To the South African economy, mining is a bit like the goose that lays golden eggs – everyone wants one but the eggs are getting smaller and more people are claiming a share.
South Africa’s mining sector is the historic backbone of our economy. But the hunter’s dark shadow continues to lengthen over the golden goose. Pressure is mounting from all sides – there is uncertainty (particularly of the regulatory kind) and then there are the challenges relating to the three Ps of the triple bottom line – profits, planet and people.
Profits are shrinking as a result of rising production costs and macroeconomic woes such as sinking commodity prices as well as South Africa’s junk status and volatile currency. Planet-related issues include tighter environmental legislation as well as water scarcity due to the drought. And in terms of people, the escalating demands and frustrations of host and labour-sending communities are taking their toll.
The disagreements between miners and local communities can cost dearly – in monetary terms and in reputation. These relationships need to be managed with sensitivity and care, not by simply throwing money at them.
Mining companies spend far more on CSI than any other sector. They alone dish out roughly one-third of South Africa’s total CSI expenditure, estimated at ZAR8.6 billion in 2016. But is this money well spent?
CSI is meant to generate goodwill among the affected communities because mining houses depend on healthy relationships for their social licence to operate. Thankfully, companies have moved away from painting classrooms and other ad hoc CSI projects, which may have been useful photo opportunities and PR but produced no lasting benefits.
Despite these efforts, however, resentment still seethes against mining and its perceived negative impact on society. ‘We’re losing the battle for hearts and minds,’ said Mike Teke, then Chamber of Mines president. He added that an increasing number of NGOs were supporting mining communities, orchestrating public sentiment against the industry. The solution, he said, lies in the aggressive pursuit of value creation for all, in order to win social legitimacy for the industry.
He’s right about shared value, and the first step should be honest conversations to help mining companies understand community needs while being transparent enough for community members to adjust expectations of what corporates can realistically deliver.
As profits shrink, CSI budgets are also affected. Modern mining is not about digging harder and deeper, but smarter. The same applies to CSI, where smarter means tackling systemic issues. A good example is Anglo American’s pioneering HIV/Aids programme, and more recently, the group’s three-year ZAR120 million investment in the Municipal Capacity Development Programme – a public-private partnership to improve basic service delivery in selected local communities through training and skills transfer.
It is essential to measure and evaluate. Exxaro was one of the first South African miners to analyse its social return on investment, while a review of Anglo American’s ZAR100 million education investment revealed the project had little impact, and is being shared as a useful lesson.
However, too often SA mining houses are lumbered with basic service provision for their CSI. If the state fulfilled its mandate, it would free up CSI flows towards more creative goals. Harmony Gold, for example, is planting fast-growing grass as biomass crops on mining-impacted land. This generates electricity, rehabilitates land and creates jobs.
Just imagine what might be possible if miners didn’t have to provide basic services. South Africa’s golden goose might not feel quite as endangered as it does now.