Investing in employee relationships and development

Alletta Diane issuing PPE to employees working at 1B/4B shaft.
We have completed an OPM plant this year.

Overview

Lonmin’s mining model is labour-intensive and we recognise that sustaining strong relationships with our employees, and with their representative unions, is critical for the sustainability of our business, both in the short and long term. The importance of people is evident in the four pillars of our strategy, specifically our  people and relationships.

We continued to focus on strengthening our relationships with our employees to create open lines of communication, particularly between supervisors/direct line management and their teams.

A new multi-year agreement was signed with AMCU which took effect on 1 July 2016. This was achieved without any strike action or labour disruptions. The wage agreement is discussed in Employee Relationships.

Succession planning was a key focus area, with a focus on identifying the pipeline of future leaders and developing a management plan. Succession is further supported by a bursary programme (2016: 66 bursars) offering students a full bursary to study in key technical fields, and a graduate programme (2016: 41 beneficiaries) that offers relevant corporate experience and exposure to other key aspects of the business.

This chapter discusses Lonmin’s approach to employee engagement and development, and our performance against our objectives for the year. The content covers all operations, however, data relating to accommodation mainly applies to the North West Province operations.

The majority of our employees originate from the Eastern Cape and North West provinces.

Key stakeholders

Employees

Lonmin employed, at 30 September 2016, 25,296 permanent full-time employees, with whom we are focused on building trust and strengthening our relationships. Daily interactions between management, leaders and teams provide an opportunity to achieve this.

To assist with better communication, front-line supervisors and managers receive communication materials on a wide range of topics, regular talking points and responses to frequently asked questions to support conversations around important matters with the aim of keeping our employees informed and continuously engaged.

Unions

The Association of Mineworkers and Construction Union (AMCU) is the majority union at our operations, as determined by the number of employees belonging to the union (2016: 81% of our full-time employees). Lonmin supports our workers’ rights to choose their organised labour representatives and recognition agreements are in place to allow for freedom of association, within the confines of South African labour legislation.

Contractors

Our complement of 7,497 contractor employees, as at 30 September 2016, makes up 23% of our workforce. Contractors are an important resource for creating and sustaining employment in and around our operations. They include transient and small-scale partnerships as well as long-term, large-scale professional relationships.

Engagements with contractors happen in the daily course of business as stipulated in formal service agreements.

Risks and opportunities

The sustainability risks and related opportunities that apply to employee relations are discussed below, with references to the location of further information regarding their management and mitigation. The risk management approach is discussed here and in the Annual Report and Accounts 2016.

Employee and union relations

Description

Optimal relations can significantly enhance operational execution and improve employer-employee relationships, whilst a breakdown in relations could result in production stoppages as well as a breakdown of trust.

The industrial relations environment has stabilised over the last 12 months as evidenced by the improved dialogue between unions and company management. Whilst the environment has remained stable, the potential for volatility remains, which could result in disruptions to operations and have a material adverse effect on the Company’s financial position.

Impact

Various internal as well as external factors could influence the employee relations space and could lead to disruption of operations and breakdown of employer-union relations.

Opportunities and mitigation

To ensure open and transparent dialogue, appropriate structures have been established to enable effective employee engagement across all levels. These structures include a Future Forum which enabled the consultation process for voluntary severance as well as the Section 189 process. A relationship-building programme and charter to govern relations between unions and the company have been established. As part of enhancing employee ownership, an Employee Profit Share Scheme has been established.

Further reading

Employee overview

Valuing our employees

Skills development

Employment equity and diversity

Employee accommodation and living conditions

Loss of critical skills

Description

Due to the depressed mining sector, the risk of the loss of critical skills remains high.

Impact

The loss of critical skills could negatively impact safety, production and the ability to deliver against targets. In order to retain our skilled labour, we continuously review market-related remuneration packages as compared to the incentive and retention schemes offered by Lonmin. This continuous monitoring of remuneration practices and matching the packages offered by our peers in order to attract and retain employees of a suitable calibre can result in increased costs.

Opportunities and mitigation

Implementation of a scheme to retain key critical skills. Ongoing review and analysis of our remuneration practices in order to ensure that we remain competitive and are able to attract and retain the skills required during this challenging time. We also use counter-offers selectively in order to retain the most critical employees. The implementation of an employee value proposition which focuses on employee wellbeing.

