Courtesy: Ivanplats

Mines are often the dynamos of their local economies, but with this reliance comes dependence. More can be done to diversify the local economy and make it resilient, according to SRK Consulting.

The last two versions of the Mining Charter have placed greater focus on enterprise and supplier development, as well as local procurement, according to Lisl Fair, principal consultant (social sciences) at SRK Consulting.

This article first appeared in Mining Review Africa Issue 6, 2020
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“This has encouraged many mines to incorporate local suppliers into their supply chains, which is a good start to supporting the local economy,” says Fair.

“However, it is easy to create over‑dependence, where many smaller suppliers would not be able to survive the inevitable closure of the mine.”

In developing and operating mines, it is important to ring-fence certain products and services for local businesses.

If local suppliers cannot be found, mines could create local enterprises in collaboration with local business chambers or entrepreneurial groups or facilitate the formation of joint ventures to ensure that ring-fenced services are delivered by local businesses.

As a mine continues to progress through its life cycle these enterprise development initiatives must be re-evaluated to assess their ability to survive post mine closure.

There are several ways of strengthening local businesses, which in turn makes the local economy more resilient. An important strategy for a mine’s enterprise supplier development function is to work with suppliers to broaden their customer bases.

“It is always good business practise to avoid having all your eggs in one basket,” she said.

“Through its training and mentoring efforts, a mine can drive home this point with its local suppliers. This should improve not only these suppliers’ long-term sustainability, but also their profitability.”

To facilitate contact between suppliers and potential new customers, mines can host trade shows or supplier fairs – inviting other large employers, including other mines, in the vicinity, she notes.

A less intuitive – but equally important – contribution that mines can make is to the informal sector, which usually underpins the economies in local communities.

Fair notes that informal businesses contribute as much as 14% to South Africa’s gross domestic product, and are in many ways the engine of local economies.

It is important for mines – throughout their life-cycle but particularly as they approach closure – to strengthen the informal sector in their local communities,” she states.

“This can be done through financial literacy training and basic business skills, as well as improving the infrastructure around their physical working spaces, such as providing shade for traders at taxi ranks.”

This kind of training is often not commonly provided by mines, which tend to focus on tertiary education bursaries or skill-sets that serve the mine’s direct technical needs.

However, it is possible to fund alternative training from the skills development fund in the mine’s Social and Labour Plan (SLP) or from the mine’s supplier development fund. Often, the various development programmes in a mine’s SLP are run in silos.

Combining core or non-core skills development with basic business training, can result in a much deeper impact on community and individual level.

Among the most valuable services that a mine could provide is to facilitate access to government support programmes for informal businesses, she adds.

Through its enterprise and supplier development team, mining companies can help suppliers with informing them of available grants and loans, completing forms and accessing services like SEDA or NYDA grants.

These forms and process can be very complicated to fill in and understand and is an area where support to fill in forms and helping suppliers get quotes from SEDA-registered suppliers can be very helpful.

Mines can also provide a platform where small and medium enterprises can hone their skills. Often, the resources in these programmes are out of reach because of the complexity of application forms and procedures.

“Mines should also leverage their larger suppliers – who include well-resourced multi-national companies – to contribute to these efforts,” Fair highlights.

As mines approach closure, there is a greater imperative to support capacity-building among small and medium suppliers and the informal sector, she warns.

Where mines do not already have relevant strategies in place, a useful starting point is for experts to conduct a socio-economic impact assessment of the area which often includes a macro- and or micro-economic assessment and mapping of the skill sets in the area in which the mine operates. A self-sustainability gap analysis could also be done, to identify those suppliers most at risk when the mine reaches closure stage.

“The coronavirus pandemic has also highlighted the importance of having a digital, remote platform for procurement – making it easier for local businesses to supply the mine with products or services,” she says.

“This can even be done on a regional basis, involving a number of different mines in the same area. While sharing a common platform, each mine can still have their own portal for vetting submissions, for receiving quotes and for tracking orders.”

Series review

All mines must close, and this closure has a profound and often devastating impact on surrounding communities and towns. It is accepted that mines have a central role to play in mitigating this impact, by helping improve the resilience of local economies in the face of mine closure.

But how to facilitate such a ‘social transition’ away from dependence on mining is a complex question. In this series of five articles, experts from SRK Consulting share experience, lessons and insights that contribute to resolving this inevitable challenge.

In the first article, it was argued that sustainable social transitioning begins with a paradigm shift in corporate thinking – moving away from seeing communities as beneficiaries and rather appreciating the assets that exist in the community as resources for building sustainability. The second article considered what this means in practical terms, with a focus on some of the lessons learnt by mines in helping create self-sustainable community projects.

This article, the third in the series, highlights the importance of economic diversification in the local economy of a mine – and how mines can promote such diversification through the way they manage their supply chains and other resources.

The fourth article will look at options for how mine employees can be launched into new ventures outside of direct mine employment. In the fifth and final article in the series, the experts tackle the conundrum of how a mine should engage transparently with community stakeholders about mine closure.