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USB report unpacks how to improve women’s representation on corporate boards

USB News

USB report unpacks how to improve women’s representation on corporate boards

  • MAR 03
  • Tags Women on Boards, Gender Diversity, Female Representation, Anita Bosch, Corporate Governance, JSE, Business Women’s Association of South Africa

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Diversity in the boardroom makes for more effective and informed decision-making, corporate strategy and governance – but while half of the South African population and 45% of the employed workforce are female, only 20% of directors of JSE-listed companies are women.

Corporate boards are failing to take advantage of the value of female business leaders’ diverse perspectives and networks, despite a “vast, untapped pool of qualified and capable women”, says the newly-released report Women on South African boards: facts, fiction and forward thinking by the University of Stellenbosch Business School (USB).

“According to the [Business Women’s Association of South Africa] BWASA Women in Leadership Census, from 2012 to 2017, only 26 JSE-listed companies consistently had a 25%+ female board, while approximately 45 of the 277 companies had no female directors at all, the report’s lead author Prof Anita Bosch, the USB Research Chair for Women at Work, said.

Corporate boards are failing to take advantage of the value of female business leaders’ diverse perspectives and networks, despite a ‘vast, untapped pool of qualified and capable women’.

“The pool of talented women suitable for board directorships is steadily increasing and gains have been made, but they are too erratic and too small to correct the gender imbalance,” she said.

The report recommends a voluntary target of 30% female board members as “reasonable and feasible”, with 40% as a stretch target.

South Africa has no legislation specifically requiring companies to include women on their boards of directors, and indirect measures – such as the Johannesburg Stock Exchange (JSE) listing requirements – are limited in scope, relevance, impact and enforceability, the report found.

“For instance, there have been no consequences for JSE-listed companies that have not complied with listing requirements related to the advancement of gender diversity at board level,” she said.

There have been no consequences for JSE-listed companies that have not complied with listing requirements related to the advancement of gender diversity at board level.

Contrary to popular belief, Prof Bosch said, there are more than enough talented women to serve on boards – “directors just need to look outside their normal, comfortable networks to find them”.

The report’s publication, sponsored by WDB Investment Holdings (WDBIH) – the women-owned and -operated group focused on advancing the meaningful participation of women in the economy – explores what is needed to strengthen women’s representation on boards and “what it takes for women directors to gain the power, influence and critical mass to be able to effect change”.

Contrary to popular belief, Prof Bosch said, there are more than enough talented women to serve on boards.

Voluntary targets, improved monitoring and reporting, enforcement and consequences for non-compliance, establishing shadow boards to grow the next generation of female directors, and lobbying, are among the recommendations of the report.

“In SA we can only do voluntary targets since quotas are regarded as unconstitutional. Voluntary targets, however, can be just as effective as quota systems. The trick lies in the enforcement of voluntary targets and penalties, even if only through social pressure, which could be associated with non-compliance to own targets.”

The lack of women in senior management is evident from BWASA statistics:  from the almost 600 female board members of JSE-listed companies in 2017, over 80% were non-executive directors.

Addressing the gender imbalance in the top tier of business leadership in South Africa will take strategic and concerted efforts by companies, directors, shareholder activists and institutional investors, she said.

The lack of women in senior management is evident from BWASA statistics: from the almost 600 female board members of JSE-listed companies in 2017, over 80% were non-executive directors.

“Indirect measures to encourage gender diversity on boards” include the Broad-Based Black Economic Empowerment (B-BBEE) Act and codes of good practice, the Employment Equity Act, the King IV Report on Corporate Governance (application of these codes is voluntary except for JSE listed companies), and stock exchange listing requirements.

Co-author, Prof Kathleen van der Linde said, “these are all limited in scope, relevance, impact and enforceability”. And meanwhile, the 2013 Women Empowerment and Gender Equality Bill, which provided for equal representation of women on the boards of public and designated private bodies, was withdrawn for further consultation in 2014 and “appears to have since been abandoned”.

