Mining Charter: Department of Mineral Resources, Business Unity South Africa, Chamber of Mines: public hearings Day 1

Meeting report

Introduction
The Chairperson noted some 28 organisations had responded to the Committee's call for submissions on the Mining Charter. The Constitution required South Africa to develop its natural resources, including mineral resources, in an ecological manner for the benefit of all South Africans. Whether this constitutional provision was being put into effect by those concerned, had to be tested.

The Mineral and Petroleum Resources Development Act (MPRDA) instructed the Minister within five years of the promulgation of that Act in 2004 to draft and establish a Mining Charter. The first Mining Charter ran from 2004 to 2009, and had seven pillars. The Department of Mineral Resources (DMR) had rightly conducted an assessment of the impact of the Mining Charter within the society in the country and the results had been made public. However, what the Committee had observed of the findings was 'not pleasant'. It was a picture that was 'quite disturbing', for there had been very little transformation in the mining industry.

As a result of that assessment report, the Department and the Ministry had therefore embarked on the amendments to the Mining Charter. Hence, today, we had an amended version still in line with the targets that were set in the 2004 Charter, but, however, strengthened in terms of implementation, reporting, and other aspects. With this the Committee was happy, because of the cooperative efforts of the tripartite structure – Government, business, and labour. However, since that Charter went beyond those three structures, it became necessary for the Committee to then engage mining communities and other interested stakeholders and make space for them to tell the Committee whether they felt the impact of the Mining Charter and whether they understood that there was an amended version.

After the hearings, the Committee would deliberate and take its own decision as to whether the amended version of the Charter went far enough to address the challenges in the country.

 The mining industry had played a pivotal role in the industrialisation of South Africa since the discovery of minerals in the 19th century. Yet the recurrent question was that South Africa was faced with ever-rising levels of poverty. It had to be asked whether there was a role to be played by the mining sector and if South Africa's God-given natural resources could be used differently.

Coupled with the rising levels of poverty, there was the challenge of inequality in the country. It was a known fact that we had been declared the world's most unequal society. Indeed, those gaps continued to increase as we spoke. It had to be asked what the mining industry could do, while addressing transformation, to help South Africa close that gap.

The further challenge was the high level of unemployment. In the 'good days' mining made a big contribution to employment. Now we were seeing a steady decline in the numbers of persons employed in the mining industry. It had to be asked if there was anything that could be done by the mining industry to contribute to the national goal of creating five million jobs.

Submissions
Department of Mineral Resources (DMR) presentation
Mr Andre Andreas, DMR Director: Mineral Policy and Legislation Development, noted that the Chairperson had already dealt with some aspects of the Department's presentation, in particular, the assessment that had been conducted and the subsequent amendment to the Charter.

The presentation would review the new elements that had been inserted into the amended Charter; sustainable development; the scorecard, which was a shift from the previous one; the reporting templates; and the Department's views on how to ensure compliance (slide 3).

Section 100(2) of the MPRDA made provision for the Minister to develop a broad-based socio-economic empowerment Charter to the mining industry. As a result, mining sector stakeholders signed the Mining Charter in October 2002. Stakeholders agreed to review the Mining Charter after five years. In 2008 the DMR appointed an independent service provider to assess progress made on the Mining Charter against specific targets (slide 4).

The assessment of the Mining Charter
The assessment yielded the following results:

Beneficiation
Levels of beneficiation were not aligned with the levels provided by Section 26 of the Act and by the Charter.

▪ Employment equity
Only 37% of mining companies had developed employment equity plans.

26% of companies achieved a threshold of 40% of historically-disadvantaged South African (HDSA) participation at management level.

▪  Mine community and rural development
Only 49% of companies participated in the formulation of integrated development plans (IDPs).

Social labour plans were not implemented as per application.

▪ Housing and living conditions
26% of companied had provided housing for their employees and a mere 29% improved existing standards of housing.

▪ Procurement
89% of mining companies had not given companies preferred supplier status.

80% had not committed to the progression of procurement from HDSA companies over three to five year time frame.

Reported levels of procurement from HDSA companies averaged 37% of companies.

▪ Ownership and joint ventures
Black economic empowerment (BEE) ownership aggregate was at 9%.

Some funding models were packaged so that they coincided with or went beyond the life of the mine.

BEE partners were to pay off their debts through dividends.

There was no value in their hands at the end of debt payment.

▪ Human resource development
Innate inhibitions existed against progress on skills development and;

There was a disconnection between the plans submitted to the DMR and actual implementation (slides 5- 10).

The Amended Mining Charter 2010
The review aimed to strengthen and sharpen the Charter's effectiveness in driving transformation and competitiveness in the mining sector.

The Amended Charter sought to achieve that through implementation of the following nine elements:

▪ Ownership
▪ Procurement and enterprise development
▪ Beneficiation
▪ Employment equity
▪ Human resource development
▪ Mine community development
▪ Housing and living conditions
▪ Sustainable development and growth in the mining industry
▪ Reporting (monitoring and evaluation)
(For further details, please see slides 11-21).

Concluding remarks
▪ A monitoring and evaluation module was to be developed to ensure higher levels of compliance with the Charter.
▪ Companies must report levels of compliance annually.
▪ There must be a review of the MPRDA to increase penalty provisions that may be imposed on companies for non-compliance. (slide 22).

