/ 28 June 2012

Platinum wealth holds no shine for people left in the dust

The Bapo Ba Mogale community of about 30 000 people live on one of the Earth’s greatest treasures
The Bapo Ba Mogale community of about 30 000 people live on one of the Earth’s greatest treasures


The Bapo Ba Mogale community of about 30 000 people live on top of one of the Earth’s greatest treasures – rich platinum deposits. Lonmin Plc, the world’s third-largest platinum producer, which has a market capitalisation of about R19.5-billion, mines the metal under the Bapo’s land. Although they settled in the area more than 200 years ago, community members say they share little of the area’s riches.

This is a story about the toxic mix of poverty, the limitations of black economic empowerment, the exigencies of the corporate world, divided community leadership and, ultimately, the ordinary people who suffer as a result.

The community
To reach the Bapo, one heads west from Johannesburg on the N4 highway towards Rustenburg and takes  the turn-off to Sun City. Homes are huddled against a backdrop of grey mine dumps and concrete mine headgear. Everything nestles in heavy smog. This is Bapong, a Bapo village. Under the earth here, mineshafts are up to a kilometre deep.

Lonmin is not the only company mining the land. There is also Samancor Chrome Limited, International Ferro Metals and its subsidiary, Sky Chrome Mining.

Lonmin has been mining for platinum group metals on Bapo land since about 1994, although it has leased the land from the Bapo since 1969.

Many of the Bapong houses – built by the Bapo themselves – have been there for more than three decades on plots of at least 1 000m2. Some are neatly kept but others are unkempt, featuring piles of scrap metal and old wood. There are outhouses in most yards to house the toilets – holes in the ground covered with toilet seats set in wood or concrete. Many houses have green plastic tanks that are filled from boreholes because there is no running water. For people without tanks, getting water can entail a 30-minute walk.

The mines
Signs of the mines are everywhere. They are not all bad: Lonmin spent R194-million from 2007 to 2011 on improving its mining communities in North West province as well as the areas from which migrants come, primarily the Eastern Cape. Of this money, said Lonmin, 60% was spent on the Bapo. Projects included renovations to schools and job creation.

But many residents the Mail & Guardian spoke to were far from happy with the effects mining has had on their community.

One, who asked to remain anonymous for fear of being harmed by local political factions, is a slight old woman with sunken eyes. She lives in a shack and walks 30 minutes to fetch water from the nearest tap. She was in Bopang before the advent of the mines.

She said not much had changed: “There is just more dust.”

Mine dumps and shaft headgear are visible from back gardens. Some houses have cracked foundations and walls, which the owners ­believe is as a result of blasting at nearby open-cast mines.

Emily Tabana (69) is worried about the centimetre-wide crack in her kitchen wall that runs through the bricks. One can look through it into her backyard.

Less than a kilometre from her house, Sky Chrome has an active open-cast mine. She said blasts occurred every week, shaking the foundations of her home and keeping her awake at night.

Informal settlements have sprung up next to Bapong – the homes of mine workers from the Eastern Cape, KwaZulu-Natal, Gauteng and Mozambique.

The Bapo are unhappy about ­having outsiders on their land. They believe these miners have taken work that should have gone to their own people.

Bapo community members are a minority among Lonmin employees. According to the company, 83% of its employees are South African. Of these labourers, 28% come from what Lonmin terms the “greater Lonmin community” – all its mining areas in Marikana, North West, of which the Bapo is just one tribe.

Barnard Mokwena, executive vice-president of human capital and external affairs at Lonmin, said the company could not favour the Bapo at the cost of other communities because it would amount to illegal, unfair discrimination.

“Our track record shows that we value the Bapo community and provide training, opportunity and jobs to members of the Bapo Ba Mogale,” Mokwena said.

But one thing is certain: many Bapo believe Lonmin has not done enough to create employment for the local communities.

After unrest by the Bapo in August last year, Lonmin said, it employed 643 Bapo people on a permanent basis and began establishing job creation initiatives such as a bricklaying project, which employs 10 people, and a waste management project, which provides work to 30 people.

One of the beneficiaries of the projects, Neo David Ngele (26), said: “This is not for a while; this is for a lifetime. This will create more jobs.”

But for royal family member Vladimir Mogale, Lonmin’s efforts do not meet the needs of the community. He said Lonmin had not made good on its promises to employ the Bapo and that, despite Lonmin’s efforts and promises to create jobs, unemployment was a huge problem.