As part of ensuring the development and retention of critical skills Individual Development Plans (IDPs), succession planning and retention strategies for scarce skills have been established. Ongoing monitoring of remuneration practices which matches Lonmin peers are monitored in an ongoing manner. Graduate development, mentorship programmes and internship programmes have also been established to ensure development of existing and future human resources capacity.

Further reading

Skills development

Employment equity and diversity

Accountability and governance

Lonmin’s Human Resources Strategy is implemented through the human resources function, which is integrated into the Company’s other business streams to enhance service delivery to our employees and to support more effective decision-making. Monthly reports on key internal human resources indicators track progress against our targets and integrate certain targets into Lonmin’s corporate and operational objectives.

The strategic human resource drivers that support the effective implementation of Lonmin’s strategy are:

  • Employee relations – rebuilding our relationship with employees and unions
  • Winning the hearts and minds of our people – ensuring visible leadership and management accessibility
  • A compelling proposition for employees – culture transformation through “The Way We Work at Lonmin”
  • Financial literacy and counselling
  • BEE transactions – through the Employee Trust and the profit share scheme
  • Housing and living conditions – focus on enabling our employees to access decent living conditions and home ownership

Contractors

Contracted companies are required to operate sound business models that protect the basic human and constitutional rights of their employees and comply with the prevailing labour laws to facilitate an environment of productivity and development. These requirements are enforced through the Company’s procurement assessment process. Contractual terms and conditions bind contracting companies to adhere to Lonmin’s Sustainable Development Standards, Code of Business Ethics and the Basic Conditions of Employment Act, 75 of 1997. Contracting companies must also demonstrate how their internal processes provide and uphold fair treatment of their employees’ rights.

Grievance procedures

Formal mechanisms are in place for employees to lodge grievances, including an anonymous ethics hotline. As outlined in the corrective action procedure, employees can also request a mediation to be set up by a human resources practitioner or line manager. Further information is available on human rights and ethics.

During 2016, Lonmin refined its disciplinary procedure to include revised corrective action procedures that define the consequences for non-compliance with Company standards, including absenteeism and safety disciplines. This procedure is being consulted on with our majority union and will take effect once this process and any subsequent revisions have been exhausted.

External policies, frameworks and regulations

Lonmin’s Human Resources Strategy, policies and procedures comply with the requirements of South African labour laws and align with other relevant frameworks, guidelines and codes of practice where these relate to human resources. The Company’s progress against the human resources requirements of the Broad-Based Socio-economic Empowerment Charter for the South African Mining Industry (the Mining Charter) are reported to the Department of Mineral Resources, including accommodation and living conditions, employment equity, transformation and human resource development.

The draft of the Mining Charter was released during the year. The revision in its current form is likely to have an impact on the Company, including as it applies to ownership, transformation, employee housing, procurement and skills development. Consultation between the industry and the Minister of Mineral Resources is ongoing.

Approach and performance

Employee overview

As at 30 September 2016, Lonmin employed 25,296 (2015: 26,968) people on a permanent full-time basis, of whom 79% were HDSAs. Of our full-time employees, 9.1% (2015: 8.8%) are women. Our management headcount, as at 30 September 2016, was 437 compared to 475 at 30 September 2015. We employed 7,497 (2015: 8,701) contractors; of these, 689 or 9.2% (2015: 799) contractors are women.

The decrease in headcount is predominately attributable to the reorganisation programme initiated last year, natural attrition and a greater proportion of contractors departing as part of our continued organisational optimisation initiatives.

1 Please take note that the reorganisation process stretched beyond the financial year scope and included the reduction of contractors.

84% of our employees are South African; the majority of our 16% foreign employees originate from Mozambique and Lesotho. Our South African workforce comes mainly from the Eastern Cape and North West provinces.

To support the increased participation of South Africans in the local resource economy, Lonmin employs locally where possible. Training initiatives in local communities develop skills to increase the pool of local employees. Initiatives include the production cadet, the mining technical service and community engineering learnership programmes. Community education and skills development are discussed in detail in the Social Licence to Operate chapter of this report.

Employee demographics by geographic origin at 30 September 2016

Reorganisation

Lonmin has a policy in place to assist us to act in a manner that is both substantially and procedurally fair in the event that retrenchments are required.

