HELE) coal technology, including supercritical and ultra-supercritical South Africa, piped natural gas from Mozambique (Rovuma Basin), indigenous gas like power plants with CCUS ) to comply with climate and environmental requirements. The coal-bed methane and ultimately shale gas, could form a central part of the strategy for stance adopted by the Organisation for Economic Cooperation and Development and regional economic integration within SADC. Co-operation with neighbouring countries financial institutions in regard to financing coal power plants is a consideration upon is being pursued and partnerships are being developed for joint exploitation and which the support of HELE technology is predicated. This ensures that South African beneficiation of natural gas within the SADC region. SADC is developing a Gas Master coal will still play an integral part in the energy mix. Given the significant investments Plan, to identify the short- and long-term infrastructure requirements to enable the required for carbon capture and storage (CCS) and CCUS technology, South Africa could uptake of a natural gas market. Availability of gas provides an opportunity to convert benefit from establishing strategic partnerships with international organisations and to CCGT and run open-cycle gas turbine plants at Ankerlig (Saldanha Bay), Gourikwa countries that have made advancements in the development of CCS, CCUS and other (Mossel Bay), Avon (outside Durban) and Dedisa (Coega IDZ). HELE technologies. 64 >> D e p a r t m e n t o f M i n e r a l R e s o u r c e s a n d E n e r g y Renewable Energy: Solar PV, wind and Concentrating Solar Power with storage, present an opportunity to diversify the electricity mix; to produce distributed generation; and to provide off-grid electricity. Renewable technologies also present huge potential for the creation of new industries, job creation and localisation across the value chain. The Wind Atlas developed for South Africa provides a basis for the quantification of the potential that wind holds for power generation elsewhere in the country, over and above the prevalence of the wind resource around the coastal areas. To date, most wind projects have been developed in the Western Cape and Eastern Cape. The generation of electricity and heat through biomass and biogas, to be supplied for industrial processes, holds huge potential for South Africa, recognising that such projects range from small (kW) to larger (MW) scale and could be distributed across the industrial centres. Biomass from waste, paper, and pulp from the sugar industries could be used in co-generation plants and deliver electricity at a price-competitive level with minimal transmission and distribution infrastructure requirements. When deployed together, the nexus between the biomass and a government-backed biofuels programme could improve the economics of the initiatives and create job opportunities in rural and urban centres. Energy Storage: There is a complementary relationship between Smart Grid systems, energy storage, and non-dispatchable renewable energy technologies based on wind and solar PV. This is highlighted in Policy Position 5 where the requirement is that the current annual build limits on renewables (wind and photovoltaic) be retained, pending a report on a just transition. The traditional power delivery model is being disrupted by technological developments relating to energy storage, and more renewable energy can be harnessed despite the reality that the timing of its production might be during low-demand periods. Storage technologies including battery systems, compressed air energy storage, flywheel energy storage, hydrogen fuel cells etc. are developments that can address this issue, especially in the South African context where over 6 GW of renewable energy has been introduced, yet the power system does not have the requisite storage capacity or flexibility to deal with it. S t r a t e g i c P l a n 2 0 2 0 – 2 0 2 5 << 65 Strategic Response The strategic response of the energy cluster has been informed by challenges identified, and considers all elements in the energy value chain below as summarised below: Energy value chain Integrated energy planning seeks to consider all the key elements of the energy value chain Primary energy/resources Conversion technologies Secondary energy carriers End-use technologies Demand for energy services Industry » Steam boilers Industrial sector » Furnace » Process steam Renewables » Machinery » Motive power Power generation » Solar » Conventional coal plant Commerce » Wind Commercial sector » Nuclear » Air conditioning » Biomass » Electronic communication » CCGT » Hydro » Light bulbs » Cooling » OCGT » Solar Fossil fuels » Electricity Households Residential sector » Wind » Coal » Heat » Space heaters » Space heat » Crude oil » Refined petroleum products » Refrigerators » Refrigeration Fuel processing » Natural gas » Stoves » Cooking » Oil refineries » Geysers » Hot water » GTL Nuclear fuels » CTL » Uranium Agriculture Agricultural sector » Resources extraction and » Irrigation pumps » Water supply Regasification sourcing Transport Transport sector » Vehicles » Person kms » Aircraft » Rail 66 >> D e p a r t m e n t o f M i n e r a l R e s o u r c e s a n d E n e r g y Solution statement: Ensure the availability of resources for energy consumption and the rapid deployment of alternative energy; energy efficiency; and the technological diversification of energy sources that would result in significant energy security and economic development. Regulatory Increased Additional Increased certainty and Increased Unemploy- Increased Positive energy megawatts electricity economic investment Economic ment and Low carbon infrastructure effects availability commis- reserve transformation into South growth poverty emissions investment factor sioned margin of the energy Africa reduced sector Ensure the availability of resources for energy consumption and the rapid deployment of alternative energy; energy efficiency; and the technological diversification of energy sources that would result in significant energy security and economic development. Secure Minimise Energy Minimise Increase Diversify Transforming funding emissions security of the cost of access to supply of the energy for energy from energy Promote supply energy energy energy sources Promote sector infrastructure sector localisation, energy technology efficiency Ministerial transfer and Create an and water determina- Renegotiate Exploration Pursue job creation enabling National Commercial conservation tion on all coal of gas and oil cleaner coal regulatory Treasury sector technologies contracts fields technology and legislative in IRP2019 environment Bid window Cheaper Development of Separation Interventions for new build, mode of Transport the gas market Renewable and BRICS Bank enable self- transporta- sector as an alternative energy unbundling generation tion source of energy of Eskom Develop Renegotiate Forge relation- Carbon capture electricity Implemen- IDC, DBSA, BW 3 review Mining ships with storage and generation tation of AfDB energy sector other African underground capacity IRP2019 pricing countries coal gasification outside of Eskom Review Convert diesel Electrification Transition to Private Update Manufac- energy turbines to gas of the trans- a low carbon sector regulations turing pricing turbines port sector economy S t r a t e g i c P l a n 2 0 2 0 – 2 0 2 5 << 67 There are several responses to South Africa’s inadequate energy supply and to ensure High electricity prices will be responded to by renegotiating coal contracts and revisiting the security of supply. the transportation of coal, including cheaper modes for the transport of coal. BWs 1–3 can also be renegotiated and existing diesel generators at facilities can be converted DMRE entities have translated the provisions of IRP2019 into their responses to the to natural gas. A review of the Electricity Pricing Policy (EPP) should also be done - the challenges that the energy sector is facing. policy hasn’t been adapted to reflect current market conditions. Inadequate energy supplies will be addressed in the short term by accelerating energy A just transition to low carbon-emitting sources will be facilitated by integrating various efficiency rollouts. LPG gas will be promoted as an alternative for heating and cooking. workstreams, in so far as they relate to and impact on energy security. Interventions Generation capacity with short lead times and self-generation will be enabled through such as labour relations are not being integrated with other workstreams. This initiative systematic regulations. is aligned with Policy Position 4 of IRP2019 stating that a team will be convened to put together a ‘just transition’ plan within a year, in consultation with all social partners. For medium- and long-term outcomes, the IRP2019 will be implemented, together with In addition, Policy Position 6 requires that the planning framework for energy (coal addressing procurement and establishing a bid window for a new build. The DMRE’s resources) and the environment must support a just transition. These policy positions will processes to enable key short- to medium-term interventions will be accelerated. To help avoid job losses, guide the modernisation of the energy sector, and appropriately enable industry to invest in the energy supply mix through self-generation, regulations exploit current resources. governing self-supply will be updated and streamlined. The development of the gas market as an alternative source of energy will be pursued The market will be tested for robust costing and funding options towards nuclear to meet limited and depleting gas supplies. Exploration of gas fields will be increased generation. Cleaner coal technologies, including CCUS, will improve coal’s sustainability (Policy Position 7 of IRP2019 – Support the development of gas infrastructure), and as a primary energy source. To address the concentration risk with coal dependence relationships will be forged with other African countries for supply and market access. and Eskom as the dominant customer, focus will be placed on the following strategies: »» Additional mining rights and acquisitions and ensuring sustained Eskom uptake The Nuclear Programme will undertake the following activities to further contribute to and diversification of clients the energy security challenge the country is facing: »» Identification of minerals that are in demand for both clean energy (to support the »» Develop and implement a roadmap for the 2 500 MW Nuclear New Build Programme. IRP2019) and other diversified minerals in general Policy Position 8 of IRP2019 requires that the nuclear build programme commences »» Applications for mineral rights and identification of key off-takers in collaboration immediately. This will be a no-regret option in the long term, particularly if the Grand with CGS and MINTEK and with DMRE support Inga Hydroelectric Project does not materialise. »» Development of a regional and continental strategy that provides opportunities »» Promulgate the Section 34 Ministerial determination for procurement of the Nuclear and offtake for various minerals. New Build Programme »» Develop a position paper to implement 2 500 MW Nuclear New Build Programme The decision on the Grand Inga Treaty requires a long-stop date. Renewable energy »» Revise the Feasibility Study for the 2 500MW Nuclear Build Programme to support will be explored beyond BW 4. Buyer issues will be resolved through the creation of a procurement and actual procurement of the programme state-owned special-purpose vehicle. »» Develop a position paper for small modular reactors (SMRs) 68 >> D e p a r t m e n t o f M i n e r a l R e s o u r c e s a n d E n e r g y »» Exercise oversight of the Koeberg Plant Life Extension Programme. This initiative The sustainability of the distribution industry can be improved by reviewing the is in support of Policy Position 2 of IRP2019, which requires that the necessary regulatory framework and industry structure. Ineffective institutional arrangements can technical and regulatory work be undertaken immediately to extend Koeberg’s be addressed by reviewing the energy sector’s institutional architecture. design life by another 20 years »» Establish a fully functional National Liaison Office within the Nuclear Branch of the To address the lack of economic transformation in the energy sector, electricity, oil and DMRE to facilitate Technical Co-operation Projects and other IAEA related regional gas sector codes with target timelines must be developed and enforced. Partnerships programmes. with development finance institutions and other commercial financial institutions (Treasury, BRICS, World Bank) will accelerate industry transformation and access to Through the Programmes and Projects Branch, the DMRE will play a critical role in affordable finance. managing, co-ordinating and monitoring energy and minerals programmes and projects. Some of the key focus areas include: In response to the financial challenges that are faced by the different entities, there »» Overseeing the National Electrification Programme is an urgent need to diversify revenue streams to reduce over-reliance on grant funding, »» Overseeing programmes and projects focused on development, improvement and especially from non-commercial entities. Improving administration and finance will transformation of electricity generation, transmission and distribution e.g. the Solar enable entities to effectively manage available resources to advance their mandates Home System Programme, deployment of renewable energy projects and electricity while remaining financially sustainable. This process will leverage financial strategic infrastructure projects, amongst others planning, a financial plan of action that highlights the projected expenditures and the »» Provide strategic guidance on environmental management and climate change entity’s potential, to generate income which will cover these expenditures. »» Advance energy efficiency »» Ensure integration into mainstream energy supply in South Africa. The foremost outcome will be increased availability of energy, and a wider electricity reserve margin. The actions will increase infrastructure investment, much of it The reliance on international crude oil can be reduced by the electrification of the supported through regulatory certainty and the sector’s economic transformation. transportation sector. The lack of integrated approaches to the transport sector’s transition These actions collectively will boost employment and additional investment prospects, will be addressed. Exploration for oil fields and a targeted source diversification strategy, as well as meeting lower carbon emissions. Ultimately, these actions will contribute to focusing on Africa, will also reduce reliance. A biofuels framework will be implemented, economic growth. as well as a strategic stock policy. Responses to the pricing of petroleum products include finalising a review of the current pricing methodology, focused on the Basic Fuel Price, Magisterial District Zones and the Regulatory Accounting System. Energy Distribution Infrastructure Rehabilitation can be achieved by developing and implementing funding, as well as regulations to improve NERSA’s Regulatory oversight on infrastructure maintenance. S t r a t e g i c P l a n 2 0 2 0 – 2 0 2 5 << 69 3.1.2 Mining Cluster Problem statement: Lack of investment in mining and poor economic performance has adverse implications along the mining and minerals value chain. Lost global Rise in llegal Low investor Unemploy- market mining Negative Poor economic Migration of Sovereign Civil and consumer ment and share and activities and consequences growth skilled labour downgrade unrest confidence poverty competitive ownerless and position derelict mines Lack of investment in mining and poor economic performance has adverse implications along the mining and minerals value chain Inadequate Growth and Regulatory Fiscal crisis and Volatility of Leadership Direct infrastructure Higher costs of Lack of financial and legislative global financial commodity and causes and supply of doing business transformation sustainability certainty crisis prices governance enenrgy of SOEs Framework Labour within which Cost of energy uncertainty Dependency