“We’re not advocating that our youth all go underground. The initial idea was that Lonmin creates projects like farming and bricklaying,” he said.

Unlike jobs, schools in the area are not in short supply. Children in blue-and-white uniforms play in the dusty ground surrounding Nkukine Primary School. A sign declares the school is “proudly supported” by Lonmin. Another sign warns of “blasting in progress” at the nearby Sky Chrome mine.

Nkukine is one of 29 schools supported by Lonmin, whose assistance includes feeding schemes and new classrooms.

A few blocks away, headmistress Julia Lekalakala stands in the dusty quad of the Segwetlhane Primary School, one of those supported by Lonmin. Lekalakala started teaching here in 1978. Times have changed since she first set foot in the classroom, but not all the changes have been for the better.

“The children who come here are the poorest of the poor,” she said. Of the 700-odd pupils at the school, she estimated that more than 200 were orphans some of whom had lost their parents to Aids.

She said that school personnel helped in their personal capacity: “Teachers donate money to buy uniforms for orphans in school,” Lekalakala said.

But, at that moment, Lekalakala is more worried about a meningitis scare. Last week, she said, three pupils at a neighbouring school had died of the contagious disease.

Residents also worry about the effect of the mines on their health.

Environmental effects
About 10km from Bapong lies the Segwaelane community, another of the Bapo villages.

Lazarus and Samuel Diale are brothers who hail from Bapo land. Their friend, John Ncube, also a  Bapo, joined in the conversation. They had nothing good to say about the mines.

Lazarus pointed at a rocky hill behind the village. “I was born just behind that hill. They moved us here when the mine was built – about 1972,” he said.

Lazarus pointed at a Lonmin tailings dam in the distance. It is a catchment area for the mine’s waste products. “That slag dam was built on our farmland,” he said.

Ncube said: “When the wind blows from there, there is a dust cloud over the village.” Samuel added: “There is dust on the windows, in the mealie meal …”

According to Mokwena, “dust suppression mechanisms” had been put in place, such as the planting of vegetation on the sides on the dams. He said quarterly reports on dust management were sent to the department of mineral resources.

Stakeholder forum

Lonmin also hosted an “environmental stakeholder forum” at which it reported on environmental issues to communities and it would be the ideal place for the Segwaelane community to address their concerns about the environment, he said.

But, when the loss of farmland comes up, it would appear that the matter is not for discussion. Samuel said they were not compensated for their land on which they had grown mealies and sunflowers.

Asked whether the community had received any compensation for the farmland, Mokwena said that Lonmin had a notarial lease agreement with the Bapo, which clearly outlined the terms and conditions agreed by the parties.

“We pay royalties to the Bapo in line with this agreement,” he said.

It does not appear as if the community left their land more than three decades ago of their own free will.

Broken down
Samuel took us to meet an old man who lives on the edges of Segwaelane. From the stoep of his pink brick house, one can see the tower of the Implats mine.

Benjamin Molemane is 76. He tried hard to recall when they were moved here from their farmlands to make way for Lonmin mines and finally estimated that it was in 1973. Their houses were broken down and the apartheid government gave money to move the bricks to the new location. The people had to rebuild their houses themselves.

“The mines made the dam where we used to plough,” Molemane said. They had farmed mealies, beans and sugar cane, which they sold.

“They did not tell us the mines were coming. Before Lonmin was here we were alive. We were dependent on those farms.”

Apart from pollution, forced removals and the loss of farmland, the men are also not happy with migrant mine workers moving into and out of the area.

Apart from taking jobs, which they say should go to the community, the men are angry about the social and health impacts the migratory labour system, typical of mines, has brought to their villages.

Movement of strangers
“They come here, they take our sisters and leave them with children and this virus,” Ncube said.

Another man joined the conversation. He lives in Bapong and, because he works for Lonmin, did not want to be named.

He said there was another reason why the movement of strangers into and out of the area was such a problem – and not only mineworkers, but also the political elite who visited mining companies in the area.

“Any man who comes here in Bapo must notify the chief. They just come and go as they please.”

It was a blatant breach of traditional customs, he said.

Another slap in the face for the community is the restriction of movement on their own land. The land may belong to the Bapo, but Lonmin keeps the mines under tight security.

Community leaders Israel Moerane and Emias Mogale are part of the Bapo Ba Mogale royal family. Moerane is the headman of one of nine clans of the Bapo. Mogale is the rangwane, or the “uncle to the chief”. He is second in command of the entire community. First in command is the chief, Kgosi Bob Edward Mogale. Born in 1942 and retired, he did not join us on a tour of the community.

