Maintaining our social licence to operate and investing in the community
Lonmin’s strategy commits us to creating benefit for all our stakeholders and defines our approach to social spending as an investment and a business imperative. We believe that success on an operational and societal level can only be achieved through multi-stakeholder commitment. Building strong and constructive relationships with the communities surrounding our operations creates a predictable and stable operating environment that supports our strategic goals over the long term. Together we have achieved a lot, but there is still much to do.
Our goal is to demonstrate our commitment to good corporate citizenship through projects that support the wellbeing and development of our host communities and those affected by our operations. These projects form part of the local economic initiatives contained in our Social and Labour Plans (SLPs).
There are four broad focus areas through which we strengthen our social licence to operate:
- Stakeholder engagement: Regular formal and informal engagements with stakeholders in local communities, which include engagements with government representatives, allow us to understand stakeholders’ expectations of Lonmin and communicate the current position and delivery status of the Company. During 2016, Lonmin invested in the development of community representative structures which facilitated improved formal engagements. More information on our stakeholder engagement is available in the online supplementary report
- Community upliftment initiatives: Our investments in local communities target some of the most pressing socio-economic challenges facing the Greater Lonmin Community (GLC) and some labour sending areas. These include improving education and health, developing local suppliers and assistance in improving basic services and social infrastructure. Lonmin believes that education can fundamentally change lives, therefore, we invest in the education value chain – from early childhood development, school infrastructure and sport development to supporting students at tertiary level. We also train local communities, which develops the pipeline of possible future skilled employees and increases opportunities for local procurement. These same skills are transferable and can later be used for other community development projects, such as road construction. These initiatives are dealt with in detail in the rest of this chapter.
- Corporate and community partnerships: Addressing the challenges evident in local communities requires a broader partnership approach that includes the Company, the community, local and national government, and the various companies operating in the area.
- Ethical business practices: Lonmin’s Code of Business Ethics commits the Company, its employees and suppliers to ethical standards of social and business practices. Ethics at Lonmin is discussed in more detail in the Governance section and our commitment to uphold human rights and our performance in this regard is discussed here.
This chapter provides an overview of the initiatives implemented in local communities, with a focus on the GLC as the majority of the Company’s operations are in the North West Province.
Lonmin’s Marikana operations are flanked on the eastern side by the Bapo Ba Mogale community. Other communities surrounding the operations include localised and transient migrant workers from across southern Africa. It is estimated that more than 126,0001 people live in formal and expanding informal settlements around our operations. The difficulties in addressing the many challenges arising from informal living conditions are exacerbated by lack of basic services. While there is an imperative to employ preferentially from local community members, this must be balanced with the need to respect the rights of migrant workers to work.
At the Limpopo operation, local traditional authorities include the Mphahlele, Ledwaba, and Kekana.
Non-governmental organisations, non-profit organisations and faith-based organisations
There are many non-governmental organisations (NGOs), non-profit organisations (NPOs) and faith-based organisations active in local communities, and these organisations play a crucial role in supporting people in need through initiatives that raise awareness of various social issues. By collaborating with these stakeholders, Lonmin can more effectively address the many challenges faced by local community members. NGOs with a humanitarian and environmental mandate are increasingly active in holding companies accountable for their performance in these areas.
Lonmin works in partnership with local government so that socio-economic development initiatives are viable, sustainable and align with the National Development Plan (NDP), regional integrated development plans and other government-driven community initiatives such as Project Phakisa. Regular engagements are held with various government departments, including the departments of Basic Education, Health, Trade and Industry, Social Development, Human Settlements and Mineral Resources, as appropriate, and with provincial and local government. These engagements also provide oversight on projects implemented by the Company.
|1||Based on the assumption that every employee and contractor, based on 2014 headcount, supports 3.3 dependants, as per information from the South African Census 2011 – Statistical Release (revised) P0301.4 by Statistics South Africa.|
Risks and opportunities
The sustainability risks and related opportunities that apply to our social licence to operate are described below, with references to further information regarding their management and mitigation. The risk management approach is discussed here and in the Annual Report and Accounts 2016.
A sound relationship with surrounding communities will enhance relations and organisational reputation, whilst a failure to do so could result in disruption of operations or community unrest. 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.
As many of our employees live locally, any disruptions within the communities can have a direct impact upon production. The failure to deliver social upliftment projects can trigger protests or violence and corporate reputational damage can result, if the relationship with these stakeholders is not managed effectively. Lonmin has acknowledged the important role of communities as a critical stakeholder and has implemented various engagement platforms and development initiatives to ensure appropriate upliftment. Procurement has become another focus area as communities view it as an opportunity to improve their livelihood through increased income. Lonmin has identified this need and has introduced procurement opportunities for communities.
Opportunities and mitigation
The development of a revised stakeholder strategy with emphasis on continuous engagement at all levels and communities (Bapo and non-Bapo communities) as well as involvement of the communities in the implementation of the Social and Labour Plan (SLP). Greater consultation with stakeholders which includes upliftment measures to be initiated. This approach has increased community ownership of both the challenges facing communities and the solutions provided as part of the SLP implementation plan.
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 cadette 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 Bapo Ba Mogale, Madibeng and Rustenburg communities. The engagement meetings address employment, economic development, community infrastructure programmes and SLP status. The transaction with the Bapo Ba Mogale resulted in community trusts being entitled to a minimum of R5 million per annum and the provision of R1.65 billion worth of procurement contracts.
