Mining Charter unclear on benefits for mining-affected communities

This opinion piece appeared in the Business Day on 19 June 2018. The original article can be viewed here.

The new draft Mining Charter, gazetted last week by Mineral Resources Minister Gwede Mantashe, makes a number of changes relating to mine community development. This is particularly important because of February’s high court ruling that mining-affected communities must be included in charter negotiations. But the changes leave so many questions unanswered it is unclear whether they are a positive development for host communities.

The requirement that 8% of the 30% black economic empowerment shareholding for new mining rights must be distributed to host communities in the form of a community trust remains, as does the requirement that a further 8% shareholding be distributed to employees. Both of these distributions must take place within five years of a mining right being granted. It is not clear how these 8% distributions will be calculated, as many host community members are also employees. In addition, there is no explanation of how community trusts are to be managed as the previous draft’s intention to introduce a mining transformation and development agency to manage community trusts has been excised.

The new draft includes a “trickle dividend” that will see 1% of operating profits distributed to employees and host communities after six years if a dividend is not issued. It is unclear, however, if this 1% is to be shared between employees and communities or if they are each to receive 1%. Existing mining rights holders have been granted five years to increase their BEE shareholding to 30%. However, it is not stated if existing rights holders are then required to distribute 8% of shares to employees and community members, as required by new rights holders.

Mines are to continue contributing to the socioeconomic development of host communities via social and labour plans (SLPs), which, in a long overdue move, must now be made public. The charter removes the provision that this contribution must be “proportionate to the size of the investment”. While this is a welcome development due to the vague nature of this commitment, the revised charter fails to replace it with any meaningful guidance, simply noting that “SLP guidelines shall be reviewed to provide clear targets and timelines for implementation”.

The lack of clarity in this charter in relation to mine community development is unlikely to appease community members, who feel they are not adequately compensated for hosting mines. Recent research I undertook for Oxfam SA — David vs Goliath, The Case of the Social and Labour Plan Outcomes of Mineral Sands Resources Limited (MSR Ltd), Tormin Mine and the Community of Lutzville — indicates just how much work the Department of Mineral Resources needs to do to convince communities that mine community development is central to its mandate.

The department’s role is to ensure SLPs adhere to regulatory requirements, are properly implemented and are effectively reported on by mines in annual SLP compliance reports.

In terms of enabling legislation, a mining licence can be suspended or withdrawn for failure to comply with SLP requirements. The shambolic state of the Tormin SLP and reporting against it indicates that the department is completely unable to meet these basic requirements.

The Tormin SLP is not compliant with legislation, lacking basic information relating to community health, economic development and the negative impact of mining operations on the local community. None of the local economic development projects in the plan is aligned with the integrated development plan of the local municipality (Matzikama). Local economic development project performance indicators are often misaligned or contradictory, while budget allocations are regularly misreported.

MSR’s reporting against the plan is equally chaotic. Multimillion-rand projects in the SLP appear to have either been partially implemented or not at all. For example, R1.5m was supposed to have been spent on developing the Baleni School in Xolobeni, a labour-sending area for the Tormin mine. It has been established that no money has been spent on this school. In addition, R750,000 was supposed to be spent on a local aquaculture project in Vredendal, while R1.5m was to be spent on the development of small businesses in the community. Matzikama’s development manager says there is no evidence that either project exists.

Another project where R300,000 was supposed to be spent on a maths and science project for local pupils in 2016 appears to have stalled as MSR reported that it only spent R3,300 on this project. Only 10 adult basic education and training classes for community members allegedly took place in 2015 and 2016 against a target of 53.

The failure of MSR to meaningfully meet its SLP obligations has created a great deal of frustration in the communities that live around the mine, where hostility to the company is widespread. Why is this level of noncompliance tolerated by the department? Oxfam’s report shows that the head of its Western Cape office, Duduzile Kunene, freely acknowledges that no SLPs are ever fully compliant with regulations. She also claims that she only has one employee in her office dedicated to SLP compliance for the province. This employee is expected to review all SLPs, which are renewed every five years, approve them, ensure compliance against them and take action against mines for noncompliance. Research undertaken by the Centre for Applied Legal Studies at Wits University illustrates that this capacity constraint is not unique to the Western Cape but is a national problem.

This inevitably brings us to the question of political will.

Is the department serious about holding mining companies to account for their social and economic obligations to host communities? If it is not, simply using the revised charter to increase resources directed towards local communities is no guarantee that these resources will even be spent, let alone spent effectively.

While it is clear that the SLP system needs a complete overall, the creation of community trusts also needs to be carefully managed. Experience from the Renewable Energy Independent Power Producer Procurement Programme is relevant here because 2.5% of each development must be owned by the local community in the form of a community trust. These trusts have generally not proven to be good vehicles for community socioeconomic development as they have either been captured by local elites or are dominated by project developers, resulting in little community participation but a lot of frustration.

Income-sharing and compensation tools such as the Mining Charter and SLPs will only function effectively if they are properly implemented by a capacitated and motived Department of Mineral Resources. In addition, it is clear that genuine community participation is crucial. The Oxfam report shows that there is little evidence that community members participated in the creation of the Tormin SLP or that they have any ongoing role in its realisation. Unless mining communities participate fully in decisions that affect them and are supposed to improve their lives, there can be little hope of meaningful change taking place.

This is one area where the new charter holds out some promise, as it states that host communities must be represented on the board or advisory committees of rights holders. For this representation to be meaningful, community members must have a substantive say in issues that affect them.

The high court case involving the Amadiba Crisis Committee and the Department of Mineral Resources over the right of community members to say no to mining on the Wild Coast places community concerns at the very heart of mining, where they should be. If the court challenge is successful, it will lay the groundwork for a new relationship to emerge between the Department of Mineral Resources, mines and mine-affected communities.

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