Increasing Road, rail and SOEs liquidity Overlapping exploration to mining and on a few debt ports issues mandates and mining houses community commodities companies activism can obtain prospecting and mining rights Access to SOEs revenue Dysfunctional Secondary and the relevant Declining tax Water and Water Illegal international pipelines governance causes environmental revenue electricity scarcity mining markets capabilities structures authorisations Lack of Geo-political Lack of access Decline in Cost of coordination risks and Customer Aging mining to exploration exploration regulatory between slowdown concentration infrastructure data funding compliance mining and of global risks communities economy 70 >> D e p a r t m e n t o f M i n e r a l R e s o u r c e s a n d E n e r g y Mining in South Africa is under pressure from numerous factors. A lack of investment The results of not attending to these problems are bound to be catastrophic for an and maintenance has caused inadequate transport infrastructure for ports and rail, industry that has been on the decline in recent years. These challenges will result in as well as inadequate water and electricity supply. Some of the mines’ own infrastructure low investor and consumer confidence. Such diminished support results in dwindling is also aging and in need of renewal. The lagging water and energy supply has two investments, weak economic growth and a brain drain of skilled labour, which inevitably acute causes: the cost of energy to mining houses, caused by both rising prices and contribute to growing unemployment and increased poverty levels. Civil unrest poses poor energy supply, and increasing water scarcity. a long-term threat if the challenges in the mining sector are not addressed. The mining sector, specifically exploration activities, faces several challenges. In terms of policy and mandate, an optimal framework around mining and petroleum is required. The concentration of petroleum is a concern, as are licensing turnaround times. Resourcing and capacity challenges include funding, skills development and monitoring capacity. Access to land, including land constraints caused by trusts, chiefs and municipalities, poses a threat to the mining sector. Furthermore, there continues to be an overall lack of co-ordination between stakeholders. The challenges and pressures on the mining sector are increasing labour uncertainty, which is evident in increased community activism, insufficient co-ordination between mines and communities, and rapidly growing concerns for safety and security, particularly of female employees in the mining industries. Growing unemployment contributes to an increase in illegal mining activities, and continues to plague the local industry. Illegal miners continue to pose a threat to the safety and security of mine employees. This is acute as the two groups often mingle, complicating situations such as fatality identifications. As a result, monitoring of health and safety, particularly related to accessing exploration sites, has been challenging. Factors limiting the ability to explore and map South Africa’s new prospective mineral resources, particularly by the Council for Geoscience, are cited as a barrier to investment. Volatile commodity prices, increased energy costs and slowing global growth are considered as depressing factors for the mining sector. Energy costs are a challenge for mines when processing minerals, leading to uncompetitive extraction costs. Infrastructure, policy and labour pressures are by far the most prominent problems facing the sector. These exacerbate the cost of production for mines with already tight margins in a sector under pressure to invest in upgrading and modernising its asset base. S t r a t e g i c P l a n 2 0 2 0 – 2 0 2 5 << 71 Strategic Response The strategic response to mining sector challenges is segmented according to the different value chain elements of the mining sector, as illustrated below. Industry value chain: Mining Smelting, refining, ener- Fabrication and Demand for energy Exploration Mining Mineral processing gy, chemicals manufacturing services » White goods » Auto and machinery » Furnaces » Rolling and foundry » Electricity » Geophysical » Crushing and » Metal casting » Machining and » Plastic products mapping » Drilling screening » Power plant assembly » Ceramics » Drilling » Lab analysis » Processing and » Chemical » Chemicals, plastics » Construction » Lab analysis » Mine planning mineral recovery production and fertilizer products » Survey » Lab analysis » Precious stone » Jewellery » Fertilizers polishing » Chemicals and detergents Logistics infrastructure and cost, a key component in the value chain 72 >> D e p a r t m e n t o f M i n e r a l R e s o u r c e s a n d E n e r g y Exploration (Mining and Petroleum) The strategic responses to the mining sector challenges will be enhanced by commitments To meet exploration funding challenges, one remedy is to look at prescribed assets, from supporting SOEs and are summarised below. particularly related to miners and CGS. There should be engagement with National Treasury and, if necessary, the BRICS and World banks to source exploration funding, including The Council for Geoscience (CGS) the need for a ‘farm-in and farm-out’ funding model. This will aid in accommodating »» The CGS has resolved to fast-track the implementation of the Geoscience Technical newcomers to the market. Programme (GTP) in the short term to catalyse investment in exploration. The goal is to ensure a long-term, sustainable funding model to sustain the impact of the Focusing on the concentration of petroleum and minerals, it will be necessary to geosciences in South Africa. encourage partnerships between emerging junior miners, and conduct a legislation »» The CGS has resolved to implement data policy guidelines, together with the review with regard to the petroleum bill to encourage inclusive, equitable and competitive installation of appropriate technological infrastructure, in line with the ICT governance exploration. The requirement for an optimal legislative framework for petroleum will framework and data architecture. Full implementation of the integrated and be addressed by expediting the legislative processing framework. multidisciplinary geoscience mapping programme, annual recapitalisation plan, and job evaluation and exploration of a sustainable funding model will occur in Transformation will be addressed by enforcing compliance with relevant legislation. the short term. Once successful, this response will be evident, with the minerals and petroleum sectors »» The CGS wishes to become a streamlined government business and will conduct a reflecting the country’s demographics. The DMRE is committed to ensuring regulatory detailed analysis of functional duplication of geosciences within the DMRE entities and legislative certainty through several channels, including the development of and streamline such activities to an entity with a legislated mandate for geosciences. comprehensive legal guidelines aligned with the objects of the MPRDA (i.e. optimal This should significantly improve operational and cost efficiencies for the geosciences exploration and substantial and meaningful participation by HDSA’s. function, with optimal impact. »» To address its financial sustainability, the CGS will develop a long-term sustainable Access to land for exploration, as well as monitoring of compliance, will be achieved funding model that balances its mandate with commercial business. It will establish by engaging with respective landowners (including trusts, chiefs, and municipalities), continuous engagement with National Treasury to advance the value proposition of as well as establishing a framework for engagements, exploration and monitoring. investment in geosciences, as well as develop an aggressive commercial business development strategy in South Africa and abroad. To reduce licensing turnaround times, relevant legislation will be reviewed and »» The CGS will prioritise the mining commodities summarised in the table below in strengthened. Capacity in terms of human resources will be strengthened, and the its geological mapping programme. Deloitte anticipates that these commodities licensing process will be reviewed. Technology will be used as an enabler to track and will be used in future, driven by consumer choices and environmental concerns. unblock bottlenecks, as well as improve communication. Co-operation between the The commodities are used in the production of lithium-ion batteries which are DMRE, Department of Water and Sanitation (DWS) and Department of Environmental becoming increasingly important in the face of transitioning to a green economy. Affairs (DEA) towards implementing one environmental system will be encouraged. S t r a t e g i c P l a n 2 0 2 0 – 2 0 2 5 << 73 Commodity Description The most prominent mining commodity and a key component of Li-ion batteries. Commodity analysts predict global demand will double by 2030. Lithium Lithium is high on the exploration list of mining companies and countries that have potential mineralisation of such a commodity will attract global exploration investment. Has seen increased demand as a result of growing interest in battery technology. Due to the surge in demand, synthetic graphite electrodes have increased Graphite in price tenfold. Cobalt Cobalt deposits are one of the desirable mineral deposits in the world. Prices have quadrupled, creating a global supply deficit in 2018. Nickel is increasing in demand due to the large quantities required for EV batteries. Only high-grade nickel is used in EVs, but only around half of the world’s Nickel supply of nickel is of the right grade for such use. Demand for nickel sulphides (battery-grade nickel) is expected to increase 50% by 2030, while the percent of nickel in car batteries could rise up to 80% from the current 33%. As the demand for electrification increases; demand for copper wiring will also increase. Around 28 million tonnes (Mt) of copper is used annually of which Copper 75% is used for wiring. Demand for copper is driven by EVs which contain four times as much copper as combustion engine cars. Renewables such as photovoltaics are five times more copper-intensive than conventional power generation from thermal plants and nuclear. Coal drove the industrial revolution and its continued importance in many countries’ fuel mixes is not in doubt. However the realities of climate change and the global response will negatively impact future demand. As the world commits to reduction of fossil fuel energy sources, coal is most likely to become Coal a commodity of the past. The reality may not necessarily be realised in the short term due to the continued importance of coal in South Africa’s current energy mix. Its future may also be prolonged by the adoption of cleaner technologies. Future growth will be impacted by the global drive to recycle, but due to its strength, steel is widely used and demand remains strong. The world steel association estimates that by 2030 1.9 billion metric tonnes of steel will be needed to meet global demand. But at the same time recycling initiatives are Iron ore expected to ramp up globally and iron ore demand will be negatively impacted by this. To drive this reality home, currently the US produces around 70% of its steel from scrap metal, reducing demand for iron ore, according to the Deloitte report. 74 >> D e p a r t m e n t o f M i n e r a l R e s o u r c e s a n d E n e r g y Petroleum Agency of South Africa (PASA) Mining »» PASA has resolved to increase its licensing and exploration fees, promote revenue Several responses that focus on mining have been proposed: sharing agreements, offer sign-on bonuses, and secure funding via a special MTEF allocation. Furthermore, it will focus on its financial efficiencies and revenue Licensing turnaround times will be addressed by reviewing and strengthening relevant generation capability, as well as translate resources into economic value. As part of legislation, strengthening capacity through more people (warm bodies), and reviewing its 5-Year Strategic Plan, PASA will establish effective use of its resources and improve the licensing process through technology to track and unblock bottlenecks. The DMRE, workforce productivity. Additionally, it will identify projects aligned with the NDP DWS and DEA will be encouraged to co-operate around one environmental system. imperatives, and review its fee structure. These responses vary between high and low priority, ultimately resulting in an expedient »» In terms of its operating model, PASA will increase exploration and production activities licensing regime. The Mineral and Petroleum Branch is responsible for these interventions. in South Africa, as well as regulate the exploration and production environment. It will acquire, archive and enhance all petroleum exploration and production data, ensure Infrastructure development, including energy, rail, water and other examples, is a viable and sustainable Agency, and deliver national projects. Underpinning this regarded as a high priority. The appropriate response includes engaging with all the is an effective and efficient operating model that is aligned with policy imperatives relevant departments to co-ordinate efforts. This is a short- to long-term strategy, aimed while realising the mandate. This will be enacted through its 5-Year Strategic Plan at increasing the availability of support infrastructure for mining. The Policy and Planning 2019–2024. Outcomes should include improved capacity, staff engagement, advocacy, Branch is best positioned to be responsible for this response. brand awareness, business processes, and stakeholder management. The strategy should also diversify participation; increase exploration activity; improve resource To address concerns around the cost of energy to mining houses, the sector will efficiency; and increase revenue generation, stakeholder and customer satisfaction. be encouraged to generate its own energy, and it should be explored as to whether »» Overlapping mandates will be addressed by resolving inefficiencies in SOEs and another entity can be established to assist in energy generation. More meaningful state establishing PASA as an independent entity to regulate, promote and facilitate (this participation in Eskom’s coal supply will also improve energy costs for heavy users. This includes the storage of relevant data) the oil and gas industry. PASA has resolved to will contribute to delivering sustainable and affordable energy for mining. intensify its focus on oil and gas development. It requires closer collaboration with all stakeholders including CGS, the South African National Energy Development Institute Mining research is lagging due to a lack of support capacity. The expansion of the (SANEDI) and NERSA in terms of the shale gas project; carbon capture project and mandates of the respective entities is proposed to support research in mining and streamlining the oil and gas regulatory value chain. Strategic relationships will be enhance their capacity. This should result in improved support for mining research and regulated by memorandums of understanding. increase the competitiveness of the South African mining industry. »» Ensuring regulatory and legislative certainty will be met through several channels, including finalisation of the Upstream Oil and Gas Bill and development of The legislative framework will be revised to prevent illegal mining. Small-scale comprehensive legal guidelines aligned with the objects of the MPRDA (i.e. optimal mining should also be encouraged, to prevent illegal mining. Supporting artisanal exploration and substantial and meaningful participation by HDSAs). PRASA has miners will encourage legitimate mining, particularly if backed by a framework on how resolved to partition both onshore and offshore acreage into reasonably sized to support artisan miners – this framework will have to be developed. blocks to be informed by a benchmarking exercise. The development of an acreage maturation chart will be implemented. These interventions have been initiated with a view to increasing investment in South Africa. S t r a t e g i c P l a n 2 0 2 0 – 2 0 2 5 << 75 A significant number of mines remain under care maintenance, requiring a framework to »» To manage overlapping mandates, MINTEK is already collaborating with CGS on deal with these mines. Specifically, such mines should not be decommissioned without specific projects of common interest, at a work-in-progress stage. MINTEK is also investigating their viability more extensively. This will encourage the optimal utilisation working with Necsa and Pelchem, regarding both Ketlaphela Pharmaceuticals and of South Africa’s mineral resources. common interests concerning diagnostic test kits and medical products. »» MINTEK is addressing its leadership challenges. A Science, Engineering and Technology African Exploration Mining and Finance Corporation (AEMFC) (SET) Human Development Programme is aimed primarily at developing skills, The AEMFC has undertaken the following: capacity and capabilities in science, engineering and technology, from junior level »» Own and shareholder equity funding to be explored through strategic partnerships through to senior researcher levels. with other DMRE subsidiaries, FDIs and BRICS »» A phased approach to mine commissioning »» Lease vs Buy decisions in areas where this can be implemented »» Additional mining rights and acquisitions and ensuring sustained Eskom uptake and diversification of clients »» Closer collaboration with CGS regarding maps »» Identification of minerals that are in demand for both clean energy (to support IRP2019) and other diversified minerals in general »» Apply for mineral rights and identify key off-takers in collaboration with CGS, MINTEK and DMRE »» A regional and continental strategy – opportunities and offtake of various minerals. MINTEK »» MINTEK has almost completed working on a strategic realignment that covers all the identified areas: from the alignment of the entire organisation with the mandate as articulated in the Mineral Technology Act, to engagements with customers and industry in particular. It also resolved to align its research and technology development operations to meet industry needs. »» MINTEK has developed a series of position papers focusing on reviving and stimulating specific sectors within the minerals and mining space, to make a meaningful contribution to the economy. The position papers cover several key topics: Reviving the ferroalloy industry; energy storage; the titanium industry; rare earth minerals; and coal as a strategic mineral. 