Gwede Mantashe. Picture: GCIS
Gwede Mantashe. Picture: GCIS

In the preamble to the third Mining Charter gazetted by mineral resources minister Gwede Mantashe, the point is driven home about the dysfunctional state of mining communities.

It notes that in the review of progress made under the 2004 charter, the first document to map out the requirements for social, workplace and ownership transformation of the mining sector, not enough had been done. In recording an assessment of compliance with the 2010 charter a decade after the first iteration, the preamble contains a telling point.

"The majority of mining communities continue to live in abject poverty despite the state being the custodian of the country’s mineral wealth on behalf of the nation," it notes.

It goes on to touch on one of the poison roots that fester in communities around mines, the transfer of tangible benefits from companies’ coffers to people living around mines. "As a result of inefficient administration, trusts holding the interest of mine employees and communities constrained the flow of benefits to their intended beneficiaries," the preamble notes.

From the moment exploration drill rigs start turning to when a mine is in full production, community expectations of benefits are high, seeing it as an opportunity to improve lives, but some seize it as a way to get rich and wield power at the expense of many.

Those two quotes are important because there are so many intertwined factors lying behind them, with fault resting with companies, the government and communities themselves.

From corrupt, incompetent and failing local government structures to poorly executed social plans by mining companies to the grab for money, benefits and status by community members in empowerment structures, the implementation of community schemes is fraught with difficulty.

While the intention of forcing community ownership on mining companies cannot be argued with, it has proved a challenging exercise in reality.

From the moment exploration drill rigs start turning to when a mine is in full production, community expectations of benefits are high, seeing it as an opportunity to improve lives, but some seize it as a way to get rich and wield power at the expense of many.

Stories abound of community trustees suddenly driving luxury vehicles and upgrading their houses while projects and schemes for the broader community fail to materialise, leading to protests and deep unhappiness with mining companies. The drafters of the charter clearly recognised the problems arising from ad hoc community structures set up by mining companies, by more clearly stipulating what was expected from both sides.

In the charter, mining companies are obliged to give "host communities" a nontransferable 5% "carried interest" in the company, underlying mining asset or units of production.

Shares must be placed in a trust or a similar vehicle and the trust must include representatives from the host communities as well as the mining company. The company must consult with municipalities, traditional authorities and community representatives to identify what development projects are needed and which will be undertaken by the trust.

The immediate concern arising from the charter is how do mining companies, particularly listed entities, which are tightly governed and, in the case of dual-listed companies, work within these strictures because they cannot be seen to be associated with corruption in any form.

Years of municipal audits show that local government is faulty, making honest, progressive work with these structures difficult at best and impossible at worst. Mining executives talk of municipalities expecting companies to fulfil government duties, maintaining electricity supply, water reticulation, roads and even rubbish collection.

Some companies have loaned internal expertise to municipalities, be it engineering, management or human relations skills to plug the glaring gaps. This is a short-term measure and needs a longer-term fix from national government to address the building frustration with the lack of service delivery and the easy blame of companies operating nearby.

For the charter to bring the meaningful change to communities that the drafters envision, there is a much larger problem that needs to be resolved and it falls well outside the powers of Mantashe to tackle alone.

The problem lies at the heart of rising unemployment, social upheavals and slowing investment, particularly in mining.