Lonmin territory
Moerane and Mogale took me and a photographer to Lonmin’s shaft number three. A barbed-wire fence surrounds the mine and a sign makes it clear that this is Lonmin territory and private property.

But Moerane was determined to exert what he saw as his right to be on Bapo land. Earlier, I had raised my concerns about security guards at the mines and a possible confrontation. But Moerane was undeterred. “We will deal with him … like a dog deals with a bone.”

About 30m in front of the mine’s gate, five towering security guards appeared. We were intruding, they said. We were on private property and needed a permit from the mining manager to be there and to take photographs. But the Bapo men stood firm and Moerane was outraged: “It is our land … but we have to ask permission on our own land?”

The largest security guard was at least 1.83m tall and could easily fill a door frame. “We are going to take you to our offices. We run the mine,” he said.

An emotional argument ensued. Moerane and Mogale decided to wait to discuss the issue with the head of security. Eventually the man arrived, a truce was reached and we left without further obstruction.

The security guards were doing what they were hired to do: protect Lonmin’s assets. The land may belong to the community and they are leasing it to Lonmin, but the mining infrastructure belongs to the company.

Later Lonmin agreed to take us underground.

Nearly seven storeys below the ground, groups of six miners crouched in narrow, dark tunnels, drilling holes into the rock. Explosives are placed in the holes to blast the platinum-rich rock. The roof of the tunnel we were in had a fissure, which meant a potential rock fall. The roof is secured by metal rods and every time miners come on duty they have to check these to make sure they are still secure. When we left, we were searched for explosives – mining explosives have been used to bomb ATMs.

But it is not just restrictions to the mines – primarily for security reasons – that stir Moerane’s anger. The confrontation at the mine is indicative of the fury in the Bapo ranks over Lonmin. This has built up over decades.

Apart from being physically excluded from the mines, Moerane said they had been largely excluded from Lonmin’s “flagship” black economic empowerment company, Incwala Resources. Because Incwala would be mining on Bapo land, the community had hoped to obtain a substantial share.

Referring to the original Incwala transaction in 2004, Moerane spoke with great disappointment: “We had this BEE thing, Incwala. But Lonmin behaved badly. They called us a ‘cornerstone’ [investor], but at the end of the day told us we have no space, that the dream has left us.”

Lonmin created Incwala as its BEE arm on September 6 2004. At the time Brian Gilbertson, Incwala’s chairperson, said: “The formation of Incwala today has the potential to transform South African mining. In the next 10 years the mining industry’s compliance with the Mining Charter will generate a stream of empowerment transactions to a value of some R100-billion. No company is better placed than Incwala to compete for and build on those opportunities. If we get it right, Incwala will become the mining flagship for millions of historically disadvantaged South Africans.”

Due diligence
The Bapo people spent R700 000 on due diligence checks to make sure that buying Incwala shares was actually a financially sound decision. The money came from mining royalties Lonmin had paid into a community trust account over the years. At their own expense, the Bapo also appointed financial and legal advisers. Nedbank undertook to back the Bapo and raise funds for their stake in Incwala.

After nearly a year of negotiations with Lonmin, the community was invited by the company to consider “cornerstone” investor status. The two parties never agreed on the size of the Bapo’s share of Incwala, but the Bapo expected to be able to acquire the same percentage of Incwala as any other cornerstone investor, on the same terms and at the same price.

Mokwena said the value of Incwala was confidential and he would not divulge it.

By December 2003, the community’s traditional authority, its legal representative, Martin Rosenberg, and Nedbank Corporate were sure that the community was on the verge of becoming a “cornerstone ­investor”. But, to the shock of the community and Rosenberg, Lonmin’s message to the community changed in a matter of days. They were told that they had missed crucial deadlines. But, according to Rosenberg, neither he nor the community’s financial adviser were aware of these.

Mokwena would not say what the deadlines were, adding: “At the time … there was no obligation on mining companies to include local communities as shareholders.”

He said Lonmin chose the most “suitable” BEE partners, which were Andisa Capital, Dema Capital and Vantage Capital. Each was allotted 16.22% in the company and the community was allotted 2.85%.

At the time, Andisa Capital was headed by Ronnie Ntuli, who later founded the Thelo group and is now the chairperson of the government’s National Empowerment Fund, which promotes BEE.

Dema Capital, a women’s empowerment group, was headed by Zanele Mbatha, who later became Incwala’s chief executive. Vantage is still run by Mutle Mogase.

