SA Mining Report

7/30/2019 SA Mining Report

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SUSTAINABLE MINING IN THE 21ST CENTURYShifting Leadership Thinking: A South African Perspective

Cindy Mogotsi and Michael H. Rea


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1 Sustainable Mining in the 21st Century

Leaders of today are inundated with aninsurmountable number of complex issues inthe day-to-day running of any organization.No longer can they afford to focus purely onthe economics of their business, but they musthave the unique ability to grasp the social andenvironmental pressures in which they operate,and to understand the inter-play between each ofthese on the bottom-line.

Moreover, they must accept that gone are thedays when companies had only one stakeholderto satisfy: the investor. However, and despite theobviousness of the paradigm shift in which wenow operate, some leaders continue to battle tobalance social and environmental responsibility

in the pursuit of economic gain and prosperity ofthe organizations they lead.

In Africa, where some of the worlds poorestcountries can be found, and where the continentspopulation of roughly one billion are among thepoorest people on the planet, natural resourcewealth is exists in almost obscene abundance.Gold, diamonds, platinum, oil, natural gas,uranium, iron ore, coal, and any number of yetto be exploited resources are found in such

great quantities that Africa should be perceivedas limitlessly wealthy. However, while thecontinents natural resources hold great economicpromise for its people, few African nations havetruly beneted from their inherent wealth.

INTRODUCTION

Introduction

Interesting Statistics

The 2009 United Nations Human DevelopmentReport lists the Gross Domestic Product (GDP)per Capita of 194 different countries (including

additional information from www.undata.com) and ranks only 1 African country in the50 wealthiest countries (Equatorial Guinea,#40, $19 552 per capita).

Based on this data, only 7 African countriesboast a GDP per Capita within the top 50% ofnations, while 33 are within the bottom 25%.Africa is also home to 18 of the 20 poorestnations, and 13 African countries have a GDPper Capita of less than $1 per day.

GDP per Capita of African Countries(Source: 2009 UN Human Development Report)

Rank Country GDP/Cap

40 Equatorial Guinea 19 55258 Libyan Arab Jamahiriya 9 475

61 Gabon 8 696

62 Seychelles 8 560

71 Botswana 6 544

73 South Africa 5 914

80 Mauritius 5 383

93 Algeria 3 996

99 Angola 3 623

101 Tunisia 3 425

103 Namibia 3 372

110 Cape Verde 2 705

115 Swaziland 2 521

117 Morocco 2 434122 Congo 2 030

127 Egypt 1 729

137 Sudan 1 199

140 Nigeria 1 118

141 Cameroon 1 116

143 Cte d'Ivoire 1 027

146 Djibouti 997

148 Zambia 953

149 Sao Tome and Principe 916

150 Senegal 900

152 Mauritania 847

156 Lesotho 798

159 Comoros 714

162 Chad 658

163 Ghana 646

164 Kenya 645

165 Benin 601

168 Mali 556

171 Guinea 487

172 Burkina Faso 458

174 Tanzania 400

175 Central African Republic 394

176 Uganda 381

177 Togo 380

178 Gambia 377

179 Madagascar 375

182 Mozambique 364

183 Rwanda 343

184 Somalia 298

185 Niger 294

186 Eritrea 284

187 Sierra Leone 284

188 Zimbabwe 261

189 Malawi 256

190 Ethiopia 245

191 Guinea-Bissau 211

192 Liberia 198

193 Congo (Democratic Republic) 143

194 Burundi 115


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2Sustainable Mining in the 21st Century

African governments, in countries whereenormous natural wealth exists, have come to therealisation that a mineral is a national asset whichshould be developed for the benet of its people.It is both part of the national heritage, as well asthe key to the future success of its people.For this reason some governments have tailormade legislation to ensure that the benets of suchassets accrue to the people. African countriesare fast becoming savvy at demanding socialand environmentally friendly business practices,ensuring that natural assets are exploited in asustainable and much more equitable manner.

Granted, GDP per Capita is not necessarily aneffective measure of national wealth. The fact that

Equatorial Guinea, a small, oil rich country witha relatively small population, but an even smallernumber of people who have access to a reasonablyfair share of the countrys GDP, is deemed thewealthiest country in Africa in terms of GDP perCapita, is evidence that not all countries can bemeasured using the same ruler. Equally, onemust not assume that all African countries areusing legislation to ensure that resource wealthis exploited in a manner that reaps the greatestutilitarian reward for the greatest number of

people.

