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Mine communities - A corporate responsibility nightmare?

February 2016

In an attempt to address the economic imbalances of the past, various legal frameworks have been enacted, which have resulted in huge legal and social obligations for mining companies. These frameworks are there to ensure that mines transform the social and economic welfare of South Africans who are mostly dependant on mines for social improvement.

One of the objectives of the Mineral and Petroleum Resources Development Act 2002, as amended, (MPRDA) is to substantially and meaningfully expand the opportunities for historically disadvantaged persons, including women, to enter the mineral and petroleum industries and to benefit from the exploitation of the nation's mineral and petroleum resources, and further, to promote economic growth and advance the social and economic welfare of all South Africans.

Over the past 21 years of our democracy, various legislative instruments have been created to address the inequalities of the past and to promote transformation within the mining industry. It can be argued that the enactment and implementation of these legal frameworks has, in effect, caused an immeasurable social burden on mining companies, as they are required to comply with them in order to retain their rights. But what do these enactments really mean?

The Social and Labour Plan

One of the documents that must accompany a mining right application is a Social and Labour Plan (SLP). Once the mining right is granted, the mining right holder is required to start with the implementation of the SLP immediately, whether the holder of the mining right has commenced with mining activities or not.

In the SLP, the mining right holder is required to commit to the implementation of the various social programmes to uplift the socio-economic constraints of the communities surrounding the mining operation, by implementing the following as part of the SLP:

  • A human and resources development programme, which encompasses a skills development plan for the mine employees, a career progression plan, a mentorship plan, an internship and bursary plan, and the employment equity statistics of the mining operation.
  • A local economic development programme, which includes identifying and implementing infrastructure and poverty eradication projects, measures to address housing and living conditions of employees, measures to address the nutrition of employees, and a procurement progression plan.
  • A management of downscaling and retrenchment plan, which includes the establishment of future forums, job saving mechanisms, alternative job solutions, and mechanisms to ameliorate the social and economic impact of retrenchment of individuals.

The mining right holder is obliged to provide financially for all the programmes required in terms of the SLP. Should the mine fail to implement the commitments in the SLP, the Department of Mineral Resources (DMR) will regard this as non-compliance and issue a Notice in terms of section 93 to compel compliance at the risk of losing their mining right.

The Mining Charter

The Mining Charter, as given effect to by section 100 of the MPRDA, is an instrument that is intended to facilitate sustainable transformation and sets out specific targets in order to achieve the objectives in the MPRDA:

  • Ownership: Achieve a minimum target of 26% ownership to enable economic participation of historically disadvantaged South Africans (HDSA).
  • Beneficiation: Facilitate local beneficiation of mineral commodities by adhering to the provisions of section 26 of the MPRDA and mineral beneficiation strategies.
  • Employment equity: Achieve a minimum of 40% HDSA demographic representation at all management levels.
  • Human resource development: Invest, by 2014, 5% of annual payrolls in essential skills development activities reflective of the demographics.
  • Mine community development: Determine the developmental needs in collaboration with mining communities and identify projects within the needs analysis for their contribution to community development.
  • Housing and Living Conditions: Implement measures to improve the standards of housing and living conditions for mineworkers.

Non-compliance with the Mining Charter obligations renders the mining company in breach of the provisions of the MPRDA and subject to penalty provisions, which may include the revocation of the mining right.

The BBBEE Codes

The BBBEE Codes were introduced to dismantle the legacy of past inequalities and to promote access to finance for black economic empowerment. More importantly, they aim to accelerate the participation of black people in the economy by encouraging change in the following key areas of business: ownership, management and control, employment equity, skills development, preferential procurement, enterprise development, and socio-economic development.

In essence, the mining companies (and various other companies in different sectors) are required to meet the compliance targets as set out in the BBBEE Codes, and depending on the companies' standpoint and personal vision, compliance with the BBBEE Codes can be regarded as a well thought out empowerment plan and economic strategy or it can be viewed as another economic burden that puts the business at risk.

King III Report

The King III Code is a comprehensive corporate governance regime that addresses the financial, social, ethical and environmental practices of organisations and in its own terms provides that:

"Although a company is an economic institution, it is also a corporate citizen and accordingly has a social and moral standing in society, with all the responsibility attached to that status. The company is not merely responsible for the company's financial bottom line, but rather for the company's performance within the triple context in which it operates: economic, social and environmental".

Mining companies, in this context, have a social responsibility to ensure that they contribute to the wellbeing of the economy and society, which more often than not, requires a degree of financial contribution, which again, may or may not be construed as a social and financial burden on the mining company.

The Mining Codes

In order to enhance the implementation of the Mining Charter, the Codes were introduced and must be read in conjunction with the MPRDA and the Mining Charter. The Codes prescribe socio-economic strategies, plans and principles, which are aimed at transforming the mining industry in respect of the various elements such as: ownership, management control, employment equity, human resource development, preferential procurement, mine community and rural development, beneficiation, and housing and living conditions.

Mining companies and mining right holders have an immense social responsibility to ensure that they contribute to the economic welfare of our citizens. In certain instances, failure to comply with the social obligations can result in the cancellation or suspension of mining rights. Although some criticise the passing of social responsibilities by the state onto private corporate citizens, it is not out of place to expect mines to re-invest some of their rewards into the social upliftment of its people and communities. After all, the minerals belong to the people and mines operate under a licence from the state as the custodian of these minerals. Mining companies that are stuck in archaic practices and that perceive communities as irritants and an obstacle to their prosperous business, will in due course find themselves out of step with reality and may find their shareholder value irreparably eroded.

In order to achieve and comply with the provisions and targets set out in the created legal frameworks, it is imperative that mining companies commit to full local community engagement processes wherein they consult with communities during the initial stages of the mining operation, and continue to do so throughout the life of the mine. This will avoid community unrests and unreasonable demands by the communities, which are often caused by the irretrievable breakdown in communication between the mine and its communities, which is then exploited to advance alternate agendas.

For mines to wish away their responsibility to contribute to the social and economic development of the country is foolhardy. Mines need to embrace a strategic long-term business plan underpinned by the social responsibility we all carry as citizens.

The team

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