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 regarding taxation, royalties, divestment, repatriation of capital and resource nationalism. The latter 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.
The Mineral and Petroleum Resources Development Act (MPRDA) Amendment Bill currently remains the subject of Parliamentary debate. In particular, beneficiation is a major consideration, with the Bill proposing that the Minister be granted a discretion to declare certain minerals as strategic, that the Minister determine what percentage of strategic minerals are to be made available locally, and the developmental price at which strategic minerals are to be sold, as well as the Minister being able to determine the conditions applicable to export permits. In addition, the Davis Commission is currently looking at the tax regime with a view to determine whether additional taxes including a carbon tax should be imposed on mining companies. The mining industry is also awaiting clarity on the interpretation of the applicability of the “Once Empowered Always Empowered (OEAE)” principle. Currently, engagements are taking place on the OEAE principle and the new Mining Charter.
The Department of Mineral Resources (DMR) has also recently come under pressure to demonstrate that it is taking action to monitor compliance with undertakings made in the SLPs submitted by mining companies. This has led to the DMR issuing section 93 notices to mining companies on a more regular basis. Lonmin has received section 93 notices in respect of its housing and living conditions obligations and continues to engage with the DMR to reach a constructive solution. In addition, the Department of Trade and Industry is attempting to legislate a policy of creating black industrialists.
The ongoing debates in respect of resource nationalism have created policy uncertainty. If some of the issues under consideration are implemented, this could have a material adverse effect on the mining industry in South Africa. For example, profits could be negatively impacted by the imposition of additional taxes and revenue could be impacted by the sale of metals at discounted developmental prices. The obligation to sell locally could impact long-term supply agreements with our customers and give rise to concerns about security of supply from South Africa, potentially expediting the growth of the recycling industry and increasing substitution concerns.
Opportunities and mitigation
Lonmin is participating in the Chamber of Mines process to engage the DMR with regards to concerns regarding the new Mining Charter, as well as engaging more broadly with government regarding this exposure. Appropriate governance structures in the form of Executive and Board Committees are being established to ensure ongoing reporting of progress against agreed SLP targets. Bilateral and industry level discussions with the DMR and other government agencies are ongoing.
Accountability and governance
Lonmin’s strategic pillar of corporate citizenship defines our commitment to contribute to the wellbeing and development of the communities that host and are affected by our operations. Lonmin’s Relationship Charter codifies the Company’s approach of partnering with communities, as does the Lonmin Safety and Sustainable Development Policy. The Social, Ethics and Transformation (SET) Committee monitors the Company’s transformation and community development progress. The Executive Vice-President of Communications and Public Affairs, who reports to the Chief Executive Officer, is responsible for delivery on the Company’s community development commitments.
The community development department and the enterprise development arm of the procurement department work together to identify opportunities arising from local economic development projects.
The community investment programme comprises specific community development projects that are defined in our SLPs, as well as a number of additional community upliftment projects that are conducted over and above those in our SLPs.
Purpose statements are put in place before a project is started to define objectives and deliverables.
External policies, frameworks and regulations
Lonmin’s regulatory community development projects are defined in our SLPs, which are compiled in terms of the MPRDA, and progress against these commitments is reported regularly to the DMR. As a member of the International Council on Mining and Metals (ICMM), the Company subscribes to the ICMM’s 10 Principles of sustainable development, including Principles 9 (community development) and 10 (stakeholder engagement).
Transformation, including procurement, is regulated by the Broad-Based Black Economic Empowerment Act, No 53 of 2003, and our approach is also framed by the Preferential Procurement Policy Framework Act, No 5 of 2000.
The original Mining Charter was issued in 2004 and revised in 2010, which included certain targets set to 31 December 2014. A draft revision was released in 2016.
Approach and performance
Social and labour plans
SLPs define the Company’s commitment to develop and implement comprehensive human resources development programmes and are required to acquire mining or prospecting rights under the MPRDA. These initiatives include local economic development programmes and employment equity plans.
Breakdown of Rand value spent on community SLP projects:
Community relations and engagement
Our local community projects are managed by the community development department. The community value proposition process was initiated by the community development department in 2012 to support Lonmin’s goal of making a social investment that is sustainable and has a lasting impact beyond the life of the mines. To develop an in-depth understanding of communities’ development needs, we engaged with community leaders and interested and affected parties.
Projects are incorporated into Lonmin’s SLPs, which consider local municipality integrated development plans (IDPs)1 and the projects identified through our community need assessment process. Project progress is monitored against SLP targets determined at the start of the projects, and reported to the SET Committee of the Board, as well as on an annual basis to the Department of Mineral Resources (DMR).
|1||IDPs map out short, medium and long-term plans for communities, including spatial planning, economic development and infrastructure development.|
Stakeholder groups are identified on a geographic basis and on the basis of common issues of concern, and are then included in the stakeholder map. Stakeholder engagement officers interact with representatives from local communities through formalised structures, including community project meetings, ward councillor meetings and meetings with representatives of civic, religious, environmental, youth and women’s groups. Community members and other stakeholders can raise complaints with the Company through these channels.
Community grievances are noted in the minutes of meetings and entered into a new tracking system. System administrators are receiving training on the tracking system, to support successful implementation.