Nonetheless, proponents of sustainabledevelopment have meticulously argued thatbusiness prosperity can not be measured purelyon economic performance but must take intoaccount the ethical and governance conductof organizations, as well as the social andenvironmental impact an organization has in itssphere of inuence. They have successfully linkedsocial, environmental and ethical performance to

the overall nancial viability of the organization,most often with the help of some tremendouslypublic disasters (e.g., Shells Brent Spar, the Enroncollapse, and BPs Gulf of Mexico oil rig disaster).They have argued that what happens in one partof the world can no longer be isolated from theglobal village in which we now operate, andthey have therefore been able to call companiesto account for their social and environmentalimpacts.

In the mining industry, leaders are often confrontedwith various challenges which may or may not

be directly related to the daily operation of thebusiness but ultimately have a profound impacton the performance of the organization. Theseissues, if not adequately understood, managedand integrated into the running of the business,can adversely impact its nancial performanceand ultimately its long term viability.

The following discussion focuses on 4 key issuesin relation to sustainability namely:

I. What is Sustainable development andsustainability in the business context;

II. Non-nancial performance and its implicationsfor business;

III. The importance of both the legal and sociallicense to operate; and,

IV. The dynamics of leading in the 21st century.

These discussions shall draw upon experienceswithin the mining industry and some case studiesshall illustrate some of the fundamentals in

ensuring long term sustainability within the SouthAfrican context.

INTRODUCTION


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As dened by the Brundtland Commission of theUnited Nations back in 1992, at the Rio Summiton Sustainable Development, sustainabledevelopment is meeting the needs of the presentgeneration without compromising the ability offuture generations to meet their own needs.

In the context of the business, sustainabilityfocuses on the ability of the organization to grow

What is sustainable development and sustainability

thrive and overcome challenges that it may face.In accounting parlance, we often discuss whetheror not a company is deemed a going concern,whereas in more pedestrian jargon, we refer towhether or not the company has the ability tomanage its triple bottom line, or its nancial,social and environmental performance, with thelatter two elements still being commonly referredto as non-nancial performance indicators.

ECONOMIC

SOCIAL ENVIRONMENTAL

Socio-environmental

Socio-economic

The Triple Bottom Line

Enviro-economic

WHAT IS SUSTAINABLE DEVELOPMENT AND SUSTAINABILITY

Figure 1: Sustainable Development


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In a recent discussion with a senior leader of amining company about the importance non-nancial performance targets being integratedinto the key performance indicators (KPIs)of all managerial and supervisory employees,the company executive argued vehementlythat anything other than production andcost containment would always be deemed asecondary, or non-key, performance indicator.

This discussion highlighted some of thechallenges associated with encouraging corporateleaders to interpret and understand a variety ofsustainability-related issues, and the relevance ofthis understanding on the overall sustainability oftheir business.

Sub-Saharan Africa is estimated to have morethan 22 million adults and children (5.2% of alladults) living with HIV according to the WorldHealth Report of 2009. In South Africa, the North-West Province has an estimated HIV prevalencerate of more than 22%, and the government ofZimbabwes ofcial gures estimate a prevalencerate of 14.3% in 2010.

Between 2008 and 2009, Zimbabwe experienced

a cholera outbreak which resulted in an estimated98 000 infections and nearly 5 000 deaths.

In 2008, South Africa experienced a series ofpower outages, and power to mining houses wassuspended, resulting in an estimated cost to theeconomy of some R50 billion (US$ 7 billion).

In 2010, the issue of acid mine drainage in theJohannesburg area, resulting from contaminatedwater seepage from derelict gold mines, has

come back to haunt government, communitiesand businesses.

What can be demonstrated through these issuesand events?

In the rst two instances, one must consider thatall organizations draw a majority of their skillsand human resources from the community inwhich it operates. Consequently any sickness anddisease present in the community is likely to ndits way into the organization. This in essence hasa direct impact on the bottom line, arising from

increased illness-related absenteeism, high staffturnover due to death or medical incapacitation,a resultant loss of institutional memory and coreskills, compensation costs for medically boardedemployees, the high cost of recruiting andtraining new employees, and the overall impacton productivity due to high rates of employeeturnover.

Thus how does an organization manage tocontain costs, increase productivity and improvethe bottom-line when sickness and disease isprevalent in the community, and subsequentlywithin the workforce?

The power outage that plagued South Africa, in

2008, had dire short and long-term consequencesfor the business community, raising globalconcerns about South Africas ability to be aproductive and competitive supplier of preciousmetals, leading to an increase in metal pricesin anticipation of short supply. Even once theurgent issue of electricity supply was addressed,the apparent imbalance of demand exceedingsupply left a legacy of price efciency impacts.

