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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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