Publications
Partners
SOCIAL licence to operate seems like a simple thing to achieve.
Ask your average Joe residing in the developed world and he will assume that as long as a company plays by the rules, isn't damaging the environment, manufacturing with child slavery or Ponzi architecting, licence to operate is the default assumption.
Applying this thinking to emerging markets would make sense; in fact, thinking otherwise would be outside our average Joe's frame of reference, but guess what Joe - it isn't so.
I'm sure researchers will one day establish where the educational tipping point lies in society where people's thinking sways from believing they deserve something for nothing to believing they need to work hard and earn things - but the phenomenon is starkly visible the world over.
The logic of entitlement
Poverty, both financial and intellectual, breeds entitlement.
That is the unfortunate reality with which we are faced both globally and as South Africans, with the nation tipping recently into a state where more people receive government handouts than contribute to the feeding hand itself.
All industries are affected by this, but the quantum of impact is relative to the exit barriers of each industry. Mining is obviously the most heinously impacted, since you can't exactly move your shafts to Luxembourg.
One step up the pyramid is agriculture which, although it operates above ground, is almost as immobile as mining. The next rung up is manufacturing, which despite significant exit costs as history has witnessed, is flexible to changing conditions.
The top of the pyramid is the services industry, which catches flight at the first signs of inclemency in the weather.
For these reasons, unfair as they may seem, the mining industry is the whipping dog of government and unions alike, especially when the commodities which they dig out of the ground are in high demand, giving companies extra leg room to be whipped for compromise.
Whine as we may about these injustices, they're not about to become fair in our lifetimes - which brings us to the new dawn in mining, one filled with smog and soot but morning nonetheless: the dawn of the mining super ethic.
The mining super ethic
The basic mining equation is simple:
• Mines pay lots of taxes to the government;
• Mines implement more social development projects than any other industry pro rata;
• The government is unable to deliver on social projects, regardless of how much tax it receives;
• Mines are therefore to blame for government's inability to deliver social justice; and
• Mines therefore are required to do more to compensate for government incompetence.
If you don't understand how this equation works, revisit the logic of entitlement above.
The fact remains that in order to maintain their social licence to operate, mines need to deliver against a super ethical standard which involves mines doing their job plus government's job.
My readers will now bifurcate into those who see nothing wrong with this and those that do; this perception separates those bred with a sense of entitlement from those educated with a work ethic.
1+1=1
The problem with the mining super ethic equation is that mines live in a cyclical environment and as we are currently witnessing, many once-marginal operations are now digging deeply into the red.
Even the ethically challenged believers described above are disturbed by the thought of mines going insolvent since without a gravy train to ride, their sole commercial skill as professional dependents has diminishing marketability.
So these belt-tightening times may be just the opportune moment to sink a shaft of logic in the skulls of the pilfering civil leadership towards the goal of creating a commercially viable status quo.
Ringfencing the field of dreams
The mining super ethic solution lies not in mines paying more taxes, since they are struggling for survival already. It lies not in mines subsidising labour generating schemes, since this is well-meaning but financially ludicrous.
So wherein lies this utopian homeostasis, which allows mines to remain competitive and profitable while simultaneously delivering on the super ethic solution?
The answer is simple, possibly too simple - ringfencing.
In this context, ringfencing is the dedication of the revenue of a specific tax for a specific expenditure.
So how does the mining super ethic ringfencing structure work?
Well, it's quite simple: taxes payable from mining companies in the normal course of business will be paid into a ringfenced non-governmental entity, which is responsible for deploying these funds towards clearly defined social development initiatives in the region.
For example, the platinum mines operating around the Rustenburg area are all still solvent, so they all pay taxes.
Those taxes - or at least a significant portion of them - would be paid into a transparent entity managed by a highly credible third party, which would undertake to release these funds for earmarked initiatives such as local housing, schools, artisan colleges and clinics at predefined milestone events.
The same structure would be applied to gold mines, coal mines and iron ore mines.
The result would be professionally managed social development projects on a national scale, or in other words, industry doing government's job.
Much as this pains my tax-paying heart, the alternatives are to either bemoan the fact that the government after 20 years of democracy is just getting progressively more useless, or to heed the call to action and undertake the task of nation building for the good of all of the country's inhabitants.
Life's not fair
All this doesn't sound very fair to the idealist - but as every fat kid who survived high school will testify, life's not fair and the sooner you realise it, the easier it gets.
Obviously, this approach does not sanction government's continued incompetence. The watchdogs should not cease their barking, and should continue casting their rotten tomatoes at incompetent government leaders in the hope that they will be replaced by capable souls.
However, the goal is not delivering justice to gravy train engineers but building the economic and social fabric of society - and this task is too dear to be left to bumbling idiots.
As such, it is the ethical imperative that industry leaders acknowledge the realities for what they are and unify their efforts, working towards a less ideal but infinitely better achievable goal.
The most crucial task which remains, the call to action for our time, is for industry, citizens and virtuous politicians alike to unite in their calls on government to rapidly implement these ringfenced solutions and to liberate the country from lethargy, while there still remain profits to tax.
- Fin24
*Jarred Myers is a resources strategist and can be followed on Twitter on @JarredMyers. Opinions expressed are his own.