Due to persistently low PGM prices, reorganisation was initiated in 2015 to refine the business model. At the conclusion of the reorganisation in March 2016, the restructuring had contributed to a headcount reduction of 5,4331 people. 1,428 employees were reskilled and redeployed into vacant, more productive roles. Forced retrenchments were limited to 62 people. The reduction was achieved through active engagements and consultation with trade unions. That the process was completed without strike action or any operational disruptions is a tribute to the maturing relations built through the Relationship Charter between Lonmin and the unions.

1 This figure is representative of the reorganisation process that commenced June 2015 and was completed in March 2016, thus stretching beyond the financial year scope. The figure includes contractors.

Support offered to employees during the restructuring included reskilling options, a no-obligation voluntary package calculation service (which among other benefits offered two weeks’ severance for every year worked), a dedicated help desk, an SMS helpline, financial support to acquire a new portable skill as a means to sustain economic participation, easy access to payroll services and financial advice from a reputable external financial adviser firm, as well as pension and provident fund service providers. The counselling service offered emotional support, and any study assistance or debts to the Company accrued during the 2014 strike were written off for those exiting the Company on a voluntary basis.

Employee turnover

Employee turnover decreased to 7.9% in 2016 (2015: 9.1%); of this, 4.24 % was a result of the headcount reduction initiatives. Adjusting for the headcount reductions, Lonmin’s turnover rate has remained relatively low for the mining industry.

Absenteeism

Achieving our strategic goal of operational excellence is critically dependent on increasing labour productivity, and particularly important given the reduced headcount at our operations.

We increased our focus on absenteeism, with an emphasis on improving our understanding of the root causes, how to address them and how best to support our employees. Absenteeism (unplanned non-availability) deteriorated to 12.7% (2015: 11.2%), amounting to 1,163,957 person days lost/shifts lost. With planned non-availability due to training or leave running at just over 10%, it is important to minimise absenteeism to support safe and productive operational performance.

A group of employees with high levels of absenteeism was identified and interviewed to gain qualitative insight into absenteeism. Follow-up actions include financial counselling, and support through our employee wellbeing service among others. We held workshops with employees and AMCU to highlight the consequences of absenteeism, both for employees and for the Company. We are now moving towards finding solutions jointly with our employees and automating the collection and analysis of absenteeism data in real time to monitor the effectiveness of joint interventions implemented.

Measures already in place to address absenteeism include linking attendance to bonus payments and the use of buffer labour crews, which is being piloted at a number of our Generation 2 shafts. The Company also piloted a project to assess the impact of daily nutritional supplements on employee wellbeing and to determine whether this has a positive impact on absenteeism.

Employee turnover by reason – as at 30 September 2016

2 One of the fatalities in 2015 was a contract employee and therefore will not reflect in the statistics above.
3 Voluntary separation packages.

Business improvement initiatives


The business support office continually facilitates and monitors the implementation of business improvement initiatives by line management, aimed at increasing productivity and improving performance.

Pursuant to the successful rationalisation of the workforce by 19%, we experienced an increase in productivity at our Generation 2 shafts from 5.6 square metres per person in 2015 to 5.9 square metres per person in 2016. As the disruption created by the rationalisation process settles down, we expect the mining teams to return to the long-run target levels of production. Whilst we are pleased with the implementation of our Business Plan and with our strategy to reduce high cost production in a low price environment, we have yet to fully harness the productivity gains, and mining has not been able to deliver the planned tonnes for Generation 2 shafts during the 2016 financial year for a variety of reasons, including redeployment and reskilling of employees taking longer than anticipated, absenteeism of key personnel reducing the planned blasts per month and higher incidences of safety stoppages in the first nine months of the year.

We remain focused on improving productivity and recognise that multiple challenges remain and a step change is needed to realise further improvement. In parallel with the ongoing implementation of the initiatives set out below, additional stoping crews will be deployed in order to further support the achievement of planned output, as our healthy ore reserve position allows for this.

The current initiatives being implemented to improve productivity are:

  • establishing a labour skills buffer;
  • addressing employee absenteeism;
  • introducing a programme aimed at the empowerment of frontline supervisors; and
  • implementing the Theory of Constraints framework in order to improve the optimisation of half levels at Generation 2 shafts

Valuing our employees

We value the contribution made by all our employees and recognise that morale and retention remain under pressure as a result of the restructuring, reorganisation and continuing cost constraints, with limited salary increases and few development opportunities.

Employee relationships

Our ability to deliver on our business plan is supported by the continued focus on communication and relationship building with our employees, further entrenching the vision of “The Way We Work at Lonmin” (TWWW@L).

