Ian Farmer: apologies for Marikana and hope for SA
For the first time the former Lonmin CE, in charge at the time of the Marikana shootings, talks about the week that changed his life and the course of history of a nation, and apologises for the tragedy
IAN FARMER was CE of Lonmin the day police opened fire on a group of striking Lonmin staff near the platinum group’s Marikana mine, west of Pretoria, killing 34 men.
At the time, Mr Farmer was nowhere to be seen.
Only later was it learned that he was ill, in the UK. It didn’t look good. Earlier this week, Mr Farmer addressed a conference in London, speaking in public for the first time about his role in the Marikana tragedy.
“I spent 26 years working for Lonmin,” he told his audience.
“For the last four of these years I had the privilege of being its CE. I loved the job and I threw my heart and soul into it, but I feel that I clearly let my company and my people down that week, and at every opportunity I convey my heartfelt apologies to the loved ones of those families affected.”
Mr Farmer was appointed CE of Lonmin in 2008 at a crucial stage, when he replaced former CE Brad Mills, who for years had insisted that underground mining operations at the world’s third-largest platinum group be converted to mechanisation.
Mr Mills’s ambitious mechanisation plans failed because the technology used successfully in underground coal and base metal mines could not be adapted to the narrow reefs typically found in SA’s platinum mines.
Mr Farmer — who was Lonmin’s chief financial officer — inherited the resultant financial and operating mess.
He made major progress in returning the mining operations to largely conventional methods and restructuring the organisation by moving its head office from London to Johannesburg.
Lonmin was restored to profitability, but Mr Farmer was forced to step down abruptly in August last year for medical reasons that were not explained at the time, just as the labour strikes erupted on the group’s Marikana mine. heart and soul into it, but I feel that I clearly let my company and my people down that week, and at every opportunity I convey my heartfelt apologies to the loved ones of those families affected.
There were a range of factors that gave rise to events that fateful day at Marikana.
We should ask ourselves whether these factors have become structural rigidities, and whether they will continue to inhibit the pace of SA’s growth. to support its balance sheet.
Globalisation has brought greater competition and a technical revolution, resulting in one of the greatest transformations in the history of mankind. This has had profound implications for both society and business, and amongst other things it has revolutionised the manner in which information is shared.
Social media have contributed to the so-called Arab Spring. Young people know what’s out there. They aspire to a decent education, employment opportunities, and a better life.
We should, therefore, not be surprised when those without any hope of achieving these ambitions find ways of protesting.
Increasing frustration arising from poverty, income disparity, and lifestyle disparity further increase the risk of people taking to the streets to show their frustration. In SA, for example, this takes the form of regular service delivery protests. The International Council on Mining and Metals (ICMM) reported 42 incidents of mining-related conflicts worldwide involving protests and/or the use of force in 2012. SA came in individually as the highest country, at seven incidents.
Governments worldwide are looking for ways to respond to this risk by re-examining the wealth- generating potential of their assets under the banner of “resource nationalism”, and the pendulum swings this way and that way as governments struggle to find a fair and balanced distribution between society and investor-risk-weighted returns.
We have recently started to see signs of growth in the developed economies.
The global requirement for materials — driven by urbanisation, industrialisation, and infrastructure — will remain large. However, the unwinding of stimulus schemes is likely to provide uncertainty for emerging market currencies over the near term as the economic forces of gravity readjust and pull money back towards the developed markets.
Secondly, there are factors that are particular to SA.
SA’s democracy has entered its late teens.
The rainbow nation’s honeymoon period has ended.
As a result of stark inequalities in society and high unemployment levels, particularly amongst the youth, the ANC government, influenced by its alliance partners, is constantly tinkering with the regulatory environment, and a creeping sense of narrow black nationalism risks eroding the rainbow nation image.
Mining accounts, directly and indirectly, for 19% of the domestic product. The prize for getting this right is huge
Many investors see SA as “just all too difficult to get your mind around”. Death by a thousand cuts is an expression I have heard used by investors, and we have recently seen disinvestment, downgrades by rating agencies and the cost of capital creep upwards.
Admirably, leadership in SA is in many cases made up of people who participated in the liberation struggle and have devoted their lives to their country.
However, elements of the colonial and apartheid legacies still linger in the shadows, and distrust remains between business and the government, and business and organised labour. Consequently there is still a culture of blame, and this gets in the way of constructive dialogue. Problems are further compounded by a lack of implementation capacity in the government’s ranks. The country does, however, have a vibrant civil society sector that seeks to keep both the government and business on their toes.
