Business Day

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

- John Capel Capel is executive director of the Bench Marks Foundation.

The proposed Mining Charter must be recognised as a step in the right direction given its broaderbas­ed 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.

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.

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 decisionma­king 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 betterinfo­rmed 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, sus- tainable 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.

IT IS THEIR LAND WHERE THE MINERALS — WORTH BILLIONS — ARE FOUND. BUT THE INDUSTRY IS CRYING FOUL MINE COMMUNITIE­S ARE LARGELY TRAUMATISE­D PEOPLE TRYING TO SURVIVE AMID UTTER DESTRUCTIO­N

 ?? /Arnold Pronto ?? Making the case: Bench Marks Foundation executive director John Capel has suggestion­s to improve the latest version of the Mining Charter, based on many years of consultati­on and research.
/Arnold Pronto Making the case: Bench Marks Foundation executive director John Capel has suggestion­s to improve the latest version of the Mining Charter, based on many years of consultati­on and research.

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