Line management is encouraged to build relationships with employees directly to reduce the perceived gap between Company and employee. Lonmin believes that improving two-way communication and ensuring consistent messaging can build trust so that wherever possible, concerns can be addressed and issues resolved as they arise.

“The Way We Work at Lonmin”

“The Way We Work at Lonmin” is a leader-led change process to develop and institutionalise a Lonmin culture that supports sustained success by establishing productive behaviour and mindsets built around work-team relationships. The initiative is based on five core concepts that aim to improve communication, entrench accountability and empower resource teams to do what is required of them.

Remuneration and benefits

Lonmin aims to comply with all relevant labour legislation, including the Basic Conditions of Employment Act, 75 of 1997. Our employees have access to a range of benefits, such as on-site healthcare, comprehensive life and disability insurance, which includes retirement provisions, a defined-contribution pension scheme, paid study leave, four months paid maternity leave and family responsibility leave.

Various performance-linked bonus schemes serve to incentivise employees, including production-related bonus schemes set against specific targets, in which the majority of operational employees participate. Where production bonuses are not applicable, a corporate balanced scorecard is in place to incentivise employees against a range of targets which include Company financial performance, operational performance, safety, transformation, employee relations and personal achievement. The balanced scorecard is explained further in the Annual Report and Accounts 2016. Remuneration and benefits matters are subject to review and ratification by Lonmin’s Remuneration Committee (Remco). Wages for employees falling within the bargaining units are negotiated through collective bargaining arrangements. The Company aims to pay competitive wages and monitors comparable employers for equivalent levels of work in the South African mining industry. The absolute level of earnings for employees is also an important consideration.

Wage settlement

The Company announced, on 31 October 2016, the settlement of the negotiations with AMCU about wages and conditions of service. The three-year agreement, which is effective from 1 July 2016 to 30 June 2019, provides employees with a realistic and competitive settlement and ensures the continued sustainability of Lonmin. We are pleased that the negotiation process was concluded in a timely fashion and primarily without strike action, which was the desire of all parties involved.

The key points of the agreement are:

  • Increases for category 4 – 9: R1,000 per year or 7% (whichever is greater) on basic salary
  • Increases for officials (B and C band): 7% on total cost to company for each year of the agreement
  • Living out allowance increases by R100 in each year of the agreement
  • Allowances calculated off pensionable basic
  • Rock Drill Operators’ allowance increases by 6% in each year
  • Holiday Leave Allowance calculated off normal basic from year two (1 July 2017)
  • Medical contributions for category 4 – 9 employees will increase in January of each year. The medical aid contribution increase will be based on medical aid inflation as determined by the Board of Trustees of the medical aid. The increase is estimated to be 13.5% for 2017.

At the end of this wage agreement, a Rock Drill Operator at Lonmin will earn R12,296 (basic salary) and a guaranteed package of R19,455.

The impact of these wage agreements for this bargaining unit is an increase of 7.8% in financial year one, 8.0% in financial year two and 7.1% in financial year three or an average of 7.6% over the three-year period.

Below is an example of the basic agreed guaranteed packages for category 4 – 9 employees. These figures exclude overtime and safe production bonuses which make up a significant part of employees’ wages.

Lowest paid entry level underground employees

Rock drill operators

1 Cash remuneration is paid directly to the employee while the guaranteed package includes payments to funds on behalf of employees (e.g. provident fund).

Employees also have access to a range of non-financial benefits, including:

  • free transport to and from shafts, plants, housing areas and bus stops for those residing in the Greater Lonmin Community (GLC);
  • financial literacy and counselling; and
  • an employee wellness service that provides free, confidential professional counsellors and therapists on matters of emotional, physical and financial distress.

Profit share scheme

A profit share scheme was established to create shared ownership among employees who were not participants in the Company’s existing share award schemes. The implementation of this EPSS enabled Lonmin to receive an hdsa equity accreditation of 3.8%.

Financial literacy and counselling

Employee indebtedness is a concern for the mining industry as a whole and has repeatedly been identified as a debilitating burden in engagements with our employees and their unions. We revitalised a financial wellbeing programme in 2012, facilitated by an external service provider, to provide financial wellness training and support to our employees.

The financial fitness module is incorporated into the induction programme1 provided to every employee on joining the Company and when returning from leave. An on-site office informs employees on how to manage their debt and reviews garnishee orders.

1 Induction training is a pre-requirement and those working in core operations have to attend refresher training every 12 to 18 months.

