Social licence to operate

Maintaining our social licence to operate and investing in the community

Social licence

Community programmes are developed to address the most pressing community issues in the short, medium and long term.

Protection

We have established a waste swop shop in Wonderkop at the primary school.

Context

Our commitment to our corporate citizenship agenda defines our duty to contribute to the wellbeing and development of the communities that host, and are affected by, our operations. This duty is formalised in our SLPs, which set out our local economic development commitments. Our broader social licence to operate depends on strong relationships with our host communities. The Company’s ability to build financial capital in the long term is critically dependent on a predictable and stable operating environment, which is only possible if we have constructive relationships with our immediate communities and labour-sending areas.

We aim to strengthen our social licence to operate through:

  • Stakeholder engagement to ensure expectations are understood
  • Community upliftment initiatives to address social issues
  • Ethical business practices that include the commitment to uphold human rights
  • Corporate and community partnerships

Lonmin’s investments in the community aim to address some of the most pressing socio-economic challenges facing the GLC. These initiatives focus on education, health, local supplier development and infrastructure programmes, and also aim to sustain a pipeline of skilled local employees and increase procurement from the local community. Working in partnership with local government is a key enabler for these initiatives and for building our social licence to operate.

This chapter provides an overview of the initiatives implemented in local communities, with a predominant focus on the GLC as the majority of the Company’s operations are in the North West Province.

Key stakeholders

Communities

Lonmin’s operations are surrounded by communities located in formal and expanding informal settlements. These settlements bring with them a range of challenges, including a lack of formal governance structures and the need to provide jobs equitably to local community members without infringing on migrant workers’ right to work.

The traditional local community on the eastern side of our operation is the Bapo ba Mogale, while other community members include localised and transient migrant workers from across southern Africa. In Limpopo, we have various traditional authorities – Mphahlele, Ledwaba, and Kekana.

Community engagement is managed through a range of initiatives and meetings that facilitate engagement and support communication with local ward councillors and traditional authorities. These interactions give the Company insight into the needs and expectations of the communities and enhance collaboration in contributing to the GLC.

Government

For socio-economic development initiatives to be viable and sustainable, they need to align with the National Development Plan (NDP) and regional Integrated Development Plans. We engage regularly with the departments of Basic Education, Health, Trade and Industry, Human Settlements and Mineral Resources, as appropriate, and with provincial and local government to build partnerships. These engagements also provide oversight on projects implemented by the Company to create alignment with standards and goals.

In addition, issues of concern to stakeholders are being addressed in the government-driven Project Phakisa.

Non-governmental organisations (NGOs), non-profit organisations (NPOs) and faith-based organisations

NGOs, NPOs and faith-based organisations play a critical role in local communities through their support of people in need and through various awareness initiatives on a range of social matters. Lonmin’s collaboration with these stakeholders allows us to address many social challenges better.

Risks and opportunities

The information below involves risks to the sustainability of the business that apply to our social licence to operate, and indicates where to find more detail on how Lonmin manages and mitigates these risks. More information can be found in the Annual Report and Accounts 2015.


Community relations

In line with a number of mining companies operating in South Africa, the Company has also experienced high levels of community unrest in the areas adjacent to its operations. These could persist or worsen in scale, intensity and duration. Mining is conducted in areas where communities are present and the communities have various expectations of the mines, such as employment opportunities, socio-infrastructure support and business opportunities. When these expectations are not met, it may result in conflict and unrest.

Deteriorating relationships with local communities as a result of poor service delivery by local government and high unemployment rates can result in civil unrest, which sometimes disrupts our operations. Failure to deliver social upliftment projects can trigger protests or violence and result in corporate reputational damage if the relationships with these stakeholders are not managed effectively. The environmental, health and social impacts of mining can be felt by those communities who live and work in close proximity to the operations.

Opportunities and mitigation

As part of enhancing relations with communities, the Company has reviewed its engagement process and implemented a revised stakeholder management process. In order to improve governance and project execution of community-related investments, a procurement framework with appropriate project management office capabilities has been established. Other aspects of community investment included the establishment of a Cadet Training programme as part of the Company enhancing its potential future employment capacity. Formal engagement structures have also been established in the form of bilateral forums with the Bapo and Madibeng Rustenburg communities. The engagement meetings address employment, economic development, community infrastructure programmes and the SLP status. The Bapo Transaction and Lonmin’s other BEE transactions announced in November 2014, resulted in the establishment of two community development trusts, each receiving a minimum of R5 million per annum, and an undertaking by the Company to provide the Bapo traditional community with R200 million of procurement opportunities.

