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Independent auditing of community trust funds will now be enforced – RBM

25th August 2021

By: Martin Creamer

Creamer Media Editor

     

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JOHANNESBURG (miningweekly.com) – External auditing of community trust funds by independent auditors will now be enforced and transparency optimised, said Richards Bay Minerals (RBM) MD Werner Duvenhage on Wednesday.

While the auditing by independent auditors of the trust funds has always been a requirement, enforcement has been questionable.

“The enforcement hasn’t been so great and I’ll be the first to say that maybe we could have pushed harder for this in the past. We agree we can do better, the Amakhosi agree we can do better,” Duvenhage said in response to Mining Weekly.

For some time, there has been serious concern around the governance of these community trusts and the lack of evidence of broad-based benefits to the communities.

Financial statements were not going out on a regular basis and when they finally came out, most of them were qualified.

To address these concerns, the company has been working closely with government, traditional leaders and other stakeholders to agree on a plan that improves governance and leads to the modernisation of the trusts so that the trust funds now, and in the future, are used to empower the broader communities around the operations.

The latest agreement commits all parties to ensure the long-term modernisation of the trusts and compliance with the trust deeds.

This significant milestone demonstrates the collaborative spirit of the engagements with the various stakeholders having all expressed commitment to ensuring the broad-based upliftment of the mine’s local communities, Duvenhage told journalists during an online media roundtable.

With the signing of the agreement, RBM this week released more than R130-million to the community trusts, much of it held up over governance concerns.

With the conclusion of what Duvenhage referred to as the fifth trigger, there is a sentiment that the core issues that have kept the business closed for nearly three months have been sufficiently addressed and that operations can now be safely and sustainably restarted.

This will be done in a phased manner with various processes put in place, starting with Covid-19 requirements, that will enable employees to be recalled.

“We are really pleased to have reached this stage and would like to thank all stakeholders, including the Amakhosi, the host communities, the community structures, government representatives and the RBM teams, who have worked tirelessly to enable us to reach this agreement as the final trigger."

These are the five triggers that have opened the way:

  • continued and sustained peace for a period of time;
  • more private security and police security on the ground;
  • the proactiveness being seen from traditional councils and their sub-structures;
  • engagements with national and provincial government; and
  • the disbursement of R130-million-plus in community funds which had been withheld for some time owing to governance and transparency issues.

“As a business we will continue to work hard to ensure long-term stability of our operations for the sustainable benefit of all stakeholders,” Duvenhage said.

Having signed another agreement with the Sokhulu community a few weeks back, the final task was to resolve the issue of the disbursement of funds to the four community trusts, while recognising that the investigation into the murder of RBM GM operational services Nico Swart in late May would take more time.

A dedicated 11-person police investigation team has been put together to investigate Swart's murder, and renewed investigation is also under way into the fatal shooting in 2016 of RBM human resources manager Ronny Nzimande.

The shooting of Swart in May was followed by violent disruptions at the operations, which included the burning of equipment during the month of June.

That culminated in a business decision to put the safety of RBM’s 5 000 employees and its assets ahead of production at a time of very strong market fundamentals and prices.

Mining activities were stopped and smelting operations were curtailed, resulting in the declaration of a force majeure on June 30.

Furnace 4 was also shut in response to the curtailed operations, a decision never easily taken given the requirements to restart a shut down furnace.

Through innovation and dedication, the operational teams ensured that the other three furnaces were kept going under the challenging circumstances.

On a positive note, the process of restarting operations has begun following a milestone agreement reached between the Amakhosi or traditional leaders from the mine’s four communities.

This agreement supports improved governance and controls of community trusts and also provides for greater transparency of these trusts.

Throughout this difficult time, work was done to find sustainable solutions to the issues that have led to this situation, said Duvenhage.

When RBM concluded its empowerment transaction in 2009, two community trusts were put together, one of which is a shareholder that receives regular dividends from RBM. Under normal circumstances dividends are declared twice a year.

The second part of the empowerment transaction is corporate social investment (CSI) that ensures that a minimum flows through to the trusts. The R130-million is a combination of these two amounts, the biggest R58-million portion of which is related to refinancing the 2015 dividend, with about R50-million going to one community and about R8-million to another. Around R19-million to R20-million each are CSI monies paid out over a number of years.

“For a while, we’ve been concerned around the governance issues around the trusts and we got more information and took stronger steps to find resolution, working directly and through government," said Duvenhage in response to a questions.

Bringing the Swart murder to finalisation is seen as important. “We had Nico’s murder. The next week we had quite violent protests in one of our communities where we do mining and the Sokhulu community then forced us to shut the business.

"We did not shut the business immediately after Nico’s death but we clearly saw an escalation of violence and from previous experiences we’ve realised, even back in 2019, you will recall, we had similar incidents in which violence would bring the business down.

"We would try and restart and then there was more violence until such time as what we perceived the issues to be were addressed. This time we adopted a more long-term mindset. We know that a lot of the violence has got to do probably with money flows.

"We are not saying Nico’s murder per se was the result of this, therefore we had to resolve the money issues very publicly so that everybody is aware of what is happening with regard to trust monies, money decisions and the money flows.

"It is over a period time that the R130-million has accumulated. It’s not an amount that we’ve just come up with and agreed to pay. It’s been building up over a period of time and most of it has been sitting in the lawyers’ trust accounts.

"We think there is money relating to community activities that is definitely a contributor during this time. We really wanted to deal with that. We’ve got Nico’s investigation ongoing specifically around the Sokhulu community and we are not aware of any other new matters that could further lead to violence against our business," said Duvenhage.

Edited by Creamer Media Reporter

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