The financial wellness service provider also offers the following services:

  • Audits of emolument attachment orders (garnishee orders): All emolument attachment orders issued against Lonmin employees are audited before Lonmin activates payments to the respective parties. This process helps to stop or cancel a number of irregular or illegal garnishee orders, for example where administration fees are charged above the allowed 12.5%. Since inception, this process has saved employees approximately R4 million, and stopped 473 garnishee orders.
  • Reviewing interest charged: This assisted in reducing the outstanding balances on our employees’ loans and emolument attachment orders by R2.5 million since inception. Interest charged on employee debt has halved from 19% to 8% and the total debt instalments charged to employees were reduced by over R200,000 a month. Thus far, through this assistance, three houses and 13 cars have been saved from being repossessed.
  • Assisting employees with tax consulting services: This service has resulted in tax savings and refunds for our employees, and was also instrumental in identifying tax scam perpetrated by bogus tax practitioners. We were able to warn our employees of the scam and provide the necessary assistance where needed of R462,000 over the last year.

Case study: Mr Motsh


  • The financial wellness service provider met Mr Motsh in December 2015 when he visited Chris Ryce, our financial wellbeing consultant. He requested assistance because he could no longer afford his debt commitments, which were over 70% of his net salary.
  • He had two personal loans which amounted to just under R200,000 in outstanding capital and R10,700 monthly repayments.
  • The service provider was able to reduce his instalments from R10,700 to R3,500 by reducing interest rates under the debt counselling solution. Mr Motsh now pays only 30% of his net salary on his debt repayments.
  • This ensures that he takes home nearly double the amount now, compared with when he received assistance from the service provider. This is a R7,200 additional disposable income available to spend on his living expenses and family.
David Thengimfene a loco operator working at Saffy shaft.

Skills development

The industry shortage of critical skills is a risk to Lonmin’s ability to achieve its strategic goals. The Company’s employee development initiatives aim to develop the required skills in our employees to create an empowered and productive workforce.

Lonmin’s total investment in employee development decreased to R156.89 million (2.3% of annual payroll) compared to R183 million in 2015 (2015: 2.6%).

While spending on developmental training remained constrained due to the focus on cost containment and cash preservation, the Company is taking the necessary steps to ensure that the skills pipeline remains appropriate to meet our forecast needs.

A programme to develop and upskill leadership and empower line managers will be rolled out. This will be followed and supported by a team intervention, which will include shaft management, from general managers to team leaders, and will be rolled out on a shaft-by-shaft basis over the next three years. These programmes will also emphasise productivity to re-establish this key attribute at pre-strike levels.

The business model arising from the organisational restructuring enabled standardisation of human resources development programmes across all sections. The ISO 9001 quality audit which took place this year covered all operations and sections. It led to a single ISO 9001 accreditation across the Company, which was secured in preparation for the Mining Qualifications Authority (MQA) audit.

Breakdown of average training hours per employee category

Lonmin trained 19,602 employees and 7,764 contractors at our training facility which is based near our operations in the North West during 2016, investing a total of 1,336,106 hours of training.

Learnerships

Scarce technical skills in mining, processing and engineering are developed through learnerships in our mining and process operations, and engineering function. The current intake decreased due to cost containment, from 148 in 2015 to 38 in 2016.

Core skills

The core skills programme focuses on critical competencies required by the mining and process operations. 1,609 employees received training to develop basic core skills and meet key operational standards (2015: 5,286).

Bursaries and graduates

Lonmin’s bursary and graduate programmes build the pipeline of future skills the Company needs by identifying and developing appropriate candidates. The programmes focus on students studying mining or mining-related disciplines, such as mining, electrical, mechanical, industrial or chemical engineering, metallurgy and mining technical services disciplines (for example, geology). Comprehensive bursaries are made available to promising candidates on the basis of a service binding contract after graduation, for a period equal to the number of years’ study. Preference is given to HDSA candidates and those from the Greater Lonmin Community (GLC). Upon completion of their studies, bursars enter Lonmin’s graduate-in-training programme.

Lonmin had 66 bursaries in place during 2016 (2015: 98). Of these, 55% are students from the GLC, 82% are HDSAs and 38% are women.

There were 41 graduates on the graduate-in-training programme during the year, which 83% are HDSAs; 31% are from the GLC; and 41% are women.