76 >> D e p a r t m e n t o f M i n e r a l R e s o u r c e s a n d E n e r g y Mineral Beneficiation Social Contract for Mining To create access to minerals for beneficiation, necessary licensing conditions need to be »» To address the lack of proper consultation between municipalities and communities co- created. MPRDA Section 50 must be revisited to help increase domestic beneficiation. operative governance between the three spheres of government will be encouraged. »» The lack of formalised community structures requires the development of a relevant The cost of beneficiation needs to improve, in order to deliver cost-effective products. framework, as well as inter-governmental forums led by the DMRE. Addressing import parity pricing will help deliver this outcome, as well as addressing »» The lack of co-ordination between the mines and municipalities is also concerning the cost of energy. and will be remedied. Access for beneficiating products to international markets can be improved. This can Mine Health and Safety be done by using bilateral and multilateral agreements to facilitate preferential access, A review of legislation, and DMRE-led facilitation between the mines and communities, which would increase exports of manufactured products. will reduce the negative impacts of mining on communities. Compliance with legislative frameworks will be enforced to address fatalities, injuries and diseases. Research will be To address the lack of innovation in mining beneficiation, investment in research and conducted to improve health and safety, including the development of technologies development will be increased. There will also be a focus on upskilling and increasing for fall-of-ground accidents. The investigative skills and capacity of the inspectorate capacity, to diversify products and improve the country’s manufacturing capability. will be improved, particularly to reduce reliance on external parties. The inspectorate’s capacity will be enhanced with additional human resources. The South African Diamond and Precious Metals Regulator (SADPMR) »» The SADPMR has compiled proposed amendments to its empowering legislation. A review of legislation on health and safety relating to upstream petroleum and hydraulic »» To manage overlaps, it is pursuing constant engagements through forums with the fracturing will ensure zero harm to mine workers. The security and safety of women in South African Revenue Service (SARS) and the South African Police Service (SAPS). mining in relation to gender-based violence is a high priority. The implementation of »» To address alignment with legislation and local imperatives, the SADPMR has drafted guidelines and directives will create a working environment that is conducive to women proposed amendments for the DMRE’s consideration. There will be an intense in mining. To address illegal mining, stakeholder forums will be formalised between implementation of the Marketing and Communication Strategy, phased in over a mines, the DMRE and law enforcement agencies. five-year period. The Mine Health and Safety Council (MHSC) The State Diamond Trader (SDT) »» A Fourth Industrial Revolution (4IR) implementation strategy will be developed, taking »» A review of SDT’s business model will create a better revenue picture. Interventions into account the impact of technology on employees and reskilling requirements. include the diversification of operations, such as the trade on polished diamonds. »» The MHSC will implement its Promotion and Dissemination Strategy for target Alternative funding streams will be identified, and there will be a focus on selling to audiences, and build internal capacity within MHSC. both beneficiation parties and dealers. The SDT will, with the Minister, explore the possibility of review regulations, particularly around buying and selling in the market. »» Overlaps will be addressed through roundtables with involved parties to ensure properly co-ordinated functions, and clarified roles and responsibilities. S t r a t e g i c P l a n 2 0 2 0 – 2 0 2 5 << 77 3.1.3 Policy and Regulation Cluster Problem statement: Policy uncertainty and paralysis. Environ- Negative mental Lost global Low impact Lack of Unproduc- pollution Poor market Slower Negative investor and on the investment tive mining Sovereign and economic share and emissions consequences consumer price and in the local and energy downgrade degradation, growth competitive decline confidence availability economy sectors and threats position of energy to public health Policy uncertainty and paralysis Overlapping Policies Policies not in Evolution of Fragmented Direct Energy transition policy mandated High cost of developed in alignment with the mining and oversight from causes readiness (inter- compliance isolation NDP energy sector departments departmental) Mining, energy, Dysfunctional Incoherent Lack of stakeholder environmental, Regulatory Outdated policies governance government consultation science and barriers 4IR disrupting structures policies technology traditional mining and Stakeholder energy industry structures Delays in consultation Mining and Dysfunctional Secondary Lack of research policy Resistance to creates a minerals governance causes capacity implemen- change lag in policy beneficiation structures tation development Mining, energy, Time-consuming Evolution of Overlapping trade and approval Poor leadership consumers mandates investment processes promotion 78 >> D e p a r t m e n t o f M i n e r a l R e s o u r c e s a n d E n e r g y The DMRE and its entities have flagged ongoing policy uncertainty and paralysis as a Clarity around policy and regulation is particularly important due to pressures on significant barrier to its delivery. the mining and energy sectors. There is a need for transition towards carbon-neutral energy, without damaging South Africa’s current and future capacity to provide power, The introduction of more stringent environmental legislation and regulations, e.g. NEMA or impact employment negatively. There is resistance to change towards CO2-efficient and Carbon Tax has made it challenging for entities to achieve their mandates. As a energy, and incoherent government policies are also creating barriers. result, entities are of the view that the State should consider the relaxation of certain parts of the relevant regulatory framework (e.g. NEMA, Income Tax Act and SARB). In Overlapping mandates, as well as overlapping regulatory bodies, are partially responsible some cases, there is a need to form joint ventures. However, Section 54 sometimes for fragmented oversight in the mining and energy sectors. Dysfunctional governance makes the process slower. The turnaround time for regulatory approval is cited as a structures and delays in policy implementation are also contributing to this fragmentation. major challenge because it delays progress. In terms the Occupational Health and Safety Act and the MHSA, the CEF Group indicated that compliance is low. This is a major challenge because people’s lives are at risk. Entities have also raised specific challenges in this regard: »» NRWDI battles with long lead times to obtain approval for the establishment and Both the energy and mining sectors are undergoing significant evolutions. New players operation of radioactive waste management and disposal infrastructure. This is a enter the sectors by leveraging innovation, as part of the current 4IR modernisation wave. challenge because radioactive waste is constantly being generated. Higher volumes Such modernisation is disrupting traditional mining and energy, but is not spontaneous of radioactive waste are generated for disposal due to the increased application of – the evolution of consumers and citizens is motivated by policies relating to mining nuclear science and technology. and energy which are not fully aligned with the NDP. There is a lack of communication »» PASA is battling with the development of comprehensive legal guidelines aligned with industry players, as well as a decrease in research capacity towards the NDP’s with the objects of the MPRDA (e.g. optimal exploration, substantial and meaningful goals, both often underpinned by poor leadership at different levels of engagement. participation by Historically Disadvantaged South Africans). »» Necsa is struggling with non-compliance with safeguard agreements and failure to Policy uncertainty and paralysis contribute to an escalating series of adverse outcomes. maintain ASME and ISO certifications. Policy uncertainty often results in lower investor confidence. The resultant lack of »» CGS finds problems with partial compliance with regulatory requirements of the investment in the local economy contributes to weak economic growth. An unproductive Geoscience Act. and uncompetitive economy translates into higher unemployment and poverty levels. The plight of citizens and industry worsens because uncertainty harms the price and During the strategic planning session it was realised that there are overlapping policy availability of energy, due to the lack of investment in infrastructure and development. mandates within the departmental entities. Different entities share mandates around South Africa’s obligations in terms of carbon emission targets are also compromised. mining, oil and gas matters. Matters such as beneficiation, energy and the environment, and investment actions, are often caught up in rival policies that mandate different spheres of the state. These and other design problems in the policy space are forcing high costs of compliance and significant regulatory barriers. S t r a t e g i c P l a n 2 0 2 0 – 2 0 2 5 << 79 3 . 2 A lignment with the 2 0 1 9 – 2 0 2 4 M edium T erm S trategic F ramework The MTSF reflects the commitments made to the national priorities of Faster, inclusive growth is key to improving and sustaining higher living standards, government, including the commitment to implement the National and successfully reducing inequalities in the economy. Some key considerations for accelerating delivery are: overcoming challenges with State Owned Enterprises Development Plan (NDP). The MTSF lays the foundations for all social (SOEs); industrialisation; small business development; the minerals - energy complex; partners to assist government in creating inclusive economies, reducing transformative innovation; the Fourth Industrial Revolution; and ensuring a supportive inequality and eliminating poverty while protecting women, the youth macroeconomic environment for investment. Specific priorities are also needed to and those most vulnerable. The Seven Priorities derived from the broaden opportunity and employment for women, the youth and people with disabilities 2019–2024 Medium Term Strategic Framework (MTEF) are: through dedicated economic inclusion, education and skills development. Priority 1: A Capable, Ethical and Developmental State Priority 3: Education, Skills and Health A capable, ethical and developmental state underpins all seven priorities of the MTSF. To develop skilled individuals, the country must address structural barriers in tertiary It is a vision of strong leadership, a focus on people and improved implementation institutions, whilst making dedicated investments to ensure labour activation. These need capability. Facilitating this vision into action will involve a transition to a more functional to happen in tandem with skills review processes to ensure appropriate improvements in and integrated government that is capacitated with professional, responsive, embedded learning and skills levels. South Africans also depend on improvements to the suboptimal and meritocratic public servants to strengthen relations and efficiency. Intergovernmental health sector and substantial efforts are needed to strengthen management, financing and citizen engagements are key enablers to this priority to ensure programming across and delivery in this sector. all departments and agencies and the joint pursuit of a capable state. A developmental state that is capable and ethical will provide conditions that grow the economy, create Priority 4: Consolidating the Social Wage through Reliable and Quality jobs and improve quality of life. Basic Services A comprehensive, inclusive and responsive social protection system ensures the resilience Priority 2: Economic Transformation and Job Creation of citizens. Social protection is critical for income security of citizens as well as the In order to improve South Africa’s productive capacity, human capital and state capability, flexibility and competitiveness of the economy, particularly in an environment where inclusivity needs to be encouraged through broad-based investments. Improving change will accelerate because of climate and technological advances and traditional sustainable long-term growth is needed to significantly reduce unemployment. This livelihoods will come under more pressure. A continuing, increased focus on social requires both broad structural reforms as well as targeted interventions. The uncertain protection and notions around a basic citizen’s income will become more urgent and global environment and local constraints require the enabling arms of government to requires an effective social security policy framework and accompanying accessible rebuild confidence and galvanise investment in the country. mechanisms (norms, standards and processes) to enable economic inclusion. 