1. presentation to the parliamentary portfolio committe on mining: mining charter 10 november 2010 2
DESCRIPTION
PRESENTATION LAYOUT The Mining Charter in context Impact of the reformed mining regulatory framework on the industry and the economy –Mineral Rights structure –Employment –Investment –Economic Indices Assessment of progress against the Charter elements – Extent of transformation of the mining sector The amended Mining Charter 13 September 2010 Concluding remarks 3TRANSCRIPT
1
PRESENTATION TO THE PARLIAMENTARY PORTFOLIO
COMMITTE ON MINING:MINING CHARTER
10 NOVEMBER 2010
2
PRESENTATION LAYOUT
• The Mining Charter in context
• Impact of the reformed mining regulatory framework on the
industry and the economy
– Mineral Rights structure
– Employment
– Investment
– Economic Indices
• Assessment of progress against the Charter elements – Extent of
transformation of the mining sector
• The amended Mining Charter 13 September 2010
• Concluding remarks
3
4
THE MINING CHARTER IN CONTEXT The Mining Charter is a stakeholder negotiated document
Established in terms of Section 100 of the MPRDA, 2002
First sector instrument to effect transformation
Objectives of the Charter:
Promote equitable access to the nation’s mineral wealth
Substantially and meaningfully expand opportunities for HDSAs
to benefit from exploitation of the nation’s mineral resources
Utilise the existing skills base to empower HDSAs
Expand the Skills base of HDSAs
Promote employment and advance the social and economic
welfare of mining community and the major labour sending areas
Promote beneficiation of RSA mineral commodities
5
ELEMENTS OF THE CHARTER
• Ownership and Joint Ventures
• Human Resource Development
• Employment Equity
• Mine Community and Rural Development
• Housing and Living Conditions
• Beneficiation
• Procurement
• Reporting
6
MINERAL RIGHTS STRUCTURE• Pre MPRDA and the Mining Charter, Mineral Rights were
vested in private hands – thwarting the potential for investment
• This regulatory framework (MPRDA) vested custodianship of mineral rights in the hands of State, unlocking the inherent potential for mineral development
• Regulatory framework enabled diversification of mineral commodities and their socio-economic impact (from depleting Gold resource development)
• More than 26 000 applications have been received by the DMR since the promulgation of the new regulatory framework – RSA Mineral Rush
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300
400
500
600
700
800
900
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
to J
une
'000
EMPLOYMENT TREND – MINING INDUSTRY
DMRStatsSA
8
Real mining GFCF
-
5,000
10,000
15,000
20,000
25,000
30,000
1998
'
1999
'
2000
'
2001
'
2002
'
2003
'
2004
'
2005
'
2006
'
2007
'
2008
'
Year
FCF
(mil)
MINING INVESTMENT
SARB
9
Chart Title
Growth=7.42%
-
2,000
4,000
6,000
8,000
10,000
12,000
14,000
16,000
18,000
20,000
1998' 1999' 2000' 2001' 2002' 2003'
Year
FCF
(RM
ill)
Investment Growth Rate, 1998-2003
SARB
10
Growth=17.95%
-
5,000
10,000
15,000
20,000
25,000
30,000
2004' 2005' 2006' 2007' 2008'
Year
FCF
(Rm
il)
Investment Growth Rate, 2004-2008
SARB
11
0
50
100
150
200
250
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
R Billion
MINERAL EXPORT SALES
DMRStatsSA
12
Contribution of Mining to GDP
0
50
100
150
200
250
2000' 2001' 2002' 2003' 2004' 2005' 2006' 2007' 2008'
Year
Min
ing
GDP
(R b
illio
ns)
0.0
2.0
4.0
6.0
8.0
10.0
12.0
Perc
enta
ge C
ontri
butio
n to
G
DP
Mining GDP Mining as % oF GDP
StatsSA
SA GDP PER CAPITA
0
10
20
30
40
50
1998
'
1999
'
2000
'
2001
'
2002
'
2003
'
2004
'
2005
'
2006
'
2007
'
2008
'
GDP per Capita growth = 9.1% (1998 - 2003)= 11.2% (2004 – 2008)
Source: StatsSA
R Thousand
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SA GINI COEFFICIENT
South Africa the most unequal society in the world in terms of income levels by Class, Gender and Race.
0
0.2
0.4
0.6
0.8
1993
'
1995
'
1997
'
1999
'
2001
'
2003
'
2005
'
2007
'
Gini coefficient
14
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PROGRESS AGAINST THE CHARTER TARGETS
METHODOLOGY:
• Records in the Department
• Records from the mines
• Questionnaires
• Detailed analysis of data
• Services of external consultants
• Interrogation of the Charter 2002 construct
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OWNERSHIP
Measure:
Has the mining company achieved HDSA participation in terms of ownership for equity or attributable units of production of 15 % in HDSA hands within 5 years and 26 % in 10 years?
