Mining Charter is a step away from the wasteland
Mine-hosting communities are recognised, but they need shares and benefits now, not in the distant future
The proposed Mining Charter must be recognised as a step in the right direction given its broader-based approach incorporating communities and workers for the first time, the 70% local procurement requirement and alignment of social and labour plans across sectors.
Representation of communities and workers on company boards is also a progressive step. Yet the charter is full of ambiguity and nuances that need clarity. Clearly, the devil is in the detail.
The debate about mining frequently fails to recognise that mining activity means local communities give up their land and their livelihoods, and suffer severe health effects, along with water and air contamination and soil erosion.
The effect is to reduce their land to a wasteland, in the name of investment and jobs. Proper cost-benefit analysis of mining and community impacts is never done. Bench Marks has long said there are winners and losers in mining. The losers are locally affected communities and the winners are shareholders and executive management. So the question of what is investment, and at what cost, needs deeper inspection.
IT IS THEIR LAND WHERE THE MINERALS — WORTH BILLIONS — ARE FOUND. BUT THE INDUSTRY IS CRYING FOUL.
Based on 13 studies by the Bench Marks Foundation, poor communities are getting poorer. Mine communities are largely traumatised people trying to survive amid destruction. They have no voices or are criminalised if they protest because the mine will not engage them.
When communities are uprooted and relocated, the costs for them are enormous and include socioeconomic loss and exclusion from mine benefits; loss of ancestral land and culture shock; and loss of their way of life and a sustainable existence. Mining should mean they are better, not worse, off. After all, it is their land where the minerals — worth billions — are found. Nevertheless, the industry is crying foul over the free carry shares of 5% for communities and for workers.
Communities are rightly included as part of the black economic empowerment shareholding with 8% and workers with 8%. As the proposed charter correctly states, mine communities continue to live in abject poverty. Limited progress has been made in meaningful participation of black South Africans in the mineral sector.
This brings into question just how mine workers and communities will benefit from the total 16% shareholding. Six percent of these shares have to be bought. Even if 10% is a free carry interest and is paid for through vendor financing, what will this actually amount to? If no dividends are declared in the first five years, no benefits for communities or workers apply. If there is no profit, there is no interest to pay. In the sixth year this falls away and a 1% trickle dividend is paid based on revenue and not earnings, as the Department of Mineral Resources clarified for us.
MINE COMMUNITIES ARE LARGELY TRAUMATISED PEOPLE TRYING TO SURVIVE AMID UTTER DESTRUCTION.
As good as this sounds, what will be the state of these communities in the preceding five years? They already suffer and encounter economic losses through loss of land, degradation of soil — and thus their crops and cattle die — and associated water and air contamination and health impacts. Communities desperately need shares and benefits in the here and now, not in some far-off distant future.
Over the years the Bench Marks Policy Gap series of studies has identified the community trusts as problematic. The department now recognises this too. We welcome the new thinking about trusts and hope money will reach communities themselves and not only go to administrative costs or traditional authorities. The challenge is to have democratic decision-making processes in this regard with community consent.
The new order mining right requires a 14% BEE entrepreneur partner. Over the lifespan of the mine, this share must increase incrementally from 15% to 50%, then to 70% and finally 100%. What does this mean if the lifespan is only a year, as in the case of West Wits, where the department is issuing a mining licence? Or if the lifespan of the mine is 30 years?
The department also recognises that the share ownership schemes, in which communities and workers have to buy the shares, are wholly inadequate. BEE shareholders are exposed to the vagaries of the market. The trickle flow of financial benefits to BEE partners has been dismal to date. BEE partners need to pay for these shares and interest earned on these shares is the dividend they receive. No dividend, no money.
Of great concern is old order mining rights. In a meeting with the department, Bench Marks and Bua Mining Communities sought clarity on this matter. Old order mining rights are not subject to the 16% equity and 10% free carry on interest. This is highly problematic as most operating mines are excluded from this provision. In reality this means mines with a 10-to 30-year concession will continue to operate, excluding communities and workers from gaining their rightful share in the industry. No dividends or trickle dividend equal to 1% of revenues after six years will be paid. Communities that are protesting daily will not be beneficiaries.
We need to know how many new order mining rights there are, when the 2,500 operational mines’ licences expire and why communities are excluded from this provision. How do existing mines move towards the 30% BEE ownership target? Existing mines continue to cause havoc in communities. We need clarity on this issue. What about workers’ and communities’ 10% free ride and 6% paid for? Remember, the free ride is paid for — it’s only the interest on the dividend that communities get back, and maybe only after six years.
The charter’s plans in respect of social and labour plans are a step forward. Bench Marks has for many years called for the integration of these funds and joint social and labour plans for mines that operate in proximity. In addition, we call for communities’ full say and control over these funds to promote popular development from below, in consultation with local government. Communities in mining areas are beginning to think about how to develop alternative economies, be it agricultural, turning negative mine impacts into opportunities for development. This opens the way for community participation in the development and monitoring of social and labour plans.
Probably the most ambitious aim of the charter and most welcome is the 70% local content provision. The 11% equity equivalence against the ownership is admirable. Seventy percent of SA’s gold and platinum is processed in Switzerland and 80% of catalytic converters made in Europe and the US are, with most mining equipment sourced from Sweden. In the distant past we had a much better manufacturing sector associated with mining. This has been declining since 1994. We believe the 70% local content provision can stimulate growth on the supply and demand side and all roleplayers and sectors of the economy need to be engaged to explore the enormous potential benefits of this approach. This will help to tackle poverty, inequality and unemployment and build a sustainable long-term sector that will bring real benefits to SA.
Skills transfer is one area in which companies seem to be progressing well at board, executive and senior and junior management level. When it comes to critical skills, such as science, technology and engineering, the industry still needs to address apprentices, training colleges and focus on opportunities for local communities.
Of major concern are women in the workplace and sexual harassment in the underground work environment. Women in the workforce need to be taken more seriously as they are outnumbered 10 to one.
To meet the many challenges of mining, Bench Marks Foundation proposes that its independent capacity-building fund, paid for by the industry and the government, become part of the charter. Not only will the fund facilitate informed decision making by communities, it will also address skewed power relations, allowing for a more level playing field between the industry and communities. Overall, the result will be better-informed communities, with increased capacity, leading to better developmental outcomes, and improved relations and dialogue that not only benefits communities but also industry.
An independent, effective problem-solving facility geared towards developmental, sustainable solutions is urgently needed in the mining sector to address the multitude of problems between mining-impacted communities and mining companies. The seriousness and highly problematic nature of this situation cannot be underestimated. In response to this situation, Bench Marks has developed an independent problem-solving service for the sector and proposes that this be integrated into the Mining Charter. The service is underpinned by social justice values and has facilitated dialogue as the key problem-solving mechanism. It arises out of many years of consultations, research and learnings from the historical mistakes made.
Bench Marks has been engaged with civil society organisations including the Centre for Applied Legal Studies and Action Aid, and hundreds of communities that have endorsed this approach. We are engaging mining companies and the Minerals Council of SA and spearheading this initiative globally and at UN level.
• Capel is executive director of the Bench Marks Foundation.