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Sustainable Development Report for the year ended 30 September 2012

03/People, Planet, Profit

people:
(noun) group of individuals living and working together;
linked to each other by common needs, challenges and interests

Developing our people: training, development and transformation

Our context

Amidst a shortage of skills in the South African mining industry – combined with the need to meet transformation objectives – attracting, developing and retaining skilled employees from a diverse background is of critical importance to Lonmin. We confront the competition for skilled labour not only in South Africa but also internationally and across industries.

Compounding the matter further are the following important issues:

  • an unemployment crisis in South Africa. Job creation is one of government’s most pressing imperatives, and communities are increasingly looking to companies to deliver jobs where government has not and cannot meet this demand;
  • current market circumstances, which place significant cost pressures on the Company;
  • a legacy of inequality in South Africa, which has meant that historically disadvantaged South Africans (HDSAs) and women have not been appointed or developed in core mining skills, or in professional or management positions; and
  • a legacy of systematic sub-standard education for HDSAs that has left large percentages of the country’s adult population illiterate or without skills. Further, many employees from neighbouring countries have received similarly poor standards of formal education.

Our SLPs respond to statutory requirements in compliance with the Broad-Based Socio-Economic Empowerment Charter for the South Africa Mining and Minerals Industry (the amended Mining Charter). But our recruitment, development and retention programmes are about more than compliance. We strive to develop and retain a skilled, productive workforce drawn from the broadest spectrum of South Africans, particularly from our host communities, to maintain a profitable and sustainable business.

Finding people, particularly from our local communities, who have the appropriate level of education or skills is a challenge which we are addressing through:

  • investing in the education of young people in the GLC from early childhood through to tertiary education (see Partnering with our communities for further information); and
  • providing ABET in the GLC so we can close the gap in the education levels of job seekers and equip them to qualify for employment within Lonmin.

The management of our human capital is a line function, guided by the Executive Vice President: Human Capital and External Affairs, who in turn reports directly to our CEO.

Our strategy is aimed at:

  • The effective attraction and retention of employees, by providing competitive rewards, recognition and development opportunities for employees, and ensuring compliance with our Mining Charter targets;
  • the creation of skills, talent and leadership within our employee pool through effective employee and leadership development;
  • building a culture that is values-based, performance-focused and through which teams and individuals are highly motivated – in short, a transformed performance culture.

Our recruitment, remuneration and promotion policies and procedures aim to ensure that equal opportunities are afforded to all, although there is an emphasis on achieving transformation within our workforce and in meeting our Mining Charter requirements.

Attracting and retaining employees

During 2012 we recruited 2,016 employees (2011: 6,544 employees) - 76% of the new recruits were HDSAs and 14% of these recruits were women. While every effort is made to source employees from local communities, the lack of available skills locally, particularly at a professional and management level, sometimes necessitates the drawing of candidates from major urban centres. This issue is complicated by the definition of who can be classified as a local community employee. Employees who have a local address may have originally lived elsewhere. Currently 30% of our employees originate from the North West Province, 7% from Gauteng, 5% from Limpopo, 31% from the Eastern Cape, 10% from the other provinces and 17% from outside South Africa.

Identifying critical skills

An important component in our recruitment strategy is the identification of critical skills. Our analysis started from the base of critical skills identified by the Mining Qualifications Authority (MQA) and was supplemented by an intensive study not only of vacancies and attrition rates but also forward-looking projections, given the fact that ours is an aging workforce. Key disciplines of concern were: shift supervisors, engineers, artisans, miners, surveyors, ventilation officers, among others.

To address the issue of skills shortages and to bolster our skills pipeline we have embarked on a process to identify and develop talent, both within and outside of the Company. We are investing in developing the communities around our operations through various programmes which include education, mining skills related training, bursaries and learnerships.

The hiring of people from surrounding communities is no different to our standard recruitment process.

Learnerships and bursaries

Number of learnerships [pie chart]

As far as possible, we aim to empower the local community by providing training opportunities and employment. We employ a number of initiatives to attract new talent to the Company, including:

  • offering learnerships to people entering the mining industry;
  • providing bursaries through academic institutions; and
  • graduate development programmes.

In spite of this offering, it is still difficult to source skilled or sufficiently prepared individuals, not only for entry into tertiary institutions but also to enter into learnership programmes. This year we had a total number of 248LA learners on the learnership programme. Refer to the Number of Learnerships graph for more details. In an effort to increase the number of local people who could become eligible for learnership programmes, Lonmin has been running supplementary classes for school learners in mathematics, physical science and English, as well as a one year technical and a one year course for “university preparedness”. Other coaching – in terms of life skills, interview techniques, information and guidance relating to potential fields of study – is also provided.

