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Empowerment in the South African Mining Industry

The notion of BEE or BBBEE is therefore firmly situated in the development paradigm. It frames the problem to be addressed as “disempowerment”, which entails poverty, inequality and underdevelopment as a result of past racial discrimination. Empowerment entails focussing on investment, economic growth and efficiency and restoring ownership in businesses to black people.

The history of the South African mining industry, unfortunately, epitomises the narrative of past racial discrimination and exploitation. The Truth and Reconciliation Commission branded mining in South Africa as “the blueprint for ‘grand apartheid’” because of its history of exploitation of cheap black labour.¹³³ The gold mining industry’s success has been ascribed to the availability of a large and affordable work force and not necessarily the size of the gold reserves.¹³⁴ While the mining industry boomed, the migration of black labour caused various injustices, such as the disruption of communities and family structures.¹³⁵ Mining also created new communities, heavily dependent on the activities of the mine for their livelihood.¹³⁶ Areas, previously poor and undeveloped, acquired economic importance because of mining and attracted labourers, traders and shopkeepers.¹³⁷

These newly created communities have been in conflict with government and mining companies since the dawn of mining in South Africa.¹³⁸ The recent labour unrest¹³⁹ and continuous contestation of the right to mine in the light of the environmental and social impact¹⁴⁰ of mining, are current day manifestations of the conflict.

Nevertheless, mining remains an important economic activity that continues to yield some economic benefits.¹⁴¹ Given the history of South Africa and the mining industry specifically, the focus has shifted to sharing these benefits with historically disadvantaged persons and communities affected by mining. The mining industry, therefore, has been one of the cardinal targets of the larger drive for transformation in post-apartheid South Africa.¹⁴²

The link between the transformational aspirations of the Mineral and Petroleum Resources Development Act¹⁴³, benefit sharing and the development of mining communities has been set out in part 2 of this paper.¹⁴⁴ To reiterate, section 100(2) of the MPRDA mandates the Minister to create a broad-based socio-economic empowerment charter (“Mining Charter”) to provide for the historically disadvantaged South Africans to participate in and benefit from the mining industry.

This section will set out the tale of four Mining Charters by specifically looking at how the different iterations of the Mining Charter provide for the empowerment of mining communities. The purpose is to see how the rhetoric regarding mining communities has changed since the first Mining Charter. The hypothesis is that more emphasis is being placed on the hardship of mining communities, but that the framing of the problem that requires addressing, remains locked in developmental paradigm thinking. The four charters will be assessed briefly by looking at how broad-based socio-economic development is defined and how provisions pertaining to mine community development are constructed. The allocation of ownership in mining companies to mine communities is also considered briefly.

1. Defining Broad-Based Socio Economic Empowerment

Primarily, broad-based economic empowerment as provided for in the MPRDA focusses on addressing past and present discrimination against historically disadvantaged persons and the transformation of the minerals and petroleum industry.¹⁴⁵ Transformation includes the socio-economic development of mining communities and labour sending areas from the benefits arising from the mining activities. ¹⁴⁶ The focus is on mining communities specifically but also includes all historically disadvantaged South Africans (“HDSA’s”).¹⁴⁷

The 2004¹⁴⁸ and 2010¹⁴⁹ Mining Charters define broad-based socio-economic empowerment (“BBSEE”) in the same manner as broad-based economic empowerment is defined in the MPRDA, but excludes reference to the socio-economic development of all HDSA’s. The 2016 Draft Mining Charter deviated from the previous charters by referring to “Broad-Based Black Economic Empowerment” (“BBBEE”), as defined in the Broad-Based Black Economic Empowerment Act instead of BBSEE.¹⁵⁰

The difference between the MPRDA’s vision of BBSEE and the 2016 Draft Mining Charter’s vision of BBBEE, regarding mining communities specifically, is that BBBEE does not refer to the socio-economic development of either mining communities specifically or HDSA’s generally. BBBEE focuses on the “empowerment of all black people…in particular … people living in rural areas…” by means of “integrated socio-economic strategies” that include providing communities with ownership and management opportunities regarding enterprises.¹⁵¹ It is by no means denied that the various socio-economic strategies included as part of BBBEE¹⁵² may also lead to the socio-economic development of mining communities, without making explicit reference to development. The proposed amendment, however, does digress from one of the stated objectives of the MPRDA.¹⁵³

The 2017 Mining Charter does not include a definition for BBSEE or BBBEE. A definition would have been expected, seeing that the name of the 2017 Mining Charter refers to “broad-based black socio-economic empowerment”. It is accepted that empowerment in this instance should encompass both the MPRDA’s definition of BBSEE as well as the BBBEE Act’s definition of BBBEE. The 2017 Mining Charter thereby retains the “social” aspect and focus of empowerment on mine communities explicitly, while very clearly prioritising the empowerment of Black persons.¹⁵⁴

2. Mine Community Development

Embracing the different elements of empowerment provided for by the Mining Charter¹⁵⁵ will ultimately benefit mine communities, be it indirectly. The 2004, 2010, 2016 and 2017 Mining Charters, however, specifically provide for the empowerment of mine communities through the promotion of mine community development. Mine community development is, therefore, a separate element that the holder of a mining right must promote in order to comply with the requirements set by the legislative framework.

