In 2014, the timeframes set out to achieve the transformation targets of the original Mining Charter draw to a close. Now is the time for the mining industry to take stock.
This year will mark a decade since the original Mining Charter was introduced. Companies across one of South Africa’s cornerstone industries will be measured against the transformation targets the Charter set out back in 2004 and its subsequent revision in 2010.
“The Charter has been the driving force behind the realisation that mining companies cannot detach themselves from the realities of the communities that they operate in,” says Anglo American head of transformation and regulatory affairs, Lindiwe Zikhali.
She believes that many companies have acknowledged that transformation remains critical in an industry plagued by socio-economic instability and which inherited legacy issues of social exclusion and discrimination. But there have been varying levels of success in implementing the transformation agenda on the ground.
“There’s no doubt that transformation is a challenging process,” adds Zikhali. “It is more than about reaching targets and requires people to change what they are familiar with: their work environments, the way they do things, their attitudes and behaviours. I think there is still some way to go."
The original Mining Charter measured a company’s transformation progress against eight pillars: human resources development; employment equity; ownership; beneficiation; procurement; housing and living conditions; migrant labour; and mine community and community development.
“The Charter set out to redress historical and social inequalities and encourage transformation at all tiers – from ownership to employment equity, procurement and rural development,” says Zikhali.
But from 2009–2010, the Department of Mineral Resources (DMR) conducted an assessment of the industry and found that the mining industry had fallen short of the initial targets. The DMR then revised the targets, keeping the target of 26% Historically Disadvantaged South Africans (HDSA) ownership of South Africa’s mining assets by 2014 as before, but adding that HDSA’s at each level of management should constitute 40% of the total and linked the target to demographics.
Zikhali asserts that Anglo American was able to get a head start in the transformation process as it began its transformation journey before the Mining Charter came into force. But she emphasises that Anglo American’s approach is more than just meeting the numbers: “Scorecards can be self-defeating in that you end up getting what you measure. We seek to approach the transformation challenge less as tick-box compliance with regulations and more as an essential initiative as corporate citizens of this country. We’ve regarded transformation from the outset as something that is basically the right thing to do.”
She points to the changing gender roles in the mining industry as an example of how difficult it can be to achieve meaningful transformation.
“We have women working underground in roles that historically they would never have had access to, but subliminal discrimination still exists,” explains Zikhali. “So while we may see the number of women increasing each year, we don’t really measure or check whether the same women are staying in the same positions year-on-year. Any lack of continuity may indicate the pressures that transformation can have on individuals.”
Zikhali says companies need to constantly interrogate whether what they are doing is in the best interests of the people affected, taking cognisance of their diverse social circumstances, needs and aspirations. She believes that, going forward, the impact of transformation projects needs to be measured differently.
“It’s one thing measuring how much companies spend on Social and Labour Plan initiatives, but quite another ensuring if and how they actually benefit people on the ground. It’s the difference between providing a community with a school building, and working with the community to build a school where learning and teaching can take place.”
Within the context of transformation, providing infrastructure for communities is something Anglo American can do as a company, but ensuring that it can actually deliver value to those communities requires consultation with all the associated stakeholders – from municipal authorities to community members – to ensure that the company jointly delivers facilities that have sufficient capacity, are properly resourced, efficiently managed and well maintained into the future.
The same principle can be applied to transforming ownership. Employee Share Ownership Plans (ESOPs) can be an effective tool in redistributing wealth. A leading example is at Anglo American’s Kumba Iron Ore where a combination of favourable conditions, including a strong financial performance enabled the business to distribute among its employees – through the Envision employee share ownership scheme – the largest collective social dividend ever paid out by a company to HDSA.
The initial cash payment in December 2011, at the conclusion of the first phase, saw each permanent employee who had been with the company since inception, below management level, receive R576 045. This was a life-changing event for many employees, who used the money to pay off their debts, buy property, provide for their children’s education and, in many cases, buy a car for the first time.
The scheme continues to pay healthy dividends to employees. Since March 2012, employees have received a total dividend payment of R41 508. For the first six months of 2013, Envision received a dividend of R271 million, of which R95 million was paid out to almost 6 600 employees, who each received R14 649 before tax at the end of August 2013.
She also emphasises Anglo American’s enterprise development initiative, Zimele, which is now seen as a global best-practice model for companies seeking to integrate local small and medium enterprises into their supply chains. The model hinges on enhancing capability and opportunities by linking ED programmes to Anglo American’s core business. About a third of the businesses currently funded and supported by Zimele are directly linked to the company’s supply chain.
“It is through these types of initiatives that we have seen a real positive impact in terms of the Charter’s aims and objectives,” says Zikhali.
Zikhali believes that the industry needs to work together with other stakeholders, including government, communities, workers and investors, if innovative and sustainable solutions are to be found.
She adds that one of the weaknesses of the Charter is that rather than encourage mining houses to work together, it creates a competitive space where mining houses are judged per operation and per licence. This discourages companies from engaging municipalities and working together with other, sometimes neighbouring, mines to pool their resources for bigger-impact projects.
Examples that are making a difference in thousands of people’s lives include a partnership between Anglo American’s Platinum business with government on the Lebolelo Water Scheme, and Flag-Boshielo and De Hoop dams in Limpopo. The development of a R26 million community health centre – a partnership between Anglo American’s Thermal Coal New Denmark colliery, the Lekwa Municipality and the Mpumalanga Department of Health – will significantly improve the quality of healthcare for around 2 400 community members.
“In future iterations of the Charter, we hope that there will be room to encourage a more collaborative approach to transformation – across mining houses, operations and geographic regions,” notes Zikhali.
As Anglo American chief executive Mark Cutifani pointed out recently, the South African economy may have diversified significantly over the past two decades, but the mining industry has remained its backbone. Recent research produced by the Chamber of Mines indicates that the industry employs some 525 000 people, with another 841 000 people employed indirectly in supplying goods and services to the mining sector.
Based on the assumption that each person employed in the mining industry supports on average another nine people, close to a quarter of our population depends on the mining industry in one way or another.
“We need to leverage this leadership position to create sustainable solutions to ensure the country’s economic transformation,” says Zikhali.
Following the 2009–2010 assessment of the industry’s progress against the Mining Charter, the DMR has initiated a detailed audit of the Revised Mining Charter by Moloto Solutions.
There remain a number of uncertainties ahead, including what shape and form the Charter will take. “It is necessary to still have a blueprint or guiding framework which can be used to incentivise companies to continue to transform, but in terms of what that will look like, it is not yet clear,” says Zikhali.
While industry collaboration and the sharing of best practice can be used to drive improvement among peers, Zikhali says it’s vital that mining houses look internally too.
“While the Charter does provide an external impetus, ultimately, it’s how each company grapples with transformation and translates those aims into its own culture and business that will ensure sustainable equity.
“At Anglo American, we are fortunate to have a leadership team that buys into, not only the letter of the Charter, but also its spirit. This should permeate every part of the business, beyond the transformation department and senior leadership.”
Looking ahead, Zikhali says the next decade calls for the industry, government and all stakeholders to work together, with a common purpose and a shared commitment, for the benefit of the country and its citizens.