Community development projects receive support from the project management office at Lonmin that assists with the creation of project plans, KPIs and regular reports to improve performance measurement and track delivery.
Investing in community development
The community development strategy defines how Lonmin intends to create long-term social and economic value by:
- 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; and
- enabling community businesses to become business partners of choice and contribute to the growth of Lonmin.
We invested R52 million in approved community projects that form part of WPL and EPL SLPs (2015: R62.5 million).
Summary of expenditure of key community focus areas
|2||This includes programmes over and above SLP projects for WPL and EPL, and excludes overheads and donations.|
|3||Incorrectly reported in 2015, as R3.2 million.|
|4||Excluding administration costs and donations.|
Community education and skills development
Unemployment and poor education are two of the most serious challenges facing South Africa and our local communities. Lonmin’s investment in projects that support education and improve skills and employability create opportunities for community members to break the cycle of poverty, contribute to the sustainable upliftment of the community, and build a pool of skilled community members for industry and nationally.
Our community education programme focuses on six key areas of education: school infrastructure development, learner support, educator support, parent support, school nutrition, and sport, arts and culture. Projects are reviewed and adjusted on a quarterly basis to keep them aligned with evolving community needs and are benchmarked against the education component of the NDP and with the Mining Qualifications Authority (MQA).
Baseline assessments are conducted before commencing projects, specifically in the case of school infrastructure projects and early childhood development (ECD) centres.
Skills development projects place increasing focus on developing entry-level skills for mining to support hiring from local communities, in line with the revised recruitment plan established on completion of the restructuring. Fifteen community members were trained according to the needs of mine technical services and absorbed into the mine during the year. A further 13 community trainees were permanently employed in the process operations.
Lonmin also provides information to contracting companies about skills that have been developed in the community for specific projects. For example, the community pool of bricklayers, welders and plumbers is being accessed in construction of the infill apartment housing project.
Community education programme
Since 2007, we have provided infrastructure support to 28 schools in the GLC through additional classrooms, mobile classrooms, electricity upgrades, sporting facilities, or ablution facilities. Wherever possible, we use GLC construction companies to support the local economy. Since 2010, Lonmin has provided a total of 82 classrooms (with supporting ablution facilities) in the GLC schools.
We plan to fund the construction of a new primary school in Marikana, including sports facilities, within the next year. The school will benefit 680 learners.
Other infrastructure projects include installation of a borehole pump, renovation of the mobile classrooms at Majakaneng Primary School, palisade fencing to be installed at Marikana Combined School and around the perimeter area where the new school will be built. Fencing was upgraded at Thlapi Morue Primary School and Rakgatla High School. Ablution facilities were repaired at Kgwanyape Primary School, trees cut back and rubble removed at Machadam Combined School. Borehole facilities were repaired at Nkukime Primary School and Bapo Primary School.
Renovations, additional classrooms and ablution facilities were completed at Thlapi Morue Primary School and Segwaelane Primary School. Two schools, St Catherine’s Primary School and Kwanyape Primary School, sustained severe damage to the roofs following a storm, and this was repaired.
Lonmin provides support to learners in the GLC to improve education and pass rates.
Support programmes include:
- The Ithuteng programme for grades 9 to 12 (100 learners in 2016);
- The examination preparedness and support programme (449 students);
- The community study assistance programme, which supported 63 students enrolled for mining and non-core mining-related studies; and
- Career guidance to 2,167 learners.
The university and technical preparedness programmes were combined into the general preparedness programme, which supported 47 students identified from seven high schools in Marikana and six high schools in Limpopo who are applying for tertiary institutions or learnerships (2015: 51). The programme assists students in making a successful transition to tertiary education through either a university or an engineering learnership. School leavers on the technical preparedness programme receive support to achieve technical skills accreditation within one year of training. In 2016, the national qualification levels were increased to include N4 in the programme.
The mining-related skills programme provides skills development opportunities to local youth who have reached adult education and training (AET) level 4 (equivalent to Grade 9) and are seeking employment. 185 cadets completed the training.
We offer bursaries to promising students from the GLC. Candidates who received bursaries in the prior year continued and held 55% of the Lonmin bursaries (2015: 52%). During 2016, no new bursaries were allocated but additional funding was allocated to existing bursars for accommodation assistance. More information can be found under our bursaries and graduates.
A strong performance by GLC high schools
Six out of the seven GLC high schools achieved an average Grade 12 pass rate above that of the national average for 2015. This is particularly noteworthy since progressed1/cohort learners were included in 2015 for the first time. Notable achievements are Mogale High School in Bapong, which improved from a 72% pass rate in 2014 to 92% in 2015. Marikana combined obtained the highest pass rate in the GLC with 94.2%, and the DBE Madibeng Office obtained first place in the North West Province. This significant achievement is a tribute to the combined efforts of a range of stakeholders, including the Department of Basic Education, the school principals and their management teams, the school governing bodies, Bapo Ba Mogale leadership, ward councillors, Ukuqonda Institute, Brainwaves, the EPS management team, parents and, most importantly, the learners.
|1||Progressed learners are learners who failed Grade 11 twice but were promoted to Grade 12 without meeting the passing criteria, as directed by Department of Basic Education policy.|
Support for primary and high school educators is offered through in-class and off-site workshops. It is primarily focused on mathematics, but workshops also include technology and physical science. During 2016, 92 educators attended these workshops in the GLC and Lebowakgomo (Limpopo). Study assistance was provided to four educators to assist them to improve their qualifications.