Asked to respond to community allegations that Vantage was allotted cornerstone investor status because of its political and business connections, Mutle said that he “is not sure what this means”, but his company brought with it business acumen, governance and an ability to make decisions.

Ntuli would not comment and Mbatha could not be reached.

The remaining shares in Incwala went to the South African Women in Mining Association (0.27%) and the Lonmin Employees Masakhane Trust (1.1%). The Industrial Development Corporation and Lonmin each held 23.6%.

But the Bapo would get another chance to buy Incwala shares. Incwala was declared insolvent when the platinum price fell during the 2008 economic recession and the first group of BEE shareholders wanted out.

The Bapo were ambitious: they hoped to acquire a majority share in the company. But it was not to be. The majority of shares went to Cyril Ramaphosa’s Shanduka Group.

Said Moerane: “There were shares we could buy, but they sold those to Cyril Ramaphosa. We feel as a community we want to take Lonmin to court.”

Moerane is not the only one angry about it. “He [Ramaphosa] took up the position of the community. He is big in the ANC,” said the unnamed Lonmin employee. “The mining charter says we should have 26% ownership in mines … you can’t make those rules as a government and not follow those rules. Cyril came up with BEE, but he got past those rules,” said Samuel Diale.

“BEE is made for the big guys of the ANC, not communities,” Ncube said angrily.

Shanduka’s director of corporate affairs, Yvonne Themba, said the group was a broad-based company and had always supported community participation in its transactions.

But community legal representative Hugh Eiser said the Bapo sent a letter to Shanduka in December 2009 stating the Bapo’s objection to Shanduka buying the Incwala shares. The community invited Shanduka to discuss the matter, but the group ignored the invitation, Eiser said.

Themba said Shanduka only bought its majority share in Incwala after lengthy negotiations with all selling shareholders. It did not engage the Bapo directly, because they were not selling.

“Obviously, the Bapo were also free to engage selling shareholders at the time of the transaction, particularly because they were a fellow shareholder. In a way, they were in a much-favoured position. Their advisers knew this situation very well.”

Themba said that, in the Bapo case, although the community had pre-emptive rights (the first option)to buy shares in Incwala because it was already a shareholder, it did not manage to raise the money before the deadline set in the shareholders’ agreement. Therefore, the community was not able pick up any shares, she said.

Corporate realities
Mokwena denied that Lonmin had sidelined the community in favour of well-connected black business partners and said it had the community’s interest at heart.

But, when it came to the crunch with the Incwala deal, the community had difficulty raising funds to buy the shares.

He said that disputes among community leaders and the lack of a legal entity with which to do business deals made it impossible to deal with the community.

The community has been plagued by internal leadership disputes for decades. Apart from protracted legal battles between royal family members, community leaders are at odds with the provincial administration that has control of all their money – mining royalties that Lonmin paid to the community over the years.

Allegations of corruption by government administrators of the community’s trust fund and members of the Bapo royal family are also rife. The community has struggled for years to hold legal elections to set up a legitimate traditional authority.

But, Eiser said, leadership disputes could not have stood in the way of a greater share in Incwala for the community.

Ingenuity of Lonmin’s
“If there was genuine concern about the disarray in the community’s governance, then it would not have been beyond the ingenuity of Lonmin’s and the community’s legal advisers to devise a structure to overcome this.

“There is an example of how the community governance disarray has never had any detrimental effect on the Pandora Joint Venture, in which both Eastern Platinum Limited and the community are joint venturers with two others,” he said.

All the cornerstone investors insisted on being bought out and the community, with its 2.85% of the shares, was the only party that had the remaining pre-emptive right, Eiser said.

But Mokwena said that the community was unable to raise the finance to purchase the majority share. Lonmin lent Shanduka R2.5-billion to purchase the majority shares in Incwala and Shanduka also chipped in.

“Shanduka contributed R300-million of its own risk capital into the Incwala transaction; this again is one of the largest equity cheques contributed by a black investor to a transaction in the South African mining sector,” Themba said.   

Shanduka thus obtained 50.3% of the shares and, on July 13 2010, the transaction was finalised.

Same terms
But Moerane believes the Bapo were not treated fairly. “They even financed shares when Cyril came in. But they couldn’t assist us?”

Eiser said the community should be given the same terms as Shanduka.