80 >> D e p a r t m e n t o f M i n e r a l R e s o u r c e s a n d E n e r g y Priority 5: Spatial Integration, Human Settlements and Local Government and equality, but also requires dedicated interventions to address actions that undermine these values. Achieving social cohesion and safe communities requires strengthening Spatial integration criminal justice platforms, police services and community participation in public policing. The NDP identifies a direct link between inherited colonial and apartheid spatial patterns It also requires improving trust in the public sector and its institutions which underpin and the stubborn persistence of poverty, inequality and economic inefficiency. In order the above platforms. to address this historical spatially-grounded injustice, the NDP calls for the urgent, well planned and systematic pursuit of national spatial transformation, which takes account Priority 7: A Better Africa and a Better World of the unique needs and the potential of different rural and urban areas. Government will continue international leadership, working towards global peace, people-centred development and prosperity for all. This will be done by capitalising Environmental Management and Change on government’s role in supporting multilateral frameworks to resolve global disputes South Africa has a rich endowment of natural resources and mineral deposits, which, and assist Africa in laying the foundations for a shared future. A key focus will be on if responsibly used, can fund the transition to a low-carbon future and a more diverse increasing investment in opportunities for trade, economic development and a presence and inclusive economy. Developmental challenges must be addressed in a manner in global compacts. that ensures environmental sustainability. Developing countries are at particular risk due to a combination of geography, the intrinsic vulnerability of poor communities to Policy certainty is critical to ensure the country is influential, and is able to deepen environmental threats, and the pressures that economies based on resource extraction integration and co-operation to increase investment and accelerate the pace of inward place on the environment. There are several opportunities for transitioning South Africa direct investment. to a development path that actively pursues environmental sustainability as a core value. Targeted actions are needed to safeguard the country’s unique natural resource These seven priorities inform the interventions and programmes to achieve the NDP base and mitigate risks such as climate change. Vision 2030. The response of the DMRE to the MTSF priorities is reflected in its Strategy Articulation Map, which incorporates the relevant impact and outcome statements. Priority 6: Social Cohesion and Safe Communities The achievement of outcomes is linked to indicators and targets and supported by A socially cohesive and safe South Africa requires a series of intersecting interventions initiatives that demonstrate a focus on enabling the outcomes of the MTSF. These have that unite the country. This vision pivots on instilling a democratic culture of participation been detailed in Annexures B to D in this document. S t r a t e g i c P l a n 2 0 2 0 – 2 0 2 5 << 81 3 . 3 D M R E S trategy A rticulation M ap VISION A leader in the transformation of South Africa through economic growth and sustainable development in the mining and energy sectors To regulate, transform and promote the minerals and energy sectors, providing sustainable and affordable energy for growth and development, and ensuring that all South Africans MISSION derive sustainable benefit from country’s mineral wealth at 30% of the energy mix by 2025. Economic transformation and job creation Transformed, diversified and sustainable minerals and energy sector contributing to economic growth Economic Descent jobs created Industrialisation, localisation Significant energy security A just transition to a Improved access to basic Accelerated inclusive growth and sustained economic services and and sustained and export growth low carbon economy benefits affordable energy prices Industry Trade and investment Infrastructure and energy supply Stakeholder Increased transformation, Diversify supply of mineral Increased investment in Increase in South Africa’s Security of supply and Diversify energy sources economic inclusion, and policy resources in support of both mineral and petroleum sector, share of the global minerals through implementing diversify liquid fuels Perspective and regulatory certainty mining and energy sectors onshore and offshore and energy market IRP2019 Unlock South Africa’s high potential Increase in South Africa’s share of the Global Increased infrastructure investment mineral and energy resources exploration budget by both public and private sectors Policy, research, technology Regulatory, operational, service delivery and health Exploration Access to new markets Integrated service delivery Policy, Regulatory and and innovation and safety processes A stable framework and investment Improved and streamlined within which exploration promotion Internal Processes Evidence-based policy regulatory, service delivery, and mining companies Improved regulatory Ensure sufficient making that advances operational, health and safety can obtain prospecting Inclusive, Facilitate development, oversight, collaboration and and relevant skills inclusive economic processes and collaboration and mining rights and the equitable and strengthen trade and investment optimisation synergies and in the mining and Perspective growth and socio- across regulators and relevant related environmental competitive links with key economies (BRICS, skill sets (Joint projects and energy sector economic welfare role-players authorisations exploration SADC, AU, EU) programmes) Human capital and transformation Information capital Financial capital and governance Resourcing and Develop ethical leadership Promote culture of change and capability and accountability employee empowerment Governance at all levels Modernise IT infrastructure in Provide the full portfolio of Mobilise funding for strategic support of AI and Big Data in Strengthen governance IT applications required in programmes and ensure mining and energy with reliable of DMRE service delivery Perspective Attract, recruit, retain and develop modern DMRE workforce ready support of the DMRE financial sustainability of to tackle challenges associated with the evolving and dynamic and accurate mining, energy institutions value chain DMRE SOEs mining and energy sectors and economic data MTSF Priority 1 MTSF Priority 2,4,5,6,7 MTSF Priority 2 MTSF Priority 2 82 >> D e p a r t m e n t o f M i n e r a l R e s o u r c e s a n d E n e r g y The map articulates the strategic priorities of the DMRE in relation to the MTSF. The Improving the governance structures of DMRE’s service delivery institutions is particularly existence of the DMRE is premised on its vision of becoming a leader in the transformation relevant in the face of the challenges highlighted by the entities. Mobilising funding is key of South Africa’s economic growth agenda through the sustainable development of the to the development and implementation of strategic programmes. The DMRE’s strategy mining and energy sectors. This vision will be operationalised by focusing on regulating, for mobilising financial resources will help government and the private sector to fund transforming and promoting the mining, minerals and energy sectors to provide sustainable changes to the economic wellbeing of the country and to the environment. sustainable and affordable energy for growth and development, thereby ensuring Access to funding also contributes to economic growth and employment. Strengthening that all South Africans derive sustainable benefit from the country’s mineral wealth. the position of the DMRE in the above areas will influence the achievement of MTSF For the execution of its mandate and to enable the achievement of its vision, the DMRE Priority 1 as it relates to “A Capable, Ethical and Developmental State.” is supported by various entities whose mandates and operating models culminate in the ability of the DMRE to make a sustainable contribution to the MTSF imperatives. From a Policy, Regulatory and Internal Perspective, the challenges have been well documented and much emphasis has been placed on interventions to create a streamlined The Resourcing and Governance Perspective is moulded on the empowerment of policy and enabling regulatory environment. This will be enabled by evidence-based the DMRE’s workforce and the development of a pool of appropriately skilled, engaged, policy making that advances economic growth and socio-economic welfare. The latter motivated and capacitated individuals to better support and enable the execution is in line with MTSF Priority 5 which calls for the urgent, well planned and systematic of the mandates of the DMRE and its entities. The DMRE is required to invest in the pursuit of national spatial transformation. Another element of MTSF Priority 5 speaks recruitment, development and retention of human resources and to develop leadership to environmental management and climate change. A dynamic and more responsive capability and accountability at all levels. In addition, it must create an environment policy environment will create an enabling platform to fast track efforts relating to conducive to empowering employees and promote a culture of change. Together the reduction of carbon emissions, industry transformation and the diversification of with the development of ethical leadership capability and accountability, these are mineral resource supplies. critical components to ensure that the DMRE is appropriately capacitated to meet the deliverables imposed in its mandate. Improved regulatory processes and collaboration across regulators and relevant role players will provide stability in the areas of prospecting and mining rights and the With the advent of 4IR, it is necessary that supporting processes and structures reflect related environmental authorisations, allowing for greater participation in the mining the transitioning to more sophisticated IT applications to support the DMRE’s value and energy industries. This will encourage more inclusive and equitable arrangements chain. The modernisation of IT Infrastructure in support of AI and Big Data in mining and enhance the competitiveness of particularly the mining industries. and energy will result in more reliable and accurate mining and energy data and other information that can be shared more transparently to regain confidence in the DMRE. The A sound policy and regulatory environment will enable access to new markets as modernisation of systems and applications will provide the platform with streamlined this will encourage and facilitate the development and strengthening of trade links and enhanced networks that will enable collaboration across regulation and between and investment opportunities with key economies (BRICS, SADC, AU, and EU). This is various role-players. Technology enablement will also contribute to improved and more in line with MTSF Priority 7 which calls for a better Africa and a better world. Broader competitive exploration processes and smooth the transitioning into new markets. This collaboration and extended networks across borders and countries would further enable technological enablement will directly influence the achievement of improved and efforts to meet MTSF Priority 7. In addition, trade and investment opportunities will streamlined regulatory, service delivery, operational, and health and safety processes. increase in the mineral and petroleum sectors, thereby growing South Africa’s share S t r a t e g i c P l a n 2 0 2 0 – 2 0 2 5 << 83 of the global mining and energy markets, as well as its share of the global exploration supply constraints demands that focus be placed on diversifying energy sources while market. Supporting and enabling policy and regulatory frameworks will contribute to green activists worldwide continue to lobby for reduced carbon emissions. A review of improved growth and socio-economic welfare and open up opportunities for South the structure of the energy and mining sectors is imperative to meet the DMRE’s goals Africa to unlock the country’s high potential mineral resources. in support of broader national objectives in the form of accelerated transformation, economic inclusion and policy certainty. Infrastructure investment by the public and The DMRE oversees a large portfolio of entities, which are responsible for various private sectors, as well as the development and maintenance of infrastructure, are core programmes and projects. This requires an appropriately structured planning and enablers for expanding the mining and energy sectors. execution framework to enhance service delivery capacity and capability. This will enable greater collaboration and exploitation of synergies between the various entities The Economic perspective reflects the outcomes of the DMRE effectively executing and an opportunity for planning and execution of joint projects and programmes, its mandate, thereby contributing to the MTSF objective of economic transformation eliminating potential duplication and funding requirements. Such arrangements will and job creation. This is reflected in the DMRE’s focus on expanding its human resource strengthen the DMRE’s business case for the sourcing of infrastructure investment for base, driving inclusive growth and promoting industrialisation, localisation and the development and expansion of mining and energy infrastructure; as well as funding export growth. Furthermore, the department will contribute to the development of of the IRP2019 Programme aimed at increasing energy availability for the country and a transformed, diversified and sustainable minerals and energy sector contributing to its dependent industries. economic growth through the enablement of improved access to basic services and affordable energy prices. The latter will be the result of interventions implemented The Policy and Regulatory perspective also supports economic transformation and job through IRP2019, supported by an enabling regulatory environment. creation, as well as the education, skills and health priorities contained in the MTSF. An integrated approach, considering the interdependencies of the elements contained The Stakeholder perspective comprises a large portion of the DMRE’s strategy as the in the strategic articulation map, will translate into the DMRE achieving its vision and elements herein relate to its core mandate. South African industries are hugely dependent cementing its footprint in the South African economy. on the outputs of the portfolios that the department oversees. The reality of energy 84 >> D e p a r t m e n t o f M i n e r a l R e s o u r c e s a n d E n e r g y 3 . 4 I nstitutional performance information 3.4.1 Measuring the Impact Harness the synergies of the energy and mining sectors to enable energy security that makes a positive contribution to the growth and Impact Statement competitiveness of mining and other energy-intensive sectors of the economy, thereby generating economic benefits for the country. 