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Mining compact needed

to ensure sustainable industry

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SPW Contributors

Sanlam Private Wealth

In an address to the South African mining industry at the Joburg Indaba towards the close of last year, Chamber of Mines Vice President and Sibanye Gold CEO Neal Froneman unveiled a ‘roadmap’ for the sector to realise its economic and transformation potential in our country and beyond. Here Neal gives us further insights into his blueprint – which includes a mining compact between business, labour and government to create value for all industry stakeholders.

The opening lines of the Zambezi Protocol – drawn up in April last year at a meeting in Zimbabwe convened by the Brenthurst Foundation, under the auspices of former Nigerian President Olusegun Obasanjo – read as follows: ‘Africa’s mining sector is in crisis. At its root is a lack of trust between mining companies, governments and indeed, the very nations they lead. A failure to tackle the crisis will result in serious, adverse implications for both economic growth and employment prospects at the moment when the continent’s needs are rapidly increasing.’

At its heart, the Zambezi Protocol sets out a template for Africa to realise optimal value from its vast mineral wealth based on a foundation of trust and more constructive partnerships. It challenges us all to develop a vision of what a sustainable, successful mining industry should look like across the continent. It also challenges us to do a great deal of honest introspection.

What are the factors currently inhibiting the potential of the South African mining industry? According to the 2015 Fraser Institute survey on mining and exploration companies, South Africa ranked 65th out of 109 mining jurisdictions with regard to overall investment attractiveness. Factors that contributed to this relatively poor ranking included regulatory uncertainty, labour relations and militancy – a factor that’s widely recognised as a significant impediment to productivity and promotion of investment, and the development of community conditions.

From my personal interactions with investors, these factors are considered among the most critical for business to operate effectively, to invest capital with confidence in a sustainable future and to contribute to a value-generating role in society.

I would like to suggest a three-stage ‘roadmap’ to turn around the South African mining industry and ensure it realises its full potential for all its stakeholders:

We need to acknowledge our past.
The South African mining industry was a flywheel in the development of the South African economy. Joburg – or Egoli – was founded on a base of mining, as was much of our country’s infrastructural development, financial services and industrial sectors. The industry has played, and continues to play, a significant role in our national and regional economies.Can we honestly say, however, that the mining industry did the best it could for all stakeholders and that it acted humanely and morally? I for one must acknowledge that it did not. The negative impacts of the mining industry – from migrant labour that impoverished rural areas by forcing men off the land and accommodating them in single-sex, barrack-style hostels, to job reservation and the lack of opportunity for women and people of colour – are still felt today.We need to critically and honestly acknowledge the role of the mining industry where it acted against the interests of the vast majority of South Africans if we wish to secure full reconciliation with our broader society. Our legacy of mistrust and polarisation is a predominant factor that prevents stakeholders from working together for mutual benefit.

We need to agree on a vision for the mining industry.
The African Mining Vision, adopted at the February 2009 African Union summit, states that Africa needs to ‘shift its focus from simply mineral extraction to much broader developmental imperatives in which mineral policy integrates with development policy’. What this means in practice is using our country’s vast mineral resources as a catalyst for development, so that the mining industry can play a transformative role. To do this we need to integrate mining into development policies at all levels of society.

We need to develop a social and economic compact – between business, government and labour – that creates superior value for all stakeholders.
Business will need to commit to open and transparent disclosure of information as the basis for meaningful engagement with all stakeholders. More importantly, business will have to ensure that value flows equitably to all stakeholders according to an agreed and specific framework, including employee benefits, profit sharing, taxes, social expenditure and dividends to shareholders. Commitments to invest in growth projects and sustainability in the right investment climate will be a necessity.While we recognise that unions have an important historical role in promoting a political agenda, the unions of the future should see their role as serving their members’ interests first. They need to engage proactively around the sustainability of mining operations, and industrial action that could compromise the business should be avoided. Unions should be more supportive of measures that enhance business performance, and critical and possibly difficult business decisions required in the interests of sustainability should be supported.

Government will need to provide clear policy and a regulatory framework that provides the level of certainty that is required for confident investment in mining projects. Increased incentives for investment in mining growth projects and a fair taxation regime will promote investment, from industry as well as from local and foreign investors.

Can such a future for the South African mining industry realistically come about, or is it a utopian dream? I believe most would agree that this would be a far more preferable way for the industry to function than through the adversarial and hostile interactions that are commonplace in our current climate and which only serve to destroy value.

This ambitious vision can be realised through a renewed collective will and rebooted relationships that are not contaminated with historical perceptions and legacies. We’re unlikely to be looking at a ‘big bang’ scenario, however – a transformed mining industry will more likely be the result of incremental progress over time.

What is crucial is that all stakeholders need to be aligned with contributing towards the industry’s success instead of trying to further their own self-interest. Ultimately all South Africans have an interest in creating an environment in which the mining industry fulfils its potential in building a stronger nation. All stakeholders – whether business, government or labour – need to make it their first priority to collectively protect the industry’s sustainability as the source of the value that will accrue to all South Africans.

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