17
8.9
-5
0
5
10
15
20
1
Perc
enta
ge
OwnershipNet Asset Value
OWNERSHIP
18
HUMAN RESOURCE DEVELOPMENT
Measures:
(i) Has the company offered every employee the opportunity
to be functionally literate and numerate by the year 2005
and are employees being trained?
(ii) Has the company implemented career paths for HDSA
employees including skills development plans?
(iii) Has the company developed systems through which
empowerment groups can be mentored?
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HUMAN RESOURCE DEVELOPMENT17 17
11
0
2
4
6
8
10
12
14
16
18
Functional Literacy Career Pathing Mentoring of empowermentgroups
Measure
Per
cent
age
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EMPLOYMENT EQUITYMeasures:
• Has the company published its employment equity plan and reported on its annual progress in meeting that plan?
• Has the company established a plan to achieve a target for HDSA participation in management of 40% within five years and is implementing the plan?
• Has the company identified a talent pool and is it fast tracking it?
• (iv) Has the company established a plan to achieve the target for women participation in mining of 10% within the five years and is implementing the plan?
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EMPLOYMENT EQUITY
26
17
26
0
5
10
15
20
25
30
Achievement of 40% threshold 10% participation of WIM Talent pool identification andfast tracking
Measure
Per
cent
age
22
MINE COMMUNITY AND RURAL DEVELOPMENT
Measure:
• Has the company cooperated in the formulation of integrated development plans and is the company cooperating with government in the implementation of these plans for communities where mining takes place and for major labour sending areas?
• Has there been an effort on the side of the company to engage local mine community and labour sending area communities? (Companies will be required to cite a pattern of consultation, indicate money expenditure and show a plan)
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63
49
14
0
10
20
30
40
50
60
70
Consultation Intergrated Development Plan(IDP)
IDP's for labour sendingareas
Measure
Per
cent
age
MINE COMMUNITY AND RURAL DEVELOPMENT
24
HOUSING AND LIVING CONDITIONSMeasures:
• For company provided housing, has the mine, in consultation with stakeholders established measures for improving the standard of housing including the upgrading of hostels, conversion of hostels to family units and promoted home ownership options for mine employees? Companies will be required to indicate what they have done to improve housing and show a plan to progress the issue overtime and is implementing the plan?
• For company provided nutrition has the mine established measures for improving the nutrition of mine employees? Companies will be required to indicate what they have done to improve nutrition and to show a plan to progress the plan over time and is implementing the plan?
25
2629
34
29
96
0
5
10
15
20
25
30
35
40
Provision ofhouses to
employees
Improvementof existinghousing
infrastructure
Homeownership
participation
Nutritionalplans
established
Upgrading ofhostels
Conversion ofhotels to family
units
Measure
Perc
enta
ge
HOUSING AND LIVING CONDITIONS
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PROCUREMENT
Measures:
• Has the mining company given HDSA’s preferred supplier status?
• Has the mining company identified current level of procurement from HDSA companies in terms of capital goods, consumables and services?
• Has the mining company indicated commitment to a progression of procurement from HDSA company over a three (3) to five (5) year time frame in terms of capital goods, consumables and services and to what extend has the commitment been implemented?
27
37
11
20
3
0
5
10
15
20
25
30
35
40
HDSA participation inprocurement
HDSA prefferedsupplier
Commitment toprogression over 3 - 5
years
value of expenditure
Measure
Perc
enta
ge (%
)
PROCUREMENT
28
BENEFICIATION
Measure:
• Has the mining company identified its current level of beneficiation?
• Has the mining company established its baseline
level of beneficiation and indicated the extent that this
will have to be grown in order to qualify for an offset?
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REPORTING
Measure:
• Mining companies undertook to report on an annual basis as per the provisions of section 28(2)(c) and section 29 and the measure was as follows:-
• Has the company reported on an annual basis its progress towards achieving its commitments in its annual report?
30
37
11
0
5
10
15
20
25
30
35
40
Companies with audited reports Submission of audited reports
Perc
enta
ge
REPORTING
123 31
Amended Mining Charter 2010
The review of the Mining Charter was aimed at strengthening and sharpening its effectiveness in driving transformation and competitiveness in the mining sector,– Improve the construct of the language, the scorecard and
remove ambiguities The Amended Charter retains all original element and
introduces a new element on SD; Mining Charter amendment concluded under the auspices
of MIGDETT, a tripartite mechanism established in December 2008
123 32
Amended Mining Charter 2010 cont...