Discussion
Mr H Schmidt (DA) was willing to ask a question, but was worried that the meeting was running behind time.

The Chairperson agreed that Mr Schmidt should proceed.

Mr Schmidt observed that the validity of the Department's figures depended on an independent service provider. What guarantee was there that those figures were correct and acceptable to all concerned?

Ms M Njobe (COPE) asked for clarity on housing and living conditions (slides 7 and 19).

Ms F Bikani (ANC) found Mr Andreas 'very depressed' as he was presenting, as if he was 'suspicious' about something. She asked him to give details of the specific changes made to the scorecard (slide 3). What impact had those changes had thus far? How far had the new scorecard been implemented?

Ms Bikani asked how the social fund would be used (slide 13).

Ms Bikani asked what progress had been made in fulfilling its social roles, functions and responsibilities since the inception of the DMR.

Ms Bikani noted the demographic targets set, which appeared to be 'low and slow', (slide 16) and reminded the Department that in the public service the Skills Development Act 1998 had already been implemented. How far had the Department progressed?

Mr R Sonto (ANC) said that the MPRDA, with its shortcomings, and the Mining Charter, with its good intentions, were tools designed to enable us to address anomalies prevalent in the mining sector. Yet the presentation told us that up to now little progress had been made. To what could this be attributed?

Ms B Tinto (ANC) asked if there were any results or if the reviewed Mining Charter was still a concept document. Had the reviewed Mining Charter been implemented already?

Ms Tinto observed that the MPRDA required all companies to report to the Department. Was there any capacity, or was there a shortage of capacity constraining the Department, to enable it to follow-up such reports?

The Chairperson observed that the picture presented by the Department of the assessment results was not good to say the least. With reference to the amended Charter, the Department was saying that there was a commitment that, by 2014, the Department sought to achieve, in terms of the pattern of ownership, 26% ownership by the Historically-disadvantaged South Africans (HDSAs). Given that over the previous five years, 2004 to 2009, the Department's results showed that only a mere 9% and not the 15% that was envisaged was achieved, how feasible was that commitment? Moreover, the Department was indicating that the other experts in the mining industry were estimating that this would be less than even 9%. Surely this, bordering in the region of 5%, did not represent movement in changing patterns of ownership in the mining industry? What had the Department put in place to ensure that these targets were met? He also wanted the Department to avoid chasing moving targets? The 15% had not been achieved in 2009. Now we were talking of 26%, which, of course, was already there in the 2009 version of the Charter. However, 'the performance of the mining industry had been dismal' in this instance.

The Chairperson considered procurement, in which the Department had set important targets. By 2014 40% of capital goods had to be procured from HDSAs. What was the current picture with capital goods, as well as consumer goods and services? Could the Department quantify? Moreover, how much was it worth?

The Chairperson said that the beneficiation strategy had just been adopted by Cabinet. It was still early days, and in September Parliament would be conducting public hearings on the strategy. He would not ask the Department many questions on beneficiation, even though it was provided for as early as 2002.

The Chairperson asked if the targets that the Department had set for employment equity were in line with other targets that one would find within the broader regime in Government, in terms, for example, of the Department of Trade and Industry (DTI) codes. Were we talking the same language in relation to BEE as seen by the DTI? It was important to have a sense of Government departments working together. The Department's report indicated slow movement, yet there had been public statements by players in the industry that there had been a tendency within the industry of focusing on the deployment into positions of responsibility of white women. Could the Department speak to that in terms of its results? Or was this picture the 'figment of imagination' of those who had made those comments.

The Chairperson asked how the human resources development fund was going to be managed. There were Sector Education and Training Authorities (SETAs) in South Africa which had serous funding at their disposal. However, every financial year, there had been roll-overs. How was the Department looking at managing and disbursing this fund so that we could deal critically with the issue of skills shortages in the mining industry? Was the Department in partnership with institutions of learning in order to absorb as many students as possible? Also what was the arrangement for in-house training by companies themselves? Such arrangements in the past had demonstrated that the industry was able to produce, for example, artisans.

Members were much concerned about mining community development. He noted that when the Committee returned from oversight visits, Members came back depressed, because before you entered a mine, you walked through 'a sea of poverty'. The Department had not implemented its social and labour plans. Mining communities lamented that they extracted the wealth of the country but did not themselves receive 'a drop' of this wealth. How would the Department make provision to strengthen the implementation of the social and labour plans?

Mr Andreas responded that the Amended Charter was the result of much good work between the Tripartite Alliance. It was not always a rosy relationship, but many self-interests had been put aside. A document had been produced that broadly represented what industry, labour and the Department felt was good for the nation and the mining sector.

Mr Andreas responded to Mr Schmidt. Those independent studies were not an exact science. However, the Department had ensured that its staff from the Mineral Regulation Branch went out to do a further assessment and corroborate the information supplied by the consultant, who had not worked alone but had collaborated with the Department and with the officials in the various regions. There were many other reports done by various consultants, which gave totally different figures, especially on ownership. The report undertaken by the Department, with the help of the consultant, was no different.

Mr Andreas responded to Ms Njobe (slides 7 and 19). The percentages in slide 7 depicted the current state – the percentages indicated by the study undertaken by the consultant. Slide 19 simply set the new targets with which the Department expected companies to comply by 2014.