While the impact on global metals pricing might

have subsided following the immediate crisis,the long-term impact on South Africas abilityto compete internationally was established interms of forward-looking electricity pricing,which is likely to result in a tripling of the price ofelectricity in less than 5 years. For manufacturingor metal processing companies, where electricityis a signicant component of the total cost ofproduction, this is not only an economic concern,but a social issue, as the management of one costis likely to impose cost containment impacts on

social considerations.

To contain overall costs, production will need tobecome far more efcient, which tends to meanfar less labour intensive, which in the SouthAfrican scenario is in direct opposition to thecountrys commitment to overcoming rampantpoverty through job creation. In a country withan ofcial unemployment rate of 25.3% (www.statssa.gov.za), not counting under-employment,or those who have given up trying to nd gainfulemployment, the shift towards less labourintensive means of production due to the rising

Business implications of non-nancial performance

BUSINESS IMPLICATIONS OF NON-FINANCIAL PERFORMANCE


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price of electricity seems counter-intuitive, andanother barrier to growth and development.

Recently, the term Acid Mine Drainage hasentered into the lexicon of many South Africans,even those who have little or no prior knowledgeof mining issues. In non-technical terms, AcidMine Drainage, or AMD, refers to the water thathas been contaminated by mining processes, tothe point of being acidic, and thus harmful topeople and the natural environment. Rather thanbeing treated, the water is allowed to accumulateunderground, continuing to be contaminated bythe remnants of historical mining practices, andultimately escaping from old and abandonedmines to the detriment of current plants and

water sources.

Although a solution to AMD in and aroundJohannesburg has been identied, the plan toimplement the solution has been limited by a lackof nancial support. While previous mine ownersreaped the benets prior to the closure of derelict

or unprotable mines, some dating back severaldecades, those living around the abandonedmines have been left to count the costs of theiractions. With no legal framework, or even areasonable expectation to locate and prosecuteowners of long-closed mines, the problem is notlimited to the acidity levels of the contaminatedwater, but rather who is responsible for cleaningup the mess, and thus who must pay for it.

With South Africa being deemed a waterscarce environment, and the real and pressingprobability that it will not have enough potable

water to sustain its growing population in thenext 20 years, water is quickly becoming an issuethat transcends the environment and encroachesupon economic stability. How companiesdeal with the rising signicance of water as amaterial cost of production is just as likely toaffect the social implications of doing businessas the dilemmas posed by South Africas recentelectricity crises.

These examples not only demonstrate how non-nancial issues are often beyond the controlof an organization, but with signicant nancialimplications for the business, but also the inter-relatedness of all three legs of the triple bottomline, as well as the inadequacy of assuming that

economics can be assessed in the absence ofsocial and/or environmental considerations.

Any organization that has the vision to sustainitself into the future, will pay due regard tothese issues (among so many others) and willmonitor, measure and evaluate the nancial andnon-nancial parameters that may inuence theperformance of the business and impact all of itsstakeholders and react accordingly to mitigatethis impact on the business. This does not only

show good corporate citizenship, but has a directimpact on the companys ability to contain costsand increase productivity and protability, byactively identifying shortfalls and taking correctiveaction where it is required.

In the mining business, where price is set bythe market and competitive advantage is gainedthrough high efciencies, high productivityand overall cost reduction per unit of productproduced, organizations can ill afford to ignore

non-nancial performance.

Thus, it is prudent for leadership to recognise thatnon-nancial indicators can no longer be assumedto be non-core business issues. Rather, social andenvironmental performance should be integratedinto the overall business model, with clearperformance targets, and systems to monitor andevaluate performance. As such, these should formpart of performance management for executives,management, supervisors and employees, withclear accountability to shareholders and otherstakeholders.

BUSINESS IMPLICATIONS OF NON-FINANCIAL PERFORMANCE


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Africa is endowed with a seemingly inniteinventory of natural resources, and is consequentlypopulated with an abundance of mining activity.While billions of dollars in capital investmentows into mining operations, generating evenmore money in mineral-related prots, very little,if any, signicant economic benet is accrued tothe communities around mines. In most cases,mining rights are secured by foreign investors ata fraction of the real value of the resource wealthburied beneath the soil, and the vast majorityof all revenue is exported alongside the minedresource.

Mining houses in these communities are oftenbeing accused of plundering resources at a cost

to host communities who often lose grazing andcrop elds, or access to limited water sources, tomining operations. Meanwhile, the communitiesare expected to endure unfamiliar levels ofdust, noise, waste and efuent. Despite theirefforts to reinvest some of mining prots in theircommunities as part of their commitment tosocial responsibility, and in an effort to createsustainable communities beyond the projectedlife of the mine, the companies individual effortstend to have insignicant impacts, leading to a

seemingly endless cycle of socio-economic andenvironmental problems.

