With global diversified mining major Xstrata having met its 2014 targets in respect of ownership by historically disadvantaged South Africans (HDSAs), and making good progress on employment equity, you would expect them to be happy with the status quo. Not entirely.
Concluding BEE deals in a proactive manner as Xstrata does may sound spectacular to some, but the philosophy we adopted in pursuing BEE means that we need to go further. We have to ensure that as broad a base of people as possible are able to participate in the mining industry in a way that has a lasting impact on their lives. Those that cannot participate directly need to see the benefits of transformation in their communities. A few big deals do not necessarily address all the challenges of transformation and development.
Xstrata fully accepts transformation as a necessary business imperative that is good for the long-term social and economic stability of the country. There is no sense in doing business in South Africa if we cannot adopt the country’s goals, of which BEE and transformation are a part. Economic marginalisation is one of the most common causes of instability, and to give the previously disadvantaged access to our country’s wealth cannot be a bad thing if pursued in the right spirit. In 2002, which incidentally was before the Mineral and Petroleum Resources Development Act (MPRDA) came into effect, Xstrata concluded a pooling and sharing arrangement with SA Chrome (now Merafe Resources), by which SA Chrome took a 17,5% participation in the pooling and sharing venture. Merafe’s participation has since grown to 20,5% and is expected to rise to 26% soon.
The Xstrata-Merafe chrome venture is now the biggest exporter of ferrochrome in South Africa.
In 2006, Xstrata concluded two more empowerment agreements in respect of its coal and platinum group metals businesses. African Rainbow Minerals (ARM) took up an initial 20% participation in Xstrata’s South African coal business, which was extended to 36% by the end of last year. The two companies also formed ARM Coal, in which ARM has a 51% shareholding and Xstrata has 49%.
Kagiso Trust Investments (KTI) took up a 26% participation in Xstrata’s platinum group metals business. This was in respect of the Mototolo joint venture with Anglo Platinum. This gave KTI an effective 13% participation in the joint venture.
Early this year, the Bakwena Ba Mogopa Traditional Community of Bethanie in the North West took up 26% of Xstrata’s vanadium business, making this Xstrata’s final transaction under the new Mining Industry Charter. The Bakwena are the surface-rights owners of Xstrata’s Rhovan vanadium operation.
These transactions do not mark the end of the road, but the continuation of a journey. Total transformation cannot be wholly encompassed in a few transactions. That is why we are making considerable investments in the areas of education, enterprise development, job creation, health and social welfare across Mpumalanga, North West and Limpopo provinces.
Xstrata is one of just a handful of global companies that set aside 1% of pre-tax profit for sustainable development. Xstrata has allocated R100-million to be spent on development in South Africa alone this year. The company is investing a further R103-million to internal skills training this year, while procurement with BEE empowered companies will total R3-billion for the year.
The R100-million spent on development as well as past and future commitments will hopefully help cultivate a refreshing legacy for Xstrata’s approach to empowerment. The MPRDA provides for a bigger socio-economic role for mining companies to play. The industry can no longer leave mine dumps empty and ghost towns when resources have been depleted.
The skills imparted and investments in development are of a nature that allows them to survive the mining operations, enabling the former mining communities to sustain themselves. Often, those that benefit from the job creation, enterprise development and education initiatives are historically disadvantaged individuals, as they bear the brunt of previous inequalities.
A good example is ML Phadima Construction, one of many new companies based in rural mining communities that have been developed by Xstrata and entered into business with the company. Formed in 2006, Xstrata assisted them in setting up a proper business structure with access to financing. Today, Phadima has six permanent employees and more on a contract basis, and are looking to employ more as they grow.
This company clearly had potential and the young entrepreneurs who own it had all the enthusiasm and basic knowledge of construction and bulk services to make good development candidates. All we did was to assist them to get a firm foot in the door of the economy. If one day our business becomes too small for them, we will know that we have succeeded. Their world cannot begin and end with Xstrata. They have to have and realise bigger dreams than a contract with one mining company. That is the kind of BEE the ordinary person wants to see.
Xstrata employs over 11 500 people in South Africa across its alloys and coal operations in the Mpumalanga, North West, Gauteng and Limpopo provinces.
Eric Ratshikopha is Xstrata’s executive director for corporate development. This article was placed as part of an advertising agreement