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Transformation: How is SA’s mining industry faring?

DAILY MAVERICK / O5 DECEMBER 2019 - 00.00 / ED STODDARD

The Minerals Council South Africa, the main mining industry body, has unveiled a portrait of the state of transformation in the mining industry in 2018, against the benchmarks laid out in the 2010 charter. Based on a member survey, it finds that the industry exceeded most of its targets, falling short in areas such as ‘meaningful economic participation’.

Mining companies operating in South Africa must comply with various targets that have been laid out in “mining charters” drawn up by the government, which aim to boost levels of black ownership in an industry that was seen as the backbone of the iniquitous apartheid economy.

Certain provisions of the latest version, finalised in 2018, are being challenged by the industry in court. The Minerals Council has now surveyed its members to assess compliance with the 2010 charter, which was the standard until 2018, to, among other things, highlight its transformation record.

On the 26% ownership target that was in place, the survey found the industry in 2018 had far exceeded that goal with 39.2% black, or historically disadvantaged South African (HDSA), ownership. But many of the BEE deals to bring in black owners occurred before 2010, so the industry came up short on the definition of “meaningful economic participation”, which held that ownership must include entrepreneurs, workers and communities. The industry’s effective ownership on this score was 23.7%.

This highlights the perennial problem of shifting goalposts, long an investor complaint. Once a target is obtained, often at cost or through the dilution of shareholder value, another one must be met.

On employment equity, the council found that the 40% target for management posts ranged from 58.2% for top management to 78.7% for junior management.

“Consultation with communities” – a frequent flashpoint of social discontent – was 89%, shy of a 100% target, but that is a target shrouded in some ambiguity.

On the community front, the Minerals Council found that the bulk of expenditure on community development was spent on infrastructure, but might more usefully be extended to projects that create permanent jobs, noting that unemployment was a key cause of the protests and social unrest that often beset mining regions.

“Mining companies spend mostly on infrastructure programmes, with a total expenditure (in 2018) of R576-million (43.7% of total spend). Job creation, health, environmental, and recreational programmes receive the least spending from mining companies, each representing less than 2% of total spend,” the report said.

It recommended that: “Mining community development spend should prioritise programmes that foster long-term sustainable job opportunities, considering that the majority of community protests are due to lack of jobs.”

That would be welcome – mines cannot provide employment for all of the working-age people in the communities in which they operate. Seed capital for local entrepreneurs looking for opportunities in the procurement chain is one example that comes to mind.

But given the dysfunctional state of local governance in many mining communities, it seems doubtful that the government would fill the infrastructure void, even if that is properly the state’s business.

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LINK : https://www.dailymaverick.co.za/article/2019-12-05-transformation-how-is-sas-mining-industry-faring/

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