It is important to note that in the mining context,and particularly within more rural areas,companies are expected to be abundantly awareof the difference between a legal license and asocial license to operate. While the legal licenseis formally acquired through government mineralrights procurement processes, the social licenseis informally granted by those most affected by

mining activities (i.e., the key stakeholders), andis much more tenuous in terms of its volatility.

Interestingly, the South African governmenthas attempted to link both of these licensesthrough the development of its Broad BasedBlack Economic Empowerment Charter for theMining Industry (the Mining Charter). In orderfor any company to acquire mining rights, or toconvert old order mining rights to new ordermining rights (i.e., now that the Mining Charteris in place), they must demonstrate that theyhave systems and processes in place to consider

the needs of the local communities affectedby their mining activities, and that they willequally minimise the negative socioeconomicimpacts, while maximising the Socio-EconomicDevelopment (SED) returns to the community. Infamiliar terms, this is the social equivalent of anEnvironmental Management Plan.

Thus, the legal license to operate is directly linkedto their ability to deliver on SED commitments,and one might assume that if all companies areheld to the same expectations, developmentwould rapidly occur in areas of signicantneed. However, the projects of various miningcompanies, regardless of their proximity to othercompanies operating in the same area, tend to be

similar in terms of scope and objectives, and oftencompete, rather than complement each other.Mine personnel responsible for SED tend to be ill-equipped to identify, select and manage the mostappropriate projects, implementation processestend to be disjointed, and systems for ensuringdevelopmental effectiveness rarely exist. Thus,the investment of signicant amounts of money, inthe hundreds of millions of Rand annually, resultsin no visible impact which can put a mines sociallicense to operate at risk, and either be caused

by, or exacerbate poor relationships with thesurrounding communities: particularly if they areperceived as not doing enough to address socialneeds within the local community.

The collaborative approach toSustainable Development

In South Africa, platinum mining operationsare centralised into 3 main clusters The

Eastern, Western and Northern Limb (Figure2 below). Each cluster takes into account theunique challenges faced by the area, the level ofmaturity and establishment of that area, as wellas the extent of mining activity in the area. Theseelements dictate the scope and type of projectsthat need to be undertaken, as well as who is bestpoised to facilitate the implementation of theseprojects.

Legal and social license to operate

LEGAL AND SOCIAL LICENCE TO OPERATE


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In the Western and Eastern Limb of the BushveldIgneous Complex (BIC) of South Africa, whereseveral mining companies can be found, thecombined effort of mining houses, governmentinstitutions and communities has proven to besuccessful in achieving certain developmentalobjectives through the establishment of variousforums (examples are the Eastern Limb ProducersForum, Western Limb Producers Forum, WaterForum etc.).

Rather than attempting to mitigate their own,individual, negative socio-economic andenvironmental impacts, companies are workingtogether, in a collaborative approach model, toestablish maximum developmental impact incommunities.

By pooling their nancial, human resource andintellectual resources, companies and otherstakeholders are proving that when it comes to

community development, the sum of the partsis often greater than the whole. This approach,

if explored and implemented effectively, canincrease the impact of mining companies oncommunities positively.

The various Forums consist of between 3 24mining houses, represented by mine generalmanagers, senior managers from the affectedlocal municipalities, traditional leaders andother community leaders. The main purposeof the Forums is to improve the delivery

rate of sustainable projects in collaborationwith communities by ensuring that there is acommon understanding of the problems at-hand, and no duplication of effort in addressingthese problems. In each phase of the mine lifecycle,impacts nancial, social and environmental exist at different levels, while the need to interactwith, and invest on behalf of, local communitiestakes on very different forms.

To oversimplify, the following stages of socio-

economic development occur:

Figure 2: Cluster by Region and Common Assets



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Exploration: During the early stages of mineral seeking and viability testing, engagement withcommunities is limited, and socio-economic development investment tends to be lim-ited to goodwill-seeking charitable donations. No strategic approach to developmenttends to occur at this stage, although part of the feasibility testing of the mine wouldinclude baseline socio-economic impact, and needs, assessments.

Development: As the mine begins to take shape, following the establishment of mineral rights andland lease agreements, baseline socio-economic impact assessments give way to acombined model of immediate needs mitigation (i.e., relief aid, where necessary),and the start of long-term development programmes. Investment in the communityramps up, engagement with various stakeholders is ongoing, and the monitoring andevaluation of developmental impacts should occur almost immediately (i.e., as fromthe end of Year 1 of programme implementation).