Ask your average Joe residing in the developed world and he will assume that as long as a company plays by the rules, isn't damaging the environment, manufacturing with child slavery or Ponzi architecting, licence to operate is the default assumption.
Applying this thinking to emerging markets would make sense; in fact, thinking otherwise would be outside our average Joe's frame of reference, but guess what Joe - it isn't so.
I'm sure researchers will one day establish where the educational tipping point lies in society where people's thinking sways from believing they deserve something for nothing to believing they need to work hard and earn things - but the phenomenon is starkly visible the world over.
The logic of entitlement
Poverty, both financial and intellectual, breeds entitlement.
That is the unfortunate reality with which we are faced both globally and as South Africans, with the nation tipping recently into a state where more people receive government handouts than contribute to the feeding hand itself.
All industries are affected by this, but the quantum of impact is relative to the exit barriers of each industry. Mining is obviously the most heinously impacted, since you can't exactly move your shafts to Luxembourg.
One step up the pyramid is agriculture which, although it operates above ground, is almost as immobile as mining. The next rung up is manufacturing, which despite significant exit costs as history has witnessed, is flexible to changing conditions.
The top of the pyramid is the services industry, which catches flight at the first signs of inclemency in the weather.
For these reasons, unfair as they may seem, the mining industry is the whipping dog of government and unions alike, especially when the commodities which they dig out of the ground are in high demand, giving companies extra leg room to be whipped for compromise.
Whine as we may about these injustices, they're not about to become fair in our lifetimes - which brings us to the new dawn in mining, one filled with smog and soot but morning nonetheless: the dawn of the mining super ethic.
The mining super ethic
The basic mining equation is simple:
• Mines pay lots of taxes to the government;
• Mines implement more social development projects than any other industry pro rata;
• The government is unable to deliver on social projects, regardless of how much tax it receives;
• Mines are therefore to blame for government's inability to deliver social justice; and
• Mines therefore are required to do more to compensate for government incompetence.
If you don't understand how this equation works, revisit the logic of entitlement above.
The fact remains that in order to maintain their social licence to operate, mines need to deliver against a super ethical standard which involves mines doing their job plus government's job.
My readers will now bifurcate into those who see nothing wrong with this and those that do; this perception separates those bred with a sense of entitlement from those educated with a work ethic.
1+1=1
The problem with the mining super ethic equation is that mines live in a cyclical environment and as we are currently witnessing, many once-marginal operations are now digging deeply into the red.
Even the ethically challenged believers described above are disturbed by the thought of mines going insolvent since without a gravy train to ride, their sole commercial skill as professional dependents has diminishing marketability.
So these belt-tightening times may be just the opportune moment to sink a shaft of logic in the skulls of the pilfering civil leadership towards the goal of creating a commercially viable status quo.
Ringfencing the field of dreams
The mining super ethic solution lies not in mines paying more taxes, since they are struggling for survival already. It lies not in mines subsidising labour generating schemes, since this is well-meaning but financially ludicrous.
So wherein lies this utopian homeostasis, which allows mines to remain competitive and profitable while simultaneously delivering on the super ethic solution?
The answer is simple, possibly too simple - ringfencing.
In this context, ringfencing is the dedication of the revenue of a specific tax for a specific expenditure.
So how does the mining super ethic ringfencing structure work?
Well, it's quite simple: taxes payable from mining companies in the normal course of business will be paid into a ringfenced non-governmental entity, which is responsible for deploying these funds towards clearly defined social development initiatives in the region.
For example, the platinum mines operating around the Rustenburg area are all still solvent, so they all pay taxes.
Those taxes - or at least a significant portion of them - would be paid into a transparent entity managed by a highly credible third party, which would undertake to release these funds for earmarked initiatives such as local housing, schools, artisan colleges and clinics at predefined milestone events.
The same structure would be applied to gold mines, coal mines and iron ore mines.
The result would be professionally managed social development projects on a national scale, or in other words, industry doing government's job.
Much as this pains my tax-paying heart, the alternatives are to either bemoan the fact that the government after 20 years of democracy is just getting progressively more useless, or to heed the call to action and undertake the task of nation building for the good of all of the country's inhabitants.
Life's not fair
All this doesn't sound very fair to the idealist - but as every fat kid who survived high school will testify, life's not fair and the sooner you realise it, the easier it gets.
Obviously, this approach does not sanction government's continued incompetence. The watchdogs should not cease their barking, and should continue casting their rotten tomatoes at incompetent government leaders in the hope that they will be replaced by capable souls.
However, the goal is not delivering justice to gravy train engineers but building the economic and social fabric of society - and this task is too dear to be left to bumbling idiots.
As such, it is the ethical imperative that industry leaders acknowledge the realities for what they are and unify their efforts, working towards a less ideal but infinitely better achievable goal.
The most crucial task which remains, the call to action for our time, is for industry, citizens and virtuous politicians alike to unite in their calls on government to rapidly implement these ringfenced solutions and to liberate the country from lethargy, while there still remain profits to tax.
- Fin24
*Jarred Myers is a resources strategist and can be followed on Twitter on @JarredMyers. Opinions expressed are his own.