In 2012, 25 learners participated in the supplementary school programme and 15 learners in the university preparedness programme. All of these participants were HDSAs. Following this, 21 students from the community were awarded learnerships in 2012 (2011: 9).

The Lonmin Bursary Scheme is another important part of our human capital pipeline. It is not only a valuable entry point into Lonmin, but also generates loyalty to and within the Company. Bursars are defined as students who are busy studying towards a tertiary qualification on a full-time basis. Our bursar pool currently consists of students in the following major fields of study: chemical engineering, electrical engineering, electronic engineering, industrial engineering, mechanical engineering, mining engineering, mine survey, metallurgy, geology and instrumentation. Non-core bursaries are also allocated in the fields of finance and information technology. In 2012, Lonmin supported 98LA bursars (2011:43) of which 42% are from the GLC.

Good progress was made in a number of elements of this programme in 2012:

  • a revised Bursary Policy was developed, with the inclusion of various new clauses and consistency guidelines;
  • a vacation programme was set up for each bursar by discipline, including a Facebook page to improve interaction with students;
  • internal mentors were identified per discipline. These mentors undertook university visits and provided academic guidance to students as requested; and
  • an online bursary application was developed. However, GLC community members still have the opportunity to apply via the paper-based application route.

The Company is currently experiencing a high failure rate amongst bursars. In response to this, Lonmin has developed mentorship and vacation programmes. A Lonmin Bursary Support Programme is also being developed together with the University of Pretoria and Career Wise. The objective of this programme, like the supplementary school programme, is to improve bursars’ academic success rate through additional mathematics and science tuition.

Another core challenge for Lonmin is the low entrance into core fields such as mining and engineering. We have hosted several school open days to promote mining and mining-related careers among school-leavers to try and address this.

The graduate development programme provides valuable and structured practical experience and exposure through a Graduate-in-Training Programme to bursary students who have completed their studies. In 2012, we had 27LA graduates-in-training. The retention of these graduates-in-training is an area of concern and a review of Lonmin’s graduate remuneration was undertaken during the year to ensure that the Company’s offering is competitive.

Remuneration and career development

Lonmin endeavours to provide its employees with remuneration, benefits and career development prospects that are competitive within the market in which we operate. In respect of gender equity, calculated on the basic salaries of our employee categories the most significant differences are:

  • in top management, where women earn 21.22% more than men.
  • in the semi-skilled category where women earn 10.83% more than men.
  • in the technical skills category, where men earn 14.07% more than women.

To remain competitive we compare the wages which are agreed with organised labour with the industry standard through annual market-related surveys.

For those employees in Patterson grading A and B we pay rates are higher than the local minimum wage for the mining and platinum industry. The comparison with our junior and middle managers compare well with the local minimum wage and no significant differences exist.

Competitive benefits are offered to full-time employees, and comprise health care, life insurance, disability insurance, retirement provisions, and a share incentive programme for management level employees. An employee share option programme (ESOP) is currently under development, which will see all Lonmin employees participating directly in the profit of the company. This ESOP is expected to be implemented within the next two years.

Incentivising and retaining employees

We reward outstanding performance and incentivise employee development through our reward and retention programmes. A Talent Management Policy guides our performance management process, and all supervisors, management and professionally qualified employees (6.2% of employees in 2012) are subject to an annual performance review. Performance management includes the ongoing management, measurement, monitoring and development of employees to drive performance at the individual level, to ensure that the organisation meets its goals and objectives.

Developing employees, developing leaders

Employee and leadership development are critical objectives for Lonmin. Our aim is to retain and develop employees with the right skills to continue implementing our business strategy. In 2012 the Company spent R200 million or (US$24 million) (2011: R195 million; US$28million) on training and development. This equates to 3.6%LA of payroll (2011: 3.8% of payroll).

A total of 2,326*,LA (2011:1,611). Individual Development Plans (IDPs) were in place in 2012, with a significant emphasis on HDSAs and women in management. IDPs assist C-level and management employees either to improve performance in their current position, and/or prepare them for their next role. A comprehensive Human Resources Development Value Chain was designed focusing on human resources development from source, which in many cases is our local communities and HDSAs.