Maturity: By the time the mine reaches production maturity, or full production, socio-economicdevelopment (SED) should be at its sustained peak, with limited change in the over-all scope and/or focus of either engagement or programme strategies. SED projectsshould focus on sustaining the economy in that community beyond the life of the

mine.Decline: As the mine reaches the end of its life and begins to shut down operations (i.e., prior

to closure), the focus of shifts towards SED investments that will meet life after minerequirements, using SED spend as a mechanism for off-setting at least some of thenegative impacts of mine closure on the local economy. Much of this investmentis likely to focus on re-skilling and/or preparing employees for relocation to othercommunities, while some will focus on the establishment of secondary and tertiaryindustries that are not mine-dependent (i.e., not depending on mine procurement tobe sustainable).

Closure: Engagement with, and investment in, communities ought not to cease immediatelyupon closure of a mine, but rather extend well into the short-term future to helpmanage the negative socioeconomic impacts of a life after mining economy. Skills

development and educational support tend to be the main focus areas of SED supportwithin the extended closure period.

EXPLORATION

DEVELOPMENT DECLINE

CLOSURE

MATURITY

Figure 3: Socioeconomic Stages of the Mining Lifecycle


This model is based on the following principles:

Formation of clusters based on common assets and the life of mine. Leveraging of resources between stakeholders.

Establishment of a vigorous planning process for all projects. Establishment of a fundamental integrated approach to project implementation.


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Figure 4: Increase in Local Government Expenditure through Collaboration

R40 000 000

R35 000 000

R30 000 000

R25 000 000

R20 000 000

R15 000 000

R10 000 000

R5 000 000

0

2005/2006 2006/2007 2007/2008 2008/2009 2009/2010 2010/2011 2011/2012

Allocation Commitment Expenditure

GTMM

IG

Alloca

tions/ExpenditureinRMillions

Greater Tubatse Municipality MIG Achievements

R12 383 250.00R14 599 296.00

R20 257 003.11

R25 019 209.62

R30 919 000.00

R25 524 367.34

R36 311 000.00

R- R-


In the Eastern Limb of the BIC, mining operationsare relatively new and the communities tendedto be under-developed prior to the arrival of themining companies. Relatively few actual townsexisted, and most villages within mine-affectedareas were primarily agrarian, with much ofthe population being reasonably classiedas subsistence farmers. Jobs were few, andincome was limited either to the heavy relianceon social welfare grants, income generatedthrough traditional microeconomic enterprise orincome generated through the selling of homegrown produce. Unlike the area referred to asthe Western Limb, in the Rustenburg area of theNorth West Province, which has well-establishedmines and a vastly different set of socioeconomic

requirements and challenges, the social needs inthe Eastern Limb have been deemed both uniqueand substantial.

As a result, mining-related Socio-EconomicDevelopment projects on the Eastern limb tendto focus on the immediate needs of infrastructure

development, with the following 4 main focusareas:

Water supply to local communities and themines

Development and/or enhancement of roadsand other transportation infrastructure

Electricity generation, supply anddistribution

Technical skills development

Since the Eastern Limb Producers Forum wasestablished in 2002, and with collaborationof business, government and the community,the development of the region has grownexponentially through an increase in municipal

spending as technical skills and expertise havebeen established within the relevant municipalgovernment departments. This is supported by theincrease in expenditure between the years 2005to 2010, focussing primarily on infrastructuredevelopment in the Eastern Tubatse area, asillustrated by the following graph (Figure 4).


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What this suggests is that if governmentdepartments are adequately capacitated withskills and expertise, typically supplied in a form oftechnical skills transfer or capacity building fromthe private sector, funding for social developmentcan not only be drawn from the government scalbudget, but be efciently deployed to achievegreater success, thus requiring less funding fromthe private sector to complete specic projects.

Rather than relying on companies to do the workof local government, owing to the greater skillscapacity within the private sector, effective private-public partnerships for development (PPPDs)tend to affect much greater developmental gain,at lower long-term cost, and with greater success

and sustainability.

While in many cases this might seem altruisticor perceived to be a charitable good work onthe part of the mines, the benet is reciprocaland therefore this is far closer to mutualism (orcommensalism) than altruism. While the localcommunity benets from the developmentalimpacts of enhanced infrastructure and improvedservices, local government gains from an increasein internal capacity and skills, particularly withrespect to project management and technicalskills, and the mines benet from the enhancedprotection of their licenses to operate: legal andsocial. Moreover, the collaborative approachtends to become much more cost effective for allparties involved, using the principle of economiesof scale to reap the greatest developmental

benet from a nite stockpile of nancial andtechnical reserves.