3.4.2 Measuring the Outcomes Outcome Outcome indicator Baseline Five-Year target Interventions Responsible Investing in Framework for a just transition New indicator Framework for a just transition Ensure macroeconomic policy Mining, Minerals and Energy accelerated inclusive to a low carbon economy to a low carbon economy alignment and coherence Policy Development growth developed and implemented developed and implemented by 2022 Number of investment New indicator 50 investment promotion Accelerate delivery through Mining, Minerals and Energy promotion events held to events transformative innovation Policy Development attract investment in the – Operation Phakisa Mining South African mining cluster Laboratory – galvanising Number of direct jobs created New indicator Increase the number of growth, investment and Mineral and Petroleum per investment direct jobs created as per employment creation along Regulation investment, with up to 34 000 the mining and energy value additional jobs created over chain and mining-related the MTSF communities Industrialisation, Masterplan developed Automotive and Masterplans developed and Create a conducive Programmes and Projects localisation and CTLF Masterplans implemented environment to enable exports promoted National priority sectors grow New indicator Exports of national priority national priority sectors to Mining, Minerals and Energy contribution to GDP above sectors increased by 4% support industrialisation Policy Development current 3% and increase and localisation, leading exports by 4% to increased exports, employment, and youth- and women-owned SMME participation S t r a t e g i c P l a n 2 0 2 0 – 2 0 2 5 << 85 Outcome Outcome indicator Baseline Five-Year target Interventions Responsible Secure supply of Strategy and plan on liquid Integrated Energy Strategy and plan for liquid Secure supply and diversify Mining, Minerals and Energy energy fuels reviewed and updated Plan (IEP) fuels updated by 2022 liquid fuels Policy Development Feasibility study on new oil Draft Feasibility Feasibility study on new Mining, Minerals and Energy refinery completed study oil refinery completed by Policy Development 31 March 2021 and final investment decision made Additional 2 500 MW of New indicator 2 500 MW of nuclear energy Implement the Nuclear New Nuclear nuclear energy procured procured by 2024 Build Programme at a scale and pace that the country can afford, to ensure security of energy supply Koeberg Nuclear Power Plant New indicator 20-year extension of Koeberg Koeberg Nuclear Power Plant’s Nuclear life extension completed Nuclear Power Plant’s life life extended to 2044 completed by 2024 Centralised Interim New indicator Centralised Interim Establishment of the Nuclear Radioactive Waste Storage Radioactive Waste Storage Centralised Interim Facility for Facility procured Facility procured by 2024 sustainable management of radioactive waste New Multi-Purpose Reactor New indicator New Multi-Purpose Reactor Replacement of SAFARI-1 Nuclear procured procured by 2024 Research Reactor by New Multi-Purpose Reactor Green House Gas Percentage reduction in total New indicator 42% reduction in total GHG Implement 4 Sector GHG Mining, Minerals and Energy emissions (GHG) GHG emissions by 2024 emissions by 2024 Emission Reduction Plan Policy Development reduced (contribution from the largest emitters of GHG) 86 >> D e p a r t m e n t o f M i n e r a l R e s o u r c e s a n d E n e r g y Outcome Outcome indicator Baseline Five-Year target Interventions Responsible State of geological Number of strategies 10 Ingress 1 strategy developed for AMD Strategy developed for acid Mining, Minerals and Energy infrastructure developed for Acid Mine point measure mitigation mine drainage mitigation Policy Development improved Drainage (AMD) mitigation projects to be Programmes and Projects implemented Number of mine water/ New indicator 3 mine water/ wastewater Mine water/wastewater Programmes and Projects wastewater management management plans management plans plans implemented implemented implemented Develop and roll out New indicator Rollout of municipal electricity Develop and roll out Mining, Minerals and Energy municipal electricity asset asset management framework municipal electricity asset Policy Development management framework developed management framework Improved capacity Number of households 1.285 million 1 million additional Grid connections to Programmes and Projects to deliver basic electrified through grid connections connections households in terms of the services, quality connection between National Electrification Plan infrastructure and 2014–2019 integrated public Number of households 85 993 75 000 additional connections Non-Grid connections to Programmes and Projects transport to increase electrified through non-grid connections households in terms of the household access to connection between National Electrification Plan basic services 2014–2019 Percentage of municipalities New indicator 50% Develop and rollout municipal Mining, Minerals and Energy where the framework has electricity asset management Policy Development been rolled out framework S t r a t e g i c P l a n 2 0 2 0 – 2 0 2 5 << 87 Outcome Outcome indicator Baseline Five-Year target Interventions Responsible A functional, Percentage elimination 2018 baseline 100% elimination of wasteful Measures taken to eliminate Financial Management efficient and of wasteful and fruitless and fruitless expenditure wasteful, fruitless and irregular Services integrated expenditure in public sector incrementally from baseline of expenditure in the public government institutions 2018 by 2024 sector Percentage reduction of 2018 Baseline 100% reduction of irregular irregular expenditure in public expenditure incrementally sector institutions from baseline of 2018 by 2024 Percentage reduction of 2018 Baseline 100% reduction of qualified qualified audits in the public audits incrementally from sector baseline of 2018 by 2024 Percentage resolution Trends from the 95% resolution of reported Programme to prevent Risk and Integrity of reported incidents of anticorruption incidents of corruption by and fight corruption in Management corruption in government hotline and crime 2024 via disciplinary and government statistics criminal interventions Ensure functionality of ethics New indicator Establish ethics committees structures and adequate and adhere to terms of capacity reference Percentage participation New indicator 100% participation in District Develop and implement Mineral and Petroleum in District Planning Forums Planning Forums district/metro development Regulation (integrated plans) model (Contribute to the Khauweleza District Planning Programmes and Projects Model) Enter into shareholder New indicator Enter into shareholder Improved service delivery and Corporate Services compact with schedule 2A compact with schedule 2A attainment of positive audit SOEs SOEs outcome Approval of SOEs Annual Approval of SOEs Annual Performance Plans Performance Plans 88 >> D e p a r t m e n t o f M i n e r a l R e s o u r c e s a n d E n e r g y Outcome Outcome indicator Baseline Five-Year target Interventions Responsible A functional, Approval of Strategic Plans Approval of Approval of Strategic Plans Improved service delivery and Strategy, Monitoring and efficient and and Annual Performance Plans Strategic Plans and Annual Performance Plans attainment of positive audit Evaluation integrated and Annual outcome government Performance Plans Progress reports which detail 5 Annual 5 Annual progress To broaden our focus and CD: ODG the implementation of the progress reports reports which detail the response beyond outcomes 2014-2019 MTSF which detail the implementation of the in the signed delivery implementation 2019–2024 MTSF agreements by the Minister of the 2014-2019 MTSF Ensure effective Percentage approved invoices 100% approved 100% approved invoices paid Improved service delivery and Financial Management and sound paid within 30 days of receipt invoices paid within 30 days of receipt attainment of positive audit Services financial resource within 30 days of outcome management receipt Improved and Percentage reduction in 10% 10% Transformed minerals sector MHSI streamlined occupational fatalities regulatory, service Percentage reduction in 5% 5% delivery, operational, occupational injuries health and safety processes and Percentage reduction in 10% 10% collaboration across occupational diseases regulators and (including TB) relevant role players Percentage of investigations 80% 80% completed (initiated vs completed) Percentage of inquiries 80% 80% completed (initiated vs completed) Number of qualitative 40 000 40 000 inspections conducted (cumulative) S t r a t e g i c P l a n 2 0 2 0 – 2 0 2 5 << 89 Outcome Outcome indicator Baseline Five-Year target Interventions Responsible Strengthen the Percentage of authorisation 70% of 70% of authorisation Thorough investigation of the Nuclear control of nuclear applications processed within authorisation applications processed within implications of greater use material and the 8-week time period applications the 8-week time period of nuclear energy, including equipment processed within its potential costs, safety, the 8-week time environmental benefits, period localisation and employment Promulgated regulation on N/A Developed Regulation on opportunities, uranium Nuclear Physical Protective measures Physical Protective measures enrichment, fuel fabrication for nuclear material for nuclear material and the dangers of weapons proliferation 90 >> D e p a r t m e n t o f M i n e r a l R e s o u r c e s a n d E n e r g y 3.4.3 Explanation of planned performance over the five-year planning departments’ initiatives will be increased availability of energy, and a wider electricity period reserve margin. The actions will increase infrastructure investment, with much of it The IRP2019 programme aims to increase energy availability for the country and its supported through regulatory certainty and the sector’s economic transformation. These dependent industries. The DMRE has translated the provisions in the IRP2019 in its actions collectively will boost employment and additional investment prospects, as well responses to the challenges that the energy sector faces. Inadequate energy supply will as assist in meeting lower carbon emissions and will contribute to economic growth. be addressed in the short term by accelerating energy efficiency rollouts. Generation capacity with short lead times and self-generation options will be enabled through The mining industry is critical for the economic growth, job creation and transformation systematic regulations. objectives of the country. South Africa’s Mining Charter is aimed at increasing investor certainty and distributing the wealth the industry creates more equitably. A lack of For medium- and long-term outcomes, the various IRP2019 technologies will be investment in mining, and poor economic performance have adverse implications implemented while the DMRE’s regulatory frameworks will be updated, and processes to along the mining and minerals value chain. enable these interventions will be accelerated. This includes the enablement of industry to invest in the energy supply mix through self-generation. Furthermore the market Research in mining is critical to support targeted outcomes and the DMRE will pursue will be tested for robust costing and funding options towards nuclear generation. The options to expand the mandates of the respective SOEs to support research in mining development of the roadmap for the 2 500 MW Nuclear New Build Programme will be which will contribute to an increase in the competitiveness of the South African mining commencing soon, while oversight is exercised on the Koeberg Life Extension Programme. industry, enabling the country to be accessible to, and compete in regional and global markets. Investment in research is required to address the lack of innovation and the Cleaner coal technologies, including Carbon Capture, Utilisation and Storage (CCUS), impact on mining beneficiation and skills development that could hinder progress to will improve coal’s sustainability as a primary energy source. Renewable energy will be improve the country’s manufacturing capability. explored beyond Bid Window (BW) 4 and buyer matters will be resolved through the creation of a state-owned special-purpose vehicle. With regards to exploration activities, the CGS has resolved to fast-track the implementation of the Geoscience Technical Programme (GTP) by 2021 in the short term to catalyse Energy access and affordability will be responded to by pursuing alternative and renewable investment in exploration. The goal is to ensure that long-term funding sustains the energy options such as gas. The development of the gas market as an alternative source impact of the geosciences in South Africa. of energy will be pursued to meet limited and depleting gas supplies. Exploration for gas fields will be increased, and relationships will be forged with other African countries for Transformation will be addressed by enforcing compliance with relevant legislation. supply and market access. A just transition to a low carbon-emitting economy will be Once successful, this response will be evident, with the minerals and petroleum sectors facilitated by integrating various workstreams that relate to transitioning to an energy reflecting the country’s demographics. The DMRE is committed to ensuring regulatory mix as per IRP2019. and legislative certainty through several channels, including the development of comprehensive legal guidelines aligned with the objectives of the MPRDA (e.g. optimal The sustainability of the energy distribution industry will be improved by reviewing exploration and substantial and meaningful participation by Historically Disadvantaged the regulatory framework and industry structure, as well as regulations to improve South Africans). NERSA’s regulatory oversight on infrastructure maintenance. The foremost outcome of S t r a t e g i c P l a n 2 0 2 0 – 2 0 2 5 << 91 To create access to minerals for beneficiation, the necessary licensing conditions need to be created. MPRDA Section 50 will be revisited to increase domestic beneficiation. To reduce licensing turnaround times, relevant legislation will be reviewed and strengthened. Capacity in terms of human resources will be increased, and licensing processes and timelines will be reviewed. These interventions are also aimed at increasing economic participation, ownership, access to resources, opportunities and wage equality for women, youth and persons with disabilities. With regards to Mine Health and Safety, a review of legislation, and department-led facilitation between the mines and communities, will reduce the negative impacts of mining on communities. Compliance with legislative frameworks will be enforced to address fatalities, injuries and diseases, while research will be intensified to improve health and safety in the mining sector. The security and safety of women in mining in relation to gender-based violence is a high priority, with a long-term timeline and will be guided by the implementation of guidelines and directives to create a working environment that is conducive for women in mining. By engaging on an integrated government Programme of Action (POA) to address violence against women and children and persons with disabilities, the DMRE will commence with the gradual implementation of the NSP and will update and enforce compliance with legislative frameworks relating to mine health and safety to reduce the negative impact of mining on communities, eliminate harm to mine workers and create a working environment that is conducive for women in mining. Policy certainty is an ongoing request from investors and businesses and provides the most significant opportunity to attract investment into the country. Policy certainty creates a business environment, which is conducive to commitment and investment in the country over the short and the long term. In recent years investment has been highest in capital-intensive sectors such as mining and quarrying, transport, storage, communication, electricity, gas and water. These are all sectors currently experiencing levels of policy uncertainty, emphasising the importance of stabilising South Africa’s regulatory frameworks to attract and sustain investment. The DMRE will lead and facilitate enabling policy and the regulatory interventions required to ensure that the energy and mining sectors make meaningful contributions to national objectives and MTSF targets. 