Each employee takes responsibility for his/her own development and is expected to complete or update this document on a periodic basis to support career development discussions and any other development related activities. These plans are optional for management employees. We have a number of programmes in place to develop other employees through alternative means. These include on the job coaching, functional competence, performance couching and leadership training.

A baseline competency analysis of internal skills informs our training plan, with particular consideration having been given to the fact that a significant percentage of our workforce will be retiring in the next 10 to 15 years.

In 2012, employees received, on average, 88 hours of training, compared with 209 hours in 2011. This decrease is due to financial constraints. Employees who are women received an average of 42 hours of training.

  • * Of these IDPs 2294 are only for WPL and EPL, which excludes our Pandora Joint Venture.

Adult Basic Education Training

Adult Basic Education Training

The challenges of employees who are illiterate is considerable. Adult Basic Education and training (ABET) provides the means to close the gap in education levels and to enable employees within the company to progress, and for community members to be recruited. Intensive efforts in ABET have paid off, with literacy levels rising year-on-year. It is currently estimated that Lonmin’s employee level of literacy is around 77%. Refer to the ABET graph alongside for more detail.

This year 942LA people attended ABET, including 15 from our Pandora operations. On a full-time basis we had accommodated between EPL, WPL and Pandora 124LA employees and on a part-time basis 523LA employees that have completed ABET. Community members may also participate in our ABET programme and this year 295LA completed ABET.

Other training

Among the specific training initiatives we provide are:

  • induction courses and annual refresher training, which involves information on technical issues, business ethics and the key principles of human rights, and is available to all our employees and contractors;
  • artisan skills training;
  • Front Line Supervisory Development Programme and managerial skills training programmes;
  • team effectiveness training for supervisors and production teams, covering Lonmin’s safety life rules, personal life skills, Line of Sight operating principles, mission-directed work teams, bonus system, Lonmin values, teamwork and issues impacting performance.
  • a Study Assistance Policy for employees, which sets out the financial assistance we will provide to our employees who wish to study and the terms of sabbaticals for employees studying independently; and
  • portable skills training, which is provided to employees who retire, are retrenched or leave the Company for other reasons, and which contributes to community skills. In 2012, 304LA people received portable skills training - 128 employees (six from the Pandora joint venture) and 176 community members received portable skills training (2011: 57). These portable skills include basic computer skills, sewing, broiler production, solar geyser installation, carpentry, clothing manufacturing, cooking skills just to mention a few. We supplied cooking kits and sewing machines to the participants. We have also linked 20 health and safety trainees with various GLC vendors.
Fit for the job

CASE STUDY: Lonmin Artisan College

Lonmin’s Artisan College opened its doors in April 2012 at a critical time in the industry and the country. South Africa is in the midst of a critical shortage of artisan skills, against ever increasing demand, and the mining industry will be faced with dire consequences if the skills shortage is not addressed. Read case study

Average hours of training per employee per annum
  Male Female Total
  2011 2012 2011 2012 2011 2012
Contractors 51.6 45.3 1.6 26.7 59.8 72
Unskilled and defined decision-making 122.8 46.2 125.4 73.8 248.2 120
Semi-skilled and discretionary decision-making 152.9 44.1 52.3 42.3 205.2 86.4
Technicians and associate professions, clerks, service and sales workers 60.1 49.8 42.8 35.7 102.9 85.5
Professionally qualified, senior officials and experienced specialists, and management 33.5 30.0 29.4 21.8 62.9 51.8
Legislators, senior officials and senior management 41.4 17.7 29.2 24.5 70.6 42.2
Top Management 32.5 32.5
Overall average 119.9 45.6 88.7 42.18 208.6 87.8

Leadership development

Our Management Advancement Programme (MAP) targets managers who need to attain a broad base of business knowledge to prepare them for a senior management position. It aims to provide a practical base of knowledge for experienced functional managers and broaden their understanding of the fundamentals of management, to develop management skills of all functional areas of business management, and to develop an integrated understanding of the management process. A total of 30 students were enrolled for MAP in 2012; 17 were HDSA employees, 11 were women and two were white males.

Our 2012 Global Executive Development Programme programme took place at the Gordon Institute of Business Science (GIBS) in Johannesburg, with sessions in Beijing, Shanghai and Singapore. The modules were led by hand-picked faculty from GIBS, as well as leading business schools around the world. They cover a wide range of business disciplines in which best practice is a central component. Employees are exposed to both local and international best practice within a world-class faculty, engaging with fellow delegates and globally successful companies. Four Lonmin managers participated in the programme in 2012; two were HDSAs and one was a woman. Two further managers will participate in 2013.