Changes to the political, legal, social and economic environment, including resource nationalism

The Company is subject to the risks associated with conducting business in South Africa, including, but not limited to, changes to the country’s laws and policies in connection with taxation, royalties, divestment, repatriation of capital and resource nationalism. Resource nationalism is a broad term that describes the situation where a government attempts to assert increased authority, control and ownership over the natural resources located in its jurisdiction (with or without compensation). It is a global phenomenon, not limited to a single country. In South Africa, the threat of nationalisation has been rejected by the government.

Lonmin is regulated by a vast array of regulatory requirements including the Mineral and Petroleum Resources Development Act (MPRDA). This legislation is critical as it impacts Lonmin’s operating licence and prospecting and mining rights. Alongside these legal and regulatory obligations and equally critical, are the Company’s social responsibility obligations, by which we earn our social licence to operate in the communities that host our operations.

Opportunities and mitigation

Lonmin and other mining companies are engaging with the South African government on issues of concern to stakeholders through the government-driven Project Phakisa. Project Phakisa for the mining industry is scheduled to commence during November 2015 and is aimed at creating win-win solutions for all industry stakeholders. Lonmin is also endeavouring to engage with representatives of local communities in an effort to minimise unrest.


Accountability and governance

At Board level, Lonmin’s Social, Ethics and Transformation Committee is responsible for overseeing that the Company meets its commitments in the areas of transformation and community development. Delivery on the Company’s community development commitments is the responsibility of the Executive Vice-President of Communications and Public Affairs who reports to the Chief Executive Officer.

The Company’s commitment to partnering with communities is entrenched in our Charter and commitments are outlined in Lonmin’s Safety and Sustainable Development Policy. Specific community development projects form part of our community investment programme and are defined in our SLPs, further complemented by a range of additional community upliftment projects that are conducted over and above those in our SLPs.

Our engagement with local communities was driven through the Community Value Proposition process, which aimed to identify community needs through consultation and to prioritise the SLP projects through a collaborative process. The community development department works closely with the enterprise development arm of the procurement department to identify opportunities arising from local economic development projects.

Progress made on community development projects is measured against defined project objectives, investment targets and/or progress against baseline assessments, and is reported internally on a monthly and quarterly basis. Most of the community projects set out a purpose statement supported by objectives and deliverables to be achieved prior to implementation. During project roll-out performance against deliverables is reported and tracked to manage progress. Transformation targets are set according to the Company’s long-term transformation goals and progress against these is reported internally each month.

External policies, frameworks and regulations

Lonmin’s regulatory community development obligations arise from its SLPs, which are compiled in terms of the MPRDA. Performance against these commitments is reported regularly to the DMR. As a member of the ICMM, Lonmin subscribes to the principles of sustainable development, including Principles 9 (community development) and 10 (stakeholder engagement). We also support the ICMM’s Position Paper on Mining and Indigenous People, which includes a number of commitments to respect and have meaningful engagement with indigenous people.

Transformation, including procurement, is regulated by the Broad-based Black Economic Empowerment Act, 53 of 2003, and our approach is also framed by the Preferential Procurement Policy Framework Act, 5 of 2000.

In 2010, a revised mining charter (the ‘Revised Charter’) was introduced and companies were required to comply with the provisions of this Revised Charter as opposed to the 2004 Mining Charter. The Revised Charter targeted 31 December 2014 as the date by which companies were required to comply. The DMR is currently carrying out an audit to determine the extent of compliance.

Approach and performance

Social and labour plans (SLPs)

Our commitment to corporate citizenship defines our duty to contribute to the wellbeing and development of the communities that host and are affected by our operations. This duty is formalised in the SLPs’ obligations, an integral part of mining or prospecting rights granted under the MPRDA. Despite numerous challenges during 2015, Lonmin remains committed to deliver on the commitments of our SLPs. The SLPs set out the Company’s commitment to develop and implement comprehensive human resources development programmes, including local economic development programmes and employment equity plans.

Given the current economic climate, subdued market conditions and consequential downscaling of the organisation, Lonmin has commenced with the review of the current SLPs. Of particular focus is a remaining three-year period 2016 – 2018. The intended outcome of the review is to align the SLPs with our new reality by way of revising commitments via a Section 102 application to the regulator as per the MPRDA.