Access to sound ECD facilities and teaching are essential to improve educational outcomes and socio-economic development. Not all children in the GLC have access to formal education during early childhood, and are cared for in informal day-care facilities. Lonmin supports 52 (2015: 49) ECD centres by providing 171 (2015: 143) ECD educators with basic skills, enabling them to teach children the foundations required to begin their formal schooling. The programme benefits these educators and the 2,674 (2015: 2497) children in the ECD centres. A new group of 12 educators attended ECD Level 4 accredited training in 2016.
Career guidance workshops are provided to parents to raise awareness about career opportunities for learners and the programmes we offer. The workshops aim to motivate parents to support their children’s performance.
School nutrition programme
We understand the vital role of learner nutrition educational outcomes. Our school nutrition programme, which forms part of the community health programme, is described here.
The Company supports various sports tournaments and provides ad hoc assistance to individuals and teams who qualify for district, provincial and national competitions. We sponsored an annual school sports tournament in which 200 under-13 to under-17 sports teams participated in netball, soccer, volleyball and chess. Entertainment was provided by local musicians and cash prizes were awarded to the winning teams. Referees and coaches also received training.
The upgrade and construction of the Bapong Sports Fields were completed during the year. The project involved renovations and additions to an existing but disused sporting facility. Upgrades included two soccer fields, two multi-purpose courts, a water system and renovations to the ablution facilities. The facilities were handed over to the Bapo Ba Mogale traditional authority and community, who will take over management and maintenance of the facility.
Lonmin provides transport for several soccer teams and players in the area.
We support the Wonderkop Boxing Club, which attended the Elite Championship held at Durban University of Technology where team members achieved one gold medal, eight silver medals and seven bronze medals.
At the Cadet National Championships in Cape Town, team members won 24 gold medals and several received individual accolades.
Lonmin is sponsoring Atang Swartbooi from the GLC to participate in the World Cricket Challenge in Melbourne, Australia in December 2016.
Mpho Madumo, a para-athlete with an intellectual disability, from Rekgonne Bapo Special School in Bapong, was chosen to participate in the 2016 World Basketball Championships in Kerry, Republic of Ireland. We provided Mpho with kit, clothes, toiletries and luggage bags.
Arts and culture
The United Dance Club from Modderspruit was sponsored by Lonmin to participate in the World Champions World Trials Dance Competition in Cape Town.
Unemployment is a national concern. At 28%1, the unemployment rate in the North West province is above the South African average. Youth unemployment is a particular concern in our host communities. Lonmin’s skills development programmes aim to provide school leavers with the skills required for employability in the mining industry or to generate an income through self-employment.
|1||Statistics South Africa: Statistical release P0211. The expanded unemployment rate in North West Province is 43%.|
Training includes one-year speciﬁc skills interventions to bridge the gap created by local schools that do not offer technical curricula. Our mining-related skills development programme combines competent B mining training with interview coaching, first aid training, CV preparation and African wisdom, which provides life skills necessary for everyday life.
The Company was unfortunately not able to absorb beneficiaries of these programmes, due to the Section 189 process, cash constraints and the orderly closure of shafts which resulted in fewer vacancies, but continues to develop valuable skills in the community that prepares for the industry recovery and upswing. Some graduates of our mine technical services programme have found employment at nearby mining companies, while others are continuing their studies.
In 2015, Lonmin provided mining-related skills training to 500 members of the Bapo Ba Mogale community as Production Generals. Initial screening for minimum requirements led to various programmes aimed at improving basic skills to support future employability. These included a three-month skills programme, support in remediating criminal records, and enrolment in an extended AET programme that supports students to achieve Level 4 AET in six months. Once these programmes have been completed, candidates who meet the minimum requirements will be enrolled in production general training. Where minimum requirements are not met, portable skills training will be provided, mainly linked to construction.
Portable skills training
Portable skills training is provided for employees and community members who lack formal education and are seeking employment opportunities outside of the mining industry.
Overview of skills development programmes and beneficiaries
|Skills development programme||2016 progress and beneficiaries|
|Portable skills||137 community members received training on various portable skill programmes.|
|Mining-related skills programme||189 cadets (86 women) attended the training, and 185 completed.|
|Community AET||295 community members received AET training.|
|Process operation exposure programme||Programme placed on hold due to cost-containment focus. Thirteen of the 19 students who successfully completed the programme in 2015 were employed on a full-time basis in 2016.|
|Community learnerships||Programme placed on hold due to cost-containment focus. Continuation of current learners – in 2016, 15 community members qualified as artisans.|
Our community health programme partners with the Department of Health and other stakeholders to provide quality healthcare services to the communities of Marikana, Lebowakgomo (Limpopo) at the Precious Metals Refinery and in the Eastern Cape.
Lonmin’s community health projects are derived to address the community health needs identified by the Department of Health, with input from municipal IDPs, where relevant.
These programmes form part of our SLP commitments and support community health through awareness, promotion and prevention and, where possible, infrastructure development.
Expenditure on community health initiatives amounted to R6.4 million (2015: R6.5 million).
HIV/Aids work continued in the Marikana GLC, as well as in Limpopo, Brakpan and the Eastern Cape. Municipal approval for the Brits Forensic Mortuary remains outstanding, delaying the completion of the project.
