In light of the Mining Charter III currently under review by the Department of Mineral Resources (DMR) and various stakeholders including mining houses, Siyakhula Sonke Empowerment Corporation Advisory (SSC Advisory) believes an ideal outcome would be for the charter to focus on radical transformation and inclusive economic growth.
This is to ensure real economic benefits for the communities within which mines operate are realised. “It is the only way to address the three national key challenges of unemployment, inequality and poverty,” says SSC Advisory director and group executive Kenneth Mudziri.
New Mineral Resources Minister Gwede Mantashe said last month that the charter would be finalised within three months, since uncertainty around the legis- lation had deterred investment in a sector that is the backbone of the South African economy and its growth.
Mudziri notes that the charter ought to focus more on local procurement, develop- ment of local small, medium-sized and microenterprises (SMMEs) and local employment, as well as skills development.
“Mining Charter III predominantly focuses on 30% black ownership. Mining Charter II specified 26% black ownership and was effective to a certain extent, but catered only for the elite – those who were politically connected regardless of their understanding of the nature of the mining business.”
He avers that the charter neglects to consider ways in which it could bring social coherence into the ownership space, such as assessing the ways in which the mines can empower local companies and communities who do not have the necessary means to acquire 26% or 30% ownership, but still want to participate in the mines’ business value chain.
“What is not told to these communities is that the 26% ownership in a particular company is not for free because the owners have to fund the 26% set aside on behalf of the community or a selected black company by way of debt funding,” he explains.
Consequently, these black companies and communities never get to realise the value of their ownership because they still have to service the loan advanced to acquire their shares, which, in many cases, is paid through dividends and can take years.
Therefore, Mudziri strongly believes that the new Mining Charter needs to be specific on the funding models of such transactions so that these communities and local business people can be supported to acquire the 26% through grant funding. “That way there will be real-time, tangible benefit to everyone involved.”
Besides, ownership must not be at arm’s length, but should rather form part of the executive at an operational, directory and decision-making level, he highlights. With the charter not specifying owners’ participation, these shareholders often do not contribute to the mines’ operational decisions.
Collaboration with Community
Mining Charter III should emphasise more how mines can collaborate with communities for local procurement, enabling not only smaller companies to tender for work at the mine, but ensuring that it enforces large, traditional companies to subcontract and partner with black-owned businesses in these communities to supply goods or provide services, laments Mudziri.
“The charter should also address mines’ categories for services, so that local SMMEs are not only considered for “ringfenced” or set-aside services, such as grass cutting, catering and cleaning, but are given the necessary support and skills to compete and partner with Tier 1, Tier 2 and Tier 3 companies.”
Tier 1, Tier 2 and Tier 3 companies entail specialised services that are critical to the mining operation, such as drilling and blasting, and roof support.
“Therefore, there has to be strong oversight from the DMR to ensure that mining houses and contractors are giving the necessary support to local SMMEs to enable growth,” highlights Mudziri.
He adds that, when large companies partner with black-owned community companies, it must not only be done for scoring black economic-empowerment (BEE) points, but rather for socioeconomic development of the communities to aid sustainability.
Mudziri points out that some mining houses are already considering ways of best supporting local communities without necessarily selling them shares in the company, because of the capital requirements attached to acquiring 26%.
SSC Advisory has been providing services for large mining houses looking to support local communities in respect of local economic development, local recruitment, skill development and capacity building.
Further, SSC Advisory assists in the development of social performance strate- gies, stakeholder engagement plans, socioeconomic development strategies and social management plans, ensuring that all negative and positive impacts as a result of mining operations to the communities are well managed.
“To understand the needs of communities around mines, community surveys are necessary, otherwise you miss the real social issues affecting the communities,” Mudziri laments.
Mining Charter III needs to be informed by community members and by what is happening on the ground, “not by the elite who sit in corporate chairs, saying they want to benefit. Real mining is in the bushes and not in corporate offices”, he argues.
Mudziri says some mines do stakeholder profiling by engaging with all their internal and external stakeholders to discuss their expectations from the mine and what they determine as risks for the mine. Stakeholder profiling enables mines to gain insight into influential role-players in the communities.
“Community problems cannot be solved by a one-size-fits-all, blanket approach – every mine and community is unique. Social risks assessment reporting needs to be based on real-time information from community engagement.”
Effective community engagement creates an environment of trust and partnership between the mine and communities, promoting peace and prosperity for both the mine and the communities within which they operate, concludes Mudziri.