Issues of concern relating to this programme, include the difficulty in retaining these EDP employees; negotiating time schedule, workload and work-life balance; and practically applying the programme at the workplace with the support of line management.

Succession planning

Talent management enables the Company to manage the identification and development of employees proactively, to ensure that we have the right skills, in the right place, at the right time, to meet our business needs, now and in the future. The specific purpose of succession management is to ensure there is a continuous pool of competent managerial and specialist staff to fill key posts, and to retain critical core skills.

Succession planning is thus a crucial part of guaranteeing business continuity by ensuring critical core skills are transferred from the present job incumbent to employee or employees identified as possible incumbents of that position. It is highly structured and supported by an IDP. In 2012 all management and supervisory employees (C-level and above) had an IDP in place. Skills matrices are in place for lower-level employees’ development.

Our 2012 succession planning process was informed by an analysis of the Company according to a ‘9-box matrix’, based on each employee’s performance and potential indicators. This matrix is a classification system that assesses employee performance and potential, providing a basis for comparability across boundaries, including departments, teams, functions and disciplines.

Succession planning was revisited at a senior management level in 2012 and extended to all management positions. An additional category was included on the succession plan in terms of readiness (within a time frame of five to 10 years), with a specific focus on identifying HDSA candidates in this category. Progress in terms of appointments made on the succession plan is tracked and monitored on a monthly basis. A particular area of concern remains the lack of HDSA and women successors currently available.

In 2012, 26 internal appointments where made based on the succession plan. A total of 47 external appointments were made, as in most cases there were no immediate successors available. Around 73% of the appointments were HDSA candidates. At the end of 2012, 48.8% of future successors identified are HDSA candidates, while 30.3% of the successors identified are female candidates.

Our Mentorship Programme is a key component and tool in support of Lonmin’s talent management practices. These, in turn, support Lonmin’s career and succession management process, providing for a transfer of knowledge, work and life experiences as well as supporting individuals to meet performance objectives. The Mentoring Programme will support the empowerment and development of individuals in order to ensure sustainable business development and leadership. In 2012, there were 160LA active mentoring relationships.

Building a transformed, performance-based company

Leadership transformation

Specific programmes are in place to ensure a fair and representative employment equity profile in the Company, and to meet the Mining Charter requirement of 40% HDSAs in management by 2014. Our Recruitment Policy gives preference to HDSA candidates. To add impetus to our programme, the Lonmin Corporate Scorecard has a bonus metric relating to the employment of HDSAs in management positions.

HDSAs in management (including white women)

At the end of 2012, 49.4%RA of permanent employees in management positions were HDSAs, including white women and 35.9%RA, excluding white women. HDSA in management, including white women increased by 6.2%. We are on track to increase the participation of employees from HDSA, including white women, within each level of management to 40% by 2014.

HDSAs in management (Including white women)
Paterson Bands 2012 % 2011 %
D-Band (Junior management) 54.7RA 52.8
E-Band (Middle management) 39.4RA 34.4
F-Band (Senior management) 21.4RA 20.0
Total 49.4RA 46.5

Women in mining

At the end of 2012, women represented 8.15%RA of our workforce, with 5.11%RA of our workforce being women in core mining positions. We employed 9.4% more women than in 2011. In 2011, these figures were 7.45% and 4.33% respectively. We are on track to achieve the Mining Charter requirement to increase female participation at the mine to 10% by 2014.

Women in mining

To facilitate employment of women we have:

  • conducted a recruitment drive during the previous financial year and provided a mining skills programme specifically for women
  • provided potential employees who are women with a fitness programme which enhances their ability to pass the entrance fitness test for specific work options ;and
  • attended to the physical environment, and the creation of policies to assist with the protection of women in the workplace.

See case study: Women in mining: fit for the job.

Productivity and absenteeism

High rates of absenteeism have a negative impact on our productivity levels. In 2012, our absenteeism rate was 13.81% (2011:8.36%). The higher absenteeism rate can be ascribed to the unprotected strike that contributed 35% to our absenteeism performance. The primary reasons for absenteeism were: the strike (35%), illness (17%), and absenteeism without permission (2.48%). We have a number of internal controls in place to address the abuse of sick leave, these include disciplinary procedures and corrective actions.

Fit for the job

CASE STUDY: Fit for the job

Apart from promoting equality in the workplace, the South African Mining Charter set a target that women should make up 10% of the total women in mining. Achieving these levels has brought with it unique challenges including the real and perceived issue of reduced physical capacity. Read case study