Mr Andreas responded that the Department had not gone into much detail on the scorecard. The primary difference with the new scorecard in the Amended Charter was that the old scorecard simply had a 'yes' and 'no' list of check-boxes. The new scorecard required the rights holder to submit many details to the Department. It was broken down on a yearly basis. There was a column which made provision for weighting. The scorecard also spoke to demographics. There was a column which specifically dealt with white males and females, black, Indian, and Coloured, since the Charter had been amended only in 2010. It was only in June 2011 that companies had to submit their first report on compliance with the Amended Charter. The Department's Mineral Regulation branch was currently assessing the reports received. There had been a tremendous response by mining companies. He was not sure if it was just a Section 47 requirement. Both the Policy and Mineral Regulation branches had noted an upswing in the number of companies which wanted to comply with the Mining Charter.

Mr Andreas replied that multi-nationals were required to pay in a certain percentage of their annual revenue into the social fund. The Department had a task team that was examining the modalities in terms of the objects of the fund in consultation with the various stakeholders.

Mr Andreas said that the skills development targets were in addition to the levy that mining companies paid. The percentages would not be paid to the Department. The companies were supposed to utilise that percentage on an annual basis to train their employees. It was not being paid into a fund. The percentage referred to in-house training conducted by the companies.

Mr Andreas responded on the shortcomings of the Mining Charter and the MPRDA. Although the original Charter took effect in 2004, the amended version took effect only in 2010. He was not sure if we were at this stage able to speak about its effectiveness or whether it would lead to greater compliance by the industry. However, the Department had seen an increase in the number of companies willing to comply. Only time would tell, if from the reports that had been submitted, progress had been made. Proposed amendments to the MPRDA would give added impetus to companies to comply with the Charter.

Mr Andreas responded on the ownership targets. The Department had made great efforts to permit offsetting in terms of beneficiation. The Department noted Members' concern that the previous target of 15% was not met. It was possible that the 26% target would not be met by 2014, and, while not diluting the ownership target, the Department was looking at the matter from a broader perspective, by merging ownership with the priority of Government which was to create jobs, and by bringing in beneficiation as a catalyst for job creation.

The mining sector, while not opposed to the DTI Codes, had developed codes of good practice as well as the Mining Charter.

The management of the funds set aside by the various companies would be the responsibility of the companies themselves.

The Mineral Regulation branch, DMR, acknowledged the need for more robust assessment of procurement. While using consultants, it had also verified data through its own inspections. The Department had called mining companies to procurement workshops and indabas in all the provinces to enable mining companies to meet suppliers. It was realised that black companies accounted for less than non-black companies, but the Department was hoping to achieve the figures 'that you have set'. Most of the BEE companies were lacking skills, especially as to capital goods. Mining companies had agreed to assist new supply companies to acquire skills. The Department acknowledged the need to approach the drive for transformation robustly. Procurement was less than 3% from black companies in that year [of the last study].

The Department was intensifying its efforts at inspection, including unannounced visits. It was encouraging a collaborative approach to community projects.

Mr Sonto asked the Department what it did with companies that resisted its monitoring.

Mr C Gololo (ANC) asked what measures were in place to punish those companies that did not comply.

Ms Bikani did not detect much indication of where the Department would be having a bigger drive to resolve some of the difficulties that it was experiencing. There should be a relationship between the DMR and the Department of Human Settlements. There was something not right with the Amended Charter. The changes were not realistic.

The Department explained that, in terms of Section 47, it had not cancelled any rights, but had given companies the chance to remedy the situation in terms of Section 93.

Mr Sonto said that this was merely 'a slap on the wrist'. If examples were not made of non-compliant mining companies, then we would not obtain the compliance that we needed.

Mr Andreas agreed with Mr Sonto. With greater enforcement, the compliance mentioned by Mr Sonto could be achieved. He acknowledged that the current penalties were not sufficient as a deterrent.

The Minister of Mineral Resources was required to consult with the Minister of Human Settlements.

The old Charter made specific reference to certain groupings in the mining sector. The new Charter tried to have a more collective approach to previously disadvantaged South Africans.

Mr Tseko Nell, Acting Deputy Director-General (DDG): Mineral Policy and Promotion, DMR, acknowledged that the Department had not reached the targets set. Cancelling rights, in terms of Section 47, would harm other players in the industry, and cause lay-offs of employees. However, there had been efforts to cooperate with industry to ensure compliance. Some companies had exceeded expectations as regards promoting and grooming emerging BEE supplier companies to enhance procurement. The MPRDA was, comparatively, a benign law. The technical team would look again at strengthening compliance.

Mr Andreas said that the Amended Charter went beyond the 10% previously made provision for, and would give effect to the demographics of the country, so that one would find more women in positions of management.

The Chairperson thanked the Department. It was clear from Members' questions that all was not well. One would have expected the Department to have done more to ensure compliance. He feared that events would overtake us, if these inequities were not resolved. Some matters, such as accommodation, did not require debate, but rather legislative compliance and enforcement. 'You are dealing with a seriously inhumane situation, where you bundle men – 12 men [was the last available figure] - in one room.' Such conditions had other impacts such as the spread of HIV/AIDS in the industry.

