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UN PRI conference: The minefield of mining

There is no denying that mining is one of the most controversial industries on the planet, which is why responsible investors have always been in hot pursuit of the company boards of mining companies. Whether they sought engagement with mining giant Rio Tinto over environmental pollution concerns, Indian mining company Vedanta over indigenous rights issues or gold producer Barrick over corporate governance issues – for many, mining companies are top of their engagement agenda.

One of the most shocking events in the mining sector occurred in August 2012 when armed police shot dead dozens of striking miners at the South African Marikana mine. In total, 46 people lost their lives, and comparisons were swiftly made with the Sharpeville Massacre of the Apartheid regime in 1960.

When I attended the ‘PRI in Person’ event in Cape Town last week, it became clear that mining remains a sore point in South Africa one year on from the Marikana shootings.

The session on mining in Africa was the most tense I have ever experienced, and other attendees conveyed similar feelings to me afterwards.

While people can agree or disagree on how transparent the mining sector is in comparison with other industries, the claim by one of the panel’s speakers that “apartheid had nothing to do with mining” was a bold statement to say the least. I was not alone in thinking the ghosts of the past had not been completely buried after leaving the session.

White South Africans seemed to be very defensive when it comes to wages in the mining sector, arguing that miners earned relatively well and that it was their personal circumstances that needed improving because the majority of the workers lived in impoverished townships on the outskirts of cities. They were seeking a social wage rather than an absolute figure. Unions had too much power, some cried, and the labour force was too uneducated and too militant.

I heard little from the other side.

But Martin Kuskus, chairman of the Mineworkers’ Provident Fund, who spoke on the panel, said South Africa was one of the most unequal societies, with a sharp contrast between the haves and have-nots. And while he said mining was meant to narrow this inequality, the Marikana massacre just served to highlight the persisting stark inequality.

One European pension fund that is used to engaging with mining companies from around the world said to me over lunch that, while there are plenty of issues in the mining sector globally, South Africa is the only country where the wages are a controversial issue.

I take my hat off to the pension funds that engage on wages in the South African mining sector because engagement must be far from easy when, other issues such as pollution and water scarcity aside, you have to tiptoe around feelings of resentment almost 20 years onwards from the country’s first democratic general elections.

However, Nina Hodzic, ESG specialist at ING Investment Management International, who visited the Lonmin (Marikana) mine following the conference, came away feeling a lot more positive. She said: “Staff training, community investing such as affordable housing and education are very important for miner Lonmin, as they lead to higher productivity of employees and subsequently a higher profitability for the company. Safety is extremely important to the company. This was very clear during the mine visit, as there were posters and other educational material hanging everywhere to remind the employees of the importance of adhering to safety rules. Lonmin has received various awards for safety achievements.”

Hodzic added: “Interestingly, I have spoken to people in Johannesburg who were rather critical about the government, but were actually quite positive about the mining companies, as they provide jobs and invest in local communities, practically taking over the role of the government. One person even mentioned that the government regularly takes credit for what mining companies have done for the community. The mining industry is facing many challenges, but I am positive about its commitment to transformation, community development and improved environmental and social practices. More collaboration is needed between the government, local municipalities, companies, unions and local communities, taking into account the importance of the mining industry for South Africa’s economy.”

The mining sector makes up 9% of South Africa’s GDP, but it is responsible for around 50% of export earnings. In addition, it has created more than 1m jobs, both directly and indirectly. In a country where youth unemployment is still above 50%, this makes it an important sector for the economy.

Therefore, while the PRI event highlighted that South Africa and the other 53 sovereign states on the continent are not just resource countries, the mining sector remains crucial, at least for now.

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