Figure 5: Expenditure of PPPDs within the Eastern Limb

Project Discipline Description Role of Forum Mine ContributionR' 000,000

Project CapitalValue Geared

R'000,000

Project Status

1 Water Supply Raising of FlagBashielo and

Lebalelo Pipe Line

Lebalelo WaterUser Association

225.0 Project Complete

2 Water Supply JWF - De Hoop

Dam and pipelines

Facilitation 6.0 16 000 Dam under

construction

3 Water Supply PWF -Mogalekwane -

Water pipeline tocommunities and

mines

Facilitation andConcept Study

3.0 100 Bulk Water pipelineto be constructed

4 Tubatse PMU Training andsupport to GTMTechnical Team

Professionalsupport and

Training

5.0 140 Roads completed

5 Tubatse Road andTransport Projects

R 37 -Upgrade andTaxi Rank 2009 -

2011

Design andFacilitation

2.0 250 Planned forconstruction

R 555 - Operationand Maintenance

Facilitation Role 0.5 30 Maintenance inprogress

D4170 & D4180Upgrade


2.0 200 Planned forconstruction

Burgersfort CBDUpgrade


1.0 10 Construction inprogress

N11 Safety andRealignment

Facilitation andPre-feasibility study

4.0 450 N11 Roadalignment and

safety planned forconstruction

TOTAL R 248 R 17 163



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The process of integration andcollaboration

Working together, or collaborating, isnt

necessarily as simple as it might seem, and astrategic approach to sharing thoughts, skillsand nancial resources must be adopted. Theprocess of collaboration requires an integratedapproach to economic, social and environmentaldevelopment, and requires the following majorelements:

1. A formal structure

This structure consists of all the major role players

and stakeholders namely, senior operationalmanagers from the mines, key political playerssuch as the mayors and senior provincialgovernment heads, recognised community and/or traditional leaders and a technical task team.In the case of the Eastern Limb, the structure isformalised through the Producers Forum.

The Producers Forums are formalised through aconstitution with a Memorandum of Understanding(MOU), with provincial governments and

implementing agreements with institutions suchas the Department of Water Affairs, Municipalities,South African National Roads Agencies etc, forproject planning and implementation.

In the Producers Forum, an Executive Committeeis formed from representatives who have beencommitted from each of the area mines. Underthe Executive Committee are task teams whichdeal with technical aspects (e.g., land, water,electricity, and other pertinent issues). The

technical team is assigned to specic projects,and it is their mandate to ensure that their projectsare managed effectively.

Rather than discussing what needs to be done inthe community and merely contributing progress-dependent funds to the local municipality tohelp them meet specic objectives, the Forumtakes an active role in ensuring that funds arematched with skills and capacity contributions,thereby investing signicant sweat equity intothe common developmental goals.

The technical teams are accountable to theExecutive Committee, and the Forum isaccountable to all of the relevant stakeholders(i.e., the member organisations involved in thePrivate-Public Partnership).

2. Stakeholder engagement process

Formal community structures for communicationhave to be established with recognised communityleaders and local municipality representativesforming part of the Producers Forum. In additionthe mining companies have to have formalstructures where mine performance and socialdevelopment issues are addressed and discussedthat ensuring adequate communication andcommunity buy-in for the projects to be embarkedon.

Stakeholder engagement must be formal, ratherthan ad hoc. Stakeholders must be identied,categorised in terms of their degree of affect(how affected they are by a specic issue) andeffect (how much of an effect they might be ableto have on the issue), prioritised, and approachedusing appropriate engagement methodologiesand engagement frequencies. In some cases a

specic stakeholder, or stakeholder group (e.g.,farmers surrounding a specic mine), must beapproached either in one-on-one meetings,or group forums, whereas other stakeholdersmight be duly engaged via press releases and/or publicised opportunities to comment (e.g.,newspaper advertisements)

A key component of the stakeholder engagementprocess must be the establishment of amechanism to ensure that the Executive

Committee is adequately apprised of the successof engagements. At least quarterly, the Committeeshould be informed of who was engaged, aboutwhat issues, in what format, and to what ends.It is the responsibility of the technical teamsto provide sufcient information to allow theCommittee a reasonable opportunity to identifyany potential barriers to project success, and todevelop mitigation strategies, where needed,prior to the situation escalating to a situation ofre ghting, or damage control.



