A REPORT produced by South Africa’s auditor-general, Tsakani Maluleke, in June painted a bleak picture of local government performance. Only 16% of the country’s 257 municipalities were given a clean bill of health. Among the dysfunctional is Rustenburg, an industrial hub in the world’s largest platinum group metals (PGM) industry.
According to the report, only 36% of the municipality’s approximately 550,000 residents have pipe water delivered to their dwelling; residents with flush toilets connected to sewage totals 53%. As alarming is the municipality’s 26% unemployment rate, which rises to 35% of its youth.
Given that it’s 10 years in August since the Marikana atrocity, in which 37 protestors were shot dead by police at Lonmin’s mine, the auditor-general’s report raises some uncomfortable questions, especially as the Rustenburg data is repeated numerous times throughout the country. One question is whether the perpetuation of unacceptable living conditions is sowing the seeds for more social unrest.
Neal Froneman, CEO of Sibanye-Stillwater, which bought Lonmin in 2019 as it teetered on the brink of bankruptcy, says the relationship between communities and his company has improved since 2012. Compliance is better and the investment mining companies are making in communities is more joined up in its implementation, as well as larger. Back then, Lonmin was found to have built only a handful of the 5,500 employee houses it had committed to six years earlier in its social and labour report (SLP). Today, SLP compliance, as required in the Mining Charter, is but a portion of the commitment mining companies make to communities. In the case of Sibanye-Stillwater, the company pays 1.5% of dividend flow to community projects.
Anglo American Platinum (Amplats), another major player in the Rustenburg region, is revising its employee share ownership scheme. As part of its proposed purchase of shares in Royal Bafokeng Platinum, Northam Platinum has promised to invest in a fleet of renewable energy projects. In September, Impala Platinum (Implats) installed solar at its employee single quarters. But the sense is that without government stepping up to the plate, their efforts are a drop in the ocean.
“There is a huge improvement in the recognition by companies that you have to share value,” says Froneman. “That’s the good part. The bad part is … the country has gone backwards very significantly. In my view, we’re sitting on a time bomb of social unrest and after the riots of last year [triggered in KwaZulu-Natal and Gauteng provinces following the imprisonment of former president Jacob Zuma], they’re just a sign of what’s coming.”
Natascha Viljoen, CEO of Amplats, acknowledges it is “impossible” for the company to single-handedly address the shortcomings in chronic service under-delivery, even in the country’s industrialised regions. “In Sekhukhune Valley, where we have our Mototolo mine, we employ about 3,000 people and about 1,500 contractors,” says Viljoen. “If we look at the demographics, we are talking about 250,000 youth unemployed in that same area; it is huge. It is impossible for us to solve that entire thing. But what we are acutely aware of is that we have a role to play in sustainable livelihoods.”
For a mining company, a consequence of government dysfunction is that social upliftment expenditures begin to look like wasted investment. “You become less competitive when government doesn’t play its role,” says Froneman. “It comes more onerous to operate in this environment and that’s where it goes pear-shaped.”
We’re sitting on a time bomb of social unrest and after the riots of last year, they’re just a sign of what’s coming.
Shareholders begin to think there are better and “less risky” places to invest. There’s also the risk of market cyclicality. Deciding to invest 1.5% of dividend flow in social upliftment programmes, while it has the imprimatur of shareholders, remains a cost that becomes the harder to bear during commodity downturns. “We all pay taxes and taxes should go into municipalities; it should be going into infrastructure. We are now paying twice,” says Froneman. Sibanye-Stillwater has paid R2bn in PGM-related SLPs alone since about 2019. At its gold mines, west of Johannesburg and in the Free State, some R11.3bn has been spent on SLPs.
Froneman has attracted negative commentary among his peers for speaking too stridently about government failings, especially in respect of the social pressures that are building in mining communities. He is unrepentant, for instance, about having said earlier this year the country was beginning to resemble a failed state – a controversial view supported by Implats CEO Nico Muller. Froneman’s comments were indirectly criticised by the former Anglo American CEO, Mark Cutifani. “It’s not helpful,” he said in May.