Breakdown of Rand value spent on community SLP projects

Communities 2011 2012 2013 2014 2015
Rand value spent on SLP community projects of WPL and EPL Rand 37,980,955 39,743,935 38,661,225 47,672,897 62,551,677

Community relations and engagement

The community development department manages the various projects and initiatives active in local communities. New projects are proposed according to needs identified by internal stakeholders, community representatives and local government priorities. These projects are then agreed and incorporated with Lonmin’s SLPs, which link to local municipality Integrated Development Plans (IDPs) and the projects identified through our Community Value Proposition process. IDPs are prepared by local municipalities to map out short, medium and long-term plans, including spatial planning, economic development and infrastructure development.

Community programmes are developed to address the most pressing community issues, with a focus on those interventions most likely to enable a step-change. Progress is monitored against baselines and SLP targets determined at the start of the projects and reported to the SET Committee.

Community liaison officers and stakeholder engagement officers interact with representatives from local communities through formalised structures, including community project meetings and ward councillor meetings. These meetings are used to gather community input, including complaints, and to report back to communities on progress in the various initiatives under way.

Investing in community development

In response to the needs identified in the Community Value Proposition process, Lonmin’s community development projects primarily focus on enterprise and skills development, education, community health and social infrastructure (including accommodation).

The community development strategy aims to create long-term social and economic value through:

  • alleviating poverty and unemployment;
  • enabling communities to participate in decision-making to achieve greater long-term control over their lives and development;
  • ensuring communities are resourceful, skilled and able to take full advantage of economic opportunities;
  • enabling community businesses to become a business partner of choice and contribute to the growth of Lonmin.

In 2015, Lonmin invested R62.5 million in community projects that form part of WPL and EPL SLPs (2014: R47.7 million). The increase in 2015 relates to infrastructure upgrades at schools, the mining skills programme that gained momentum and increased expenditure on sport, art and culture.

Summary of expenditure of key community focus areas

Financial investment in communities1 2014
Rm
2015
Rm
Community education programme (in schools)   6.4 11.7
Skills development (mining skills, portable skills training, technical skills, and learnerships for communities)   11.0 14.0
Sports, arts and culture   0.6 1.9
Community health programmes (including nutrition programme spend)   5.1 6.5
Local economic development   28.0 20.0
Supplier development   5.1 3.2
Other infrastructure projects (such as waste management)   9.9 10.0
1 Excludes overheads and donations.

Community Value Proposition

Lonmin’s overarching community development objective is to make a social investment that has a lasting impact beyond the life of the mines. The Community Value Proposition process aimed to develop a deep understanding of the community’s development needs to deliver focused social investment that is sustainable and has an impact beyond the life of the mine.

The Community Value Proposition process started with research to ensure that projects are aligned with the NDP, municipal IDPs and other contextual frameworks. This was followed by a series of engagements with prominent community stakeholders and other interested and affected parties. These engagements highlighted the key community needs as improved living conditions, employment opportunities, increased access to health services and basic social services, all of which have provided input into the SLP. The final phase of the process is ongoing and involves feedback to the communities and local government on progress, and adapting projects for the changing needs of the community.

Community education and skills development

Lonmin’s community education programme provides support in six key areas of education: school infrastructure development, learner support, educator support, parent support, school nutrition, and sport, arts and culture. Improving education and reducing unemployment are two of the most serious challenges South Africa faces. By investing in the skills, education and employability of the individual, these projects contribute to the sustainable upliftment of the community and address some of the most pressing immediate needs of the community and the country. At the same time, these initiatives develop a pipeline of skilled community members for the Company and local industries.

Lonmin’s education and skills development projects are reviewed and adjusted on a quarterly basis according to the changing needs of the community and the future skills that need to be developed, as identified by internal departments. These are also benchmarked against the education component of the National Development Plan and through engagements with the Mining Qualifications Authority (MQA).

Prior to commencing, projects’ baseline assessments are completed, specifically for school infrastructure projects and early childhood development centres.

Community education programme

School infrastructure development

The Company funded additional classrooms and ablution facilities for Segwaelane and Thlapi Moruwe primary schools and the construction of Bapong Sports Fields during 2015. These projects were awarded to GLC construction companies to support the local economy. These projects will benefit approximately 2,000 learners and 45 educators in the GLC.

Our baseline assessments were first conducted in 2007 and updated in 2010 and 2014. Since 2007, Lonmin has provided infrastructure support to all 28 schools in the GLC through additional classrooms, mobile classrooms, electricity upgrades, sporting facilities, or ablution facilities.

