Lonmin
The recently gazetted Mining Charter has attracted controversy, prompting criticism from both industry and labour and attracting at least one court challenge.

It would be prudent, however, for mining sector stakeholders to look beyond the headlines and come to grips with the details of the Mining Charter.

[quote]That’s the advice from Deloitte, which has produced a detailed, yet accessible paper outlining the strategic implications of the Mining Charter and the need for business to apply a more holistic and innovative outlook embracing shared value to drive inclusive growth that achieves both economic and social progress.

Despite the gazetted charter having clarified many of the measurement criteria and targets, says Stelio Zakkas, strategy and operations at Monitor Deloitte, uncertainty continues due to several areas open to interpretation.

Deloitte has detailed the continued areas of uncertainty and highlighted the strategic implications of the changes to the Mining Charter.

Mine community development is one of six compliance areas of the gazetted Mining Charter, which has introduced a new concept by declaring ownership, human resource development and mine community development as what are termed ‘ring-fenced’ elements, each of which require 100% compliance.

A company that fails to meet the 100% compliance with each of the ‘ring-fenced’ elements is automatically deemed non-compliant, irrespective of their scoring in the remaining elements, which are weighted as follows:

  • Preferential procurement and supplier enterprise development (30%)
  • Employment equity (35%),and
  • Sustainable development and growth (35%)

Each element in the Mining Charter (old and new), has a cost associated with it – primarily for the rights holders – and an associated shared value impact, says Andrew Lane, energy and resources leader for Deloitte Africa.

The cost of compliance certainly increases with the new Mining Charter, which many arguing that it is not affordable and will reduce investment returns to a level that may no longer be globally competitive.

There appears to be intent to create shared value. The real question is whether the shared value impact justifies the cost.

It is important to understand the cost-to-shared value impact of each element of the mining charter, ensure that the outcomes justify the costs, and that money is not wasted.

Deloitte has also published an infographic that presents a summary and scorecard for each of these elements, offering a valuable, at-a-glance guide for mining sector decision makers and stakeholders.

For example, ownership, the element which has attracted arguably the most controversy of the six, is unpacked in several succinct fact boxes which explain the much-commented-on 50% plus one black person shareholding required for new prospecting and mining rights holders, the 30% plus one black person shareholding required for existing prospecting and mining rights holders, and the breakdown of the latter between employees through share ownership schemes – ESOPs for short -(8%), BEE Entrepreneurs (14%) and mining community representatives (8%).

Each of the other five elements:

  • human resource development

  • mine community development

  • preferential procurement and supplier enterprise development

  • employment equity, and

  • sustainable development

are presented in a similarly concise, yet comprehensive graphical format, making for easy understanding and sharing.

“Deloitte’s key aim when it comes to the Mining Charter is to assist our clients in understanding their priority areas with regards to the changed elements, and thereafter working with them in designing strategies that will enable them to survive and succeed in the changed environment, whilst delivering shared value beyond compliance to mining ecosystems they operate in,” says Zakkas.

Lane adds that, “unlike a compliance driven approach, shared value thinking drives innovation, productivity and both social and economic growth.

“It is necessary in closing the trust divide in South Africa’s mining sector, as government, labour and industry work in unison to deliver value to all stakeholders.

“Deloitte aims to play its part in enabling shared value to the benefit of the mining sectors growth ambitions,” concludes Lane.

Feature image credit: Lonmin