The provisions and definitions contained in the four charters differ slightly, however, and the following aspects will now be considered: The description of mine community development, the definition of “communities”, the determination of compliance, and the interaction with other developmental initiatives such as the integrated development plan (“IDP”)¹⁵⁶ and the socio-labour plan (“SLP”).¹⁵⁷

To achieve “mine community and rural development” the 2004 Mining Charter stipulates that “stakeholders”¹⁵⁸ should cooperate with “all spheres of government” to formulate an IDP. The IDP should provide for the development of infrastructure regarding communities where mining takes place as well as for major labour sending areas.¹⁵⁹ The charter does not define “communities”, “host communities” or “mine communities” but regards “major labour sending areas” as the areas from where a lot of mine workers come from.¹⁶⁰ A mining right holder is regarded as having complied with “mine community and rural development” if the IDP has been agreed upon and implemented and if there is evidence that the mining company procured efforts to consult with mining communities.¹⁶¹

The 2010 Mining Charter places less emphasis on the IDP. It describes mine community development as the meaningful contribution to community development, enabling the holder of a mining right to retain its “social licence to operate”.¹⁶² The holder of a mining right must conform to “international best practice” by partaking in “ethnographic community consultative and collaborative processes”.¹⁶³ The charter does not define an “ethnographic community” but it does differentiate between a “mine community” and a “community”. Whereas “mine community” is defined as “communities where mining takes place and labour sending areas”¹⁶⁴ “community” is defined by relating it to land and custom.¹⁶⁵ “Ethnographic community” consultation may therefore actually refer to consultation, not with the broader “mine community” but with a specific traditional “community”.¹⁶⁶

A mining company must perform assessments to determine the mine community’s developmental needs and the promotion of projects should be aligned with the IDP for the relevant municipality.¹⁶⁷ A mining company will comply with its duties in terms of mine community development if the approved development projects are implemented.¹⁶⁸

In a response to the identified shortcomings of the 2010 Mining Charter¹⁶⁹ the 2016¹⁷⁰ and 2017¹⁷¹ charters both mention the plight of poor mine communities. The Charters claim to address this plight by promoting employment and the advancement of the social and economic welfare of mine communities and major labour sending areas.¹⁷²

The 2016 draft Mining Charter stipulates that mine community development requires “meaningful consultation and co-ordination” between the mine company, community and local municipality.¹⁷³ Other than is done in the 2004 and 2010 Mining Charters, no explicit reference is made to the relevant IDP. The 2016 draft Mining Charter furthermore provides that a specific percentage (1%) of a mining company’s annual turnover should be contributed to community development and labour sending areas.¹⁷⁴ Whereas mine community development was to make up 15% of a mine company’s empowerment spend in terms of the 2010 Mining Charter, the 2016 Mining Charter increased this percentage to 30%.¹⁷⁵

The 2016 draft Mining Charter defined “mine communities” in the same manner as it was done in the 2010 Mining Charter.¹⁷⁶ The definition of “labour sending areas” and “communities” also remained unchanged except that the definition of “communities” now specifically referred to a “coherent, social group of Black persons”.¹⁷⁷

The “Social Development Trust” is one of the funds to be established by the Minister specifically for the socio-economic development of local communities as well as for building capacity for black suppliers of goods and services.¹⁷⁸ The creation of a “Social Fund/Social Development Fund” was also mandated in terms of the 2010 charter, to finance commitments made by a mining company in its SLP.¹⁷⁹ The 2016 charter makes no mention of the SLP in describing the “Social Development Trust”. Other than in the case of the 2010 Mining Charter, it is explicitly stated that the fund is to be created by the Minister. It, however, seems as if it would have served the same purpose because 1 % of a mining company’s annual turnover was to be placed in this fund for socio-economic development of local communities and capacity building of BEE suppliers of goods. This provision, however, is not included as part of the mine community development provisions but forms part of the provisions pertaining to procurement, supplier and enterprise development.¹⁸⁰ It is, therefore, providing for a further contribution regarding socio-economic development of mine communities in addition to the 1% provided for regarding mine community development.