Business Unity South Africa (BUSA) submission
Mr Kganki Matabane, BUSA Executive Director: Transformation Policy, said BUSA's Transformation Policy Committee promoted Broad-Based Black Economic Empowerment (BBBEE) by:
•Promoting Diversity on All BUSA structures and Outside Bodies
•facilitating capacity building of previously disadvantaged business organisations
▪ proactively identifying sectors which lagged behind in transformation matters and working with them to promote transformation
▪ influencing the regulatory and legislative arena to promote transformation
▪ monitoring progress on transformation and the implementation of BBBEE in the country

current contribution of mining
the mining industry would continue to be an important pillar of the South African economy for the foreseeable future. the sector's main contributions were:
▪ creating decent work and sustainable livelihoods
▪ addressing the legacy issues of the past
▪ strengthening the skills and human resource base
▪ sharing the benefits of economic growth
▪ supporting the tax base
▪ transformation
▪ beneficiation and sharing the benefits of economic growth

the evolution of the charter for the South African mining and minerals industry
▪ the initial charter of 2002.

a draft charter was leaked in 2002 which resulted in r50 billion lost on the Johannesburg stock exchange (JSE).

thereafter the stakeholders began negotiating the original mining charter in 2002 with the intention to give effect to the MPRDA 2002. this was the second charter in history; it was ground breaking, and signed by all primary stakeholders. lessons were learned from the mistakes of the first charter. the charter was drafted in a relatively short period of time.

▪ the revised charter of 2010

amendments were made after a comprehensive assessment of progress made and identification of a number of shortcomings. it was launched in September 2010 with a vision 'to facilitate sustainable transformation, growth and development of the mining industry'. the charter was issued as a government gazette.

however:
▪  it was not aligned to the BBBEE codes of good practice. this entailed some companies having to double-report. but it had the advantage that the charter was more specific to mining.
▪ there was no requirement to verify the scorecard by an independent body.

it was also to be noted that:
▪ human resource development and sustainable development had the highest weighting of all the elements and accounted for 54% of the total scorecard.
▪ reporting was now done annually – this was a positive development.

it was expected that these changes would bring about much improved implementation thus ensuring that mining provided greater benefits to society.

the new growth path (NGP) and mining as a job driver
the NGP had specifically identified mining as one of the main economic sectors with a high potential of creating the much needed jobs – projected 140 000 jobs by 2020 and 200 000 by 2030 (excluding the downstream and side stream effects).

it was to be noted that the discussion of the mining charter should not be in isolation but in line with the objectives of the NGP.

other factors impacting on the mining industry
▪ transport and infrastructure (for example, an efficient railway system)
▪ the electricity supply
▪ regulatory issues
▪ labour laws
▪ availability of skills

conclusion
▪ mining was an industry with a long lead time on investment decisions. rules must be consistent and given enough time for implementation before being changed.
▪ BUSA remained optimistic that the mining and other sectors would meet their transformation targets.
(for full details, see BUSA's submission document).

Discussion
The Chairperson thanked Mr Matabane.

Mr Sonto premised his question with Mr Matabane's last statement. He and the Committee were also optimistic that the mining industry not 'will' but 'should' meet the transformation targets.

Mr Sonto noted that Mr Matabane had said that mining was contributing more to the local economy and to the fiscus. He asked for examples. He referred to a state-owned mining company in Chile, which had a social contribution to education, to health, and to housing. He asked for precise figures on how mining contributed to South African society.

Mr Sonto asked Mr Matabane what in its business view a decent job, as provided by mining, was.

Mr Sonto noted BUSA's view that mining was the fifth largest contributer to formal employment. Compared to what other form of employment?

Mr Sonto asked what's BUSA's view was on transformation as compared to the Department's view.

Mr Schmidt inferred, from the Department's presentation, a basic failure of the mining companies to report. Yet Mr Matabane had commented that, in some instances, double-reporting was required. Had this been taken up with DMR and DTI? If so, what was the reply?

Mr Schmidt said that there was always a counterbalance to a right, and that was an obligation. He said that we should all try to learn from South Korea, whose workforce was more expensive than South Africa's, but was more than double in terms of its productivity than South Africa's.

Mr C Gololo (ANC) asked for clarity on the initial Charter of 2002. Mr Matabane had mentioned a loss of R50 billion because the draft Charter was leaked. How did this happen?

Mr Gololo asked for BUSA's opinion on the establishment of the state-owned mining company, and how such a company would work for South Africa to distribute the wealth to the country?

Ms Bikani found BUSA's submission to be a general document. It failed to give an idea of BUSA's particular contribution to ensure that some of the issues were being implemented. There was much debate about the BEE policies that were being changed. How did BUSA expect its members to implement transformation if BUSA itself was not leading the process to ensure that its members were assisted? BUSA's document seemed to focus on 2008. As a result, BUSA's implementation of skills, which was a big challenge, even to the Department, made her wonder how successful BUSA was in ensuring that it was a reality. In terms of what had been happening in 2009, 2010 and 2011, she had to ask how much progress had been made. BUSA had mentioned that in 2008 more than one million people were directly or indirectly employed as a result of the mining industry. Was this from members of BUSA or from the industry in general? This still did not give an impression of BUSA's purpose.

Ms Bikani failed to get a sense of where BUSA felt it was in terms of assisting or contributing to the situation since the amendment of the Charter, or what vision it had of the difficulties experienced by the previous Charter and by the amended Charter, especially in regard to transformation.