The recommendations in brief

For companies

Prof Bosch said companies could play an active role in “effecting change from within” by identifying, training and promoting high-potential female employees and candidates to board positions – for example by:

  • Closing the gender wage gap between male and female, signalling to women that they are valued equally for their contribution.
  • Prioritising the search for female candidates for senior management and board positions. It all starts with the existing board members.
  • Looking outside of traditional networks and exploring avenues such as academia, professional bodies, government and non-profit organisations for new, female talent.
  • In the medium-term, sponsoring emerging talent in women senior managers to prepare them for future board positions.
  • Developing a “shadow board” where prospective future directors can shadow and learn about board protocol from existing board members.

Prof Bosch said companies could play an active role in ‘effecting change from within’ by identifying, training and promoting high-potential female employees and candidates to board positions.

For existing board members

The report recommends that current board members play a part in developing the next generation of women board members by:

  • Supporting initiatives such as shadow boards; and vouching for women in senior management to open up opportunities and prepare them for future board roles.
  • Using directorships in non-profits, unlisted companies and larger private companies to grow the pool of experienced women from which listed companies can make board appointments.
  • Supporting female executive directors to take on independent and non-executive directorships to gain experience.
  • Implementing family and other support mechanisms to enhance the opportunity for women in their child-bearing and -rearing years to serve on boards.
  • Engaging in questions of what the board is doing and what more could be done; and supporting research on board gender diversity in order to stimulate debate and critical conversation.

For shareholder activists

“Shareholder activists have the power to encourage change through applying pressure to regulatory and industry bodies, and within companies themselves,” Prof Bosch said.

She said recommended actions included:

  • Lobbying for more accurate reporting, such as the movement for the Companies and Intellectual Property Commission (CIPC) to report on board gender diversity and for licenced exchanges to enforce listing requirements on gender, age and race reporting.
  • Nominating strong women directors to the boards of companies they hold shares in, especially where a woman director is performing well on one company board and could add value to another company in which they hold shares.
  • Using their public voice, such as in the media, to stimulate public debate on board diversity.

‘Shareholder activists have the power to encourage change through applying pressure to regulatory and industry bodies, and within companies themselves,’ Prof Bosch said.

For institutional investors

Large institutional investors have a duty to look after the long-term value of investments made on behalf of their investors, and economic, social and governance considerations are interlinked with the long-term sustainability of a company. These institutions can use their voting and lobbying power to shape company strategy and influence the composition of boards, Prof Bosch said, by:

  • Encouraging the appointment of at least one additional woman to the boards of companies they invest in.
  • Giving preference to investing in companies that are making progress towards gender-balanced boards.
  • Making their votes count with a coordinated voting policy that prioritises gender diversity when voting on new board members.

On targets, monitoring and reporting

Since one in three listed companies already have at least 25% women directors according to the BWASA Women in Leadership Census, the report recommends a voluntary target of 30% for listed companies as “reasonable and feasible”, with 40% as a stretch target.

And, she said, since most board decisions are actually taken at committee level, listed companies should set specific targets for women directors’ representation on board committees and as committee chairs. They should also be required to show gender parity in nominations for board members and to document the reasons for selections to the short-list stage.

In terms of reporting, the report recommends that the Institute of Directors-South Africa (IoDSA) facilitate the enhancement of recommended practices in King IV by setting a voluntary target for gender diversity at board level, thus ensuring JSE-listed companies must report on their progress.

Prof Bosch said various government departments and agencies, as well as the IoDSA and listed exchanges, could play a role in monitoring progress and enforcing compliance.

The regular reporting mechanisms of organisations such as the Business Women’s Association of South Africa (BWASA) and the Institute of Direstors South Africa (IoDSA) should be used to keep board diversity on the national agenda.

The regular reporting mechanisms of organisations such as the Business Women’s Association of South Africa (BWASA, whose 2017 Women in Leadership Census provided much of the data for the USB report) and the IoDSA should be used to keep board diversity on the national agenda. Reporting information from the JSE and other stock exchanges could be used to produce lists of companies meeting, exceeding or not achieving gender targets, and to develop a national progress-monitoring index.

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About the report

Women on South African boards: facts, fiction and forward thinking is a publication of the Research Chair: Women at Work, at the University of Stellenbosch Business School, the publication of which was sponsored by WDB Investment Holdings (WDBIH) and published in March 2020 on the USB Management Review platform.

