B-BBEE practices in the mining sector

Historically the South African mining industry stands where it is today by virtue of excellent mineral resources, substantial foreign investment and the development of a pool of highly skilled people. Today however the mining industry is faced with a changing environment and problems that are unique to South Africa. This requires significant restructuring as well as patience and negotiations to ensure a competitive future (Mining Weekly, May 7 2004:3).

The most important factor forcing industry to restructure is B-BBEE. B-BBEE is viewed as being needed to tackle the inequalities of the past, but there is concern about how exactly how this wealth can be made broader based to avoid the continued development of an enriched elite. There is also a view that the B-BBEE wealth from the mining industry needs to be disseminated to as many previously disadvantaged individuals as possible (Mining Weekly, May 7 2004:3).

This view is predicated upon the belief that B-BBEE if implemented properly will bring about fairness, equity and economic justice thus eliminating the threat of instability and providing opportunities for black communities to empower themselves through access to business transactions.

In this regard Bheki Sibiya states that:

“For the past 10 years we have been consolidating our political freedom in

democracy but during the next 10 years we need to ensure that there is economic justice. B-BBEE is one of the biggest leadership challenges facing the current generation” (Engineering News, June 11, 2004:18).

According to Wu and Krugel (2004:1) the state of B-BBEE in the mining industry is significant for two primary reasons:

ƒ The mining charter is one of the first major empowerment charters. A study of the progress in the mining sector is likely to influence and impact on other charters currently being negotiated

ƒ B-BBEE has significantly impacted on the outcome of the negotiations between government and industry participants when negotiating the conversion or issue of new order mining rights

There were 131 different empowerment transactions that were concluded in the mining sector in the years 2000-2004. Although there was a visible jump in the number of empowerment transactions (shortly after the adoption of the mining charter), there appears to be a steady decline since 2002. Wu and Krugel (2004:3) believe that this trend may be indicative of the fact that the easy transactions have already been concluded.

However despite this by the end of 2006 the mining sector had concluded by 2006 R24 billion worth of empowerment deals making the resources sector the largest contributor to BEE deals by value for the second year in a row ( up from around R21 billion in BEE deals in 2005). Over the 11 years a total of R91 billion worth of empowerment deals have been concluded in the resources sector making it the largest contributor by value to empowerment (Chamber of Mines, 2007:12).

Wu and Krugel (2004:3) further point out that this trend confirms “the significance of the Mining Charter as the driver of corporate activity, since subsequent to the launch of the charter B-BBEE activity has been dwindling, despite the fact that empowerment has been a feature of the industry since the 1994 elections.

The largest empowerment role players in the mining sector have been Armgold, Mvelaphanda, Royal Bafokeng, Nation, Free Gold and the Tiso consortium. The reported value of these five entities empowerment transactions account for over 80% of all empowerment transaction concluded (Wu and Krugel, 2004:4). The “revolving door syndrome” and its skewed impact is highlighted by the fact that the key empowerment company in the mining sector, Armgold, accounted for over 45% of deal flow between the years 2000 and 2004 (Wu and Krugel, 2004;4)

With regard to the issue of management representation in the mining sector Wu and Krugel (2004:5) state that as at 30 June 2004 there were a total of 300 directors on the Johannesburg Stock Exchange (JSE). Of these only 64 were Black, Indians or Coloured persons. This figure constituted only 16% of the directors of the mining sector. This is significantly below 40% target set by the mining companies themselves (Wu and Krugel, 2004;6).

These statistics look even worse when one considers that only 8 of the 64 black directors hold executive positions. This has serious consequences for their ability to participate meaningfully in the exercise of controlling the resources and decision making of these companies.

The issue of employment equity in the mining sector is equally vexed. Although Black men represent 82% of the workforce as opposed to the White men who constitute 13% of the workforce, Black men only represent 15% of the management whilst white males represent around 82% of the management. Women account for 5% of the total workforce but only account for 1% of the management in the sector (Wu & Krugel, 2004:8).

In terms of the skills development it is significant that the DME saw it fit to launch Bopha Batho (building people in Sotho). Bopha Batho is a section 21 company focused on the development of black skills for the mining and mineral industries. Bopha Batho also described as a mineral and development foundation aims to grow

technical engineering and other necessary skills among those from previously disadvantaged communities ensuring that both employment equity and skills development are achieved in the mining industry (Mining Weekly, April – May 2004).

The mining industry itself through its employer representative body the Chamber of Mines admits that employment equity especially in so far that it concerns the incorporation of women into all levels of the workforce remains a challenge. The Chamber of Mines (2007b:12) states that:

“Although some progress is being made with employment equity, it is proving

to be quite a challenge to meet the target of 10% female employees by 2009. Underground mining constitutes a harsh working environment. This is compounded by the fact that South Africa has the deepest mines in the world. In addition it is historically a male dominated environment.

Other aspects such as environmental rehabilitation, corporate social investment and beneficiation all still lag far behind the anticipations originally spouted by the mining sector. The Minister of Mineral and Energy Affairs ascribes this to subtle resistance from the industry (New Agenda, 2008; 10). She states that:

“The government’s efforts to transform mining in South Africa are meeting

subtle resistance from the industry. There are delays in converting from old order rights to new order rights; there are unfounded allegations that the department of minerals and energy (DME) is slow in processing licenses; and unfounded assertions that investors are losing interest.”

B-BBEE in the mining industry could soon be taken to the next level when the workforce receives shares in the companies they work for. Helene Roux writing in the Mining Weekly of June 24-29, 2004 states that:

“Employee share-ownership plans is one of the mechanisms for empowerment mooted in the Mining Charter to which labour, government and business have committed themselves in order to bring about transformation in the mining industry”

These and other innovative measures will help to ensure the continued relevance and future positive impact of B-BBEE in the mining sector.