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Sustainable Development Report for the year ended 30 September 2012

03/People, Planet, Profit

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

Housing our employees

Our context

Addressing the critical shortage of affordable housing in our regions of operation, particularly around Marikana, is a multi-faceted challenge that requires careful consideration and the support and co-operation of both regional and national government. The challenge extends well beyond Lonmin and the mining sector as a whole, and has no simple solution.

The Company has made significant efforts to move away from historical single sex hostels. Of our total workforce approximately 4000 employees (8%) remain in hostel accommodation, compared to 8000 employees (33%) five years ago. At the end of the year, approximately 8% of employees resided in Company-owned hostels, down from 33% in 2007.

We have committed to providing all employees with accommodation options that are affordable and secure and that allow for a decent standard of living. We believe that the living conditions of our employees have a direct influence on their general well-being and on their ability to focus and perform in their working environments.

Lonmin does not support or promote informal settlements. We recognise, however, that they are a reality in our region and in our country. In conjunction with our local authorities we aim to provide better living conditions for the communities – by assisting with sanitation, water reticulation and refuse removal. Again, the issue is a complex one. Where does the role of the Company begin and end and where does the role of the state begin and end? And to what extent can the Company or state take away the freedom of an employee or citizen to choose to live in an informal settlement, particularly when there remains a housing shortage?

A further exacerbating factor is that employees who are migrant have indicated an aversion to settling in formal accommodation close to the mine, preferring to return to their home base at the end of their careers. In addition, there is a high incidence of ‘second families’ – employees effectively setting up two households; one in proximity to the mine and one at their home of origin.

Achieving this ambition though is likely to be costly and time-consuming, and is not something that Lonmin will be able to achieve in isolation.

Among the different aspects of the housing challenge are the following:

  • rising costs of housing and finance amid increasing economic constraints;
  • lack of land available on Lonmin property;
  • shortage of water and electricity, which is exacerbated by the spread of unplanned, informal settlements and consequent increase in pressure on services, as some employees choose to sub-let their purchased or rented homes to tenants;
  • lack of interest in home ownership, despite government requirements that ownership among employees be increased. Many employees still opt to stay in hostels or rentals as they are considered to be more affordable and employees from distant labour-sending areas often do not want to invest in property at Marikana when they already have a home and community base elsewhere; and
  • lack of schooling and community facilities for employees’ family members who choose to leave their homes to move into converted family units, which are often isolated from mainstream township communities.

Our focus is on achieving a series of sustainable, integrated housing initiatives, where densification has been identified as a central theme. These initiatives will also focus on the value of building partnerships with property developers, providers of capital, micro-lending institutions and local municipalities. We consult regularly on this strategy with government, local authorities and unions, whose involvement has been vital so far.

Our commitment to our SLP targets is important, and the consequence of not meeting our SLP targets is critical to the sustainability of our business. Our SLP commits the company to the conversion of all hotels into single or family units by 2014, but this in itself will not address the enormity of the challenge facing us.

Our Integrated Human Settlement Strategy comprises three pillars: transforming existing structures, provision of affordable housing and planning for future housing requirements.

Transforming existing structures

Lonmin has four hostels: Karee, Wonderkop, Eastern Platinum and Middelkraal, all of which are currently undergoing conversion to either single or family unit accommodation. Of our total workforce, approximately 4,000 employees (8% of employees) remain in hostel accommodation. This compares with 8,000 employees (33% of employees) five years ago.

In 2012, we completed the conversion of a further 19RA hostel blocks into 407 single units and 64 family units, which represents progress towards our overall 2014 target of 2,790 units. To date, we have completed 71.43%RA of our family units, and 47.07%RA of our single units. We still have 49 blocks to convert by 2014. In 2012 R89 million (US$11 million) was spent on hostel conversions (2011: R87 million / US$10 million). This budget is set for R102 million (US$12 million) in 2013 and R110 million (US$13 million) in 2014.

We aim to complete the programme of converting all existing hostel blocks and later, if possible, to investigate the option of erecting new units in the open spaces in the immediate vicinity of the converted blocks, making effective use of the resources ad assets already available to us.

Affordable housing

In 1998, the Marikana Housing Development Company (MHDC) was set up to build houses in the area of Marikana Extension 1 with the intention to sell or rent to employees and to members of the community. This has had the added benefit of providing contracts and opportunities to GLC-based suppliers, wherever possible.

Lonmin also provides financial advice and assistance with loans and rent-to-buy options to encourage home ownership, although the uptake has been slow. Of the 1,149 homes that have been built, only 242 have been sold. We believe that education in this regard is critical. The purchase price of a unit is R62,426 (US$7,754) and we provide assistance to employees to obtain finance.

In addition to these homes built through the MHDC, we also have 369 houses at Karee, 280 houses in Wonderkop Renamile Township for our employees of which 176 have been upgraded into family units.

Initially aimed at encouraging employees to take responsibility for their own accommodation, a living-out allowance was introduced at Lonmin and across the industry. The living-out allowance has also been a fixed agenda item for annual wage negotiations. This allowance was set at R1,850 (US$230) per month. With this allowance, employees may elect to seek their own accommodation, including the newly converted hostel units for families and single accommodation, if available. It is estimated that rental at the informal settlements are market related, ranging from approximately R200 (US$25) to R1,200 (US$149) per month for family accommodation. The monthly rental at our converted units has not been increased for five years and is made available for as little as R350 (US$43) . The former excludes water, lights and transport, and the latter is inclusive of these costs. While the payment of living-out allowances has proved to be a popular option for employees with more and more employees moving out of hostels, better regulation and support is required to ensure that the allowance is indeed spent on adequate accommodation that is in line with the minimum living standards we are trying to achieve for our employees. We are considering implementing personal finance skills programmes through our line-of-sight training.

Planning for the future

Housing alone does not provide an integrated solution for longer term sustainability and it is government policy to transform the country’s residential areas and build communities with closer access to work and social amenities. There has been a fundamental shift in the approach to housing in South Africa. A redirection of policy was brought about in 2004, through the Comprehensive Plan for the Development of Sustainable Human Settlement, commonly known as ‘Breaking New Ground’. The key objectives of this plan are the promotion of densification and the provision of social and community services in combination with residential developments, in order to build spatially, economically and socially sustainable communities.

A pilot project along this theme is already under development in Marikana Extension 2 and progress will be reported in 2013. Of the 863 service stands that belong to the Marikana Housing Development, 17 have been rezoned for the erection of five apartment blocks.