Learner support

Lonmin provides a number of programmes for improving education and pass rates for GLC learners. The Ithuteng programme supports 100 learners in Grades 9 to 12 and the Examination Preparedness and Support programme has 350 students enrolled. The Community Study Assistance Programme supported 64 students enrolled for mining and non-core mining-related studies, and more than 3,000 students attended career guidance workshops during the year.

Students applying for tertiary institutions or learnerships are supported through the University and Technical Preparedness Programmes, which assisted 51 (2014: 13) students in 2015 to successfully make the transition to tertiary education through either a university or an engineering learnership. The Technical Preparedness Programme enables school leavers to achieve N3 accreditation for their technical skills within one year of training. In 2015, the curriculum was amended to incorporate Instrumentation Mechanical and Rigger/Ropeman at N3 level.

The Mining-related Skills Programme provides skills development opportunities to local youth who have reached ABET level 4 (equivalent to Grade 9) and are seeking employment. The first 59 cadets who completed the training were given permanent employment within the Company and a further 91 students completed their studies by year end.

Students from the GLC who have university acceptance can apply for a Lonmin bursary, and in 2015 GLC candidates held 52% of the Lonmin bursaries (2014: 63%). More information on our bursaries and graduates.

Educator support

Early childhood development (ECD) builds a vital foundation for education and is a critical part of socio-economic development in the region and the country. A number of children in the GLC do not have access to formal education during early childhood, and are cared for in informal day-care facilities. Lonmin supports 49 ECD centres with 143 ECD educators who serve 2,497 children. The programme provides carers with basic skills to teach children the foundations required to begin their formal schooling. A new group of 16 educators attended ECD Level 4 accredited training in 2015.

Mathematics, technology and physical science workshops were also provided to 80 educators for the year through in-class and off-site training.

Parent support

Parents are invited to attend career guidance workshops to illustrate career opportunities for learners and to create awareness among parents about the programmes Lonmin offers. The goal is to motivate parents to support their children’s performance so that they can enter Lonmin programmes.

School nutrition programme

School nutrition forms part of the Company’s community health programme.

Sport, art and culture development

Lonmin supports various netball and soccer tournaments and also offers ad hoc assistance to individuals and teams who qualify for district, provincial and national competitions.

Soccer

Lonmin supported 128 teams with transport to participate in tournaments and trials such as the Platinum Star Junior soccer trials.

First aid kits and sporting equipment were provided.

Boxing

Ms Tsolofelo Ngwane from Wonderkop community was selected to represent South Africa in Boxing at the Summer Olympic Games in Brazil in 2016. Lonmin assisted Ms Ngwane with transport to ensure her participation in national events, and she has recently participated in the African Championships, obtaining a gold medal for her performance.

Lonmin is a proud supporter of the Marikana Boxing Club, through the provision of boxing equipment and transport to enable members to participate in events. At the national championships held in Pretoria, boxers from the Marikana Boxing Club were awarded six gold, five silver and four bronze medals, and Rorisang Zwakala received the title of best boxer in the age 12-14 category.

Arts and culture

Three local learners from Tebogo Primary were selected to represent South Africa in a chess tournament to be held in neighbouring Botswana.

Skills development

Lonmin’s skills development programmes include one-year specific skills interventions and programmes to bridge the gap created by local schools not offering technical programmes, and school leavers who do not have the requisite skills to be employed at the mines. Graduates of these programmes can enter the job market with a quality skills set that makes them attractive to the Company as potential employees.

The Mine Technical Skills Programme supported 20 students during 2015.

Social return on investment

With the national unemployment rate at about 24%, the North West Province at a rate of 25% and the GLC
at about 30%, unemployment is unacceptably high in the country and in the region in which we operate. Empowering local community members with the skills to be more employable or with the ability to seek own employment is undeniably important.

In 2010, Lonmin commenced with a programme to equip community members with the skills to more easily find employment in the mining industry or to generate an income through self-employment. This programme combines competent B mining training with interview coaching, first aid training and African Wisdom, which provides life skills necessary for everyday life.

When the programme commenced, the financial conditions in which the Company operated were more favourable. Unfortunately Lonmin had to reduce its cost base in the current metal price environment to sustain a viable operation and announced the orderly close down of the Hossy and Newman shafts, which affected employment. Despite the downturn, the programme contributes to a longer-term view and prepares for the industry recovery and upswing, building a pipeline of local skills and equipping participants to find alternative employment.