Prof Anita Bosch, USB Research Chair: Women at Work

Prof Kathleen van der Linde, Professor of Mercantile Law, University of Johannesburg

Shimon Barit, USB Research Fellow

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Land reform: is there a right and a wrong?

USB News

Land reform: is there a right and a wrong?

  • FEB 20
  • Tags Land Reform, Ethics, Conflict Resolution

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Whilst South Africans have until the end of February to share their comment on the draft national policy for beneficiary selection and land allocation, Prof Brian Ganson, Head of the Africa Centre for Dispute Settlement at the University of Stellenbosch Business School (USB) argues that “the land reform debate largely remains a dialogue of the deaf. Many spend their energy shouting about how they are right and others are wrong.”

Prof Ganson proposes that conflict resolution and problem-solving skills of perspective-taking and bridging principles – proven in other long-entrenched conflicts – be applied in South Africa to shift heated public debate beyond opposing, one-sided arguments to “move the conversation forward and engender real problem solving”.

The land reform debate largely remains a dialogue of the deaf. Many spend their energy shouting about how they are right and others are wrong.

He says land reform in South Africa is critically important in its own right: an unfinished promise to redress epic historic wrongs on the one hand, and on the other, a project that could easily have unintended negative social and economic consequences – in particular for the poor black South Africans it is most needed to serve – if poorly managed.

“How we all go about land reform is also a bellwether of our ability to engage around the construction of the just, democratic, and united South Africa envisioned by the Constitution,” he said.

Prof Ganson said research had shown that a key skill of people who help find solutions to exceptionally entrenched conflicts is perspective-taking: the capacity to view the world – even if temporarily – through the lens of other people’s fears, hopes, rights, and interests.

“If we want a satisfying meal of positive progress – rather than just the thin gruel of self-righteous indignation that all sides of the land debate seem to be enjoying – a starting point might therefore be to acknowledge where others are right,” he said.

He invited those who react strongly against the phrase, “give back the land”, to consider how there may be nothing remotely radical about such a demand – the principle is already contained in the Constitution.

If we want a satisfying meal of positive progress… a starting point might therefore be to acknowledge where others are right.

“The current Constitution – never mind any amendments under consideration – promises restitution to people and communities dispossessed of property as a result of racially discriminatory laws or practices going back to 1913. It gives Government broad latitude to carry this out. Any other proposed solution can and should be measured against ‘giving back the land’ to those who have legitimate expectations that it be returned.”

Prof Ganson urged recognition that the mixing of questions on the principles of restitution of land with those of whether and how people to whom land is returned would put it to productive use, “must be hurtful and angering in the extreme” to former black landholders and their descendants.

It reeks of the argument in favour of the Natives Land Act of 1913 by the President of the Chamber of Mines, who opined that it would end ‘the surplus of young men … squatting on the land in idleness’ – but in fact provided low wage workers for the mines as it destroyed families and communities for generations to come.”

Prof Ganson suggests that, “In relation to those currently holding land that may be returned in the name of restitution under the provisions of the Constitution, we can concede that many of the issues they raise – even if immaterial to the fundamental right of dispossessed people and communities to land – are real.”

He suggests that it need not be in contention that it would indeed be better for all South Africans if land reform is managed in a way that confronts the realities of the substantial bonds on many properties, minimises corruption, maximises food security, and improves the possibilities for people either to make their livelihoods from the land or to make their transition to urban life, each according to his or her choice.

He believes that such perspective-taking might in the first instance invite parties to let go of one-sided arguments that serve to raise hackles rather than engender any real problem solving.

“Putting tongue in cheek for a moment, the current owners of large plots in Bishopscourt and Sandhurst, or Plettenberg Bay and Umhlanga, might agree that the person to whom land is returned is entitled to do anything with it, or nothing at all – lest universal application of standards of idleness or lack of productive use put their own tenure in question.”

“Others might begin to realise that ‘expropriation without compensation’ is a wonderful rallying cry in the international press but fairly empty here at home. Property returned to its rightful owner is hardly being expropriated; and thus, the fundamental question that cannot be bypassed is not one of compensation, but one of just and rightful ownership consistent with the mandates of the Constitution for restoration and transformation.”

Others might begin to realise that ‘expropriation without compensation’ is a wonderful rallying cry in the international press but fairly empty here at home.

