Special Reports

Transformation "the key to success"

Supplement, Advertorial Supplement

Changes to how companies operate are the only way the industry will survive, conference hears

Anglo American’s incoming executive officer, Mark Cutifani delivers a speech at the Mining Indaba. (Gallo Images)

Without socioeconomic sustainability, the South African mining sector would fall into the doldrums of mining mediocrity. This was the message from industry commentators throughout Mining Indaba 2013, emphasising the need to change mining from what South African Chamber of Mines president and Anglo American's incoming executive officer, Mark Cutifani, referred to as an "extractive" industry to a "developmental" industry.

Roger Baxter, chief economist and senior executive of economics and strategy at the Chamber of Mines, said sustainability in the mining sector was not just about reducing the industry's environmental footprint, or creating economic growth and jobs. "It is also about using the benefits of mining to contribute to the social, economic and environmental future of South Africa. Sustainable development happens when the many benefits of mining help create long term capital for the future," said Baxter.

Steven Kilfoil, director of corporate finance at Grant Thornton, said public perception of the industry centres around mining companies selecting an area of land, ripping out the mineral deposits and then departing — leaving behind holes in the ground, dust, contaminated water and other pollutants. "The only way the industry can change this negative mindset will be to stop the destructive behaviour and become more inclusive in its operations," he said.

Kilfoil said the Mining Charter had not had the desired effect of transforming the industry, mainly because companies tended to stick to proposed minimums and targets, rather than reach beyond them.

"For example, if a minimum of 26% previously disadvantaged [ownership] is stipulated as a requirement by 2014, most mining houses will have exactly that. The overall theme of the charter, one of inclusiveness, is what needs to be worked on, rather than strictly target setting."

Inclusion

Kilfoil identified six practical ways in which this could be achieved. First, exploration companies needed to bring communities into the process as soon as there was some indication of mineral value evident in the area. The potential find should be outlined, the exploitation process clearly explained, as well as what would be required to turn the find into a viable mine, he said.

Constraints would need to be put on the table, including access rights, — usually a large stumbling block —as well as possible water and other constraints. The environmental plan, albeit in draft form, should also be put in place early.

"During 2012 a number of explorations had to be curtailed or cancelled as a result of protests over environmental concerns. While in many cases the protests were valid, a clear indication of what needs to take place and what the long term effects on the area will be normally calms the community if done in an open and transparent manner," said Kilfoil. "People fear what they don't understand. Bringing people in early on the plan and including them in the process is the way forward.

"Show them the constraints and the risks of the project, such as commodity price volatility, employee safety and environmental issues. Show them the direct and indirect ways in which the project will help them, and ask for their assistance in return."

Direct benefits, which needed to be modelled and tabled, would include a share in the equity of the mine, improved infrastructure and direct employment.

A commitment to indirect benefits should also be tabled, including assistance in educational facilities, training and other upliftment.

Kilfoil said the final transformative strategy was a commitment to purchase "local content" wherever possible. "Rustenburg's growth can, to a large extent, be attributed to mining companies making this commitment and sticking to it. It has meant mining supplies companies with offices in Rustenburg are preferred to those simply shipping in supplies and leaving. The commitment not only helped local entrepreneurs, but also brought in new families with new skills, resulting in investment to the area," he said.

Last, the company needed to deliver on what it had presented. "This way, the mining industry will be the driver for development rather than extraction," he said.

An alternative way to Indaba

Originally, an "indaba" took place when the izinduna ("principal men") of the amaZulu and amaXhosa people met to discuss weighty matters. And this year's Mining Indaba was just that: a gathering of the principal players in the world's mining industry to discuss all matters critical to the sector. Like the 18 meetings that preceded it, this year's indaba was hosted in Cape Town.

Recognised as the largest mining investment conference in the world, the event has scored Cape Town's tourism sector an estimated R336-million over the last five years, placing it in top spot on the city's list of must-retain events.

Everyone who is anyone in the industry was present — well, almost. The heads of most of the world's mining houses were there, as were government ministers, representatives from a multitude of countries, and numerous businesses connected to the industry and its supply chain.

Conspicuous by their exclusion from the 7 500 delegates, however, were representatives from the mining trade unions and mining-related NGOs, both critical cogs in the industry. Whether they are absent on principle or due to practicality becomes clear from the delegate price tag: tickets to the four-day event cost between $1 140 and $1 900 (a tidy average of R13 500).

