A land of opportunities and challenges

South Africa is rich in mineral resources. The mining companies have a series of challenges to consider, particularly major income gaps, high unemployment and the social tensions arising from the legacy of apartheid. Meanwhile, the heavy environmental impact of mining operations must be addressed in a socially responsible manner. The purpose of the Council’s trip to South Africa was to attend the annual Principles for Responsible Investment conference and visit companies.

Mining companies encounter social tensions in connection with major income gaps, high unemployment, and large numbers of unskilled or low-skilled immigrant workers from neighbouring countries. The situation calls for a socially responsible approach.

Mining operations affect communities, as well as human and animal habitats. Strikes and labour disputes over wages and working conditions are far from uncommon in mining and other industries. An additional challenge comes from the environmental impact of mining, particularly in terms of biodiversity and access to water, exacerbating social tensions in nearby communities. Mining, particularly extraction of platinum, is a water-intensive activity. Many areas suffer from water shortages, sometimes so severe that the authorities impose restrictions on mining companies to ensure that the local population has enough.

Social challenges

The mines attract many job seekers, and the shanty towns that spring up around them are overcrowded – housing standards are poor and residents are frequently consigned to rudimentary hovels. High indebtedness among the poor is a growing social problem. Many of them are at the mercy of loan sharks who charge exorbitant interest rates, leading to debt traps that are hard to get out of, further exacerbating social tensions.

Frequent accidents at the workplace

An estimated 500,000 people work for mining companies. The frequency of accidents is alarmingly high. The mining industry reported 3,105 accidents and 112 deaths in 2012. By way of contrast, Australia has approximately 245,000 mine workers (the world’s largest mining country) only five of whom died in 2012. South African mining is more labour-intensive than its Australian counterpart, including a large percentage of low-skilled workers and less use of sophisticated equipment. The mines are often deep, adding stress to the work environment.

Trade unions are powerful

South African trade unions have had a key political and social role to play throughout the nation’s history. In recent years the traditional National Union of Mineworkers (NUM), which has ties to the African National Congress, has experienced competition from the Association of Mineworkers and Construction Union (AMCU), some of whose members have left the NUM. The unions demand wage increases far greater than inflation while both commodity prices and the earning power of mining companies have declined in recent years. A number of companies have resorted to layoffs and adopted new technologies that automate some of the tasks performed by low-skilled workers in particular. Many unions use strikes to press their demands. Conflicts in 2012 between the two unions and the mining companies over wage increases and improved working conditions led to violence and wildcat strikes. A strike by 3,000 workers at the Marikana mine, which is operated by Lonmin, ended tragically when the police intervened and 46 workers were killed. Collective bargaining in 2013 went relatively smoothly at both the gold and platinum companies.

Preventive dialogue with South African mining companies

The Council on Ethics visited five mining companies (Gold Fields, Anglo American Platinum, Lonmin, AngloGold Ash anti and Im plats) to discuss health, safety, environmental impact and workers rights. Collective bargaining was under way at the time. The Council brought up the issue of handling 2013 negotiations in a way that would avert the kind of tragic violence that had occurred the previous year. The relationship of the companies to employee housing, personal debt and other conditions were also on the agenda. Many of the companies provide preventive information and training to help employees and nearby residents avoid debt traps.

The Council also met with Exxaro Resources, which is devoted primarily to coal mining but plans to invest in renewable energy as well. The government has targeted reduction of coal dependency from 95 percent to 65 percent by transitioning to alternative sources such as wind power, solar energy and nuclear energy. The Council’s discussion with Exxaro focused largely on renewable energy.

South Africa is dependent on coal and releases more greenhouse gases than any other country on the continent. It ranks 20th on an international scale. The country is likely to adopt a carbon tax in 2015 – most industries, including mining, will feel the impact. At this point nobody knows exactly how the tax will be designed or what kind of practical consequences it will have.

The Council also visited MTN?Group, a telecom operator that does business in many African and Middle Eastern countries. Among the topics that came up were the company’s policies in the areas of human rights, anti-corruption, protection of user privacy and freedom of expression.