The mining industry, more than any other in the private sector, faces immense pressure to deliver social benefits. We pose some pointed question to the CEO of the Tshikululu Fund, Tracey Henry. The talking points are derived from the mining Indaba held in South Africa late in 2013.

VA: Given the rise of various African countries like Kenya, Ethiopia and Nigeria – which is also set to overtake South Africa as economic leader on the African continent – and this without immediate focus on social benefits, is delivering social benefits the most critical activity for South Africa at this point?

TS: There is an especial focus on social benefits in South Africa because of an awareness of the injustices of the past and resultant inequalities. Alongside that is an awareness of the responsibility of private companies to ameliorate the extent of their extractive operations by addressing the most pressing needs of those they most directly rely on and affect. But there’s a difference between an acknowledgement of the importance of delivering social benefits and an agreement as to their extent. The strength of business will always be overwhelmingly their role as employer, and their function as a tax base. The extent of businesses’ involvement in social issues is largely a result of their success as businesses, though also, of course, of varying corporate attitudes. However, business cannot address the social challenges of our country on its own. It requires commitment and action from government and civil society if we are to decrease inequality and poverty in South Africa.

This is partly due to the history and symbolism of the extractive industries, South Africa’s past and present social circumstances as well as industry location and proximity relative to communities as well as indirect relationships with areas where labour is drawn from

VA: South Africa and Africa has seen a significant rise in other sectors i.e. services, retail, and a compressed but significant automotive industry. Are there any lessons the extractive industry can learn from these?

TS: Actually, the automotive industry is under significant threat in South Africa with investors looking to other parts of the continent to set up manufacturing plants. This in part is due to the volatile labour market. A key question that all industries that are labour intensive need to reflect on is how we address the ongoing labour disputes along with a drive to move towards a more mechanised industry. This could potentially negatively impact job growth targets which would fuel further unrest. Industry players are very aware of these challenges and are working to address these very complex issues.

These demands find expression in the mining charter through requirements such as a comprehensive labour and social plan, investment in areas such as small business development during operations to help diversify local economies, and through investments in rehabilitation after mining operations.

VA: South Africa compared to Europe and elsewhere has a limited downstream conversion sector. Is this a particular area we should focus on in the immediate future?

TS: If you’re talking about benefaction, some industries have been more successful than others when it comes to benefaction. However, this is recognised as an area could potentially spur the development of new industries and create more jobs.  Creating more jobs ultimately has a positive impact on poverty in our country.

Mining companies have had reasonable success in a range of areas of social delivery. These include the provision of housing in newer mining operation such as the platinum belt. Or the extension of health services to the local population in many cases. But as with many other areas of life, more can and needs to be done.

The role of unions on social investments must not be overlooked

VA: We have “hot-money” through FDI and possibly from local mining sector into social upliftment. Can this be sustained given the backlog in social upliftment needs?

TS: Well, hot money is investment for short-term gains through economic differentials. So it’s dependent on that, not on any development imperatives, and is certainly not something that South Africa should rely on for their long-term plans. South Africa needs to consider how we implement a country-wide strategy that focuses on reducing poverty and inequality. One such initiative is the National Development Plan. It takes a long term approach to economic and social development and will require not only government but also corporate and civil society input.

Union investment companies have a track record of successful social investment; the challenge is to hold union investment companies to the same standard as corporates.

VA: Will this be possible? – What processes do you think are needed and what could be a realistic turnaround timeframe for actual achievement on such an exercise?

TS: It would need greater transparency in terms of identifying and describing the unions’ investment holdings. Timeframes are difficult to extrapolate, but with increasing tensions between union groupings it’s becoming more important than ever for individual unions to demonstrate their social and, by extension, political capital.

So how do mines partner with communities to create a more competitive industry? The first thing is to carefully assess a community’s profile and development needs, too often mines assume that what worked in one community of operations will work in another. This is often not the case.

VA: Is there a contemporary difference between B-BBEE itself and any investment via any one of the seven pillars on its own?

TS: The principles of B-BBEE is the development of communities previously disadvantaged. Various models have been developed in response to the B-BBEE act, some of which have been more successful than others. Programmes that focus on community beneficiation are likely to have the greates social impact but need to be carefully considered to ensure that they focus on the most significant social issues, such as education, that are likely to yield a long term impact.

Once communities needs have been assessed, there must be a degree of consultation about how they are to be addressed. Again, mines assume they believe they know what communities need without actually consulting. In the end, a facility can be built but not properly used, if at all.

Another way to improve competitiveness is to tap into local community for projects that improve skills or build a culture of entrepreneurs. That way, a company helps create local heroes and fosters cohesion.

VA: For many years South Africa has enjoyed legislation around B-BBEE. Compared to progressing African economies without such legislation – what angles are we missing in South Africa?

TS: Well ‘enjoyed’ is a relative term. Though B-BBEE is an absolutely necessary mechanism in terms of redress, it has yet to unequivocally demonstrate its ability to foster truly broad-based upliftment, and has perhaps become an obstacle in the way of building valuable and sustainable small and medium-scale businesses. The focus for long-term growth has got to be on establishing new businesses and, with them, vastly expanded employment opportunities.

The demands on mining companies are both fair and legitimate, but the share of responsibility for meeting them has to be carefully evaluated.

Talking Point: Mining companies can and must do more to meet their social obligations, but a clear distinction must be drawn between meeting social obligations and assuming local government role of delivering service.

VA: How can we get the government to then ensure proper spend of taxpayers money in achieving the very same?

TS: South Africa has a robust, vocal, and effective civil society. South African businesses have been wary about adopting an advocacy role, and with reason, given the aggressive response of government when they do try. That said, so much of the future development and economic success of South Africa depends on establishing a fruitful dialogue between the business and the state. This will take humility, commitment, transparency, effective governance and a conscious attempt to address problems rather than adopt a defensive attitude.

So, a mine can support a local school through the provision of a library, science laboratory and sports field but the local and provincial government must engage national government to access basic schooling infrastructure.

Likewise, a mine might help build and support a local market for small farmers to sell produce for example, but the responsibility of building a road which leads to that market or supply it with water and electricity lies with the government.