The Chairperson agreed with Members who said that BUSA was too general as to the information that it had given. He wondered if that was by design, since the Chamber of Mines was present. Of course, BUSA was directly affected by what the Committee was discussing.

The Chairperson asked Mr Matabane about BUSA's Transformation Policy Committee (page 1). He asked if BUSA had tried to engage the DMR on the frustrations it experienced on the lack of transformation in the mining industry.
 
 Mr Matabane had spoken about addressing the legacy issues. Had BUSA been able to engage the mining companies on such issues as the single-sex hostels? Ownership patterns still remained in the hands of those who were advantaged by apartheid. To an extent, also, foreign ownership was an issue in the mining industry.

The Chairperson agreed that BUSA was supporting the tax base, but what was its view on broadening the tax base? For example, in the mining industry? He asked if BUSA thought that the current royalties paid by the mining companies in the fiscus were adequate, or if they were too much or too little. He gave the example of the Australian mining sector.

The Chairperson asked about transformation and BUSA'S estimate of the value of BEE deals over the past ten years . Was this the net value of these BEE deals? Or did this value encompass the loans that had been sought from financial institutions? Would an analysis of this figure be meaningful?

The Chairperson was not sure whether BUSA was making the point about the alignment of the codes as a complaint that the Charter was not aligned to DTI. Alternatively, was BUSA making the point merely as an illustration of a regulatory requirement for the mining industry?

The Chairperson asked BUSA if it had analysed the employment levels in the mining industry for the past ten years, and, if so, what picture emerged. It had to be asked if the figures were realistic. The Committee's experience was that there had been job losses in the mining industry. Employment was decreasing. On what basis was BUSA confident that by 2020 it would be possible to create 140 000 jobs in the industry? Transport and infrastructure required serious attention, especially the railway system.

The Chairperson asked BUSA what its understanding was of the energy supply situation and the drive of the mining industry, as documented by the mining companies' annual reports, to export high-grade coal, instead of supplying that coal to Eskom. From time to time Eskom complained of the low coal stock levels.

The Chairperson asked BUSA about the challenges and the perception of the labour laws. He wondered if the business community was leaning towards the trend of the apartheid era in which the rights of workers were disregarded and where they were fired without discussion and given no protection at all. Was the profit motive the major drive as opposed to the protection of workers' rights? The sooner we addressed the labour regulatory framework truthfully, the better. The conventions of the International Labour Organisation (ILO) were reflected in terms of our labour law. Therefore this claim that there was rigidity in our labour law was unfounded. If BUSA was saying that rules must not change, this would create more problems. Rules must be reviewed. This barrage of questions had arisen because BUSA's document was almost empty in terms of the Committee's expectations.

Mr Sonto said that BUSA was spending 5% and exceeding national benchmarks on skills development (page 2). What skills was BUSA developing that were not contributing to its core function in the mining industry?

The Chairperson pointed out that the questions were directed to BUSA as an entity rather than to individual members.

Mr Matabane responded that BUSA's submission was general by design since the Chamber of Mines represented members of BUSA, and the organisation expected that the Chamber would respond in detail on various points. “Some of the things that we do, we do together.' BUSA has 61 members, and sometimes it was difficult to obtain consensus. BUSA would answer questions randomly.

The definition of a decent job was as per ILO.

BUSA wanted to avoid double-reporting as it increased the cost of compliance. BUSA did not want to give opportunities for non-compliance.

BUSA's engagement with sectors was on the basis of facts, so it engaged with members when it did research on the transformation process.

The Chamber of Mines would answer questions on the tax base and royalties.

There was progress with ownership. BUSA would be the first to agree that much remained to be done, and that the current situation was unsustainable.

As to the strengthening of the skills base, there was a global skills challenge. If a company in China required a certain skill from South Africa, it could easily afford it. South Africa was competing with global multi-nationals for skills. It took time to develop skills.

As to the 140 000 jobs by 2020, there was an ongoing discussion about the National Growth Path. In the next month BUSA would be talking specifically about the mining industry. Accords, such as the Skills Accord, had been signed. These figures came from the New Growth Path.

 Mr Matabane wanted BUSA's colleagues from the Chamber to deal with the other questions.

The Chairperson said that the Chamber would have its opportunity. He asked if this was all Mr Matabane had to say.

 Mr Matabane confirmed that this was so.

The Chairperson released BUSA; if this had been a regular Committee meeting, not public hearings, 'we were going to send you packing'. Next time BUSA came to Parliament, it must prepare itself fully.

Chamber of Mines submission on Progress with implementation of Mining Charter
Mr Bheki Sibiya, Chief Executive, greeting the Chairperson, Members, and BUSA as the Chamber's 'mother body', welcomed the opportunity for the Chamber to present, but regretted the departure of some members of the Department's delegation. The mining industry stood second to none in BBBEE and transformation. The mining industry contributed about 18.5% of total corporate taxes in South Africa as in 2010. The amount was R17 billion in direct corporate taxes, and R6 billion in royalties. The royalties tax was a product of negotiation amongst a number of stakeholders. The industry was contributing as per the agreement with the National Treasury and the Department of Mineral Resources. The Chamber observed that in Chile it was the private mining sector that had been growing consistently. The Chamber supported the state-owned mining company. It made sense. The Chamber had been assured by the Minister of Mineral Resources that the state-owned mining company was to be regulated in a manner comparable to private mining companies. The Chamber's54 members had said that they would partner with the state-owned mining company to ensure that it was fully successful.