He argued that those who currently weaponise the concept of ‘give back the land’ to exclude any discussion at all might admit that the phrase might usefully be continued: ‘… in ways that protect the poor and vulnerable from corrupt officials, dishonest businesses, and an economic system that makes it difficult for the person to whom land is returned to benefit from it or even keep it’.

He says that such perspective thinking might therefore remind each and all of us of our responsibilities.

“As neither land claimants nor substantial landholders under threat, we may be happy to sit on the side lines of the land reform debate when in fact we are in a privileged position to help move the conversation forward. We can do so with another skill of exceptional problem solvers: that of constructing bridging principles, or the power of AND.”

He argues that at every available juncture, “we can be impatient with the failure to implement the land reform envisioned by our Constitution – AND be advocates for land reform that addresses the broadest possible array of social and economic interests.”

“We can insist that the interests of the poor, vulnerable, and dispossessed in land restitution and land distribution be put first – AND readily agree that we must have answers for those whose lives and businesses will be inevitably be disrupted.”

As neither land claimants nor substantial landholders under threat, we may be happy to sit on the side lines of the land reform debate when in fact we are in a privileged position to help move the conversation forward.

“We can state that no one should be asked to compromise their rights, values, or dreams around land reform or any other issue in a constitutional democracy – AND point out that endless posturing without reference to Constitutional principles or viable and just solutions is making the situation worse rather than better.”

He says that such perspective-taking and bridging principles had proven in other conflicts to provide a starting point for transforming hearts, minds, and civic discourse. “No less is required to move forward land reform, and the country.”

South Africans can comment on the draft policy released by the Government’s Rural Development and Land Reform Department until the end of February by sending an email to Bsla@drdlr.gov.za

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Entrepreneurs from low-income areas excel

USB News

Entrepreneurs from low-income areas excel

From left to right: Barbara Thandeki from Gugulethu, co-owner of hand-made wig makers Khubar Hair & Beauty, (The De Beers Business with the Most Potential award), Nicholas Lamohr director of Linchpin-PM digital agency in Diep River, ( Distell Top Student) and Michelle Mzee, managing director of Parow cleaning and security company Cleanstation (Absa Best Business Plan award)

  • Dec 12
  • Tags Entrepreneurship; Small Business Academy; Entrepreneurs

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Diep River digital entrepreneur, Nicholas Lamohr, grew his company to profitability through perseverance and a gap in the market despite lacking start-up capital and a business plan. Nicholas is the recipient of the Distell Top Student award at the 2019 Small Business Academy (SBA) award ceremony on 5 December 2019.

From left to right: Nichole Solomons (Distell), Gerhard Claassens (Distell), Nicholas Lamohr ( Distell Top Student), Michelle Mzee (Absa Best Business Plan award), Lunga Madonela (Absa) and Barbara Thandeki (De Beers Business with the Most Potential).

Linchpin-PM offers website and digital strategy services to small businesses, and Nicholas achieved the highest mark overall in the 2019 SBA programme run by the University of Stellenbosch Business School (USB) for 21 entrepreneurs from low-income areas of the Western Cape.

The De Beers Business with the Most Potential award went to Barbara Thandeki from Gugulethu, co-owner of hand-made wig makers Khubar Hair & Beauty, while Michelle Mzee, managing director of Parow cleaning and security company Cleanstation (CSI), won the Absa Best Business Plan award.

The 22 small business owners graduating from the sponsored eight-month programme, demonstrate the power of small enterprises to improve the economy and contribute to alleviating poverty.

Sponsored by Distell, Absa and De Beers, the SBA empowers small business owners in low-income areas with knowledge to grow their businesses, become more sustainable and increase their potential for creating employment.

Each participant is also matched with a USB MBA alumnus as a mentor, proving to be one of the most significant game-changers of the programme. In recognition of this, for the first time, the top mentor and mentee pair was awarded. This was awarded to participant Martin Okolo and his mentor USB MBA Alumnus, and business coach, Louis-Delien Pienaar. Martin’s company, Vogue Exchange (PTY) LTD specialises in forensic registration and compliance services.

From left to right: Martin Okolo owner of Vogue Exchange (PTY) LTD, Dr Salome Van Coller-Peter (USB) and mentor Louis-Delien Pienaar, USB alumnus and business coach.

