TALIFHANI KHUBANA: Shared value — a new paradigm for SA mining

SA’s mining industry, traditionally rooted in a “profit at all costs” approach, must adopt a radical new paradigm to remain competitive while operating in a grossly unequal society. Shared value could be the answer.

Despite economic challenges, legislative uncertainties and the Covid-19 pandemic, in 2019 mining contributed about R400bn to SA's GDP and employed almost 500,000 people, and contributed while more than R36.9bn in VAT and R24.2bn in corporate tax.

But helping build the country’s economy has come at social and environmental costs that cast a long shadow. Widening inequality and poverty suggest that mining has not translated into inclusive growth.

As a result, communities and activists now question the true socio-economic contribution of mines. External stakeholders view mining companies as sole earners of extreme wealth, as they continue to prosper at the expense of broader society.

Slow pace of transformation

While mining has undergone big changes to remain competitive and profitable, including integration of new technology and addressing climate and social issues, the industry remains entrenched in capitalist approach of maximisation of wealth.

The government has attempted to balance company profits and competition with social benefits by introducing different policies and regulations, but companies haven’t embraced these voluntarily.

Interventions include legislation aimed at promoting climate change resilience (Carbon Tax Act), forcing economic transformation through the revised Mining Charter III of 2018, and the department of trade & industry’s BBBEE scorecard.

They have all failed to create a lasting impact. High levels of unemployment, poverty and wealth inequality remain, despite our abundance of mineral wealth.

 The way forward

Mining organisations must develop business strategies that balance creation of value for communities with increased profitability, and one way to do this is through shared value.

It is critical to remember that the industry came to to the brink of collapse after the Marikana massacre — and policy uncertainty, and labour and social volatility, remain. How then should mining companies use their capital and access to resources to boldly pivot towards a sustainable future?

Porter and Kramer (2011) define shared value as the implementation of organisational policies and practices that establish and sustain an organisation’s competitive edge over industry rivals and new entrants while simultaneously advancing social and economic conditions in the communities in which it operates.

My Nelson Mandela University research into the creation of shared value within the SA mining industry context reveals that mining companies could kick-start shared value by focusing on automation and innovation and improving employment conditions (adopting a “future-fit”, socially-focused local employment and capacity-building strategy, and integrating analytics into decision-making).

Key role players

Considering the influence of mining companies on SA’s economy, the industry has a unique opportunity to take the lead in bringing industry, government and communities closer together.

In a nutshell, shared value embraces profitably addressing societal and environmental challenges, and issues that hinder business. In addition, clearly articulating a well-understood purpose (above and beyond pure profit) can contribute to a more productive workforce and thus economic growth and social progress.

The Shared Value Business Management concept is defined through a framework that includes reimagining needs, products and services, and markets, and redefining value-chain productivity and enabling local cluster development.

This approach, as defined by Porter and Kramer, focuses on building new capacities to meet underserved community needs and addressing value-chain gaps through innovation.

Organisations that focus on any of these approaches have a superior opportunity to deliver social value while establishing a competitive advantage and achieving sustainability.

In this new paradigm, which advocates for the private sector’s commitment to creating economic value and value for society and the environment, it’s important to collaborate with all stakeholders, explore innovative solutions to societal problems and climate change, make new strategic choices and measure true socio-economic impact from all perspectives: citizens, the government and companies.

• Dr Khubana is a founder of the POV group of companies and LEAD 3600 Afrika Innovation and Research. He writes in his personal capacity.