Mentorship programme and individual development plans

Employees are encouraged to set personal goals for their current and future development through individual development plans (IDPs), which combine with a formal mentorship programme that facilitates skills transfer and knowledge sharing.

There were 104 active mentorships in 2016 (2015: 115), of which 27% are for women. For C-band and above, 671 employees (24% women) have formal IDPs in place (2015: 1,317). Our aim is to have an IDP in place for all interested employees within these bands.

Adult education and training

The Lonmin Academy provides adult education and training (AET), previously known as adult basic education and training (ABET), including courses for pre-AET and AET levels 1 – 4. Level 4 is the equivalent of a Grade 9 qualification in the South African schooling system. 295 employees and 137 community members registered for AET courses (2015: 781). The Company’s emphasis on productivity and cost efficiencies created a challenge in releasing full-time employees for training during working hours.

Portable skills training

Employees affected by the Section 189 process were offered portable skills training. During the year, 156 people, including community members, received portable skills training (2015: 303). Fewer employees received portable skills training as the Company is in a cash-constrained environment and had to reduce training costs.

Employment equity and diversity

The MPRDA, which is implemented through the Mining Charter, was enacted to drive transformation in the mining industry by facilitating meaningful participation of HDSAs. Lonmin recognises transformation as a business imperative. We are committed to cultivating a workforce that reflects the diversity in our country, including that our working environment accommodates women.

Transformation and empowerment

Transformation is monitored and overseen at Board level by the SET Committee. The Exco receives monthly reports on HDSA representation in the business. Transformation considerations are incorporated into recruitment, succession, skills development and talent management functions to develop an internal pipeline of HDSAs, including women. Our bursary and graduate development programmes prioritise HDSAs in order to build the pipeline for future supply of appropriate candidates.

HDSAs in management increased to 52.4% in 2016, which remains above the Mining Charter target of 40% at management level.

Women in mining

We are committed to cultivating a working environment that welcomes the contribution of women in a traditionally male-dominated industry. Women comprised 9.1% of total full-time employees. 6.3% of core mining positions were occupied by women.

Our goal for 2017 is to continue to implement programmes that support the transformation of the Company’s workforce to improve HDSA representation in management and women in mining, and to align with the requirements of the Mining Charter once it has been finalised.

The Company is piloting work clothing and personal protective equipment designed to better meet the needs of women working at the mine.

Employee accommodation and living conditions

Human settlements

Integrated human settlement strategy

In recent years Lonmin’s human settlements initiatives have been focused on achieving a series of sustainable, integrated housing initiatives. During this journey, the Company has come to recognise that these initiatives will require a multitude of strategic partnerships with property developers, providers of capital, lending institutions, local municipalities as well as provincial and national government. We consult regularly on this strategy with government, local authorities, employees and their representatives, whose involvement is vital.

To this end, Lonmin and its organised labour are reviewing employee living standards as part of its new human settlements strategy. We believe that our employees deserve decent living standards and should have a choice of how and where they want to live allowing for personal circumstances, affordable and market-related rates and integration into the broader society during their employment at Lonmin. To assist in achieving these important objectives, Lonmin issued a formal request for expressions of interest nationwide to partner with the Company to review the existing human settlement strategy. The reviewed strategy should realise a tactical plan that addresses employees’ wishes, needs, security and affordability to ensure a fit-for-purpose and decent standard of living. This is the first step in the process of developing an appropriate strategy which will require the commitment of all stakeholders to ensure success. An element of this strategy will be an employee accommodation census to establish employee housing preference and confirm the estimated number of employees who require decent accommodation. We believe that the living conditions of our employees and their families have a direct influence on their general wellbeing and on their ability to focus and perform in their working environments. At the same time, we continue to work on collaborative projects such as the Special Presidential Package to improve infrastructure and service provision. Achieving our vision for sustainable, integrated human settlements requires careful planning, consultation and coordination between all stakeholders, including employees, communities, potential funders, developers, unions, local municipalities and all levels of government.

Affordable accommodation1

The Marikana Housing Development Company is a section 21 non-profit company that was established for the purpose of managing the 1,149 two-bedroom homes Lonmin has made available for outright purchase or on a rent-to-buy scheme since 2005. The selling price of these 45 square metre homes is R62,426, including land. To date, 369 people (2015: 325) have taken ownership of these houses. While affordability, indebtedness, and access to mortgage funding create serious challenges, marketing and education programmes are being ramped up to encourage employees to purchase the houses. Future home ownership plans are investigated as part of reviewing the employee housing strategy.

