RBM, Sokhulu trust reach governance accord
Richards Bay Minerals (RBM) is to implement new governance structures at one of the four community trusts it supports after an out-of-court settlement of a dispute over how trustees spend millions of rands in dividends.
As part of its 2009 broad-based BEE transaction mandated by the mining charter, the KwaZulu-Natal mineral sands processor majority owned by Australian mining giant Rio Tinto joined with the communities of Sokhulu, Mbonambi, Mkhwanazi and Dube in setting up trusts to enable community stakes in the company.
However, RBM has complained that there has been nothing to show for the R500m in dividends that have flowed into the trusts since they were established. Late in 2022, citing concerns over the mismanagement of funds and other issues, it approached the courts in a bid to overhaul the governance structures of the trusts.
On Friday RBM and the Sokhulu trust reached an out-of-court agreement that the company said envisaged a joint effort to improve governance structures and would give the community a say in how funds should be allocated for its benefit.
The company said the deal paves the way for the provision of “immediate” funding to the Sokhulu trust.
Werner Duvenhage, MD of Rio Tinto’s iron & titanium Africa operations, said in a statement the agreement would result in benefits for community members and improved oversight.
“We took this action in support of broadbased community upliftment and our longterm commitment to the host communities, the region and South Africa,” he said.
RBM said its legal battle with the Sokhulu trust was over but its court case for reforms at the Mbonambi, Mkhwanazi and Dube trusts continues.
Asief Mohamed, CIO at Aeon Investment Management, said community trusts had generally produced mixed results.
“Some trusts have effectively channelled resources into community development projects and poverty alleviation initiatives, leading to improvements in education, health care, infrastructure, and job creation,” he said.
“There are many excellent broad-based benefits from many community trusts. However, a minority of trusts have been plagued by governance issues, lack of transparency and corruption, with benefits not reaching intended beneficiaries.”
He added the RBM case wasn’t an isolated one.
“Several companies in South Africa have sought to modify trust deeds or renegotiate benefit-sharing agreements due to concerns about governance, transparency and accountability. Similar challenges exist with other companies and communities, demonstrating the need for ongoing improvement and adaptation in community trust models.”
RBM argued in court documents filed last year that the arrangement whereby trustees are appointed by amakhosi traditional leaders should be changed so that they are appointed in an independent, transparent process, and that disproportionate sums from trust accounts were allocated to expenses rather than being spent for the public benefit.
However, Mbonambi trust administrator Martin Mbuyazi said in a responding affidavit there was neither fraud nor
corruption.
“The trustees are not dysfunctional. The communities are benefiting. The trust deeds do not contain mistakes or errors which the founders did not intend. Indeed, the trusts’ provisions operate precisely as was agreed and as the founders intended.”
Mbuyazi rejected RBM’s contention that trusts have done a poor job and spent trust funds unwisely, and asked that the company’s call to sideline the amakhosi be dismissed.
“The inkosi is the custodian of culture and tradition of the community and enforces traditional laws. It is inconceivable that a community could be engaged with in any meaningful manner in the absence of the crucial role played by the inkosi”.
In an affidavit in June 2023, Duvenhage said RBM could not sit by “while trust funds are diverted from their true and intended purposes. It would have been irresponsible of the applicants to ignore the obvious governance concerns to the detriment of the communities.”
He said that regardless of the genesis of the trust deeds, the founders would not have wanted things to work out as they have. “These consequences are prejudicial to the interests of the beneficiaries, conflict with the public interest and hamper the achievement of the objectives of the trusts.”