By Bruce Dickinson and Jonathan Veeran, partners, Webber Wentzel
Recent changes in mining and environmental regulations relating to the way mining companies can deal with their rehabilitation liabilities open up opportunities to take a co-ordinated approach towards turning mine liabilities into community assets.
SA’s mining sector has attracted little growth investment in the last few years. Between 2013 and 2017, SA accounted for only 3% of global mining capex, compared with Australia at 24% (source: Citibank, SNL research). Corporate restructurings and mergers have largely represented the divestment of assets from major companies to juniors.
This is partly due to, through revisions to the Mining Charter, the government has intensified pressure on mining companies to spend more on social development, adding more layers of non-mining costs. However, there are opportunities in the latest revisions to community and ownership provisions in Mining Charter III and the National Environmental Management Act (Nema).
The charter allows mining companies to earn 5% of equity offsets through undertaking agreed community development projects, such as transferring redundant land and buildings, which are currently mining liabilities, into assets for communities and municipalities. In practice, many mining companies have already built community infrastructure but receive no credit for it.
There are, however, concerns about the distinction made between the obligations of new, renewing and existing rights holders. New and renewing rights holders have to allocate 5% equity ownership to each of communities and employees. Existing rights holders do not. This raises expectations in communities and may well make it very difficult for an existing rights holder, with another 25 years to run until the right is due for renewal, to tell communities and employees that they have to wait 25 years for their share. Discontent is already becoming evident, and angry communities can make it impossible to mine.
Under recent changes to Section 24B of Nema, mines may start drawing down their rehabilitation provision up to ten years before closure. They no longer have to rehabilitate mined land to a pristine state but can repurpose mine infrastructure.
This infrastructure can generate economic returns for both communities and the mines, specifically through agri-industrial initiatives.
Mines generate a significant amount of redundant water and hold unused land and infrastructure, like hostels and kitchens, which could be used for growing crops and establishing food processing facilities rather than being demolished as part of the rehabilitation obligation.
In conjunction with UCT adjunct professor Mike Solomon, and drawing on past experience in advising on community/ employee empowerment, Webber Wentzel has been assessing ways that mining companies can earn equity offset credits and co-ordinate their efforts.
Addressing the empowerment needs of diverse communities around the mines has presented problems for mining companies in the past. Since the Mining Charters required community involvement, it has tended to present communities as a homogenous group, such as the Bafokeng or Bakgatla. But the reality is that mining communities often consist of various groups, including migrants. Mining Charter III acknowledges this reality.
But this is by no means a new phenomenon; Anglo American Platinum’s Project Alchemy was the first scheme to reach out to the broader mine host communities and labour-sending areas. Previous empowerment deals were done with traditional leaders. Alchemy recognised that mine communities are not homogenous and built a structure from the ground up, which is owned and managed by people nominated by the community, who might not be traditional leaders.
Communities around the mines are the most directly affected by operations and their needs have to be addressed. Mining companies over the past few years have built infrastructure and in a way become surrogate municipalities but their efforts have not been co-ordinated. Municipalities are supposed to have integrated development plans which prioritise the needs of the region but sometimes they are not enforced. To meet communities’ needs properly, infrastructure development needs to be managed.
We are studying whether there are ways to combine mining companies’ various community development trusts and social and labour plans with those of local governments by creating special economic zones in key mining towns like Emalahleni, Rustenburg and Kathu. Through a co-ordinated approach, mining companies could contribute the development specialists they currently employ, communities would nominate representatives for their interests and plans would be integrated with local government’s integrated development plans, which in practice have rarely been implemented. The objective would be to start planning now for sustainable communities in the post-closure period, rather than waiting until mines are in their final years of decline.
If the mining companies are willing to support these ideas, it would be far more sustainable in the long term than giving communities shares in ageing mines that pay diminishing dividends. Communities could rather hold shares in agro-processing companies and mining companies would earn credits for establishing them.
Bruce Dickinson and Jonathan Veeran are partners and mining sector specialists at Webber Wentzel.