1 In addition to these houses and converted hostel accommodation, there are 369 houses at Karee and 280 houses at Wonderkop available on a rental basis.
Infill apartments per SLP commitments

All 128 single-sex hostel blocks were successfully converted into renovated single and family apartment blocks at a total cumulative cost of R387 million by end of 2014. The infill apartment project develops the areas between the existing converted blocks to utilise the space available and to access the existing installed bulk infrastructure around the converted hostels. Lonmin committed to spend R500 million over five years in terms of its SLP commitments to develop 1,240 modern apartments. The scope of the project includes sport and recreation facilities, paving and landscaping to transform the space into employee housing villages. Phase 1 of construction saw 325 units completed at Karee in 2016 at a cost of R90 million. Construction of another 168 apartments is in progress, as part of Phase 2 at a cost of R70 million. Phase 3 and Phase 4 of the apartments programme are scheduled to be rolled out in 2017 and 2018 respectively.

We continue our engagement with unions on the allocations of these units as well as the market-related rental for these units.

Collaboration projects

These are long-term projects that rely on collaboration with multiple partners and stakeholders. The collaboration projects include Marikana Extension 2, Marikana Extension 5 and Mooinooi.

Marikana Extension 2

Lonmin contributed 50 hectares of serviced land for development following the announcement of the Special Presidential Package initiative in 2013. This land, known as Marikana Extension 2, was donated directly to the Department of Human Settlements, the North West Public Safety and Liaison Department and Rustenburg Local Municipality. An estimated 2,658 dwellings of various typologies are expected to be constructed on the land, which will benefit community members, including Lonmin employees. At the close of phase 1 in March 2016, 292 breaking-new-ground (BNG) units had been constructed by the provincial government and 252 community residential rental units (CRUs). As agreed with the stakeholders from the provincial government and local municipality offices at the inception of the agreement, 70% of the units constructed are allocated to Lonmin category 4 – 9 employees. Phase 2 construction of scoped units is yet to commence and, at the time of publishing this report, the Company could not ascertain a clear commitment from the relevant stakeholders about when this will be completed.

Marikana Extension 5

Feasibility studies to construct units continue on the 134 hectares of unserviced land at Marikana Extension 5. Lonmin is seeking to enter into partnerships with prospective developers in order to develop more housing units and facilitate access to decent accommodation.

Mooinooi

Initial feasibility studies conducted by the Company have indicated that 25 hectares available for development in Mooinooi could accommodate 2,500 high density units. Rezoning and consolidation of the various serviced stands are being pursued with the Madibeng Local Municipality to partner with prospective developers for such an undertaking. Concurrent with the rezoning application we are in discussion with Madibeng to enhance the bulk services supply and infrastructure.

The request for expressions of interest for the Lonmin Employee Housing Strategy cover these initiatives.

Union relations

We respect and support our employees’ rights to collective bargaining and freedom of association, and representation. Lonmin also believes that every employee has a right to be heard.

Lonmin interacts with unions on an ongoing basis and at different levels within the Company, through the various union structures and management interactions with union representatives.

Relationships with unions, while challenging, have strengthened and matured. This contributed substantially to the successful implementation of the workforce restructuring, reduced work stoppages and the successful resolution of the 2016 wage negotiations. Management interacts regularly with union representatives and the Company has invested in supporting capacity development in union structures and leadership. Changes to the Company’s operating structures last year have made it important that the Company and union structures are realigned to improve communication. Monthly and quarterly meetings are held to share information on Lonmin’s performance and evolving situation. Training is provided to shop stewards on legislative matters, business skills and the requirements of their roles and responsibilities.

At the end of September 2016, 23,520 employees (93%) were members of various organised trade unions.

Recognition structures

Lonmin believes that every employee has a right to be heard without intimidation. The Association of Mineworkers and Construction Union (AMCU) is the majority union, representing 81% of full-time employees as at 30 September 2016. However, in accordance with the labour Relations Act of South Africa, AMCU has collective bargaining rights, unrestricted access to the workplace and rights to deductions, full-time shop stewards and office facilities on the Company’s premises.

A Relationship Charter is in place that outlines the Company’s relationship with the majority union, including aspirations, expectations, accountability and commitments from both parties. The implementation of the terms of the Relationship Charter has enabled Lonmin to strengthen relations with trade unions through constructive and regular engagements.

Lonmin’s Women’s Day celebrations