OWNERSHIP
- 26% of HDSA ownership by 2014- Emphasising meaningful BEE ownership- Entrepreneur, employees & Communities- Evaluates the financing structure
- Offsetting permissible against value of beneficiation
123 33
Amended Mining Charter 2010 cont...
PROCUREMENT AND ENTERPRISE DEVELOPMENT
- Procure from BEE entities: - minimum 40% capital goods by 2014 - 70% service by 2014 - 50% consumer goods by 2014
- Contribution of 0.5% of annual income by multinational suppliers of capital goods into social fund
123 34
Amended Mining Charter 2010 cont...EMPLOYMENT EQUITY
Companies to achieve minimum of 40% HDSA demographic representation by 2014 at: executive management (Board) level senior management (Exco) level core and critical skills middle management level junior management level
Companies to fast track existing talent pools to ensure high level operational exposure in terms of career path programmes.
OCCUPATIONAL DISTRIBUTION IN THE MINING SECTOR
123 35
Africans85.5%
Whites12%
Asians0.4%
Coloured2.1%
123 36
HUMAN RESOURCE DEVELOPMENT
Industry to invest % of annual payroll in essential skills development reflective of demographics as follows:
3% by 2010 3.5% by 2011 4% by 2012 4.5% by 2013 5% by 2014
Amended Mining Charter 2010 cont...
GRADUATES STATS IN CORE SKILLS (ENGINEERING)
123 37
QUALIFICATION RACE
B W C I
Bachelors 2007 145 640 50 34
Honors 163 270 12 32
Masters 62 146 4 20
Doctorate 4 16 1 1
Bachelors 2008 166 683 8 28
Honors 176 334 15 29
Masters 75 144 1 17
Doctorate 7 17 1 3
123 38
MINE COMMUNITY DEVELOPMENT
- Stakeholders to adhere to international best practices and guidelines,
- Invest in ethnographic community consultative and collaborative process prior to implementation of mining projects,
- Conduct assessment to determine developmental needs in collaboration with mine community and,
- Identify projects for contribution towards community development in line with IDPs proportionate to investment
Amended Mining Charter 2010 cont...
123 39
Amended Mining Charter 2010 cont...
HOUSING AND LIVING CONDITIONS
- Companies to implement measures to improve standards of housing and living conditions for mineworkers as follows; convert/upgrade hostels into family units by 2014, occupancy rate of one person per room by 2014,
- Facilitate home ownership by miners in consultation with labour by 2014
123 40
SUSTAINABLE DEVELOPMENT AND GROWTH IN MINING INDUSTRY
-Mining companies to implement elements of sustainable development commitments in Stakeholders’ Declaration,
-Improve on environmental management -Improve on industry’s health and safety performance,-To utilise S.A based facilities for analysis of samples across mining value chain.
Amended Mining Charter 2010 cont...
123 41
Amended Mining Charter 2010 cont...
BENEFICIATION
- Companies to facilitate local beneficiation by adhering to s26 of MPRDA and Beneficiation Strategy
- Offset value of level of beneficiation against portion of HDSA ownership but not exceeding 11%
123 42
REPORTING (MONITORING AND EVALUATION)
- Detailed scorecard introduced, with specific weighting allocated for each element of the mining charter and its sub-elements.
- Provided in terms of s28(2)c of the MPRDA- Reporting requirements provide for qualitative and
quantitative assessment of the impact on an annual basis- Mechanisms to effectively deal with non-compliance are
provided for i.t.o. s99 MPRDA (penalties) and s47 MPRDA (suspension/ cancellation of rights)
Amended Mining Charter 2010 cont...
CONCLUDING REMARKS• The Mining Charter – precursor of all sectoral Charters (all
of which are premised on the identical elements originally identified)
• The extent of transformation of the mining sector against the Charter elements is grossly inadequate
• The construct of the Charter 2002, as a negotiated and compromise document presented gray areas in the elements (construct) and measures (scorecard) – unintended consequences of exploitation
• Lack of capacity within the DMR compromised the extent of vigilance on implementation of the Charter
• The Charter focused on transformation of the sector – lack of focus on sustainable transformation and growth of the sector
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CONCLUDING REMARKS• The mining industry regarded the Charter as a compliance
requirement – not a business imperative
• We, as policy makers presumed that everyone is committed to transformation
• The amended Charter strengthened the construct of the language to obviate against any multiplicity of interpretations
• The amended Charter introduces an element of sustainable development
• The amended Charter introduces a scorecard with clearly defined target
• Reporting mechanisms are well defined – annual reporting• Review of MPRDA to beef up penalty provisions that
may be imposed to companies for non-compliance.
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ENDS….ENDS….
“A DROP OF WATER BREAKS A ROCK THROUGH CONTINOUS FALLING.”
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