With an election scheduled in 2014, progressive dialogue may remain elusive and we should not be surprised if we hear unhelpful populist rhetoric over coming months. This is, however, also an opportunity for the politically brave to show initiative and leadership.
Thirdly, there are factors that are mining industry-specific.
As already mentioned, having a mineral endowment alone does not ensure success.
One has to be able to extract the minerals cost-effectively for them to have any value at all.
Unions are engaged in a fierce competition for members.
This is a destructive battle from which there can only be losers. Over the last 18 months or so, unions have not always abided by the law and there have been titfor-tat murders.
SA ranked 116th out of 148 countries assessed in a recent global competitiveness index for labour market efficiency.
Productivity and profitability have suffered, inhibiting the sector’s ability to pay higher wages. Companies will inevitably adjust to the “new normal”, and mechanisation is now firmly on the radar screen.
Mining currently accounts directly and indirectly for 1.35-million jobs, but going forward job losses will inevitably result. One has to ask oneself if these are helpful developments in a country with such high unemployment.
Clearly, the industry has been slow to transform, and it should have done more in the areas of skills development, sustainability, broadening its shareholder base, improving working conditions and tackling legacy practices such as the migrant labour system.
In my experience, mining company leaders pride themselves on being good corporate citizens, and they want to “do the right thing”. The ICMM is an organisation that the industry specifically created to set the global standards for sustainability, and I think that they do an excellent job.
Managing a mining company in SA today is extremely challenging. Management teams are firefighting, and they risk focusing only on immediate problems and not the longer term, resulting in a lack of emphasis on building strong, healthy businesses.
This contributes to a reluctance to invest new capital in growth, with the result ultimately being less wealth creation and fewer jobs.
Lastly, let’s consider the factors that are specific to Lonmin.
As already mentioned, the Association of Mineworkers and Construction Union (Amcu) and the National Union of Mineworkers (NUM) have been in fierce competition for members.
Amcu gained their first foothold in the platinum industry at Impala Platinum in early 2012. Historically, the lives of smaller unions that have overpromised and then not been able to deliver have been fairly short-lived.
However, Amcu has exploited the fact that the NUM are seen to be out of touch with their grassroots membership. We all underestimated the risk this competition posed and it ignited with violent and tragic consequences in an altercation with the police on August 16 2012. The industrial relations landscape has been fractured ever since.
My illness and absence from the helm of the company at this critical time left Lonmin rudderless at a critical moment.
Would my presence have made a difference? This is a question that I will keep asking myself until my dying day.
Could more have been done with regards to social issues such as working conditions and housing? Clearly the answer to this question must be yes, but on its own this was not in my opinion a primary factor. So is there a way forward? Can this tragic event be a catalyst for change? Can all the stakeholders work together to identify a fair balance between South African society and investor riskweighted returns?
The international investment community is looking for demonstrable leadership by all stakeholders, not more finger-pointing and blame.
What is needed is a mini development plan setting out a new vision for the future of the South African mining industry.
A vision that dovetails with the National Development Plan and addresses all its aspirations, including, for example, beneficiation. This must be underpinned by a social compact between labour, the government and business. The process of compiling such a mini mining development plan would form a well-grounded intellectual and emotional framework around which to unite. It would provide a road map around which we could rebuild SA’s investment image, postMarikana.
This challenge should not be underestimated. There are no quick fixes, and building trust around the common goal of a thriving mining industry will be an important ingredient. All parties need to sit around the table and be ready to compromise for the greater good.
They must be able to demonstrate to the sceptics that this time it’s going to be different and that they can knuckle down to find solutions, remove uncertainty and put together a plan based on delivery-orientated actions.
To sum up: I no longer have a vested interest other than that of an individual who wants to make a difference. I am a friend of SA and I hope that by speaking plainly the leaders of the respective stakeholders will take the initiative and revive the spirit of the rainbow nation. By working together we can all achieve more!
SA is known for mining, and the sector’s performance is a bellwether for the investment climate of the country.
It is what SA is known for and it continues to offer long-term sustainable growth opportunities.
It’s a sector that is core to the economy and one in which it has historically been a global leader.
Let’s create a society where people have the opportunity to be equally prosperous, not equally poor — let’s create wealth, not shrink it — let’s create jobs, not destroy them.
Democratisation has taken root across much of the African continent. This is Africa’s time. SA is already at the forefront of interAfrica investment.
Let SA lead the way.