SA mines fight over proposed community revenue share

Cape Town - South Africa’s biggest mining companies are opposed to a government proposal that 1% of their annual revenue be spent on developing communities associated with their operations and have countered with suggestions that they instead pay out a share of profit.

The Chamber of Mines is in discussions with the Department of Mineral Resources and labour unions over a review of the so-called mining charter, which mandates measures designed to boost black participation in the economy ranging from ownership of assets, management diversity and procurement procedures.

“This is a regressive imposition, particularly on marginal mines,” the chamber’s CEO Roger Baxter said by phone from Johannesburg last week. “Our preference is that the commitment should be as a percentage of net profit as it is based on the affordability of the companies.”

South Africa’s economy, the continent’s most industrialised, was built on mining companies, who for over a century, during whites-only rule, profited from cheap black labour and lax environmental laws that have today left communities contending with contaminated water and toxic mine dumps.

Profit definition

Companies already pay royalties to government that differ by commodity. Gold producers pay about 3% of revenue. Sibanye Gold, which is the biggest producer of gold mined in the country, earned net income of R805m in 2015 from revenue of R25.52bn, it said in February.

Discussions around community development contributions have centred on the definition of profit, said Martin Madlala, a spokesperson for the Department of Mineral Resources.

“We have had to engage with National Treasury,” he said “There may be tax implications."

The proposal, if enacted, would require that the money be spent on communities near the mines as well as those from where they draw their labour.

While mining companies already have to submit social and labour plans, detailing their initiatives for community development, to keep their operating licenses legislation governing those is flawed and doesn’t make them accountable to the intended beneficiaries, the Centre for Applied Legal Studies said in a draft report in February.

"If they miss this opportunity to start to be fair with communities, they’re going to face a revolt," John Capel, executive director of the Bench Marks Foundation, a corporate social responsibility monitoring organisation, said. "I just see angry, angry, angry communities whether it’s across coal, platinum, diamonds iron ore, whatever."

South Africa is the world’s biggest source of platinum and manganese and Africa’s largest gold and coal producer. Mining accounts for about half of the country’s exports with members of the chamber, which represents about 90% of the country’s mineral production, contributing R11.3bn in taxes a year, according to the organisation.

Court case

A draft of the document, published for comment on April 15, includes other measures including requiring companies to ensure their assets are at least 26% black-owned even if the initial buyers sell their stake.

That’s another point of contention with the chamber and the Department of Mineral Resources involved in High Court case, with the miners arguing that by selling an initial stake they have met the requirements to keep their operating licenses and the requirement cannot be applied retroactively.

“We understand that people are worried about it and they are trying to work out which way we are leaning,” Madlala said. “The decision has not been made yet.”