Business law firm Bell Dewar Fasken Martineau director of mining and traditional communities adviser Lucas Moalusi says that South Africa’s mining industry will achieve much in dealing with many of the issues it faces if the affected communities are treated as important partners by mines and are accorded tangible benefits from the mines’ business operations.
“While mining communities are given the opportunity to participate in mining operations, the business operations in question are not structured in a way that adequately benefits communities.
“In some cases, there has been a breakdown in communication between the mining companies and communities. Communities expect to get sufficient benefits, as they see themselves as the parties who are giving up their land to the mining companies. One of the keys to creating mining industry and labour harmony is dialogue and meaningful business partnerships with local communities,” he explains.
Generally, communities want an equity stake in the deals, but mining companies will already have preferred black economic-empowerment (BEE) partners.
The challenge is in explaining to communities that the mining company is already BEE compliant and that there are social labour plans in place that will allow the communities to benefit.
Moalusi says this becomes an increasingly difficult issue, as the question of whether communities are benefiting sufficiently from social and labour plans and the mitigation of community members’ grievances by the mining companies during operations then arises.
“If the commercial arm of the community is formalised and is functioning, the mining houses find it easier to have commercial interaction with the community,” he adds.
He cites the Royal Bafokeng Nation as an example of best practice, in that it created a business arm in the form of a company, Royal Bafokeng Holdings (RBH), which, either directly or through other legal entities, owns shares in mining companies.
The shareholder in RBH is a trust, the Royal Bafokeng Nation Development Trust, which is run by a board of trustees, some of whom are independent, and the trust is chaired by Kgosi Leruo Molotlegi.
RBH is responsible for the commercial activities of the community.
Other Bafokeng entities include the Royal Bafokeng Administration and the Royal Bafokeng Institute. They are responsible for the administrative affairs of the community, social and health services, and education.
In terms of the arrangement, the Bafokeng community is currently the single largest shareholder in Implats and, through subsidiaries of RBH, has stakes in its industrial and financial endeavours.
Moalusi recommends that the community around a mine act as the anchor for empower- ment transactions with regard to mining houses, instead of outsiders who are used as majority partners in BEE transactions – as is often the case with other mining companies.
Reflecting on his experience in advising traditional communities involved in mining transactions, Moalusi has found that the percentage the community receives is no more than nominal.
“Indeed, it is often ineffective because it is too small to effectively involve the commu- nity in the company’s operations.”
He cautions that creating a commercial entity for the communities to manage their stake in the mine is by no means a solution to solve all the problems at the mines.
“But it will go a long way towards effectively managing the commercial affairs of both parties on a professional level.”