SBA head, Dr Marietjie Theron-Wepener, says the education, private and public sectors need to collaborate in supporting small businesses in order to contribute to reducing unemployment in South Africa.

“We are all aware of the National Development Plan (NDP), targeting GDP growth of 5% and unemployment reduction to 6% by 2030, to be achieved through the creation of 11 million jobs. The majority of this job creation is expected to be realised by small and expanding businesses, yet there is very little knowledge-based support for such entrepreneurs.

“Research shows that not all small businesses survive their first years. Typical hindrances include the inability to create a business plan, poor market research and financial planning and management. Business and entrepreneurial education is fundamental in sustaining these small business owners. Education providers, corporate and government need to step-up their involvement to share their knowledge and skills.

“By launching the SBA in 2013 we aimed to bridge this knowledge gap and have since trained 236 small business owners, equipping them with relevant business education, knowledge and practical skills,” she said.

The success of the programme to date is encouraging. The SBA’s ongoing impact study indicates an increase of 98% in full-time employment, a 187% increase in part-time employment and a 67% increase in revenue for the small businesses that received training at the SBA.

This approach to growth leaves uMhlathuze with a youth unemployment rate higher than for South Africa as a whole, while human development indicators as diverse as provision of water to homes, internet access, criminality and violence, and corruption lag behind. A situation in which minerals and profits are sent abroad, while relatively few local people have good jobs and the majority see no prospect for their own or their children’s advancement, is a recipe for disaster – a point underlined again and again in studies of private sector development in developing countries².

Rio Tinto’s response is to call on government to solve the problem. The company makes no mention of its own role in contributing to longstanding challenges or its responsibilities for generating and implementing solutions. Yet Rio Tinto tells us in its communications that it is a good corporate citizen attentive to the Guiding Principles on Business and Human Rights; the Performance Standards of the International Finance Corporation; industry standards such as those of the International Council on Mining & Metals of which it is a member; and the United Nations Global Compact, of which it is a founding member.

Nicholas Lamohr director of Linchpin-PM digital agency in Diep River, was awarded as the Distell Top Student, achieving the highest mark overall.

Even though top student Nicholas Lamohr, who grew up in the Cape Flats, started his business with no capital, no plan, no mentor or business training, he believed in his idea and persevered.

“I started Linchpin-PM after seeing a gap in the market for assisting small businesses. While working at a printing and design company for twelve years, I saw numerous small businesses’ requests for website design being turned away. Since the owner of the company was not interested in pursuing this opportunity, I registered my company and studied web design. Although I have been trading for eight years, I have been operating full-time for the past three years.”

Nicholas employs four freelance designers and runs his business from Diep River and his home office in Zeekoevlei. His company evaluates its small business clients’ website content, updates their corporate identity and branding, and other marketing collateral, and also provides them with a digital strategy.

“One of our key strengths is investigating whether their product or service could be marketable through e-learning, or if their business would benefit from an e-commerce solution as opposed to a conventional website. We have the necessary design and software programmes to pivot their business digitally to reach more customers.”

He credits the SBA programme for opening up a world of knowledge he never had.

The most impactful for me was the SWOT analysis which helped me to identify and plan around my business’s strengths and weaknesses. This, together with the marketing module which assisted me in addressing my business’s biggest flaw

“The most impactful for me was the SWOT analysis which helped me to identify and plan around my business’s strengths and weaknesses. This, together with the marketing module which assisted me in addressing my business’s biggest flaw – not marketing robustly enough – and creating a business plan as the blueprint to my vision and purpose, has given my business structure and future growth projection.”

Barbara Thandeki, co-owner of Khubar Hair & Beauty and winner of the De Beers Business with the Most Potential award, sees the business of hand-weaving wigs from human hair as more than a means to make a living.

Barbara and her business partner Khunjulwa Makaluza run their business from home in Gugulethu and view it as an opportunity to share their experience and knowledge, to teach and empower other women to go into their own businesses too.

“Starting the business has been a personal journey for me. Many people think that buying wigs is all about vanity. It’s not. I needed a solution to my own hair-loss problem and we realised a gap in the market for affordable, fashionable human hair wigs.”