Earlier this year, we completed an exercise to measure and account for our community mining skills-related training programme and to express the value created in monetary terms. The result of the study indicated that
for every R1 invested, R1 is returned. Since 2010, 79% of those trained by the programme received employment either at Lonmin or at other companies. Of these, 96% are still employed. The programme also has a high success rate where 98% of those who started the training completed it. Of the 207 women who received training, 86% found employment.

Lonmin has also reached an understanding with the Bapo ba Mogale traditional authority to train some of the Bapo community members. Those who pass the minimum qualifications will receive mining-related skills training and those not able to complete the minimum requirements will receive training on infrastructure-related portable skills for three months.

Many of the benefits of this programme cannot be quantified in monetary terms, such as the joy of a mother whose child was returned from foster care as a result of her employment after completing the training programme. Another woman was inspired by the African Wisdom training to refocus her life on children and has commenced her studies to become an early childhood development teacher.

Portable skills training

Lonmin offers portable skills training for employees and community members seeking employment opportunities outside of the mining industry, but who lack formal education. The training focuses on artisanal trades, enabling entrepreneurial individuals to develop small businesses. In especially promising cases, these small businesses are connected with opportunities provided by the Shanduka Black Umbrellas business incubator for further funding and development.

Overview of skills development programmes and beneficiaries

Skills development programme 2015 progress and beneficiaries
Portable skills 138 community members received training on various portable skill programmes.
Mining-related skills programme 150 cadets (of which 95 cadets are women) completed theirtraining and 59 were employed permanently. 
Bapo ba Mogale community member training In 2016, 500 Bapo community members will either be trained as production generals or will be offered three-month skills development programmes, mainly linked to construction.
Community ABET 300 community members received ABET training during 2015.
Exposure
Process operation exposure programme Programme placed on hold due to cost-containment focus. 
Community learnerships Programme placed on hold due to cost-containment focus.

Community health

As the majority of our employees live in our surrounding communities, the health of these communities has a direct impact on the health of our employees. Lonmin’s community health programme aims to support health through awareness, promotion and prevention and, where possible, infrastructure development.

Community health programmes are managed with various partners and implemented in all the operational areas – Marikana, Lebowakgomo (Limpopo), at the Precious Metals Refinery and in the Eastern Cape. The Company’s partnership with the Department of Health is particularly important to provide quality healthcare services to the communities around the GLC.

Of the R6.5 million spent on community health initiatives (2014: R5.1 million), R2.4 million (2014: R1.3 million) was spent on health infrastructure and vehicles.

Awareness, promotion and prevention

HIV/Aids

Our preferred approach is to work closely with NGOs in the field of HIV/Aids and conduct joint campaigns whenever possible. The Company held six formal health promotion days focused on HIV/Aids, TB and sexually transmitted infections (STIs) in 2015. The Company has two programmes in place: peer education to educate members of the community about HIV/Aids, and home-based care to assist in caring for those affected and infected. During the year, 1,231 community members were tested for HIV/Aids at a 17.7% positive rate. Lonmin also supports 89 home-based carers by supplying home-based care kits, immune booster meals and stipends. The carers tend to those who are too ill to leave their homes and take care of orphans and vulnerable children within their villages.

Furthermore, Lonmin offers training to volunteers from within the community to spread awareness. These peer educators work closely with seven community clinics to disseminate information, distribute condoms and go on door-to-door campaigns to perform mobile assessments of community members. Volunteers receive in-service training and medical kits provided by the Company, and are assisted in registering as formal carers with the Department of Health. At the end of September, there were 125 active HIV/Aids volunteers in local communities taking care of 1,968 patients and 1,160 orphans and vulnerable children. Volunteers reached 2,694 patients and distributed 15,026 condoms.

Lonmin encourages and supports volunteer peer educator and home-based carer networks to form Non-profit Organisations (NPOs) with the relevant structures and systems to be self-sustaining entities. There are currently nine successful HIV/Aids NPOs operating in the GLC managed by 125 community volunteers, and two new Marikana NPOs were trained in home-based care.

Health promotion

Lonmin’s health promotion project addresses learners and out-of-school youth with a focus on sexual health, HIV/Aids, TB and substance abuse. Initiatives include support for school peer educators to encourage young people to access facilities when they need to.

Lonmin also conducts TB awareness and contact tracing into the communities by visiting households of employees who have been diagnosed with TB for case-finding and health education. Health awareness campaigns at the Limpopo and Marikana communities reached 604 households during 2015.

Nutrition

Nutrition has a direct impact on health and wellbeing, and poor nutrition is linked to illness and fatigue. In children, good nutrition is essential for physical and mental development. Food is provided to GLC learners by the Department of Education and Lonmin has established six food centres that provide meals to 672 orphaned and vulnerable children in Marikana and Limpopo. These food centres operate throughout the year to provide a daily meal to children who would otherwise go hungry over weekends and holidays.