Awareness, promotion and prevention
We work closely with HIV/Aids NGOs and conduct joint campaigns whenever possible to align programmes in the community to reach as many people as possible. Three formal health promotion campaigns were held, which focused on HIV/Aids, TB and sexually transmitted infections (STIs). 4,152 community members were tested for HIV/Aids at an 18% positive rate. Lonmin’s HIV/Aids programmes in the Marikana GLC were delivered through peer education to educate members of the community about HIV/Aids, and home-based care to assist in caring for those affected and infected.
We supported 28 (21 in the Eastern Cape and seven in Brakpan) home-based carers by supplying home-based care kits, immune booster meals and stipends for group coordinators and peer educators in Marikana. The Company also provided volunteers in-service training, home-based care kits and assistance in registering as formal carers with the Department of Health and Department of Social Development.
In consultation with the Department of Health, we shifted the focus of our HIV/Aids programme in the Marikana GLC to home HIV/Aids counselling and testing (HCT) and TB contact tracing, which are crucial in curbing the high incidence of HIV/Aids and TB in mines and communities.
Peer educators are community volunteers that work closely with community clinics to disseminate information, distribute condoms and go on door-to-door campaigns to perform mobile assessments of community members.
Carers tend to patients who are too ill to leave their homes and take care of orphans and vulnerable children within their villages.
A group of 14 volunteers was recruited and trained to conduct HCT and contact tracing from seven clinics within the Marikana GLC. To date, 135 source patients have been referred by the mine hospital and 74 contacts were traced. Of these, five were found to have TB and were started on TB treatment. HCT and TB contact tracing volunteers also received referrals from the local Marikana GLC clinics, and since April 2016, they managed to screen 8,556 community members for TB, and collected 1,242 smears resulting in 109 positive tests for TB.
HIV/Aids home-based care services and peer education, as well as TB contact tracing, continued in Brakpan, Limpopo and the Eastern Cape throughout the year.
Since October 2015, 21 Eastern Cape volunteers cared for 184 patients and 55 orphaned and vulnerable children and had 45 patients on TB directly observed treatments (DOTs).
In Limpopo, peer educators managed to conduct 2,740 peer education sessions, reaching 7,519 community members from Makushoaneng, Makoeng, Dithabaneng, Makurung and Hwelereng. 83,256 male and 10,289 female condoms were distributed.
The seven Brakpan home-based carers cared for 197 patients and 41 orphaned and vulnerable children. Here, peer educators managed to hold 1,657 peer education sessions and reached 13,548 people. They distributed 60,894 male and 901 female condoms.
Health awareness campaigns at the Limpopo and Marikana communities reached 7,519 community members during 2016.
Eastern Cape HIV/Aids volunteers
Since 2011, Lonmin has been supporting 21 peer volunteers who are active in the eight villages of the Silindini area in the Eastern Cape, our main labour sending area. We provided the initial impetus and training for the group and continue to offer support through monthly stipends, in-service training, home-based care kits and food supplements for patients.
The Group has shown remarkable initiative in the face of the many challenges in the region, and with minimal supervision has built strong relationships with local municipalities and the Department of Health. The Group cares for the ill and the orphaned, and delivers talks at schools in the area. Food from the garden they established supports local patients and the excess is sold to fund their activities. A water tank and water pipes were donated by the Department of Agriculture, which has allowed them to expand the food garden.
Governance structures in the Group have been well established and the Group invests in team-building activities which the volunteers self-finance, including an annual trip to Durban to debrief on the previous year and plan for the year ahead.
Lonmin’s health promotion initiatives in the Marikana GLC aim to raise awareness among learners and out-of-school youth about sexual health, HIV/Aids, TB and substance abuse. Programmes include support for school peer educators to raise awareness about these issues and encourage young people to access health facilities, should they need to. A drama competition to showcase messages on teenage pregnancy, HIV/Aids and substance abuse was staged for all the GLC high schools.
The focus at GLC primary schools is on child protection, including issues such as child neglect/abuse, personal hygiene, human trafficking and bullying.
Meetings are also held with parents and community members to raise awareness and explain the initiatives being communicated with the youth.
A sanitary towel drive and sexuality education for grades 6 and 7 primary school learners and high school learners were initiated.
Nutrition and health are inextricably linked. In children, good nutrition is essential for physical and mental development. Lonmin supports orphaned and vulnerable children in the GLC and Limpopo through food centres and supporting food gardens.
The Department of Basic Education’s National Schools Nutrition Programme provides meals to GLC learners. We support this programme through providing monitoring and have established six food centres in Marikana and two in Limpopo that provide meals to 533 orphaned and vulnerable children.
Community members can receive training on how to cultivate food at permaculture food gardens at four of the food centres. An annual competition encourages schools to establish the best and most productive gardens. Students are taught how to grow their own food and can share this knowledge with their families.
Health infrastructure projects
We invest in health infrastructure projects that improve access to basic healthcare in the GLC, in partnership with the Department of Health, local government and other stakeholders.
We contributed towards repairing storm damage to the roof of the Segwaelane clinic.
Our local economic development investments aim to create socio-economic infrastructure that provides a platform for economic development. We work closely with local and national government to support its agenda to improve basic service in the GLC.