In response, The Alternative Mining Indaba, organised by the International Alliance on National Resources in Africa, the Economic Justice Network, Norwegian Church Aid and other civil society activists, sprung up around the corner from the official event and developed the "alterNative Mining Declaration" on fair mining in Africa.

John Capel, executive director of the Bench Marks Foundation, an independent organisation monitoring corporate performance in the field of corporate social responsibility, said the Mining Indaba's organisers used prohibitively expensive attendance fees to exclude those deemed undesirable from the conference, specifically civil society and the communities most impacted by mining.

"The voice of civil society is deliberately excluded, and we are not even invited to attend sessions dealing with corporate social responsibility and sustainability, topics that directly affect mining communities," said Capel.

Speakers at the Alternative Mining Indaba questioned the aims of its namesake, which they dubbed "the looters' conference". Discussions at the Mining Indaba about sustainability, beneficiation and the importance of improving socio-economic programmes were simply rhetoric, said Capel.

"[Sustainability, beneficiation and socio-economic programmes] are merely words and are repeated in every mining company's sustainability report. In reality, nothing is going to change. The large mining corporations will continue to exploit miners, and to strip Africa of an estimated $500-billion a year in carefully facilitated tax avoidance.

"Investors are out to make money at any cost and, because of market and other pressures, companies are driven to focus on short-term profit maximisation, completely disregarding long-term costs to society and the environment."

Draft bill leaves fracking in the air

Proponents and opponents of shale gas exploration in South Africa are anxiously awaiting the final version of the mineral and petroleum resources development act (MPRDA) amendment bill. The bill was published for comment in December 2012 and the commenting period closed on February 8 2013. An 18-month moratorium on shale gas exploration of a 250 000km2 area of the Karoo "to allow for investigation of the pros and cons of the hydraulic fracturing process" was lifted in November.

The draft amendment bill was expected to provide clarity and certainty on various issues, including the "streamlining" of the mining, environmental and water use permitting processes, but mining industry commentators have found the draft lacking.

Director at law firm Werksmans Attorneys, Justin Truter, said the draft introduced numerous new environmental provisions, including the creation of an appeal authority — the environmental minister — where matters pertaining to the environment were concerned.

He said, however, that the permitting processes remain far from streamlined under the bill. Truter said the bill also failed to address the matter of rezoning — an issue that was raised in 2012 when the Constitutional Court ruled that when a property's zoning does not permit mining, it had to be rezoned before it could be fracked.

"There may be a valid reason for this: zoning and land use planning matters are constitutionally reserved for municipalities, so there would be obvious constitutional challenges if the mineral resources minister had made provision in the amendment bill for the overriding of municipal zoning rights," said Truter.

The exploration area in the Karoo is predominantly zoned as rural and agricultural land, so under the current zoning scheme, fracking is not permitted as a land use. Under the land use planning ordinance, it is ordinarily only landowners who can apply to rezone their land or for a temporary departure from the permitted land use under the zoning scheme.

This, said Truter, would mean that companies wanting to explore for shale gas would need co-operation from landowners.

"There might be a few landowners who would allow exploration on their land in exchange for compensation, but the large majority are not in favour of fracking, so companies would have a tough time getting the zoning rights to a large enough exploration area," said Truter.

There are three options available to circumvent the zoning obstacle, all of them potentially fraught with legal challenges, he said.

The provincial minister could amend the land use planning ordinance; the municipality could apply to rezone property in certain instances or could amend the zoning scheme regulations; or the mineral resources minister could expropriate the land under the MPRDA.

"The likelihood is that it will require certain legislative amendments, and this takes time. If achieved, the amendments would still have to undergo the public participation process, and the landowners won't make it easy," said Truter.

Should the necessary rights be obtained to permit exploration there is a distinct likelihood of administrative appeals followed by high court review proceedings. Although any review proceedings are pending, landowners would have to apply for an interdict to prevent any exploration happening in the interim. Shell SA, Falcon Oil & Gas, Bundu Oil & Gas, Sasol Petroleum International and Sungu Sungu have applied for exploration licences.

Although this article has been made possible by the Mail & Guardian's advertisers, content and photographs were sourced independently by the M&G supplements editorial team. It forms part of a larger supplement.

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