“Lonmin should not have manipulated the pre-emptive rights as it did. Shanduka has no connection with the community or its land – neither did the original cornerstone investors. Shanduka’s only asset is its political connections; the same as the original cornerstone investors.

“Political connections are not part of broad-based black economic empowerment [BBBEE] in the legislation or mining charter. The community has hundreds of millions of rand in cash. It is not made of straw.”

Community leaders said that, ultimately, they were left out of the deal because they simply did not have the right connections to the government and the ANC.

But Mokwena flatly denied it. “Cyril Ramaphosa has business ­gravitas in his own right,” he said.

Community leaders and Eiser are not ready to give up the fight for a greater community share in Incwala Resources and they are on the offensive, attacking the very core of the issue – Lonmin’s operations on community land.

Incwala was to consist of 18% of the shares of Eastern Platinum Limited and Western Platinum Limited. Both mine community land and are Lonmin’s only operating mining subsidiaries.

The community was allotted 2.85% of Incwala’s shares and Lonmin established the Mirror Ball Investments 0019 company to house the community’s shares.

To hold and manage Mirror Ball’s profits, Lonmin set up the Lonplats Bapo Trust and appointed four of their attorneys, from Cliffe Dekker attorneys, as Lonplats trustees to manage the trust.

According to the first trust deed, signed on August 24 2004 by Lonmin’s attorneys, the sole beneficiaries of the trust were to be the Bapo and any person, concern or institution involved in the social upliftment of the community.

But the deed was amended on September 6 2004 – without the community’s knowledge. The amendment allows the trustees to sell Mirror Ball shares to “any other person”.

Eiser said that this meant the community was not safeguarded against the sale of its shares by Lonmin.

The community was not invited to designate a community representative to serve on the board of trustees and it has it never exercised its shareholder vote in Incwala. Eiser said that meant that the community has no stake in Incwala.

Mokwena said the amendment to the trust was necessary for the sake of the Bapo people. Without the amendment, the community would not be free to sell shares in Mirror Ball to whoever they chose. In addition, Lonmin pointed out that the change in the deed also increased the community’s share in Incwala from 0.27% to 2.85%.

Eiser said that Mirror Ball was totally under the control of Lonmin.

“Factually and legally the community never had any role to play in this shareholding, except very occasionally at Lonmin’s capricious whim.”

However, Mokwena said the community had never been in a position to take control of Mirror Ball or the trust. The appointment of the trustees was meant to be a temporary measure, he said, but the Bapo could not put forward a legitimate authority.

Eiser said that, despite leadership issues, Lonmin was still legally compelled to empower the Bapo as a host community through its BEE structures in terms of the Mineral and Petroleum Resource Development Act. Because Incwala had failed to do so, he said, Lonmin’s mining rights for Eastern Platinum and its right to mine Wonderkop mine should be set aside.

By law, Eiser said, for Lonmin to retain its mining rights, it must be BBBEE compliant, meaning, among other things, it would have to create an empowerment arm and ensure that the benefits reached the host community and communities affected by the mining. The new mining laws expressly stated that the host community had to be part of BBBEE, he said.

However, in practice, the community had been completely excluded, he said. “The community members have received no benefit at all from the BBBEE requirement that was fundamental to the mining rights issued to Lonmin in terms of the new mining laws.”

Eiser said he had advised the community to apply to the court to set aside the mining rights granted to Eastern Platinum and Western Platinum for minerals in, on and under community land.

“There is no BBBEE in respect of either, and the mining rights granted are illegal,” he said.

Mokwena said the Bapo Ba Mogale were not excluded from the deal. “They participated indirectly in Incwala Resources through Mirror Ball’s 2.85% interest in Incwala Resources.

The intention at the time of the deal was that the Bapo Ba Mogale acquire a direct shareholding in Incwala Resources through the Lonplats Bapo Trust.

“However, at the time the BEE deal was being concluded,” Mokwena said, “there was an internal dispute among the Bapo as to who on their behalf could or was entitled to take transfer of the 2.85%.”

Eiser said the fight is not over:  “We are going to court and we are going to have Lonmin’s mining rights for Eastern Platinum as well as Western Platinum’s right to mine Wonderkop set aside.”

Meanwhile, the ordinary Bapo people continue to live in poverty. A frustrated Abbey Mafate (27) summed up the community’s situation in one astute sentence: “We are rich, but we are poor.”

* This article first appeared in the Mail & Guardian newspaper

Heidi Swart is the Eugene Saldanha Fellow in social justice reporting, sponsored by the Charities Aid Foundation, Southern Africa