Almost two years later the business is profitable and the pair plan to take home-based KhuBar Hair & Beauty online and into retail spaces, invest in technology to ramp up production and eventually franchise the business.

Starting the business has been a personal journey for me. Many people think that buying wigs is all about vanity. It’s not. I needed a solution to my own hair-loss problem and we realised a gap in the market for affordable, fashionable human hair wigs.

One of the handmade wigs can take up to five hours to make, and the women can make no more than four per day between them, but an investment in the advanced technology of a specialised sewing machine could ramp production up to 60 per day.

Barbara said wigs made from human hair (sourced from India, Mongolia, Brazil and Peru) have the advantage of being washed and conditioned, as well as styled and refurbished, making it a true investment piece – unlike synthetic wigs.

Michelle Mzee of Parow received the Absa Best Business Plan award for family-owned Cleanstation (CSI) in Parow, founded by her father after his retrenchment from a security management job.

CSI offers outsourced janitorial, office cleaning and private security services for estates, office buildings and schools in Parow and Goodwood and as far afield as Retreat in Cape Town. With very few businesses in the area offering both cleaning and security, their business is well positioned, especially considering the experienced skillset of their employees.

My father started the business out of necessity but ended up employing some of the people that were retrenched along with him, positively impacting them through his business venture. Today one of our greatest strengths is prioritising the wellbeing of our employees.

Michelle says the SBA experience has been truly life changing.

“I have learned so much from this course! I have moved from viewing my business as a source of income to something that I can grow and make a big success of. One of the most helpful aspects of the course was my mentor, Louis-Delien Pienaar, a USB MBA graduate who went above and beyond to assist me. She’s an accountant, a business coach and runs her own business so she really was able to help my business in many different aspects while also assisting me with my personal growth.”

Michelle advises budding entrepreneurs to seek advice often and from a variety of sources. “Build your knowledge and be strong. It will help you survive when you fail to get up and try again and again, as many times as it takes to succeed. Never give up!”

Applications are now open for the 2020 SBA programme.

The programme is substantially sponsored, although a commitment fee is payable by participants. Applications close on 31 January 2020 and the programme starts 11 March 2020.

For more information, call Lynette Goosen on 021 918 4379.

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Time to take mining companies to task

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Time to take mining companies to task

South Africa’s mining industry

  • Dec 12
  • Tags Mining; Africa Centre for Dispute Settlement; Richards Bay Minerals; World Bank; United Nations Global Impact; International Council on Mining and Metals; South African government

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In light of escalating violence in communities around Richards Bay Minerals (RBM), Rio Tinto has halted production and put its expansion plans on hold, with knock-on effects for its smelter operations and another black eye for South Africa’s mining industry.

 

The statement of Managing Director for RBM Werner Duvenhage that “demonstrations are not related to the company” has been widely reported. Yet, unless and until Rio Tinto and other mining companies acknowledge and address their role in the socio-political conflict around them – and are held to account by their own shareholders and other stakeholders for addressing it – it is unlikely that solutions will be found, either for RBM or for South Africa.

The role of mining in fundamentally altering the communities in which it operates is widely documented. Major projects are typically accompanied by significant urbanisation of the adjoining area, with ensuing pressures on land, water, housing and public services. This is rarely accompanied by sufficient governance capacity or public service provision. In Richards Bay in particular, a 2005 World Bank report noted how the port and consequent developments had pushed the annual population growth rate to an astounding 27,3% in 1980. Study after study has shown that such unmanaged growth is a direct contributor to a variety of forms of conflict and violence¹.

The same World Bank study noted that, while the economy of Richards Bay was booming, “The capital-intensive corporate companies dominate the local economy, but provide few employment opportunities because of their capital-intensive nature”; the local economic development strategy ensured economic growth, but “few recommendations will directly benefit the poor”; and there were few meaningful linkages between major industry and the development of local businesses. The report also documented “limited, if any, community consultation and participation” in the planning of initiatives. A 2014 report on uMhlathuze by the South African Cities Network suggests that little changed in the ensuing decade.

In Richards Bay in particular, a 2005 World Bank report noted how the port and consequent developments had pushed the annual population growth rate to an astounding 27,3% in 1980. Study after study has shown that such unmanaged growth is a direct contributor to a variety of forms of conflict and violence.