92 >> D e p a r t m e n t o f M i n e r a l R e s o u r c e s a n d E n e r g y 3.4.4 Key Risks and Mitigation Measures Outcome Key risks Mitigation measures Increase South Africa’s share of the global »» Inability to grow the country’s share of the global »» Source and secure exploration funding exploration budget exploration budget »» Fast-track the implementation of the Geoscience Technical Programme Inclusive, equitable and competitive »» Not meeting transformation and growth targets »» Promote transformation of the energy and mining sectors exploration »» Pursue regulatory and structural reforms e.g. legislation review of the petroleum bill »» Disputes arising from communities, municipalities, »» Workshops and meetings on the SLP departments and holders of rights as a result of »» Participate in consultation/engagement sessions with underdevelopment of socio-economic issues; disruption of municipalities and other relevant stakeholders on mining activities; nonalignment of Social and Labour Plan alignment of the SLP with developmental plans (SLP) with the developmental plans of various stakeholders A stable framework within which exploration »» Bottlenecks in licensing processes »» Institute of Inter-governmental Forums and mining companies can obtain »» Non-compliance with environmental protection regulation »» Reduce compliance costs for new entrants, and reduce prospecting and mining rights and the and policy regulatory barriers related environmental authorisations »» IT Improved and streamlined regulatory »» Delays in regulatory decisions »» Review regulatory frameworks and make them more processes and collaboration across responsive to stakeholder needs regulators and relevant role players »» Institute inter-governmental forums led by the DMRE Improved access to basic services and »» Inability to reduce energy costs for the citizens of the »» Implementation of IRP2019 affordable energy prices country and dependent industries »» Diversification of energy sources – gas, liquid fuels, wind, solar, etc. »» Energy pricing »» Amend the National Energy Regulator Act »» Amend the Electricity Regulation Act »» Energy Security (Supply and Demand dynamics) »» IRP, IEP, Demand Side Management Evidence-based policy that advances »» Reactiveness to significant industry, regulatory and »» Prioritise and fund relevant research areas economic growth and socio-economic technology developments welfare and prepares the economy for the »» Missed opportunities to advance the DMRE’s mandate external shock of 4IR demand and supply dynamics S t r a t e g i c P l a n 2 0 2 0 – 2 0 2 5 << 93 Outcome Key risks Mitigation measures Strengthened trade and investment links »» Policy uncertainty deterring investment in the energy and »» Review regulatory structures and frameworks that enhance with key economies (BRICS, SADC, AU, EU) mining sectors harmonisation and encourage co-operation across national and international borders Increase in South Africa’s share of the global »» Inability to capture a larger share of the global minerals »» Bilateral agreements minerals and energy market and energy market »» Review regulatory frameworks to promote industrialisation Increased transformation, economic »» Non-compliance with the Draft Mining Charter »» Women in Energy (WiE) Business Directory inclusion, and policy certainty »» Legislative framework to accommodate small-scale mining »» Transformation: Noncompliance with Mining Charter »» Workshops on the Mining Charter 2018 resulting in economic and political instability and failure to »» Referral of cases of fronting to Companies and Intellectual transform sustainably Property Commission/B-BBEE Commission »» Notices, directives, orders and instructions issued in terms of the MPRDA »» Artisanal Mining »» Standalone legislation on artisanal and small-scale mining (ASSM) »» Oversaturation of the market »» Develop scientific analysis tool »» Unutilised trading infrastructure »» Finalise Standard Operating Procedures (SOPs) »» Retrenchment of employees »» International benchmark »» Unwarranted pressure on social security system »» Alignment with macro-spatial framework (national, »» Failure to meet licensing objective targets regional, etc. Spatial Development Framework) »» Possible litigation »» Make recommendations to the Policy and Planning Branch »» Unlawful operators to amend legislative framework »» Increased non-compliance »» Approval of SOPs Diversify supply of mineral resources in »» Lack of research to respond to industry dynamics thereby »» Source funding to increase resource capacity and capability support of both mining and energy sectors not capitalising on opportunities presented in the mining and energy value chains 94 >> D e p a r t m e n t o f M i n e r a l R e s o u r c e s a n d E n e r g y Outcome Key risks Mitigation measures Injection of carbon enabled and emissions »» Conflict between environmental and climate obligations »» IRP2019 reduced and aspirations, and economic growth and poverty »» Amendment of NEMA, Specific Environmental alleviation imperatives Management Acts (SEMAs) »» Climate change »» Just transition to low carbon economy »» IRP2019 and Socio-Economic Impact Assessment System »» Implementation of strengthened stakeholder segmentation and targeting strategy, and diplomacy framework »» Non-compliance with environmental legislation »» Investment in cleaner technologies »» Not meeting emissions targets »» Inability to respond to national climate change response »» Develop energy sector climate change strategy measures »» Develop mitigation and adaptation plans for the energy sector »» Allocation of additional funding »» Limited Clean Development Mechanism (CDM) project »» Lobby for bilateral trading with Japan and other EU uptake members »» Uncertainty about the form of the KYOTO Protocol commitments »» South Africa not gaining maximum benefit from the KYOTO »» Lobby for bilateral trading with Japan and other EU Protocol members »» Environment: Noncompliance with legislation (MPRDA, »» Workshops and meetings on NEMA NEMA and WASTE Act) by holders of rights and permits »» Mine Environmental Management Forum in place resulting from Environmental Assessments and EMPs »» Notices and directives issued in terms of NEMA »» Degradation and pollution of the environment, state »» Notices, directives, orders and instructions issued in terms liability, health hazards of provision of sections 6 and 29 of MPRDA S t r a t e g i c P l a n 2 0 2 0 – 2 0 2 5 << 95 Outcome Key risks Mitigation measures Diversified energy sources through »» Insufficient energy supply to service the country’s demand »» Alternative supply sources implementation of IRP2019 »» Accelerate energy efficiency rollouts »» Pursue alternative sources of energy »» Secure investments for infrastructure renewal, expansion and maintenance »» Implementation of IRP2019 »» Poor IEP – Inability to plan for future energy supply »» Develop SOPs for data collection and management processes »» Develop a standard template for the collection of data »» Liaise with local energy stakeholders to provide accurate and correct energy data »» Establishment of energy data task teams for interpretation, analysis and classification of energy data across various energy commodities »» Automation and streamlining of energy data »» Increase capacity by employing permanent staff members or interns until the full functioning of the programme Infrastructure investment by both public and »» Lack of foreign direct investment »» Strengthen governance frameworks and structures private sector »» Pursue regulatory and structural reforms Improved regulatory oversight »» Silo working, duplicate functions and investment funding »» Develop an integrated service delivery model not optimally deployed »» Develop long-term sustainable funding model »» Inconsistent implementation of agreements due to poor »» Ensure synergy and alignment of minerals and energy support from partners and line function projects to foster greater cohesion »» Engage partners and work more closely with line function »» Delay in the legislative process caused by external »» Mobilise and strengthen stakeholder consultation during consultation drafting stage of legislative process »» Uncoordinated legislation and policy development within »» Improve co-ordination and consultation throughout all government levels of government Funding mobilised for strategic programmes, »» Lack of funding for strategic programmes »» Develop long-term sustainable funding model and financial sustainability of departmental »» Expand mandates of DMRE entities SOEs ensured Strengthened governance of DMRE service »» Financial sustainability of entities reporting to the Minister »» Develop an integrated service delivery model delivery institutions »» Diversify sources of revenue 96 >> D e p a r t m e n t o f M i n e r a l R e s o u r c e s a n d E n e r g y Outcome Key risks Mitigation measures Modernised IT infrastructure in support of AI »» Lack of reliable economic data for decision-making »» Investment in IT Infrastructure and Big Data in mining and energy, ensuring availability of reliable and accurate mining, energy and economic data Full portfolio of IT applications in place to »» Lack of technology infrastructure and IT enabling platforms »» Implementation of integrated IT system support the department value chain »» Unreliable IT »» Provision of reliable IT »» Fragmented system databases »» Improve compliance and quality of economic reports through use of other departmental resources (mine economics, SARS) »» Integrate IT databases »» Inability to verify statistics and data »» Improve compliance and quality of economic reports through use of other departmental resources (mine economics, SARS) »» Capacitate the research unit »» Conduct data verification inspections and random sampling Culture of change management and »» Low employee morale and productivity »» Finalise organisational structures employee empowerment promoted »» Reduced capacity to execute mandates »» Implement culture programmes Leadership capability and accountability at »» Corruption »» Strengthen governance frameworks and structures all levels developed »» Delays in executive approvals of strategic decisions »» Fill critical executive vacancies »» Poor leadership and management capabilities »» Implement management programmes for managers and other employees Modern departmental workforce attracted, »» Insufficient skills to execute mandates »» Finalise organisational structures recruited, retained and developed »» Implement training programmes for the workforce »» Develop and implement the retention strategy S t r a t e g i c P l a n 2 0 2 0 – 2 0 2 5 << 97 3.4.5 Public Entities The Minister of Mineral Resources and Energy is responsible for overseeing a number of state-owned entities (SOEs) and their subsidiaries, which are classified as either Schedule 2 or Schedule 3A institutions according to the Public Finance Management Act, 1999 (Act No. 1 of 1999), as amended. The enabling legislation requires that the Minister appoints members of the boards of all SOEs reporting to him/her. Boards are ultimately accountable and responsible for the performance of their respective entities. Within their respective mandates, the boards give strategic direction in line with the DMRE’s strategy, and implementation is undertaken by management. Name of Mandate Outcomes public entity NERSA The mandate of NERSA, as contained in relevant legislation, is summarised as »» Refer to NERSA’s 2020–23 Corporate Plan for details regarding follows: specific outcomes planned for the period »» Issuing of licences and setting pertinent conditions »» Setting and/or approving tariffs and prices »» Monitoring and enforcing compliance with licence conditions »» Dispute resolution including mediation, arbitration and the handling of complaints »» Gathering, storing and disseminating industry information »» Setting of rules, guidelines and codes for the regulation of the three industries »» Determination of conditions of supply and applicable standards »» Registration of import and production activities. CEF The mandate of the CEF is derived from the CEF Act (No. 38 of 1977) and Ministerial »» Refer to the CEF’s 2020–23 Corporate Plan for details regarding directives issued thereafter. The mandate is to contribute to the security of energy specific outcomes planned for the period supply for the country. AEMFC African Exploration Mining and Finance Corporation (SOC) Ltd (AEMFC) is the »» Refer to the AEMFC’s 2020–23 Strategic Plan for details regarding state owned mining company, established to secure South Africa's energy supply specific outcomes planned for the period primarily through the mining and supply of coal for the generation of electricity, as well as to secure other resources that will provide energy for the future, including key minerals for beneficiation in the energy and steel value chain. PetroSA PetroSA’s mandate is to: »» Refer to PetroSA’s 2020–23 Strategic Plan for details regarding »» Operate as a commercial entity and create value for the shareholder (pay tax and specific outcomes planned for the period dividends) »» Advance national objectives in the petroleum industry, e.g. contribute to energy security of supply »» Complement and promote government policy and strategic thrust (Energy Security Master Plan and NDP). 98 >> D e p a r t m e n t o f M i n e r a l R e s o u r c e s a n d E n e r g y Name of Mandate Outcomes public entity iGas As per the Ministerial Directive of 2 October 2000, iGAS is mandated to act as »» Refer to iGAS’ 2020–23 Strategic Plan for details regarding specific the official State agency for the development of the hydrocarbon gas industry outcomes planned for the period in Southern Africa. It is required to support the growth of the Southern African economy through active investments in Southern Africa for the provision of gas molecules and gas infrastructure. Strategic According to Section 17(1) of Strategic Stock Policy The Minister may, for the »» Refer to the SSF’s 2020–23 Strategic Plan for details regarding Stock Fuel purposes of ensuring security of supply, direct any state-owned entity to acquire, specific outcomes planned for the period (SSF) maintain, monitor and manage national strategic energy feed-stocks and carriers. SSF is mandated to provide the country with security of supply of hydrocarbons and related infrastructure in case of emergency. PASA The mandate of the Petroleum Agency of South Africa is to promote exploration »» Refer to PASA’s 2020–23 Strategic Plan for details regarding specific for onshore and offshore oil and gas resources and their optimal development outcomes planned for the period on behalf of government. The Agency also regulates exploration and production activities, and acts as the custodian of the national petroleum exploration and production database. SANEDI The National Energy Act outlines SANEDI’s direct mandate, driven by the DMRE, »» Refer to SANEDI’s 2020–23 Strategic Plan for details regarding which requires SANEDI to direct, monitor, conduct and promote energy research specific outcomes planned for the period and promote energy efficiency measures throughout the economy. MINTEK The objects of MINTEK are: through research, development and technology transfer »» Work on a strategic realignment that covers all the identified areas: to promote mineral technology, and to foster the establishment and expansion of from the alignment of the entire organisation with the mandate industries in the field of minerals and products derived therefrom. as articulated in the Mineral Technology Act, to engagements with customers and industry in particular »» Align research and technology development operations to meet industry needs »» Finalise the medium- to long-term MINTEK Strategy, as well as launch the strategy and embark on a stakeholder engagement campaign to socialise them with the new strategic direction of the organisation »» Conclude the operating model, as well as the macro organisational structure: in preparation for this develop a series of position papers focusing on reviving and stimulating specific sectors within the minerals and mining space, which will make a meaningful contribution to the economy »» Monitor implementation of and reporting on the SET Human Development Programme, aimed primarily at developing skills, capacity and capabilities in science, engineering and technology, from junior level through to senior researcher levels S t r a t e g i c P l a n 2 0 2 0 – 2 0 2 5 << 99 Name of Mandate Outcomes public entity CGS The Council for Geoscience (CGS) is one of the national science councils of South »» Develop a long-term sustainable funding model that balances the Africa and the legal successor of the Geological Survey of South Africa, which was CGS’ mandate with commercial business formed in 1912 by the amalgamation of three former Surveys, the oldest of which »» Establish continuous engagement with National Treasury to advance - the Geological Commission of the Cape of Good Hope - was founded in 1895. The the value proposition of investment in geosciences, as well as Geoscience Act, No. 100 of 1993, as amended, established the CGS in its present develop an aggressive commercial business development strategy in form, to undertake the following mandate: South Africa and abroad »» Serve as the national custodian of ALL geoscientific information and prospecting »» Fast-track the implementation of the Geoscience Technical information relating to the earth, the marine environment and geomagnetic Programme (GTP) to catalyse investment in exploration; the goal is space to ensure a long-term sustainable funding model that sustains the »» The systematic onshore and offshore geoscientific mapping of South Africa impact of the geosciences in South Africa »» Basic geoscience research into the nature and origin of rocks »» Full implementation of an Enterprise Resource Plan that integrates »» Collection and curation of all geoscience data and act as a National Geoscience all business activities within the CGS; this includes developing an Repository integrated operating model »» The compilation and development of comprehensive and integrated geoscience »» Implement data policy guidelines, together with the installation of knowledge and information, such as geology, geophysics, geochemistry, suited technological infrastructure, in line with the ICT governance engineering geology, economic geology, geochronology, palaeontology, framework and data architecture geohydrological aquifer systems, geotechnical investigations, marine geology, »» Full implementation of the Integrated And Multidisciplinary geomagnetism, seismology, geohazards, environmental geology and other Geoscience Mapping Programme, Annual Recapitalisation Plan, and related disciplines job evaluation and exploration of a sustainable funding model »» Promote the search for, and exploitation of, any minerals in the Republic »» Become a streamlined government business – conduct a detailed »» Bring to the notice of the Minister any information in relation to the prospecting analysis of functional duplication of geosciences within the DMRE for and mining of mineral resources, which is likely to be of use or benefit to the entities and streamline such activities to an entity with a legislated Republic mandated for geosciences »» Promote the search for and the exploitation of any minerals in the Republic »» Pursue the full implementation of legislation provisions: Technical »» Study (i) the distribution and nature of mineral resources and (ii) geo- amendment of the Geoscience Act, finalisation of the Geoscience environmental aspects of past, current and future mineral exploitation Act Regulations and implementation of the Geoscience Data-Sharing »» Study the use of the surface and the subsurface of the land and the seabed, and Model for PR and MR holders from a geoscientific viewpoint advise government institutions and the general »» Other resolutions include the full installation of governance public on the judicious and safe use thereof with a view to facilitate sustainable structures, the appointment of the CGS Board, maintenance of a development fully capacitated EXCO and implementation of a Leadership Talent »» Develop and maintain the National Geoscientific Library, the National Management Programme Geoscientific Information Centre, the National Borehole Core Depository, the National Geophysical And Geochemical Test Sites, the National Geoscience Museum, the National Seismological Network and the National Geoscience Analytical Facility »» Conduct investigations and render prescribed specialised services to public and private institutions »» Render geoscience knowledge services and advice to the State 100 >> D e p a r t m e n t o f M i n e r a l R e s o u r c e s a n d E n e r g y Name of Mandate Outcomes public entity Mine Health »» Advise the Minister on all occupational health and safety issues in the mining »» Focus on revenue diversification by developing and implementing and Safety industry including legislation, research and promotion the revenue generation strategy, outlining diverse revenue streams Council »» Review and develop legislation for recommendation to the Minister (Focus on »» Develop a 4IR Implementation Strategy (MHSC) Regulations) »» Build capacity, including employees of the MHSC, members of »» Oversee research in relation to health and safety in the mining industry Council and its Advisory Committees »» Liaise with other bodies concerned with health and safety issues (MQA, State »» Implement the promotion and dissemination strategy for target Departments and various Stakeholders) audiences, and build internal capacity within MHSC to improve »» Promote a health and safety culture in the mining industry. turn-around times on MHSC processes, and research outcomes that incorporate changes in technology and development/enhancement of safety tools »» Build awareness that will result in reduced health and safety-related incidents, and enhanced skills and internal capacity within the MHSC »» Appoint the Social and Ethics Committee to focus on procurement and contract management improvements; create a dedicated Compliance Office and appointment a Compliance Officer; and improve review and monitoring efforts Necsa Necsa is established in terms of Section 3(1) of the Nuclear Energy Act, 1999 (Act »» Refer to Necsa’s 2020–23 Strategic Plan for details regarding specific No. 46 of 1999). The act provides for the commercialisation of nuclear and related outcomes planned for the period products and services, and delegates specific responsibilities to the corporation, including the implementation and execution of national safeguards and other international obligations. The South African Nuclear Energy Policy of 2008 directs Necsa to (i) investigate the entire nuclear fuel cycle with the aim of re-establishing viable fuel cycle facilities and (ii) serve as the anchor for nuclear energy research, development and innovation in South Africa. NECSA is mandated to undertake and promote research and development in the field of nuclear energy and radiation sciences and technology. It also processes and enriches source material, special nuclear material and restricted material. Apart from protecting the South African environment from nuclear threats, it supplies the commercial application of nuclear and associated technology and fulfills the State’s nuclear obligations. It is part of the Research and Regulation Cluster. NRWDI NRWDI is an SOE, dedicated to professional nuclear waste management and »» Refer to NRWDI’s 2020–23 Strategic Plan for details regarding specific disposal services in terms of the National Radioactive Waste Disposal Institute Act, outcomes planned for the period No. 53 2008. S t r a t e g i c P l a n 2 0 2 0 – 2 0 2 5 << 101 Name of Mandate Outcomes public entity NNR The National Nuclear Regulator (NNR) is a public entity, established and governed »» Refer to the NNR’s 2020–23 Strategic Plan for details regarding in terms of Section 3 of the National Nuclear Regulator Act, (Act No. 47 of 1999) specific outcomes planned for the period to provide for the protection of persons, property and the environment against nuclear damage through the establishment of safety standards and regulatory practices. It is responsible for granting nuclear authorisations and exercising regulatory control related to safety over: the siting, design, construction, operation, manufacture of component parts, and the decontamination, decommissioning and closure of nuclear installations; and vessels propelled by nuclear power or having radioactive material on board which is capable of causing nuclear damage. Pelchem Pelchem is the sole producer and supplier of fluorochemicals in the Southern »» Refer to Pelchem’s 2020–23 Strategic Plan for details regarding Hemisphere including hydrofluoric acid, fluorine gas mixtures and a range of specific outcomes planned for the period specialty perfluorocarbons and fluoromonomers for South African and international customers. NTP NTP is a state-owned public company, and is a subsidiary of the South African »» Refer to NTP’s 2020–23 Strategic Plan for details regarding specific Nuclear Energy Corporation (Necsa). Originally conceived in the early 1970s to outcomes planned for the period supply the local South African market with commercial radiopharmaceuticals, NTP is now among the world’s top producers and distributors of the key medical radioisotope molybdenum-99 (Mo-99), and radioisotope-based diagnostic imaging and therapy products including iodine-131 and lutetium-177. NTP currently supplies up to a third of global demand for Mo-99, which is the most widely used medical isotope. The daughter or decay product of Mo-99, technetium-99m (Tc- 99m), is used in more than 40-million medical diagnostic imaging studies every year. SADPMR Fulfills its mandate as stipulated in the Diamonds Act, 1986 as amended, the »» Gain support from the DMRE to retain the surplus from 2018/2019 Precious Metals Act, 2005, the Diamond Export Levy (Administration) Act, 2007 and »» Review finance model the Diamond Export Levy Act, 2007. »» Compile proposed amendments to empowering legislation »» Pursue constant engagements through forums with SARS and SAPS »» Draft proposed amendments for the DMRE’s consideration to address alignment with legislation and local imperatives »» Intense implementation of the Marketing and Communication strategy, phased in a five year period 102 >> D e p a r t m e n t o f M i n e r a l R e s o u r c e s a n d E n e r g y Name of Mandate Outcomes public entity State SDT is an SOE, established in 2007 in terms of Section 14 of the Diamond Act, No. 56 »» Review the business model to create a better revenue picture Diamond of 1986, to: through: Trader (SDT) »» Support and facilitate growth in local diamond beneficiation –– Diversification of operations, such as trade on polished diamonds: »» Buy and sell rough diamonds for local beneficiation identify alternative funding streams, and focus on selling to both »» Promote equitable access to and beneficiation of the country’s diamond beneficiation parties and dealers. resources –– Facilitate the changes by exploring the possibility of the Minister »» Grow South Africa’s diamond cutting and polishing industry by increasing HDSA reviewing regulations, particularly around the SDT’s capability to for beneficiation buy and sell in the market »» Address distortion created by excluding previously disadvantages groups from »» Address overlaps to ensure properly co-ordinated functions, and economic participation (transform diamond industry) clarified roles and responsibilities through roundtables with involved »» Purchase up to 10% of the run of mine from South African producers parties »» Sell to registered customers through an application and approved process. »» Expedite the Board appointment process »» Review organisational structures, including a new memorandum of understanding with the South African Diamond and Precious Metals Regulator (SADPMR) »» Explore shared services with other entities S t r a t e g i c P l a n 2 0 2 0 – 2 0 2 5 << 103 A nne x ures to the S trategic P lan 104 >> D e p a r t m e n t o f M i n e r a l R e s o u r c e s a n d E n e r g y A nne x ure A : D istrict D evelopment M odel The District Model Planning is led by the Department of Cooperative Governance and Traditional Affairs (COGTA). Annual Performance Plan service delivery projects, where applicable and when required by COGTA will be integrated into the District Model. S t r a t e g i c P l a n 2 0 2 0 – 2 0 2 5 << 105 A nne x ure B : E nergy C luster S trategic R esponses to M T S F Challenges and opportunities Strategic interventions Target completion date MTSF outcome indicator Inadequate energy supply »» Ministerial determinations on all technologies in IRP2019 followed by Medium term »» Increased energy procurement to ensure timeous implementation availability factor »» Ensure capacity under construction is delivered as planned (Medupi and Kusile) »» Increased electricity »» Update regulations to enable streamlined and expedited self-supply options reserve margin »» Bid window for new-build procurement (IRP2019) »» Additional megawatts »» Engage Mozambique in bilateral agreement on additional gas supply as a short- commissioned term solution »» Procure generation capacity with short lead times »» Accelerate DMRE Risk Mitigation Power Procurement Programme process »» Enable self-generation in all customer segments through systematic regulations »» Improve Energy Availability Factor to ensure constant supply of electricity »» Increase Reserve Margin to counter load shedding »» Nuclear – Test the market for robust costing and funding options Medium term »» New generation »» Coal – Cleaner coal technologies, including Carbon Capture, Utilisation and capacity Storage (CCUS) commissioned »» Grand Inga Treaty – decision on long-stop date »» Additional megawatts »» Renewable energy (beyond BW 4) commissioned »» Buyer – Resolve buyer issues through creation of a state-owned special purpose vehicle »» Explore embedded generation options to augment Eskom capacity »» Increase production from Coega LNG and focus on Eskom’s repowering High electricity prices »» Renegotiate coal contracts and relook at transportation of coal (investigate Medium term »» Supply of energy cheaper mode of transportation) secured »» Renegotiate BWs 1–3 »» Convert existing diesel generators to natural gas »» Review Electricity Pricing Policy (EPP) »» Review tariff methodology to align with restructuring initiative of government »» Set municipal and private distributor tariffs to ensure adequate recovery of costs and appropriate return »» Special pricing arrangements to protect vulnerable industries and sectors 106 >> D e p a r t m e n t o f M i n e r a l R e s o u r c e s a n d E n e r g y Challenges and opportunities Strategic interventions Target completion date MTSF outcome indicator Coal sustainability as a source of »» Pursue cleaner coal technologies Medium term »» Supply of energy primary energy secured Reliance on international crude »» Electrification of transportation sector Medium to long term oil »» Lack of integrated approach to transport sector transition »» Exploration for oil fields. »» Targeted source diversification strategy focusing on Africa »» Implement Biofuels Framework »» Implementation of Strategic Stock Policy Pricing of petroleum products Finalise review of the current pricing methodology per Short term »» Basic Fuel Price »» Magisterial District Zone »» Regulatory Accounting System Energy distribution »» Develop and implement funding Short term infrastructure rehabilitation »» Develop regulations to improve NERSA’s regulatory oversight on infrastructure maintenance Energy Efficiency Strategy not in Short term place Sustainability of distribution »» Review the regulatory framework and industry structure Short term »» Legislation for new industry »» Separation and unbundling of Eskom to eliminate cross-subsidisation generation model »» Strengthen NERSA’s regulatory oversight of Eskom and relevant municipalities »» Legislation for independent transmission company under Eskom Holdings established S t r a t e g i c P l a n 2 0 2 0 – 2 0 2 5 << 107 Challenges and opportunities Strategic interventions Target completion date MTSF outcome indicator Ineffective institutional »» Review the regulatory framework and industry structure Short to medium term »» Legislation for arrangements within the energy »» Assess the NERSA readiness to regulate an unbundled entity independent sector (including internal DMRE) »» Separation and unbundling of Eskom to eliminate cross-subsidisation transmission company »» Enter into MoU with relevant regulatory entities to streamline and complement under Eskom processes Holdings established »» Legislation for new generation model »» Appropriate regulatory framework to effectively regulate the unbundled entity Lack of economic transformation »» Develop and enforce electricity, oil and gas sector codes with target timelines Medium to long term »» Increased of the energy sector »» Accelerate industry transformation and access to affordable finance through infrastructure partnership with development finance institutions and other commercial investment financial institutions »» Create a conducive environment to enable national priority sectors to support industrialisation and localisation, leading to increased exports, employment, and youth and women owned SMMEs »» Support localisation and industrialisation through government procurement »» Mining and beneficiation renewables and green economy and oceans economy »» Create jobs through Job Summit commitments, Operation Phakisa and other public sector employment programmes »» Develop, implement, support and monitor programmes for equitable job creation, representation and ownership by women, youth and persons with disabilities Ineffective institutional »» Review of the energy sector’s institutional architecture Short term arrangements within the energy sector (including internal DMRE) 108 >> D e p a r t m e n t o f M i n e r a l R e s o u r c e s