Mining, though contributing a declining share to the South African economy, is still a significant employer and earner of foreign exchange revenue. It has a troubled past and, for good reason, was one of the first targets of Black Economic Empowerment (BEE) at the dawn of South Africa’s democratic dispensation. Twenty-three years later, animosity between the state and the mining industry is more pronounced than ever before. This is exemplified by the response of the public and investors to the latest iteration of the Mining Charter. One of the transformative goals that has proved elusive is the delivery of meaningful benefit to near-mine communities.
Community trusts have traditionally been used as vehicles for the receipt of mine royalty payments. This has created intractable conflict within and between communities.This latest charter stipulates that a full 8% of a required 30% ownership stake by a black person must be given to communities in the form of community trusts. However, these trusts are now to be administered by a new agency that has yet to be created. The charter provides no detail as to how this agency will be constructed or governed, but it does provide for the means of funding it. Some commentators have already suggested that the proposed channels are illegal.
This paper provides a brief overview of the mining sector’s contradictory contribution to South Africa’s development, which signals the imperative for reform. It then focuses specifically on past attempts to improve community welfare using tribal trusts (given that a large proportion of mining takes place on communal land in the former homelands). These cases provide an example of what is to be avoided in the governance of trusts. The paper concludes by posing questions for future research that will help move the industry towards a more stable equilibrium that can sustainably improve the welfare of the communities in which it operates.
Author: Ross Harvey
Click here to read our paper 'Corporate Social Responsibility in South Africa’s Mining Industry: An Assessment'