The second focus area is establishing food gardens at schools and at home. Permaculture food gardens at four of the centres offer training on how to cultivate food and encourage community members to start their own gardens. An annual competition encourages schools to establish the best and most productive gardens. Students learn how to grow their own food and can share this knowledge with their families.

Health infrastructure projects

Lonmin partners with various stakeholders, including the Department of Health and local government, to improve access to basic healthcare in the GLC.

Several of last year’s planned health infrastructure projects were affected by the strike and rolled over into 2015. Two ambulances were acquired in 2014 and converted into obstetric ambulances during 2015. These, along with a health promotion vehicle and eight computers, were handed over to the Department of Health. Two maternity waiting homes were constructed at the request of the Department of Health to mitigate maternal and infant mortality. Security upgrades were implemented at Wonderkop and Segwaelane clinics.

Educators

Peer educators providing AIDS education and awareness on prevention.

Infrastructure development

Lonmin’s local economic development investments were identified as part of the Community Value Proposition process and aim to improve living conditions in the GLC by investing in social infrastructure that provides a platform for economic development initiatives to thrive. Lonmin works closely with local and national government to assist in its agenda to improve basic service in the GLC, and to ensure that both sides contribute co-operatively in line with their skills and resources, and deliver according to agreed timelines.

Local economic development expenditure amounted to R30 million1 in 2015, a decrease of 21% from 2014 (R37.9 million), and focused on various programmes, including bulk water and road infrastructure, waste removal, lighting for public safety and the construction of a resource centre, as discussed hereafter.

1 Spend on local economic development and other infrastructure projects such as waste removal.

Bulk water infrastructure

Lonmin’s bulk water infrastructure project focused on improving access to potable water in Wonderkop during 2014 and 2015. Leaks and broken water pipes were fixed and refurbished to improve water availability. The Company provides five megalitres per day of bulk water supply to various local communities, benefiting an estimated 6,500 households in the formal settlements and 5,500 households in informal areas of Wonderkop. Water from the Lonmin-owned reservoir also provides water to the various communities. Refurbishment of existing water storage facilities increased storage capacity by 25,000 litres per day in Wonderkop. We continue improving bulk water supply in other villages of the GLC, with plans to address Segwaelane in 2016, and Bapong in 2017.

Lonmin engages with the National Department of Water and Sanitation (DWS) to explore ways to provide sustainable water solutions to host communities. These include exploring alternative methods to source and store bulk water.

Road infrastructure

The Company’s road infrastructure project develops the GLC’s socio-economic corridors through the construction of new and upgrading of existing access roads. This improves access for employees living in surrounding communities and settlements, and includes a bus and taxi drop-off zone. Construction provides contract opportunities for local civil construction companies and short-term job opportunities for local labour. This project has now reached practical completion; all road signs are installed, marking is complete and the road is open. Paving blocks for the road are manufactured from Lonmin’s waste ash at the youth brick-making project established in Bapong. Roads in Segwaelane and Bapong will be upgraded in the next phase of the project.

Waste removal

As a service to communities and to improve and promote a cleaner environment, create local jobs and enterprise development in waste and refuse management, Lonmin explored community household refuse management models. This led to the development of a community-based service delivery model, which developed four local businesses in refuse and waste management, creating at least 40 permanent jobs.

Lighting for public safety

Lonmin funded and installed 11 high-mast lights and refurbished eight existing lights in the Wonderkop formal and informal areas to address a rise in crime in Nkaneng and Wonderkop. The installation included the upgrade of power supply from rural to semi-urban supply. While 19 new installations of these lights were initially planned, illegal power connection to the new lights impede progress. New ways of isolating and protecting the power source for the lights are being investigated and we are engaging with community leaders to support the sustainability of this project.

Resource centre

Construction of a resource centre to host youth development and recruitment began in 2015, with completion aimed for 2016, should resources allow for it. The centre will also serve as an information hub for the GLC and as an outlet for the sale of prepaid electricity, water, data and airtime.

Update on previously reported local economic development projects

The brick-making facility in Bapong is in the final year of receiving assistance from Lonmin. The project is on track to reach self-sustainability and employs an average of 32 local people. Due to the gravel road upgrade project, the scope of this project has been reviewed to accommodate the manufacturing of road pavers and curbing.