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3. Leveraging of resources

South Africas Department of Minerals andResources (DMR) requires that all mining houses

invest a signicant proportion of their revenue,typically in the neighbourhood of 1% of net protafter tax, to socioeconomic development. As such,all mines are aware of the need to invest in theircommunities, and with few exceptions are doingso. However, the sum of money invested in SED byone company, even a large company with multiplemillions of Rands to invest annually, is whollyinsufcient to address the plethora of education,health, welfare, and economic developmentneeds that exist throughout South Africa. Thus,companies are better served by pooling their SEDfunds to increase the potential for private sectorSED investments to have a signicant impacton an issue such as poor secondary school testresults in Maths and Sciences. However, cashis not the only resource that must be pooled forleverage purposes.

While money is always useful, it is the lack of skilland/or capacity within the public sector that posesthe greater developmental conundrum. Even ifcompanies are aggressive in their preparedness

to donate money to worthy projects, the funds aredeemed virtually unspendable in the absence ofthe necessary skills to adequately project managekey infrastructure, healthcare or educationalprojects.

Thus, the greatest contribution mines can possiblymake to the overall development agenda is skillsdevelopment and capacity building through thepooling of their own talent. Although costly interms of their own operational needs, the benet

to local municipalities when an engineer oraccountant is spared for a specic project oftenpales in comparison to the efciency gains thecompany tends to experience, as the loanedprofessional typically becomes more motivatedto succeed in all aspects of their career.

However, the cost should not be minimised, andtherefore the sharing of skills is the responsibilityof all partners within the Forum, to ensure thatthe aggregated capacity can be leveraged for

maximum shared benet.

4. Institutional Alignment

In order for the integrated approach to work,there has to be a clear understanding of what the

national development imperatives are, as well aswhere the greatest need can be most effectivelybe addressed by the pool of resources availablewithin the Forum. On the one hand, companiescannot be expected to become the answers to allproblems, but should rather become one source ofanswers for appropriate challenges. Meanwhile,the mining companies should not attempt tox problems that either are too massive fortheir combined capacity, nor problems that thecommunities have not deemed a critical need.

In South Africa, municipalities are required todevelop Integrated Development Plans, or

IDPs, that provide a reasonable overview ofboth the socioeconomic challenges within theircommunities, and the specic challenges that aredeemed most urgent. Typically, infrastructure,health and education tend to be the three primaryfocus areas of mining-affected municipalities, andinfrastructure projects are the ones that are mostrelevant to the mining companies due to theirspecic in-house engineering capacity. Thus, itis important that through a Forum the needs ofthe communities are aligned to the capabilities of

the mining companies to increase the likelihoodof developmental success.

LEADERSHIP DYNAMICS IN THE 32ST CENTURY


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13 Sustainable Mining in the 21st CenturyLEADERSHIP DYNAMICS IN THE 32ST CENTURY

In short, so what?

Although the preceding pages possibly helpto offer clarity around a small number ofsustainability-related issues, particularly in theSouth African context, the question still remains,So what?

Ultimately, it comes down to leadership, and onecan not apply 20th century models of leadershipto 21st century challenges, particularly not inemerging markets, and certainly not in SouthAfrica.

Historically, leadership within mining companies,and particularly at the mine level, has been far too

quick to focus their attention almost exclusivelyon production and prot, with little regard foranything else. Sadly, this has had to change fairlyquickly in the past few years, as stakeholders,particularly government and unions have becomeunwilling to accept poor safety records onmines. Mine managers and company executiveshave therefore been forced to pay much closerattention to safety issues, and to accept thatmining-related fatalities and protability are NOTmutually exclusive. Where executives might

have been able to accept fatalities as long as theydidnt impede production, government and otherstakeholders have forced the hands of miningcompanies to place deeper signicance on safetymatters.

Equally, mining executives and mine managersmust accept that the long term sustainability ofan organization, the global economy and theupliftment of the bottom billion in Africa andaround the world, requires a shift in leadership

thinking. They must accept that an organizationis an open system rather than a closed one, andthat each company is dependent on its socialand physical environment for its existence.Thus, leaders of today must recognise that theyhave a duty to look beyond the shareholder, andto understand the needs and concerns of allstakeholders so that they, and their companies,might leave a sustainable legacy for futuregenerations.

Todays leaders need to understand thatcollaboration and competition can occur

Leadership dynamics in the 21st century

simultaneously. They must be able to distinguishbetween those issues that give them a competitiveadvantage over their peers to sustain theirbusinesses (e.g., enhanced human resourcedevelopment programmes to attract and retainscarce skilled professionals), and those issuesthat can be shared with their competitors tocreate a positive operational climate for mutualdevelopmental success (e.g., technical skills andexperience to efciently complete infrastructuredevelopment projects).