a n d E n e r g y Challenges and opportunities Strategic interventions Target completion date MTSF outcome indicator Limited and depleting gas »» Development of gas market as an alternative source of energy Medium term »» Supply of energy supply »» Increase exploration of gas fields secured »» Leverage strategic partnerships to extend gas production from known PetroSA discoveries »» Forge relationships with other African countries »» Source gas from the Brulpadda discovery – also consider acquiring equity interest in the block »» Engage Mozambique in bilateral agreement on additional gas supply as a short- term solution Separation and unbundling Amendment of the: Short term of Eskom to eliminate cross- »» National Energy Regulator Act, No. 40 of 2004 subsidisation »» Gas Act, No. 48 of 2001 »» Electricity Regulation Act, No. 4 of 2006 »» Petroleum Pipelines Regulation Act, No. 60 of 2003 Security of supply and »» Feasibility study on new oil refinery completed by 31 March 2021 and final Short term »» Supply of energy diversified liquid fuels investment decision made secured Growth and financial »» Review the cost structure of SOEs Short term sustainability of SOEs »» Diversify SOEs revenue streams »» Dispose of non-core assets »» Facilitate access to new markets »» Develop a long-term sustainable funding model for SOEs Regulatory, policy and »» Legislative Review and/or alignment of the SOE’s mandates Short term overlapping mandates »» Restructuring of the DMRE energy architecture Governance and leadership »» Functional governance structures to bequeath a capable State entity status to Short term posterity S t r a t e g i c P l a n 2 0 2 0 – 2 0 2 5 << 109 A nne x ure C : M ining C luster S trategic R esponses to M T S F Challenges and opportunities Strategic interventions Target completion date MTSF outcome indicator Exploration (Mining and Petroleum) Exploration funding »» Exploration funding (miners and CGS) – prescribed Short term »» To capture 5% of the global exploration spend assets, engage National Treasury for exploration (budget) funding, engage BRICS Bank Farm in and farm out funding »» Engage BRICS and World Bank Short term model Concentration of petroleum and »» Encourage partnerships between emerging junior Short term »» Inclusive, equitable and competitive exploration minerals miners »» Increased economic participation, ownership, »» Legislation review of Petroleum Bill access to resources, opportunities and wage equality for women, youth and persons with disabilities Optimal legislative framework »» Expediting the processing legislative framework Medium to long term »» Provide an enabling legislative framework (the processes of NCOP and National Assembly) Transformation »» Enforce compliance with the law (legislation) Short term »» Minerals and petroleum sectors reflective of demographics of the country »» Increased economic participation, ownership, access to resources, opportunities and wage equality for women, youth and persons with disabilities Access to land (exploration) and »» Engage respective landowners (trusts, chiefs, Short term »» Accessibility to and availability of land for monitoring of compliance municipalities etc.) exploration Licensing (turnaround times) »» Review the legislation to strengthen Short term »» Expedient licensing regime »» Strengthen capacity (human resources) »» Increased economic participation, ownership, »» Review the process (use technology to track/unlock access to resources, opportunities and wage bottlenecks) equality for women, youth and persons with »» Encourage co-operation between (DMRE, DWS and disabilities DEA) to implement one environmental system 110 >> D e p a r t m e n t o f M i n e r a l R e s o u r c e s a n d E n e r g y Challenges and opportunities Strategic interventions Target completion date MTSF outcome indicator Infrastructure development »» Engage the relevant departments Short to long term »» Availability of supporting infrastructure for mining (energy, rail, water etc.) »» Increased infrastructure investment by both public and private sectors Cost of energy to the mining »» Encourage own energy generation Short term »» Sustainable and affordable energy for mining houses »» Another entity to assist generating energy »» Meaningful state participation in coal supply to Eskom Lack of capacity to support »» Expand the mandate of the respective entities Medium term »» Increase competitiveness of the South African mining research to support research in mining and enhance their mining industry capacity Illegal mining »» Revise the legislative framework to prevent illegal Short term »» Eradicate illegal mining mining »» Encourage legitimate mining by supporting and assisting artisanal miners »» Framework on how to support artisanal miners »» Develop a framework to prevent illegal mining Small-scale mining »» Revise the legislative framework to prevent illegal Short term »» Develop small-scale mining sector mining »» Promote and formalise small-scale miners »» Encourage legitimate mining by supporting and assisting artisanal miners »» Framework to support the artisan miners Significant number of mines that »» Framework to deal with mines under care Short term »» Optimal utilisation of mineral resources are under care maintenance maintenance S t r a t e g i c P l a n 2 0 2 0 – 2 0 2 5 << 111 Challenges and opportunities Strategic interventions Target completion date MTSF outcome indicator Mineral Beneficiation Access to minerals for »» Necessary licensing conditions Short term »» Increased domestic beneficiation beneficiation »» MPRDA section 50 Cost of beneficiation »» Address import parity pricing Short term »» Cost effective beneficiation »» Cost of energy »» Percentage growth of exports in national priority sectors (mining and beneficiation, renewables, green economy, oceans economy) Access to international market »» Using bilateral and multilateral agreements to Medium term »» Diversified product for beneficiated products facilitate preferential access »» Improved country manufacturing capability »» Industrialisation, localisation and exports »» More decent jobs created and sustained, with youth, women and persons with disabilities prioritised Lack of innovation »» Increase investment research and development Short to medium term »» Diversified product »» Upskill and increase capacity »» Improved country manufacturing capability »» Industrialisation, localisation and exports Social Contract for Mining No proper consultation between »» Encourage co-operative governance between three Short term »» Sustainable implementation of the social and municipalities and community spheres of government labour plans on IDP »» Increased economic participation, ownership, access to resources, opportunities and wage equality for women, youth and persons with disabilities Lack of formalised community »» Develop a framework Short term »» Sustainable implementation of the social and structure »» Facilitate of inter-governmental forums led by labour plans DMRE »» Investing for accelerated inclusive growth »» More decent jobs created and sustained, with youth, women and persons with disabilities prioritised 112 >> D e p a r t m e n t o f M i n e r a l R e s o u r c e s a n d E n e r g y Challenges and opportunities Strategic interventions Target completion date MTSF outcome indicator Lack of co-ordination between »» Facilitate co-operation between the mines and Short term »» Increased economic participation, ownership, the mines and the municipalities municipalities access to resources, opportunities and wage equality for women, youth and persons with disabilities »» Investing for accelerated inclusive growth Mine Health and Safety Mining in close proximity to »» Review legislation Short term »» Reduce negative impact of mining to communities community »» Facilitation between the mines and communities led by DMRE Fatalities, injuries and diseases »» Enforce compliance with legislative framework Short term »» Zero harm to mine workers »» Implementation of mine and healthy safety milestones »» Conduct research to improve health and safety »» Develop technologies to prevent fall-of-ground »» Enhance the investigative skills/capacity of the Inspectorate »» Enhance capacity (human resources) of the Inspectorate »» Review of the legislation on health and safety relating to upstream petroleum and hydraulic fracturing Security and safety of women »» Implementation of the guidelines and directives Short term »» Conducive working environment for women in in mining in relation to gender mining based violence Threat to the security and safety »» Stakeholder forums between mines and DMRE and Short term »» Eradication of illegal mining of mine employees and public law enforcement agencies by the illegal miners S t r a t e g i c P l a n 2 0 2 0 – 2 0 2 5 << 113 A nne x ure D : P olicy and R egulatory C luster S trategic R esponses to M T S F Challenges and opportunities Strategic interventions Target completion date MTSF outcome indicator Upstream Regulation Gas Masterplan Gas Masterplan: include all sources of gas, including Short term Increased investment in gas, and energy security underground coal gas, and consider all upstream, midstream and downstream issues as well as relevant incentives and regulations Research All strategic pillars to develop priority research areas, Short term Evidence-based policy making that advances for prioritisation and resourcing economic growth, and socio-economic welfare, and prepares the economy for external shocks (4IR, demand and supply dynamics) Environmental protection Policy paper on the costs and benefits of Short term Increased investment in mineral and petroleum sector, environmental protection, and competing sectors, onshore and offshore, while balancing food security, laws, strategies that lead to sterilisation of strategic environmental protection and advancing policy mineral resources (must consider framework for co- certainty existence) Policy and regulation on carbon Policy and regulation on carbon capture, storage and Short term Enable injection of carbon and reduce emissions capture utilisation (upstream focus on storage) Stakeholder management Stakeholder Segmentation, Mapping and Targeting Short Term Policy certainty, increased community security, Strategy to be strengthened and implemented in a reduced work and mining stoppages, increased consistent manner (donors, NGOs, community groups, investment traditional leaders, political) Process automation Development of a portal for the submission of Short term Rationalised submission process between the Mining prospecting work reports Regulator, PASA and CGS and reduced resource requirements for the integrated mapping programme (costs cut, efficiency and investment increased) Strategy on uranium and nuclear Need clear and consistent strategy on uranium and Medium term Increased investment and energy security energy nuclear energy Review and align of MPRDA and Review and align MPRDA and NEMA and SEMAs in Medium term Policy certainty NEMA context of amalgamation of the DMR and DOE 114 >> D e p a r t m e n t o f M i n e r a l R e s o u r c e s a n d E n e r g y Challenges and opportunities Strategic interventions Target completion date MTSF outcome indicator Amendments to the MPRDA Review of non-petroleum amendments to the MPRDA Medium term Policy certainty, encouraging investment, small-scale mining and beneficiation increased Access to private land Technical amendment of CGS Act, to address access to Short term Strengthen access to land promote investment private land (geoscientific mapping programme) and sovereignty Midstream Regulation Security of supply of coal Position the AEMFC to address the cost and security of Short term Increased energy security supply of coal for local energy supply Just Transition Framework Just Transition Framework to move from labour- Short term Increased production, investment and reduced intensive deep level mining to 4IR efficient mining fatalities and job losses Strategy for the Strategy for the decommissioning of mines, treatment Medium term Reduce state liability and promote social cohesion, decommissioning of mines of mines under care and maintenance, business rescue limit social, political and economic disruption, limit job and liquidation losses, re-skill Review 10-Point Plan for mitigating job losses Transformation across the DMRE Consistency in principles, indicators and objectives Short term Increased transformation, economic inclusion, and value chain on transformation across the DMRE value chain (SOPs policy certainty youth, women, community) Strengthen and capacitate Legal Strengthen and capacitate Legal Services to appeal Short term Increased policy and regulatory certainty, and Services incorrect judgements and defend the letter and spirit administrative justice of the law and policy Policy on resettlement and Finalise policy on resettlement and compensation of Short term Social cohesion, and increased investment compensation of communities communities Harmonise emissions standards Harmonise emissions standards and regulations and Medium term Policy certainty, energy security, and investment and regulations their impact on Eskom and the mining industry at large (Climate Change Bill, Carbon Tax) Reduce compliance costs for Create a strategy to reduce compliance costs for new Short term Increased investment, and transformation new entrants entrants, and reduce regulatory barriers S t r a t e g i c P l a n 2 0 2 0 – 2 0 2 5 << 115 Challenges and opportunities Strategic interventions Target completion date MTSF outcome indicator Monitoring and evaluation Mineral regulation; capacity to monitor SLP, MWP, Short term Increased investment, regulatory certainty, and social Mining Charter annual assessment; development of cohesion systems and tools for remote reporting Upgrading of the South Upgrade SAMRAD to a fully-fledged cadastral system Short term Increased investment, transparency, administrative African Mineral Resources justice Administration (SAMRAD) system Nuclear NNR Board to urgently submit to DMRE a Regulation Short term Standardised regulations for nuclear power station on Long Term Operations (LTO) for nuclear LTO installations Downstream Regulation Amendment and alignment of Amendment and alignment of Diamonds Act, Precious Short term Reduction in illicit trade of diamonds and precious Acts Metals act and Export Levy Act to harmonise legal metals; promotion of beneficiation; increased framework transformation and SMME development Reduction of administered costs Acceleration of work on the reduction of administered Short term Increased Beneficiation costs to the downstream beneficiation sector Cost plus mines Review of policy around cost plus mines Short term Promote transformation, energy security, and beneficiation African Regional Integration Overarching regulatory agreement between the Medium term To ensure regulatory harmonisation of cross-border involved countries related issues Regulatory model for Eskom Develop ring-fenced Tx, Gx and Dx regulatory model Short term Enable the economic regulation of the electricity for Eskom sector for an unbundled model Energy-climate issues Negotiate a MoU under the Intergovernmental Short term Harmonised regulatory environment to resolve Relations Framework Act (IGR Act) with the DEA on tension between energy security and environmental energy-climate issues protection Surcharges for tariffs Develop a MoU with National Treasury under IGR Act Short term Improved regulation of administered electricity pertaining to surcharges for tariffs prices under the Electricity Regulation Act (tariffs) and the Municipal Fiscal Powers and Functions Act (surcharges) BWs 1–3 Negotiate IPP contracts under BWs 1–3 and facilitate Medium term Reduced electricity prices the reduction of the guarantee framework for these contracts 116 >> D e p a r t m e n t o f M i n e r a l R e s o u r c e s a n d E n e r g y A nne x ure E : T echnical I ndicator D escriptions ( T I D s ) TIDs will be provided in a separate document. S t r a t e g i c P l a n 2 0 2 0 – 2 0 2 5 << 117 NOTES 118 >> D e p a r t m e n t o f M i n e r a l R e s o u r c e s a n d E n e r g y NOTES S t r a t e g i c P l a n 2 0 2 0 – 2 0 2 5 << 119 NOTES 120 >> D e p a r t m e n t o f M i n e r a l R e s o u r c e s a n d E n e r g y K-15730-2 [www.kashan.co.za] RP155/2020 ISBN: 978-0-621-48350-5