BEE and nothingness
R171 each: Rio Tinto's empty empowerment promise
Beneficiaries feel shafted in Rio equity deal AFTER seven years of working on a coal mine, a Rio Tinto employee at the Zululand Anthracite Colliery (ZAC) in KwaZulu-Natal will have received an average of only R171 a year in black economic empowerment benefits — barely enough for a Friday-night braai.
And the community around the mine — about 160 000 people — have yet to see a cent of any “empowerment” money coming their way.
The scenario has become all too common in the South African mining landscape where big promises are made by mining companies to “uplift” the community but — after years of mining and selling mineral wealth from community lands — companies, directors and the already rich get even richer while the community sees next to nothing.
The colliery is one of the major remaining South African assets of Rio Tinto, the world’s second-largest diversified mining company after BHP Billiton.
The black empowerment structure at the ZAC mine consists of a community trust, an employee trust and a private partner called Siyakhula Sonke Corporation, which is owned by Fred Arendse. The combined entities form Maweni Mining Consortium, the black empowerment partner.
The BEE structure came into play seven years ago. Riversdale Mining, ZAC’s parent company, was sold to Rio in 2011, and a first dividend of R800 000 was paid out to employees by Rio Tinto that year. Each employee received R1 200, which to date works out at an average of R171 for each year since the BEE deal was struck.
Asked repeatedly to comment on the empowerment deal this week, Rio Tinto refused.
A dividend of R1.2-million was made for the community. Over the years, the community has also earned royalties from ZAC to the tune of about R160-million, which was paid into the Ingonyama Trust (land owners), managed by a certain Judge Ngwenya.
But a ZAC community representative said no one in the community had seen a cent.
Ngwenya was fired as director of Maweni in April for misconduct. Asked what happened to the community money, Ngwenya said he did not need to account to the media.
Arendse said owners and management at the mine had a blasé attitude towards the community. A previous financial director of Riversdale, Steve Thomas, once told Arendse that “we as majority partner don’t get involved in this BEE crap”.
Thomas said this was taken out of context. He allegedly received R59-million for facilitating the takeover deal in which Rio Tinto took control of Riversdale, according to Arendse.
In fact, the four top directors at Riversdale received a combined R347-million once the transaction was finalised, while the community was left empty handed, according to Arendse.
When asked, however, Thomas refused to confirm that he received the R59-million.
One of the disappointed Rio workers said he was expecting something like the R508 000 that rival company Kumba paid each worker in 2011.
“I wanted to open my busi- ness, but in the end the company only gave us R1 200. When I started speaking out and acting in the interest of employees, the company suspended me. The company … doesn’t act in the interest of employees,” he said.
Arendse, who was previously transformation manager at Anglo American Platinum, said that before he was asked by unions and community members to assist with empowerment issues at ZAC mine, communities did not even have their own bank accounts.
In June last year, the Department of Mineral Resources closed the ZAC mine for contravening regulations under the Mineral and Petroleum Resources and Development Act as well as not complying with health, safety and environmental regulations.
A parliamentary task team was set up this March to monitor events at the mine and to try to improve relations between the community and mine management. Yet the relationship continued to deteriorate as the community and employees did not feel they were benefiting from the mine’s operations.
Department spokesman Trevor Hattingh said the task team tried to open communication channels between the mine and communities, among other things.
Now Arendse is trying to buy ZAC from Rio Tinto. If he succeeds, this will be the first time in South Africa that a mine will be fully owned by community members and employees.
In September last year, Canadian company Forbes Coal put in a R440-million to buy ZAC, but pulled out this year, saying it was unhappy about the mine’s performance. It was also report- ed that Maweni and the community opposed the deal.
Rio Tinto wanted the deal to go through, even making a conditional offer of a R15 000 special bonus for each employee if they supported the Forbes sale. But most employees viewed this as a bribe and refused to sign.
A shop steward at the mine, who asked not to be named after management warned employees this week not to speak to the media, said the community and employees were rooting for Maweni to win the bid.
“I know Maweni put in an unsolicited bid before, but the company [Rio Tinto and ZAC] treated them like outsiders and did not even disclose how much they wanted for the mine. I hope they will be considered for the sale,” he said.
Some suggested that Arendse was leading a smear campaign against the company to gain support for the MMC bid.
Arendse said: “I have no interest in leading any smear campaign. I am running MMC, which is 84% owned by ZAC community and ZAC employees and is duty bound to get the best deal for MMC. Companies must be held accountable for what appears to be fronting BEE transactions.”