Todays leaders must be committed to the causeof sustainable development and who have anunderstanding that this is a business imperative.

Thankfully, the dawning of the 21st centuryseems to have brought with it a tendency towardsgreater investor awareness of sustainabilitymatters. With the establishment of indices suchas the Dow Jones Sustainability Index, FTSE forGood, and the Johannesburg Stock Exchange(JSE Limited) Socially Responsible Investment(SRI) Index, and with trillions of dollars investedin green, social and/or sustainability funds, muchmore attention is being afforded to matters stillcommonly referred to as non-nancial. Investors

are becoming much more environmentally andsocially conscious, and the pervasiveness of theinternet, even into previously deemed remoteAfrican villages, has ensured that stakeholdersare becoming far better equipped in their battlesagainst mining companies. Thus, todays leadersmust be equally prepared to understand andmanage the social and environmental impactsof their businesses as effectively as they havetraditionally managed productivity and prot.Moreover, they must be prepared to understand

who their stakeholders are ALL of theirstakeholders and must be better prepared toengage with them in a constructive and effectivemanner.

Todays leaders must be prepared to accept thatthe 21st century requires that their thinking needsto shift towards issues of sustainability, with agreater focus on an integrated approach to doingbusiness. Sustainability must be incorporatedinto the overall business process, and be alignedwith ethical business practices, good corporategovernance, and transparency.


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In conclusion, the success of future generationsand the growth and success of the global economyrests on the shoulders of todays leaders. For thisto happen, there needs to be a paradigm shift inleadership, from that of master to that of servant,understanding the diverse nature of businessstakeholders, their expectations and the relevance

of non-nancial performance in ensuring longterm business stability and viability.

The changing business environment, stakeholderinterest in business performance and practices,has resulted in added pressure on businessleaders to account. Leadership maturity within theprivate and public sector is critical in developingeconomically and socially stable communities,which ultimately benets the business.

Conclusion

Through collaboration greater benet can beattained for both host communities and miningcompanies. While the legal licence operate isessential for any mining company, the sociallicense is paramount in ensuring a sustainableoperation.

Greater stakeholder interest in businessperformance, beyond nancial matters, requiresleadership that is committed, accountable andtransparent. This requires leadership that can behonest and open to public scrutiny, recognisingthat the future of any organization is dictated by itsability to create a balance between its operationsthe environment and society.

CONCLUSION

Organizations that have integrated sustainabilityinto their daily business practices will nd addedvalue to the bottom line by being able to respondon time to issues thus saving costs and time, as

well as mitigating long term impacts that wouldotherwise be disastrous to a business in theabsence of proper management and planning.


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i i i i

Cindy Mogotsi

A research and development chemist by profession, with a BSc degree fromthe University of the North West in South Africa, Cindy has worked in the

mining industry for the last 16 years.

In 2003, Cindy acquired a Masters degree in Business Administration fromthe University of Wales, and acquired an MSc in Technology and Mining fromthe Davinci Institute of Technology in South Africa, in 2006.

The rst 10 years of Cindys career were spent at operations and involvedleading technological research on Platinum Group Metals (PGM) extraction

and analysis. The past 5 years have been invested in the eld of Sustainable Development, heading upthe sustainability performance area for Impala Platinum (Implats), focusing on non-nancial indicatormonitoring, evaluation and reporting for the group.

Cindy is a non-executive director of the South African Mining Development Association (SAMDA),working closely and playing a key role in inuencing policy-making in the mining sector, and is anexecutive director of the Group subsidiary company, Impala Platinum Limited.

About the authors

Michael H. Rea

With degrees in Zoogeography (BSc), Animal Behaviour (BSc) and CorporateSocial Responsibility (MBA), Michael is a sustainability practitioner withproject experience in more than 40 countries, over the past 20 years.

With a particular interest in socioeconomic development, Michael hasemerged as a leading sustainability reporting assurance provider in SouthAfrica, offering his clients a meaningful alternative to his key competitors: theBig 4 accounting rms: Deloitte, EY, KPMG and PwC, of which PwC (99 to2003) and KPMG (2003 to 20060 are former employers

His company, SustainabilityServices.co.za, is registered as an AccountAbility (AA1000AS) assuranceprovider, and assures no fewer than 10 annual sustainability reports. His recent mining clients includeAREVA Mining (France), African Rainbow Minerals, Merafe Resources, Royal Bafokeng Platinum,Wits Gold, Xstrata Alloys and Xstrata South Africa.

For more information, please contact the authors at:

[email protected]

or

[email protected]

SA Mining Report

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