“It’s time to call out the failings,” says Froneman. “We run public companies and the government is a public organisation. We actually have the right to speak out about it. I will remain outspoken in the national interest.”
The fact we are publicly diplomatic does not mean we are privately diplomatic.
Viljoen says she shares Anglo American’s ‘quiet diplomacy’ approach but insists her company’s conversations with government in private are vigorous. “Does the fact that we say how bad it is [social conditions around the mines] improve it, or is it about what we do?” she says. “The fact we are publicly diplomatic does not mean we are privately diplomatic.”
One of SA’s other outspoken CEOs is Errol Smart, CEO of Orion Minerals, who inspired headlines in 2020 for calling out “mafia-type behaviour” among people organising themselves around a narrow group of economic interests seeking to extract contracts from mines. This ‘procurement mafia’ is only barely linked to nearby mining communities, if at all, but it is a symptom of broader government dysfunction and poses a major risk for mining firms.
Said the Minerals Council, of which Smart is an executive: “Very often, they [members of the procurement mafia] are equipped with weapons. While some protests appear to stem from a lack of municipal service delivery, there is worrying evidence of a culture of corrupt ‘tenderpreneurs’ having been allowed to disrupt legitimate operations, and who are seeking to subvert legitimate procurement practices.”
Keith Scott, CEO of Fraser Alexander, one of South Africa’s largest mining contractor firms, specialising in tailings management and plant build, says stopping a mine is as easy as blockading the road that supplies it. For business interests aiming to extract favours from mining companies, this is often the modus operandi. “We’ve had many instances of road blockading, communities pulling our trucks off the road, taking our drivers hostage, taking keys away, making demands,” he says.
Scott is more qualified than most to speak of how events like this have become a national phenomenon as Fraser Alexander, as a contracting company, operates on 60 to 70 sites around the country. “What we’ve seen over the last couple of years is the localised business mafia: taxi organisations that operate like mafia. We’re seeing more kind-of organised mafiosi-type cartel activity. Very seldom are these community people.”
Alarmingly, mining companies can’t rely on the South African Police Service. A number of mining firms where protests occur say police were either unable to help, or were reluctant. “When we phone the police, they literally say they don’t want to get involved, so it’s a very hard situation to manage.” One of the most recent striking examples of police haplessness was on June 6 amid an attack on employees at Sibanye-Stillwater’s suspended Cooke facilities, west of Johannesburg.
I just think that’s going to become the norm, this idea that you’re supplementing and supporting local government. What we’re doing to a smaller extent is taking up ownership of some of those issues in those communities.
According to Daily Maverick, electrical cables had been cut by illegal miners, who had then planned to access the mine. The police were called in to assist after shooting broke out, but they stood by – perhaps understandably – owing to the heavy arms the illegal miners bore, described as “military-style” weapons. “There were about 150 armed assailants – it was planned and they had stashed supplies,” the Daily Maverick quoted an eye witness as saying.
Amid these enormous pressures on communities, the vast majority of which are not criminal but in very many cases are desperate, it’s become a non-negotiable for mining companies to step in and take over the work of government. Even for a contracting company like Fraser Alexander, which despite maintaining long-standing contracts with established clients, is still ‘in and out’ of a particular site, it makes sense to take on a degree of community-related investment, if only to establish the company’s partnership credentials with miners.
“I just think that’s going to become the norm, this idea that you’re supplementing and supporting local government. What we’re doing to a smaller extent is taking up ownership of some of those issues in those communities.”
Says Froneman: “Up until a few years back, we just stuck to our position that it’s government’s responsibility to provide services. But all you’re doing is to have major friction with your local communities. What’s become incumbent upon us is actually to step up and look at providing water, power, and – where we can – infrastructure such as roads, internet connectivity and so on.”
The fact the ANC is heading for its elective conference in November means the political attention of government is distracted. This doesn’t bode well for the short-term fortunes of South African citizens. Froneman calls it ‘silly season’: “We already have a weak government, very unstable, and we are now going to see a lot more of this, which will feature in community protests and all these sorts of things. It is very concerning.”