The 2017 Mining Charter once again refers to the fact that the holder of a mining licence must “meaningfully contribute” to the development of the mine community, but specifies that there must be “a bias towards communities where mining takes place”.¹⁸¹ Reference is furthermore made to company’s social licence to operate.¹⁸²

If it is considered how “mine communities” is defined, it becomes clear why development should be biased in favour of communities where mining takes place. Whereas the previous charters included under “mine community” the communities where mining takes place as well as labour sending areas, the 2017 charter also adds “adjacent communities within a local municipality, metropolitan municipality and/or district municipality”.¹⁸³ “Labour sending areas” is defined slightly differently to include areas from where the majority of South African mineworkers have been sourced, historically and currently.¹⁸⁴ No definition is provided for “community”, raising the question whether omitting a definition for community means that definition provided for in the MPRDA will also be applicable.¹⁸⁵

A significant amendment brought by the 2017 charter is that for the first time examples are provided of what kind of development projects a mining company must promote. Without providing a definition, the 2017 charter states that infrastructure projects, income generating projects and enterprise development should be pursued as part of mine community development.¹⁸⁶ Of specific interest is the link with enterprise development. It is not clear, however, if the element enterprise development (procurement, supplier and enterprise development) and mine community development should operate alongside each other in this regard.

The 2017 charter not only requires alignment with projects identified in the IDP¹⁸⁷ but also specifically mandates the mining company to develop mine communities by contributing to projects that are approved in terms of the relevant IDP.¹⁸⁸ Moreover, the 2017 Charter for the first time links compliance in terms of a company’s SLP with its contribution towards Mine Community.¹⁸⁹

To comply with mine community development, a mining right holder must contribute in proportion to the size of the holder’s investment.¹⁹⁰ If the holder does not make a contribution of this size, it will be regarded as non-compliant with the element of mine community development. Since mine community development, along with ownership and human resource development, is a ring-fenced element,¹⁹¹ non-compliance with mine community development will be regarded as non-compliance with the provisions of the Mining Charter.¹⁹²

No mention is made of the “social fund/social development fund” of the 2010 charter or the “Social Development Trust” provided for in the 2016 charter. Once more, a new fund is created, in this instance in the form of the Mining Transformation and Development Agency.¹⁹³ The definition does not provide any clarity as to what the agency’s purpose or mandate will be; it merely states that the agency will be created by the Minister.¹⁹⁴ Even though the name of the agency makes explicit mention of development, the agency is seemingly not involved with mine community development. From the provisions pertaining to the ownership element,¹⁹⁵ it can be deduced that the agency will be tasked with creating and managing trusts for keeping shareholding in mine companies that should be issued to mine communities as part of compliance with the ownership element.¹⁹⁶

3. Ownership

Along with the rule of law, in general, the protection of property rights is regarded as one of the prerequisites for development to occur as it provides a favourable environment for investment and securitisation for loans.¹⁹⁷ Owning capital, therefore, places an entity in a powerful position in the development context. In spite of the extended focus brought about by broad-based black economic empowerment, BEE (and current day rhetoric) still places a lot of emphasis on the ownership of the economy and the fact that this ownership is still held by a minority group or foreign investors.¹⁹⁸ To be empowered is therefore still often regarded as owning the means of production in the economy.

The 2017 charter has therefore increased the percentage black ownership of mine companies for mining rights holders to be compliant. Ownership also remains a ring-fenced element. Whereas the 2010 charter implied broad-based ownership schemes by for instance benefitting employees in ownership deals,¹⁹⁹ the 2016 draft charter and 2017 charter make explicit provision for more broad-based ownership schemes by requiring the distribution of shares not only to workers,²⁰⁰ but also specifically to “communities” in the 2016 draft charter and “mine communities” in the 2017 charter.²⁰¹

Providing communities with shareholding in the mine companies, featured in the 2016 charter for the first time.²⁰² The 2016 charter provided for an ownership target of 26% whereof 5% had to be equally allocated in trusts²⁰³ for the benefit of workers, black entrepreneurs and the community.²⁰⁴

The 2017 Charter increases the target for ownership to 30% and 8 % of the total issued shares of a mining company must be issued specifically for the benefit of mine communities²⁰⁵ to a community trust.²⁰⁶ This is a much higher stake than provided for in the 2016 charter. The community trust must be created and managed by the Mining Transformation and Development Agency. Other than stating that the Mining Transformation and Development Agency must report to the Minister on an annual basis, the mandate of the Mining Transformation and Development Agency is not clear from the charter.

Until the mandate and powers of the Mining Transformation and Development Agency are known, it is difficult to assess what ownership in mine companies will mean for mine communities. In addition, the fact that the definition of mine communities has been broadened ²⁰⁷ will complicate distributing the benefits of the shareholding significantly.

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