Projects align with three main focus areas: job creation, social infrastructure and capacity building. Social infrastructure initiatives include, among others, the construction of a resources centre and auxiliaries such as furniture, information technology (IT) and other equipment required.
Capacity building initiatives aim to improve outcomes by putting in place the necessary structures for beneficiary groups and local authorities to continue to maintain the infrastructure once it is handed over to its beneficiaries. Currently, these projects are focused on capacitating the Bapo Ba Mogale community, the Rustenburg local municipality and the Madibeng municipality.
Local economic development expenditure including waste removal, amounted to R16.5 million in 2016, a 45% decrease from 2015 (R30 million). As bulk water and road upgrade projects will be transferred to the local authority for operation and maintenance, it is important that proper planning takes place; therefore, it took longer to commence with actual implementation.
Bulk water infrastructure
Lonmin distributes five megalitres per day of bulk water to various local communities, acting as an intermediary for Rand Water. An estimated 6,500 households in the formal settlements and 5,500 households in informal areas of Wonderkop use this water. Water is also provided to various communities from the Lonmin bulk water supply.
In 2014 and 2015, the bulk water infrastructure project focused on improving access to potable water in Wonderkop through the detection of leaks, fixing and refurbishing of broken water pipes to improve water availability. We continue to work closely with the local Water Authority, the Madibeng Local Municipality and the National Department of Water and Sanitation (DWS) to identify sustainable water solutions for host communities, including exploring alternative methods to source and store bulk water.
GIZ, the German Development Corporation, has been supporting the local municipality to build capacity, develop a water master plan for the GLC and unlock provincial DWS funding. Engineering and design work has commenced, and plans are due for delivery in 2017.
Lonmin’s road infrastructure project focuses on the upgrading of existing roads to improve access for employees living in surrounding communities and settlements. We refined the project from an upgrade of gravel roads to construction of paved roads to provide contract opportunities for local civil construction companies and short-term job opportunities for local labour. The roads are surfaced with paving blocks manufactured from the Bapong youth brick-making project. The GLC roads were upgraded in 2015, and this year plans were finalised for a service road in Bapong, and a road in Modderspruit to improve access to the school. Construction is planned to commence soon.
The brick-making facility in Bapong was recapacitated to support the road project with road pavers and curbing. The project employs an average of 30 local people and is producing products for road construction.
Community-based household waste and refuse management was established in 2012 to serve local communities, promote a cleaner environment, create local jobs and support enterprise development. Staggered handover to the local municipality started in the current year and will conclude in 2018. Further planned refinements include restructuring the collection process to separate recyclables at source, and a sorting and baling centre. 37,000 households units are being serviced in the GLC.
Lighting for public safety
We planned to install 19 high-mast lights in the Wonderkop formal and informal areas by 2015, to address a rise in crime. The Company funded and installed 11 lights and refurbished eight existing lights, which included an upgrade of power supply from rural to semi-urban supply. Ongoing illegal power connections to the lights pose a serious safety risk and no further lights are planned for Wonderkop until this challenge can be effectively addressed.
Update on previously reported local economic development projects
Construction of a community resource centre was completed and handed over to the community in April 2016. The centre hosts youth development and recruitment, serves as an information hub for the GLC, and as an outlet for the sale of prepaid electricity, water, data and airtime. We are negotiating a service contract with an external service provider to provide auxiliary equipment and infrastructure for the resource centre. Construction of a similar facility is planned for Majakaneng.
Transformation through enterprise development and procurement
Transformation is a priority for us, and is promoted throughout the business. The Mining Charter aims to promote transformation in the mining industry. The Mining Charter is currently under review, which will impose more onerous requirements on the industry.
BEE equity ownership
In November 2014, Lonmin successfully completed three BEE transactions which cumulatively gave the Company an additional 8% equity empowerment. Lonmin 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.
At the beginning of financial year 2016, the Bapo community indicated that it did not have the financial resources to participate in the Rights Issue. In order to retain its BEE equity ownership at 26% following the Rights Issue, the Directors therefore concluded that it was in the best interests of shareholders for the Company to issue sufficient new shares at US$0.000001 per share to the Bapo community in order to maintain its proportional interest in Lonmin on a post-Rights Issue basis.
The Bapo BEE shares were issued in a separate placing to the Rights Issue and the Bapo community agreed not to take up or trade its Rights. The effect of the Bapo BEE placing was to maintain the Bapo community’s current minority holding of less than 3% of the shares following issue of the new shares pursuant to the Rights Issue. As the Bapo BEE shares were issued in addition to the offer of new shares under the Rights Issue, they had a minor dilutive effect on the other shareholders in Lonmin. The Bapo community agreed to accept a 10-year lock-in period with regard to the Bapo BEE shares.
Four contracts have been awarded to the Bapo Ba Mogale (Bapo) in terms of the 2014 Bapo transaction and have been implemented. These are:
- the Yellow Equipment contract with a gross value of R45 million per annum over a five year period, totalling R225 million;
- the Ore Transport contract with a gross value of R25 million per annum and R125 million in total;
- a PPE contract worth R100 million per annum and R500 million in total; and
- a bussing contract worth R100 million per annum over an eight-year period, totalling R800 million.
The awarding of these contracts has resulted in Lonmin complying with (and exceeding by R1.45 billion) its procurement undertakings given to the Bapo. Governance within the Bapo entities that manage the above contracts remains a work in progress. Cash flows and liquidity concerns are also a focal point for the Bapo.