Dr Frans Barker, Senior Executive, Chamber of Mines of South Africa gave the presentation.

1. The Revised Mining Charter September 2010:
There had been substantial agreement but all parties had to compromise.
Stakeholders agreed to retain the principle of a special instrument for mining. Some new targets.
Some targets had been strengthened: more clarity had been added
Annual reporting had been strengthened
A proper scorecard: more clarity on non-compliance
Provisions to deal with non-compliant companies had been added

New and Improved Targets:
Ownership that was broad-based and required cash flow
Procurement targets-contributions by multinationals
Employment equity Human resource development
Decent accommodation
Health and safety
Environment

2. Progress and Challenges with Implementation:
Mining companies could and should have learned more under the previous charter
Impact of different expectations and perceptions
Progress with implementation:
Ownership: average ownership of 28%
No Chamber member less than 15%
Measured according to the charter
Procurement: more than a third of all procurement was from black economic empowerment. Skills development spending was 4.6% (Target was 3%). Employment equity targets had been exceeded with top management reaching 28.6% against the set target of 20%.
There had been R961 million spent in 2010 on community development. There had been a target of 5% for capital goods and Chamber members were above that at 39%. The target for the Chamber was 30% which presented a challenge for some members, even though the industry was at 45%. The Chamber targeted 10% on consumables and had achieved 35%.
There were challenges in procurement with the non-alignment with broad based black economic empowerment codes. The definition of non-discretionary procurement was also a challenge.

Employment equity [by occupation: top management, senior management, middle management, junior management, and core and critical skills - as against 2010 percentage targets and actual percentage; with remarks – the Chamber noted wide variances between companies in top management, and different definitions used for core and critical skills] (see table, slide 16).

Amongst some of the challenges affecting employment equity was the:
▪ Supply of skills, especially at top management level, remained a challenge as the simple average had probably been pushed up by the few companies that did well
▪ Definition of core and critical skills – could be interpreted very broadly
▪ at all levels, the representatives of females, particularly black females, needed to be improved

Dr Barker added that it would certainly be useful to develop a guidance document on the implementation of the Charter.

As to procurement, the interaction with the BBBEE Code and the Charter did present a challenge. Dr Barker agreed that there was need for alignment.

Dr Barker said that the Chamber felt that the different interpretations of the implementation of the Charter should be avoided in future, and for that reason, the Chamber would argue for independent verification. The parties should agree on how progress with the Charter would be measured, and then somebody should be appointed to ensure proper measurement. If there was agreement, the commitment to implement the Charter would be so much stronger. Also the final product would be better with full consultation.

Discussion
Mr Schmidt detected that much of the criticism on lack of transformation in the mining industry stemmed from the Chairperson's opening statement; in other words, one visited a mine and found it surrounded by poverty. However, there was nothing better than facts. When you had the facts, you could make deductions. Had there been empirical studies that indicated that the establishment of a mine led to informal settlements in its vicinity? He was all in favour of community involvement and benefits, together with employee share schemes, but wanted facts and evidence. If a mine employed 1 000 persons from a neighbouring informal settlement with a population of a million, it would be impossible for that mine to uplift that entire community. It could provide schools or roads, but he was concerned at the unrealistic levels of expectation. Were there empirical studies of what the mines had done?

Mr Sonto referred back to the Chilean analogy. He could not speak for Chile, but he could speak for South Africa, and something needed to be done. Mining as a sector needed to make a serious contribution to our society.

Mr Sonto asked Dr Barker what he would tell the Committee and why, if he were to be asked to make a critical analysis of the revised Mining Charter.

Mr Sonto noted that Dr Barker had suggested that the revised Charter should be given chance to prove itself. Was Dr Barker perhaps amplifying what BUSA had said in giving such lengthy times without interference? If not, what was he saying?

Mr Sonto appreciated that the Chamber needed feedback from DMR since thereby the Chamber was challenging the Department as the regulatory body.

Mr Sonto queried the need for a guidance document over and above the revised Charter.

Mr Sonto asked Dr Barker how it saw verification being employed, if this Charter was an improved document. (slide 10).

Mr Sonto asked what consultation process was needed to make this document complete and ready to be put into operation.

Mr Sonto asked about challenges on accommodation (slide 23). He agreed that sometimes a mining company would want the local authority to be involved for purposes of spatial planning. However, if a mining company employed people it should make sure that they were adequately accommodated. He was not sure which part of the Charter was challenged in this instance.

Ms Bikani asked if it had had an instance of member companies being summoned for non-compliance (slide 3). She noted that the Chamber supported the amendments made in the Charter. In implementation of those changes, had the Chamber summoned any of its member companies?

Ms Bikani asked the Chamber about its procurement targets, as to which it had acknowledged challenges. One of these was competition by multi-national companies. What exactly were those challenges? Did the Chamber have a specific approach to resolve these challenges, especially as to procurement.

Ms Bikani asked if the Chamber had a plan for community development projects (slide 5).

Ms Bikani asked the Chamber what its transformation plan was.