Transformation through enterprise development and procurement

Transformation is promoted throughout the business and is an obligation in terms of the Mining Charter, specifically through the ownership and procurement clauses that seek to accelerate the participation of HDSAs in the mainstream economy.

BEE equity ownership

In November 2014, Lonmin successfully completed three BEE transactions, which cumulatively give the Company an additional 8% equity empowerment. Lonmin accordingly achieved the target of 26% BEE ownership by 31 December 2014, as required by the Mining Charter. These transactions support the improvement and development of local communities and align the interests of communities, employees and shareholders.

The South African Department of Trade and Industry (dti) is responsible for leading government action on the implementation of BEE initiatives under the auspices of the Broad-Based Black Economic Empowerment Act, No. 53 of 2003 (the ‘B-BBEE Act’) and the B-BBEE Codes, while certain industries have their own transformation charters administered by the relevant government department (in the Group’s case, the Mining Charter administered by the DMR). On 30 October 2015, the South African Minister of Trade and Industry exempted the DMR from applying the BEE Trumping Provisions for a period of twelve months, on the basis that the alignment of the Mining Charter with the B-BBEE Act and the B-BBEE Codes is still ongoing. Generally speaking, the amended B-BBEE Codes, which have been effective since 1 May 2015, make BEE compliance more onerous to achieve. A new Mining Charter is currently being discussed by industry stakeholders and it is likely that this Mining Charter, if applicable, will contain more onerous provisions than the current Mining Charter.

Bapo transaction

The Bapo ba Mogale Traditional Community is a key shareholder in Lonmin. The intention of the BEE deal with the community is to share the value created by the Company and to assist in building our host community. The value that accrues to the Bapo community over the long term should make a significant difference to their lives and help improve living conditions while providing Lonmin with a stable and peaceful operating environment, which is important to successfully operate the business.

The Bapo transaction involved a royalty for equity swap and the sale of the Bapo 7.5% stake in the Pandora joint venture to a Lonmin subsidiary. This transaction provided the Bapo community with equity participation of circa 2.24% at Plc level and a deferred royalty payment of R20 million per annum payable by Lonplats (Eastern and Western Platinum combined) in each of the five years following completion of the transaction. The BEE accreditation arising from this royalty for equity swap transaction amounted to 2.4%.

The transaction includes a commitment from Lonmin to provide procurement opportunities to members of the Bapo community of at least R200 million over an initial 18-month period. The first such contract was finalised in March 2015, involving the supply of equipment to move ore between shafts, and plans are in place to award further contracts in 2016, resulting in the target of R200 million likely being far exceeded. These contracts will bring additional benefits to the community through job creation and other multiplier effects.

Other long-term opportunities are currently being identified that will not only achieve the committed amount during the stipulated period, but will also bring additional benefits to the community through job creation and other multiplier effects.

Community trusts

During 2014, two separate community trusts were established. Each trust holds 0.9% of the ordinary shares in Lonplats, and is entitled to dividend payments, which were mandated for upliftment projects in the respective communities. To the extent that no dividend is payable in a particular year, each community trust will be entitled to a minimum annual payment of R5 million, escalating in line with the consumer price index each year.

While these transactions have been successfully concluded, there has been a challenge to the transaction by a faction within the Bapo community. Lonmin continues engaging with all stakeholders to resolve the issues of concern.

Performance

Preferential procurement

The preferential procurement strategy provides opportunities to empowered companies in terms of broad-based black economic empowerment (B-BBEE), female representation and, where possible, focuses on candidates within the GLC.

The Mining Charter has set targets of procuring 70% of services, 50% of consumable goods and 40% of capital goods from HDSA-owned suppliers.

The procurement department works closely with the enterprise development department to develop local suppliers that show potential. The biggest challenge we face is increasing the number of black women-owned suppliers in our vendor base, an area that we are making an effort to address through various enterprise development initiatives and projects, such as the manufacturing of personal protective equipment.

Procurement with locally-based suppliers

Locally-based suppliers 2014 2015
Total value spent on local procurement R1.8 billion R2.8 billion
Percentage of discretionary expenditure 81% 81%
Amount spent with suppliers based within GLC R427 million R634 million
Number of new suppliers registered as vendors from GLC 423 161

Total spend with new vendors created in 2015

Vendors 2014
Rm
2015
Rm
Black-owned 14.6 7.7
Non-BEE 16.8 61.3
Other 0.8 7.3

Enterprise development

Increasing the pool of sustainable BEE suppliers is essential for Lonmin to achieve further improvements in its preferential procurement performance. To achieve this goal and to offer a solution for members of the GLC that want to do business with the Company, Lonmin established a small business incubation centre in partnership with Shanduka Black Umbrellas (SBU). SBU focuses on promoting entrepreneurship as a desirable economic path and nurturing 100% black-owned businesses in the critical first three years of existence. The programme includes training, mentorship, business plan development and access to practical resources, including office space at the Lonmin community office and IT resources. SBU works closely with Lonmin’s procurement department to understand the procurement needs of the Company and to develop a database of robust, accredited vendors.