2014 saw the establishment of two separate community trusts. Each trust holds 0.9% of the ordinary shares in Lonplats, and is entitled to dividend payments which have been 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 Consumer Price Index each year. The first transfer of R5 million to each trust was made during the year. The funds are managed by ward councillors through a board of trustees, which is mandated to disburse funds for upliftment projects in the respective communities. The establishment of these trusts, governance structures and initial capital, could encourage other investors to contribute to enable more substantial development.
While these transactions have been successfully concluded, there has been a challenge to the transaction by a faction within the Bapo community. Lonmin continues to engage with all stakeholders to resolve the issues of concern.
Lonmin’s preferential procurement strategy requires procurement adjudication to favourably weight suppliers with broad-based black economic empowerment (B-BBEE) credentials, female representation and, where possible, GLC companies. Certain procurement areas are ring-fenced for GLC and BEE suppliers only, and only GLC companies are invited to tender for capital items.
The Mining Charter sets targets of procuring 70% of services, 50% of consumable goods and 40% of capital goods from HDSA-owned suppliers. Lonmin recognises the importance of actively involving citizens who were previously excluded from the mainstream of the economy and has far exceeded these procurement targets.
The biggest challenge we face is increasing the number of black women-owned suppliers in our vendor base. We are making an effort to address this area through various enterprise development initiatives and projects, such as the manufacturing of personal protective equipment. The procurement department works closely with the enterprise development department to develop local suppliers that show potential.
Our enterprise development initiatives aim to foster entrepreneurship and economic growth in local communities, and to create a sustainable pool of local BEE suppliers that will support further improvement in our preferential procurement performance. These programmes are facilitated through a small business incubation centre established in partnership with Shanduka Black Umbrellas (SBU) that creates opportunities for GLC members who want to do business with the Company.
SBU promotes entrepreneurship as a desirable economic path and provides support to 100% black-owned businesses through their first three years of existence. The programme provides training, mentorship, business plan development and access to practical resources, including office space at the Lonmin community office and IT resources. Lonmin’s procurement department communicates the Company’s procurement needs and SBU develops a database of robust, accredited vendors.
The critical statistics from the inception of the Mooinooi incubator include:
- Businesses in full incubation: 43
- Permanent jobs created: 431
- Temporary jobs created: 73
- Jobs created in current year: 35
Other enterprise development projects during the year are discussed below.
Phakwe Mining Services
Phakwe Mining Services 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.
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.
Planet Electrical is an electrical installation and maintenance services provider, established in 2011. The company has been part of the SBU since 2013, and they are at the graduation phase of the programme. Under the management of Andrew Mokwena, the company employs 15 permanent staff members, owner included. The company provides electrical services to its clients, and one of their key clients is Lonmin. For the last quarter, the company has been awarded seven Lonmin contracts totalling R675,000. The company has also increased value with a purchase of a vehicle worth R79,000 to improve their service to their clients. Eight contractual staff had to be employed to absorb the work load from contracts received.
Measurement Process Solution
Measurement Process Solutions joined the programme in July 2015. The company provides analytical testing services to the mining industry. Since then, the company has been awarded projects that, among others, include supplying laboratory equipment. For the last quarter, this company received two projects from MINTEK and National Metallurgies Institute of South Africa, with net profits of R50,000 and R13,000 respectively. They also acquired machinery worth R10,500, adding to the company’s net asset value.
SEDA Platinum Incubator – jewellery collaboration
During 2015, we advanced our 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. SPI, with the assistance of Lonmin, worked through the key security and safety requirements to allow them to safely and securely produce alloys from the platinum sponge Lonmin would make available. The designs could not be made during the first half of the year, due to the SPI awaiting licensing from the Precious Metals Regulator. The designs will be made in the second half of 2017.
Located in Rustenburg, North West Province, 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 uplift HDSAs through their involvement in platinum beneficiation activities, mainly jewellery manufacturing.
Employee volunteering and donations
Employees support various community programmes by volunteering their time. Information on employee volunteering and donations is available here.
Lonmin’s human rights policy commits us to respect the human rights of those who have interests in and are affected by our operations. The policy aligns with the human rights entrenched in the Constitution of the Republic of South Africa and 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.
In order to meet our responsibility to respect human rights, we have implemented certain processes which include communicating this policy internally and externally to all of Lonmin’s stakeholders. Human rights training is included in the induction programme for all employees and contractors, and is included in mandatory annual refresher training. Attendees are informed of their rights, expectations, standards and mechanisms to report grievances or incidents, which include a toll-free ethics hotline service.
Human rights performance
In August 2015, a human rights working group was established, comprising representatives from all areas of the business including risk, security, health and safety, environment, labour, community, supply chain, legal, company secretarial and communications.
Lonmin’s current human rights policy was adopted by the Board in November 2015. The policy is explicitly informed by the United Nations’ Guiding Principles on Human Rights, as well as the United Nations Universal Declaration of Human Rights and other international instruments. Respect for human rights is also enshrined in Lonmin’s Code of Business Ethics.
Lonmin recently commissioned a gap analysis study, which was undertaken and completed during financial year 2016. This study sought to analyse Lonmin’s Human Rights Policy and procedural framework in the context of the Guiding Principles and best practice in the mining industry. The findings are currently being assessed by the internal working group.