Ms Bikani asked how the small companies were assisted through the presence of the big companies.

Ms Bikani asked about reporting processes. She assumed that the Chamber reported to the DMR. There appeared to be problems in getting feedback from the DMR, as it was required to do. Was there any coordinated work in terms of the amended Charter? It did appear that the Chamber was trying to comply. There would, however, be a problem if there was lack of feedback from the Department.

Ms Bikani asked about community development. Was this in alignment with required labour plans? Where did that money go to?

Ms Bikani asked about skills development. Who were the targeted people trained, and what monitoring and evaluation was done by DMR and were they aligned to the Mining Qualifications Authority (MQA)?

Mr Gololo asked which the companies surpassing the targets set by Government for 2014 were. He wanted proof.

The Chairperson said that the picture presented by the Chamber was completely different from that from the Department, which was the Chamber's regulator. This was highly confusing. At the same time, the Chamber wanted an independent assessment. The Chairperson wanted the Chamber to be upfront. Indeed there had been an acknowledgement from the side of the Chamber that the Charter had not been implemented in accordance with expectations. It had acknowledged that there had been lack of progress. The Committee wanted to verify the status of the report given to it, and the report – the 2011 figures - that the Chamber was now giving. It could not be that within two years the Chamber had taken a giant leap forward.

The Chairperson reminded the Chamber that one was dealing with matters from the political dispensation. There were expectations that all sectors of society were to change. We were now 15 years from the 1996 Constitution which called upon us to develop our natural resources, including mineral resources, for the equitable benefit of all South Africans. The Act was even more specific. Therefore discrepancies such as we saw now were worrying. Maybe a third party in the hearings would confirm one or the other views expressed today. The Committee had visited the provinces, starting with Kimberley in the Northern Cape, the North West, Mpumalanga, and KwaZulu-Natal. In all provinces, Members had been confronted with the same picture: some of these mining companies would construct only a community hall, and that was the extent of their contribution to social development, and the companies were satisfied with what they had done. In other areas, children of mining communities were forced to go to school in a church building – one class in each corner. Meanwhile, the wealth of the country was extracted not far away. It had to be asked where the money that the companies were claiming to spend on community development was being spent.

The Chamber had given an impression that it was confident that this Mining Charter would be implemented by the mining companies because they saw themselves as part-owners. This was good, but a similar process had unfolded in the original mining charter – a product of negotiations and the tripartite participation. The Committee hoped that by 2014, which was not far away, it would witness the meeting of the targets set.

In one slide, the Chamber was saying that we should not change the Mining Charter: this conformed to what BUSA had said. However, the Committee had observed, from its oversight visits, that mining communities were not consulted in the process of reviewing the old Mining Charter or in the negotiations that had given rise to the new amended version. Did the Chamber want these communities to be excluded from consultation? Surely the consultation was incomplete if it excluded the mining communities. Was it an error or by the design that the three bodies which negotiated the Mining Charter excluded the mining communities?

The Chamber responded that it was uncomfortable with the report which was compiled for the DMR. Those responsible were independent but the job was not thoroughly done. The Chamber was not given space and time to engage on the report. The Chamber believed that there could be improvements in coordination with the Department.

The Chamber replied that populations had migrated from the 'labour-sending' areas and that mining communities were ever-expanding to the extent that it was difficult to reach a point at which a mining company could say that it had adequately supported its local community.

The Chamber had presented a report showing the progress on implementation. The Chamber wished to submit itself to thorough, independent verification. In a similar manner, it would not present to the House figures that were 'cooked'. The reports were not necessarily generated for the Chamber itself. As Dr Barker had indicated, the Chamber was discussing the reports that member companies had submitted to the DMR and of which the Chamber had requested copies from the member companies. 'For us it is only the processing of the information which has been submitted.' The reports from member companies were only 33 in number, so did not represent a complete picture. However, some companies that had not submitted reports had done better. 'No member of the Chamber has done less than 15.'

The Chairperson denied that the cause of poverty around the mines was migrant labour.

The Chamber was not shying away from dealing with problems. It wanted to be part of the solution. To focus on the mining community as the 'soft underbelly' would be to let the country down. The mining industry had contributed R6 billion of tax royalties. The Chamber had engaged with the DMR, but the quality of leadership at local government level left much to be desired. However, the Chamber noted the Chairperson's point.

Dr Barker responded to Mr Sonto's questions. The Chamber agreed that mining had to make a significant contribution. It could make a bigger contribution if the Charter were fully implemented.

Dr Barker said that the current Charter was much improved. In terms of the revised Charter, the Chamber had had fruitful meetings and networking, in contrast to the first Charter.

Dr Barker acknowledged that there were challenges that the Chamber must address.

Dr Barker said that there were still some areas of uncertainty. The big advantage of the Charter was that, unlike the BBBEE Code, which was a thick and complicated document, the Charter captured in a few pages what companies needed to do. However, there was a need for guidance on what some of these issues implied, and what was expected of companies.

Dr Barker denied that the Chamber was saying that there should be no interference in operations. It did not want the situation that had developed between 2004 and 2009, and whereby the report was drafted on the basis of 2008 figures. Companies that did not comply should be taken to task.

Ms Bikani asked if the Chamber had any member companies that had been charged.

Dr Barker was not aware of any member companies that had been charged.