This year, the Mooinooi incubator received several awards in a competition with its counterparts. GLC companies Phakwe Mining (Best in Job Creation) and Modi Mining (Most Profitable Business) received awards and the Mooinooi incubator was recognised as the best Shanduka incubator in South Africa.

The critical statistics from the inception of the Mooinooi incubator include:

  • Businesses in full incubation: 43
  • Permanent jobs created: 279
  • Temporary jobs created: 25

Other enterprise development projects in which Lonmin is involved include:

Retswelapele Construction

The company was established in 2007 and received ad hoc work around Lonmin, such as plumbing and installation of pole lights. During 2015, they were awarded a contract to construct a maternity ward and to build additional blocks at a school in Wonderkop.

Phakwe Mining

Phakwe Mining was founded in 2010 and is a black-owned company from the Bapo ba Mogale community that employs 290 people and generates R34 million in annual turnover. Phakwe Mining Services provides underground cleaning, hauling, maintenance and vamping to Lonmin.

Technical mentorship

Four GLC entrepreneurs within SBU are currently in mentorship relationships that provide the opportunity for skills transfer from expert individuals and suppliers to GLC entrepreneurs.

SEDA Platinum Incubator (SPI) – Jewellery Collaboration

During 2015, Lonmin advanced its collaboration with SEDA Platinum Incubator (SPI) to assist in the launch of a range of corporate gifts to be made in platinum. The incubatees and trainees participated in a design competition and the top five designs are earmarked for production during 2016.

Located in Rustenburg, North West Province, the SPI is South Africa’s first platinum beneficiation incubator for the design and manufacture of jewellery. It is the only dedicated incubator for PGMs beneficiation in South Africa. Its primary aim is to facilitate skills transfer and ensure upliftment of historically disadvantaged South Africans. This is done through their involvement in platinum beneficiation activities, mainly jewellery manufacturing.

Employee volunteering and donations

Employees volunteer their time each year to support various community programmes.

More information on employee volunteering and donations.

Educators

An ore transport contract was finalised between Lonmin and the Bapo ba Mogale traditional community.

Human rights

Lonmin is committed to respecting the human rights of those who have interests in and are affected by the Company’s operations. This national and international commitment is contained in our Human Rights Policy, which was updated this year following a periodical review. Along with human rights contained in the Constitution of the Republic of South Africa, the policy has regard to the International Bill of Human Rights, which includes the United Nations Universal Declaration of Human Rights and the International Labour Organisation Declaration on Fundamental Principles and Rights at Work. The policy is also informed by the United Nations Guiding Principles on Business and Human Rights, which are a global expectation of all business enterprises for managing human rights risks linked to their business activities. The commitments contained in the Policy have been incorporated into the Lonmin Sustainable Development Standards.

With the support of the Executive Committee, the Chief Executive Officer is ultimately accountable for human rights matters across all operations.

Human rights training forms part of the induction programme for all employees and contractors, including mandatory annual refresher training. Training informs attendees of their rights, expectations, standards and mechanisms to report grievances or incidents, which include a toll-free ethics hotline service.

Incidents of human rights violations are recorded and investigated where possible.

Human rights performance

Incidents of human rights violations are recorded and followed up wherever possible. There has been a marked improvement in reported incidents on Human Rights violations. There were four cases of intimidation reported in 2015 (2014: 16) and no cases of discrimination (2014: 1). There were no incidents of forced or child labour at the operations.

Protecting human rights through supply chain

Human rights conditions are included in the Lonmin general terms and conditions of contract, which are attached to all tenders, requests for quotation, vendor applications, contracts and orders. New suppliers are screened when registering on the vendor database. Compliance audits are conducted on request from the operations. This year, 11 vendor contracts were terminated due to unethical behaviour.

Human rights and security

In the past three years, the Company has overcome various challenges, particularly in the area of security on the property. We revised our security procedures in early 2014, to align with international best practice with the implementation of a Security Risk Management Policy and Security Code of Conduct.