As part of the ongoing process, Lonmin is embarking on development of an internal human rights due diligence checklist to help ensure full compliance with the relevant policies and systems. A pilot study, focusing on the issue of women in mining, has been commissioned and is expected to be carried out in financial year 2017. A new human rights training programme in relation to the Guiding Principles is also scheduled to be rolled out to Lonmin’s managers and executives during financial year 2017.
Incidents of human rights violations are recorded and followed up wherever possible.
Four cases of intimidation (2015: 4) and one case of discrimination (2015: 0) were reported in 2016. There were no reported incidents of forced or child labour at the operations.
Protecting human rights through supply chain
Lonmin’s general terms and conditions of contract include human rights conditions, and these are attached to all tenders, requests for quotation, vendor applications, contracts and orders. They include a requirement to comply with the Lonmin Charter, the Lonmin Code of Business Ethics and Lonmin’s policies and procedures.
All new suppliers are screened against human rights criteria when registering on the vendor database. Compliance audits are conducted on request from the operations. This year, eight vendor contracts were terminated due to unethical behaviour.
Modern Slavery Act and procurement
As stated in the Human Rights Policy, Lonmin’s human rights commitment includes a prohibition on modern slavery in all its forms, including human trafficking and forced or compulsory labour. Lonmin also seeks to ensure that its counterparties conduct their own operations in line with these standards.
Lonmin’s vendor approval process already requires potential suppliers to answer specific questions in relation to human rights, including whether the supplier has its own human rights policy and whether it provides human rights training to its staff. In addition, the standard terms and conditions applicable to contracts with suppliers require Lonmin’s counterparties to adhere to a range of legislation relevant to human rights, including the South African Labour Relations Act, No 66 of 1995, the Basic Conditions of Employment Act, No 75 of 1997, the Compensation for Occupational Injuries and Diseases Act, No 130 of 1993, as well as Lonmin’s own Sustainable Development Standards and Code of Business Ethics. These acts and standards contain wide-ranging human rights stipulations, including health and safety at work, working hours, freedom of association, the prohibition of child labour, non-discrimination and freedom from forced labour and corporal disciplinary practices.
In addition to the above, Lonmin is currently undertaking a review of its procurement application processes, with the intention of further improving its ability to identify and exclude from its supply chain product and service providers whose operations fall short of meeting Lonmin’s standards.
Human rights and security
We appointed new leadership in the Lonmin security function, and subscribed to and are implementing the Framework for Peace and Stability in the Mining Industry (February 2013), and the Deputy President’s Framework Agreement for a Sustainable Mining Industry (July 2013). The security function has shifted away from the traditional security focus on protection of assets to an integrated proactive approach to manage crime threats. The security risk management strategy is designed to take a proactive approach to understand the security threat to operations with a primary objective to mitigate interruption to operations.
The security risk management process aligns with the fundamentals of ISO 31000, the international risk management standard, and the voluntary principles on security and human rights, which are human rights guidelines designed specifically for extractive sector companies.
The Security Policy and Code of Conduct were revised, improved and signed off in 2016, to include recommendations from the human rights gap analysis.
Our mandate is that the Lonmin security function does not engage with public disorder incidents, as that is the role of public order policing. Our focus is strictly on the safety of our people and the protection of our property. Work has been undertaken to drive improvements in training, education and vulnerability assessment processes and ensuring staff have appropriate equipment with applicable logistics necessary for asset protection (including crime prevention vehicles and thermal cameras). Security personnel are being trained on the legal and operational aspects of crowd management. Corporate operational procedures are in place, and there is a specialised corporate operational procedure on crowd management.
Security employees and contractors all have Private Security Industry Regulatory Authority (PSIRA) training as a minimum. The Lonmin Basic Security Training Programme includes modules on security philosophy, the Security Code of Conduct, teamwork, human rights and arrest rights.
Human rights forms part of the Basic Security Training Programme and all employees and contractors receive Lonmin’s human rights training at induction. Our security risk management policy and Security Code of Conduct include fundamentals on human rights. Training on our Security Policy and Code of Conduct, as at the end of 30 September 2016, covered 85% of security employees and 80% of contractors.
At the end of September 2016, Lonmin had 154 full-time security employees and 497 contractors.
Customers and human rights
BASF, a German chemicals company, has been a long-standing customer of Lonmin, purchasing PGMs primarily for use in the production of mobile emissions catalysts. Following the publication of the Farlam Report, BASF conducted a thorough assessment of Lonmin’s operations and its policies related to human rights, labour and social standards, and environmental protection against BASF’s Supplier Code of Conduct. The evaluation included an external audit and was conducted in accordance with the Together for Sustainability (TfS) initiative, which was founded to establish global standards for supplier evaluations and auditing to improve sustainability sourcing practices.
The audit covered a broad range of operational topics, including environment, health and safety, labour and human rights, management, and governance. The audit findings were included in an action tracker and the majority of the findings were closed out or are in the process of being addressed. BASF is providing active knowledge sharing with Lonmin in areas which are comparable to the chemical industry. Lonmin remains open and appreciative of BASF’s efforts to help improve its safety preparedness and sustainability performance, and remains committed to participating in follow-up assessments by BASF.
In conclusion, Lonmin is committed to the process of continuous improvement and that, in the event of any inadvertent breach in its policies, lessons are learnt and actions taken to minimise any re-occurrence.