This approach to growth leaves uMhlathuze with a youth unemployment rate higher than for South Africa as a whole, while human development indicators as diverse as provision of water to homes, internet access, criminality and violence, and corruption lag behind. A situation in which minerals and profits are sent abroad, while relatively few local people have good jobs and the majority see no prospect for their own or their children’s advancement, is a recipe for disaster – a point underlined again and again in studies of private sector development in developing countries².

Rio Tinto’s response is to call on government to solve the problem. The company makes no mention of its own role in contributing to longstanding challenges or its responsibilities for generating and implementing solutions. Yet Rio Tinto tells us in its communications that it is a good corporate citizen attentive to the Guiding Principles on Business and Human Rights; the Performance Standards of the International Finance Corporation; industry standards such as those of the International Council on Mining & Metals of which it is a member; and the United Nations Global Compact, of which it is a founding member.

A situation in which minerals and profits are sent abroad, while relatively few local people have good jobs and the majority see no prospect for their own or their children’s advancement, is a recipe for disaster

Perhaps Rio Tinto board members and senior leaders need to review these documents and the obligations they set out more carefully. They make clear that a mining company is responsible for the direct, indirect, and cumulative impacts of its presence and operations. They specifically state  that issues such as in-migration to mining areas and the development of sufficient local capacity to address heightened social, political, and economic challenges cannot be left to government alone, but are a shared responsibility of the company. They insist on full voice and participation of local communities in company planning and decision making. Furthermore, it is not enough for the company to “do something”; its responsibilities continue until problems of which it is part are effectively solved. None of these imperatives appear evident in the statements or actions of RBM.

Bold Baatar, CEO for Rio Tinto’s energy and minerals unit, said recently, “Our goal is to return RBM to normal operations in a safe and sustainable way”. Given the company’s numerous commitments, we can assume that he means operations that are not only safe and sustainable for the company, but also safe and sustainable for the broader community around it.

Furthermore, it is not enough for the company to “do something”; its responsibilities continue until problems of which it is part are effectively solved.

Should RBM be sincere in its intentions, it can draw from voluminous studies of the ways in which companies can be catalysts for peaceful development, even in the most difficult places. What these studies have in common is an emphasis on the always difficult, often frustrating, and sometimes tedious work of helping diverse stakeholders come together. We only see ‘win-win-win-wins’ for companies, labour, communities, and government where there are forums for parties with competing perspectives and interests to assess together, analyse together, plan together, and ultimately, act with common purpose.

Luckily for RBM, mining companies are well positioned to support such endeavors (even if their direct implementation is better left to more neutral facilitators). Companies have access to virtually all of the relevant information; they have relationships with almost all of the relevant players; and the resources they bring afford them significant convening power. They can either use their privileged position to try to extract value for themselves – or they can more usefully ensure the free flow of information, facilitate more trusting relationships, and support forums in which parties can hold the company and each other to account. Indeed, this is what Rio Tinto says it has itself done in places where it reports better social and financial performance.

What these studies have in common is an emphasis on the always difficult, often frustrating, and sometimes tedious work of helping diverse stakeholders come together.

It is perhaps natural for company management facing a significant financial and operational crisis to seek to place blame elsewhere – particularly when, as in places like Richards Bay, there is plenty to pass around. But Rio Tinto’s investors, project finance lenders, board members, and other stakeholders should not be distracted from the obligations – and opportunities – for RBM to do better; after all, that’s what leadership is about. And it is no less than the company – as well as the mining sector of South Africa – will require to succeed.

 


Prof Brian Ganson
Prof Brian Ganson is Head of the Africa Centre for Dispute Settlement at the University of Stellenbosch Business School.

[1] E.g., Oliver Jütersonke and Hannah Dönges, “Digging for Trouble: Violence and Frontier Urbanisation”, in Small Arms Survey, Small Arms Survey 2015: Weapons and the World (Cambridge: Cambridge University Press, 2015), pp. 37-57.

[2] E.g., Ganson B. and Wennmann A. 2016. Business and Conflict in Fragile States: the Case for Pragmatic Solutions. London: International Institute for Strategic Studies.

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