Mr Sonto interrupted to say that the Committee needed a clear response. Dr Barker was saying that there were some aspects of the Charter that needed refinement. If there were still some questionable aspects, what were they, and how would the Chamber assist in dealing with them? What was the guidance document over and above the Charter itself? Members were not clear on the stance of the Chamber on the Charter itself.

Dr Barker said that there was nothing wrong with the Charter. But the guideline that the Chamber required was on whether we were talking about the local operations of international companies or companies sitting in Italy, because one could not do anything about companies sitting in Italy, the USA, or China. The guideline was really needed on the practical implications. Guidance was also needed on the definition of core and critical skills. It had to be asked whether the definition used by the Mining Qualifications Authority (MQA) should be used.

Dr Barker said that the Chamber agreed that mining companies should contribute to the community. However, it had to be asked if this meant that a mining company, irrespective of its size, and irrespective of the role of the local or provincial authority, should uplift the whole community, even though it might employ only 3 or 4% of the local population. 'Clearly, no one would expect that.' There was nothing wrong with the Charter, it was just the practical application of it on which guidelines were needed.

The Chamber had held a strategic session in which it had decided to take a bigger role in assisting its smaller members on the various issues, one of which was transformation. In many cases the smaller companies could not make much difference, but with cooperation they could.

The Chamber had asked for regular feedback from the DMR and emphasised this. If the Department was not happy with implementation, the companies concerned should know as soon as possible.

Dr Barker agreed with the Chairperson that the picture presented by the Chamber differed significantly from that presented by the Department. One reason for that was that the Chamber referred to the end of 2010 figures, while the Department referred to figures at the end of 2008, since the report for the DMR was drafted only in 2009. Also the Chamber, in its report, was talking only of members of the Chamber, not the whole of the industry. He did not believe that all companies complied to the extent that, hopefully, the Chamber's members complied. The Chamber itself constantly emphasised the importance of these issues in its meetings. The Chamber's Chief Executive had already indicated some of the problems that the Chamber had with the report for the DMR.

Dr Barker said that the Chamber did not see the mining industry as the soft underbelly to address all the problems of community development, which was part of a bigger problem.

Dr Elize Strydom, Industrial Relations Adviser, Chamber of Mines of South Africa, denied that the Chamber did not want to progress to accommodation on the basis of one person per room (slide 23). However, it was a challenge when the life of the mine was very limited, for example, not more than two years. When converting hostels to single-room accommodation, one had to consider who would use that accommodation when the mine closed. It had to be asked if there was potential to use the accommodation as flats to rent out to people in the local town.

Dr Strydom said that alternative accommodation while conversion was in process was quite a challenge.

Dr Strydom gave the example of a town where there was an existing community. In such cases, the industry offered a housing allowance or a living-out allowance. She believed that the housing allowance was quite generous.

Dr Strydom confirmed that the industry was working towards single-room accommodation or family accommodation. During the recent wage negotiations, the Chamber had agreed with the National Union of Mineworkers (NUM) that it wanted to promote home ownership, in accordance with the Charter. The lower entry level employees, where they would be first-time home owners, would receive what the Chamber called the living-out allowance plus a premium of 10% on that allowance to encourage them to become home-owners. The Chamber believed that this was a positive development.

Dr Strydom replied that the Chamber did have a plan for community development. There was a need to work in partnership with communities and local authorities. Talking to the communities was quite a challenge as it was often hard to identify the leadership. It was also necessary to ask the communities what their needs were. The Chamber was also in discussions with the DMR on changing the social and labour plan.

Ms Bikani was disappointed not to receive a direct answer to her question. Since it was not clear how the R961 million had been spent, how true was it that there was really an implementation plan for community development? She thought that Dr Strydom was talking about theoretical future proposals.

Dr Strydom denied that this was so. However, because of the problem that had been mentioned – companies making individual contributions, the effects of their efforts was not so visible in the communities. However, projects were listed together with money spent. There was documentation in that regard and information was available.

Mr Alan Fine, Public Affairs Manager, Chamber of Mines, confirmed that some members of the Chamber had fulfilled the initial 15% target on ownership due in 2009, and they were now obliged to complete the 26% by 2014. However, there were a number of BEE companies that were close to or above 50%. This, of course, raised the average to the existing level. He gave examples.

Mr Fine replied that he understood that the Department had issued four companies with notices that they were considered non-compliant with social and labour plans. The Department made regular visits to companies.

Mr Fine replied that there were indeed challenges on procurement. The matter of the fund to which multi-national companies would have to contribute had already been addressed.

Mr Fine replied that the difference between the Charter and the BBBEE Codes of the DTI that was causing some difficulties was that the Charter and the Codes defined what was a BEE company differently. The Charter defined a BEE company primarily in terms of ownership, while the DTI Codes defined a BEE company primarily in terms of 'the overall suite of pillars of the DTI Codes'. Naturally when companies were primarily suppliers to the mining industry, it was possible to attempt to persuade them to move towards the Charter definition. However, when they were suppliers to a range of industries, they might be empowered in terms of the DTI Codes, but not necessarily empowered in terms of the Charter.

The Chairperson appealed to the Chamber of Mines and the DMR to collaborate on resolving, as far as possible, these material differences in the information presented.

The meeting was adjourned until 26 August 2011.