CEO REACTS TO REPORT
Liquidation of Blyvooruitzicht mine holds lessons for fate of workers
Gaps between mining and environmental legislation, Companies Act and liquidation legislation need plugging, writes Niël Pretorius
The International Federation for Human Rights (FIDH) and Lawyers for Human Rights (LHR) recently released a study report, Blyvooruitzicht Mine Village: the human toll of state and corporate abdication of responsibility in SA. To quote from the report’s introduction: "This study documents and analyses the impacts of the initiation of insolvency proceedings and sudden cessation of the [Blyvooruitzicht] Mine’s operations on the human rights of the surrounding village community, and in particular, on the residents’ right to development, to an environment not harmful to their health and wellbeing, and to adequate housing."
In the wake of the release of the report, as CEO of DRDGold, a previous operator of Blyvoor, and as a current Blyvoor trustee, some personal observations may provide a wider perspective to the issue and assist in bringing about a sustainable solution, not only for Blyvoor but for all other South African mines facing liquidation in future.
What the Blyvoor experience has shown (and as the FIDH/LHR report points out), is that significant gaps open up because of poor alignment between the mining legislation, the environmental legislation, the Companies Act and legislation pertaining to liquidation.
It must be recognised that liquidating a mine is fundamentally different to and more complex than liquidating almost any other enterprise. In respect of the latter, the liquidator more often than not can simply padlock the door and the process of liquidation flows mechanistically from there.
When it comes to a mine, there are much bigger, more complex issues to consider – social and environmental for example, and that of essential maintenance that must continue for at least the duration of the liquidation process and even beyond. The current legislative dispensation simply does not provide for these complexities, leading to both social decay and environmental degradation.
One cannot look to the liquidator to deal with these issues — they require the attention of an expert and of a person or institution with a different set of competencies to support the liquidator and the liquidation process and to structure it in a way that softens the social and environmental effects. The FIDH/LHR report recommends this. Until such time as these pieces of legislation are better aligned and the effect of the sudden suspension of a mine is better absorbed through appropriate social and environmental safety nets, all stakeholders should collaborate to avoid at all costs the collapse of a mine.
Regarding the state in which DRDGold handed over Blyvoor to Village Main Reef, in May 2012, there was a full stores inventory, the mine was debt-free, it was making a profit and it was adequately capitalised.
Village Main invested R160m more in capital in the mine over the next 18 months.
So, how could the mine possibly fail in less than two years?
This is an important question, because there is a very significant undertone of "moral blameworthiness" in the FIDH/LHR report.
The report remains incomplete for so long as the cause of Blyvoor’s collapse is not considered. The cause should also serve as a word of caution, to help prevent similar events from occurring.
One must consider the effect that prolonged production interruptions due to labour unrest and union turf warfare had.
The proportionality and propriety of Section54 stoppages by the regulator must receive some attention too. Without suggesting that the actions of the unions or the regulators were malicious or intended to bring harm to the mine, one must question whether the consequences of these actions were adequately understood at the time.
The obligation to keep mines open rests on the shoulders of all stakeholders. It is a matter that is important enough to transcend and outweigh whatever ideological differences there may be between these stakeholders and, it is a responsibility that, if not taken seriously, may well lead to a repeat of the hardship being witnessed at Blyvoor.
As is clear from the events at Blyvoor, the extent to which former owners and shareholders can intervene and provide relief is limited. A company is not flesh and blood — it is an abstract creation designed to receive and deploy capital for a return. Its officials are constrained in how they can deal with that capital, and gifting it away to fix the consequences of a situation that is otherwise inadequately provided for in the legal dispensation of the land is not allowed.
Until adequate alignment in the laws is brought about, the main priority should remain to prevent the liquidation of mines.
As is clear from the events at Blyvoor, the extent to which former owners and shareholders can intervene and provide relief is limited. A company is not flesh and blood — it is an abstract creation designed to receive and deploy capital for a return
On top of the already-clashing provisions of the legislative dispensation, what also aggravates the situation at Blyvoor is that the benefits that could otherwise have been achieved by properly and diligently applying many of the useful provisions of existing legislation were simply not taken advantage of.
A lot is made in the FIDH/LHR report of the fact that Blyvoor has inadequate closure or rehabilitation funding. In terms of the previous mining legislation, a rehabilitation fund could be built up over the life of the mine. However, the new Mineral and Petroleum Resources Development Act requires a fully funded guarantee up front to cover these costs in the event of premature closure.
These instruments are available through insurance policies, provided that security tenure is provided, which means the right to mine the specific mineral needs to be secured, typically through a new-order mining right.
Blyvoor was ready and able to provide such a guarantee. It was ready in 2007 when it first applied for the conversion of its old-order mining rights to new-order rights and it remained ready for the following six years.
If the mining rights of Blyvoor were converted to new-order mining rights by the regulator at any stage during this period, Blyvoor’s rehabilitation costs would have been fully funded on the day of its liquidation. But for administrative delay, the debate about the adequacy of funding would not have existed.
Legal Clarity Elusive
Much is also said in the report about dust emission. What the compilers of the report would have been unaware of is that the trustees of the Blyvoor rehabilitation trust, of which I am one, requested permission from the regulator to use the trust funds to vegetate Blyvoor’s No6 tailings dump under the direct supervision of the regulator. Trust funds are ring-fenced and fall outside the liquidation process. To date, the regulator has been unable to get adequate legal clarity about its capacity to provide such a directive. The effect of this is that money is sitting in a fund and is unavailable for its intended use because of red tape.
The LHR report goes to great lengths to canvass a system to enforce social and labour plans more rigorously. The reason for this is self-evident: mines do not last forever and mine workers need to be equipped for life after mining. In addition, alternative social and economic infrastructure have to be designed and implemented into which former mine workers can be integrated. Social and labour plans are intended to achieve this and the recommendation, therefore, makes perfect sense. The problem, however, is a practical one: I am not aware of a single approved social and labour plan. They have proved to be very difficult to approve — the communities around mines are not homogenous in composition; people in these communities have different needs and, therefore, different priorities.
There must be another, better way to re-engineer former mining communities’ economies and to reskill former mine workers in ways that benefit them
There must be another, better way to re-engineer former mining communities’ economies and to reskill former mine workers in ways that benefit them. This is something that probably requires some effort at national level and is unlikely to succeed and bring about sustainable results through more regulation of an already stressed industry.
Providing a wider perspective on the events at Blyvoor and preventing recurrences by providing some further insight into what I believe went wrong, does not provide a solution for the desperate situation that former Blyvoor workers are in.
Something more is required, an effort on a much broader scale. What is needed is an effective legal dispensation both to assist in preventing closures and, where they prove to be unavoidable, in dealing with them properly.
A long-term, sustainable structure is required for "life after mining", a national effort between business, society, the mining industry, Parliament and labour. In a conversation where ideology (from all sides) is left at the door, a structure that adequately recognises the contribution of the long-term sacrifice of mine workers and their current predicament should be put in place. SA is an economic powerhouse because of the mining industry. The industry achieved its status mostly through the efforts of those mine workers who went to work in overalls and boots. How well we do this will define us as a nation and will also be a reflection of our true system of values.
While the legal remedies available to mine workers and mining communities are lacking, there is clearly a moral obligation to assist them that is deserving of the attention of the nation as a whole.
• Pretorius is CEO of DRDGold