Mining Policy Confusion...Or Deliberate Policy
To the Editor
Business Day
Re: Policy Confusion relegates SA to depths of mining log : dated Tuesday 05 march 2013
It would appear to me that the incessant fixation of the business media, mining houses and its research and policy advocates on the difficulties faced by the mining industry attempts to hide the super profitability of the minerals sector in general in the hope that those directly affected by mining will not find a foothold in their objection to the continued exploitation of workers, communities and the land in general.
This is not to say that mining is not a challenging industry and that it is not capital intensive, with all the concomitant difficulties that it implies. Rather, the profusion of lamentations about mining are indeed an indicator of the technicality of both its financing and operations.
It would however appear to me that the super profitability of mining remains an issue which does not attract headlines. Seldom have I seen headlines shouting about the super profits made or the increased share of mining profits absorbed by shareholders and management.
According to a recent report by the Boston Consulting Group, JSE-listed Exxaro Resources delivered an average return to shareholders of 39.2 percent between 2001 and 2011, placing it seventh out of 34 leading mining companies surveyed. This compared with an average total shareholder returns (TSRs) of 18% for the global mining industry as a whole between 2001 and 2011.
The Price Waterhouse Coopers (PWC) 2012 report for trends in the mining industry, in which it tracks the financial results of 39 mining companies with a primary listing on the Johannesburg Stock Exchange (JSE), as well as those with a secondary listing whose main operations are in Africa, and which included companies with a market capitalization of more than R200 million at the end of June 2012, claims that mining operations in these companies achieved an increased Net Profit of 25% over 2011, totalling R65 Billion for the period. It is important to note that BHP Billition and Anglo American results were excluded from this report due to its “international operations and the difficulty in separating the South African contributions”. These 39 Companies increased shareholder dividends from 12% of value created in 2011 to 18% in 2012. The distribution to shareholders more than doubled from the prior year. From 17 billion in 2011 to 36 billion in 2012 or by 116% in Rand terms., while employee share of the value created by the companies decreased from 29% in 2011 to 28% in 2012.
The report goes on to say “The 25% increase in net profit is an impressive performance on the back of good adjusted EBITDA growth. Some companies achieved an EBITDA of more than the average. Petmin achieved 74.0% over the previous year’s 63.0%, Kumba Iron Ore achieved 70.0% against 67.0% the previous year.
Contrast this with reports from communities and the exploitation and degradation they experience and suddenly the reason for this subterfuge becomes apparent. In 2008, in its report, titled, Precious Metal, The impact of Anglo Platinum on Poor Communities in Limpopo, ActionAid uncovered several contradictions between specific claims made by Anglo Platinum and the reality of its operations and in many instances these contradictions were in violation of the constitution. Among others it found possible violations of community’s rights to food, water, housing and a healthy environment as well as a failure by the mining house to promote sustainable development as required by the mineral Petroleum Resources Development Act, of 2002. The report went on to call on government and Anglo Platinum to take immediate action including giving communities greater rights to be fully consulted and for communities to give informed consent before mining concessions are awarded. Needless to say, none of the requests were entertained, and today the Farlam commission sits in the aftermath of Marikana, while a growing discontent brews within mining communities.
So it would appear that the business media, mining houses and its research and policy advocates may in fact have had it right all along, but for the wrong reasons. If we hope to provide a sound and stable policy environment in which mineral extraction can occur, then the brutal extraction of minerals can no longer only be based on economic reasons, but must be based on a balanced policy of accountability to the communities affected by mining, good governance and a redistribution of the proceeds of mining so that communities are able to develop and benefit from the activities taking place in their backyards in a sustainable and environmentally friendly way . ActionAid calls on government and the mining houses to develop policy in conjunction with mining affected communities, not as an “experiment without logic”, as claimed by one mining executive, but as a logical process to avert instability. Failure to engage with communities can only lead to increased instability within the sector and further relegate us down the minerals policy log.
Re: Policy Confusion relegates SA to depths of mining log : dated Tuesday 05 march 2013
It would appear to me that the incessant fixation of the business media, mining houses and its research and policy advocates on the difficulties faced by the mining industry attempts to hide the super profitability of the minerals sector in general in the hope that those directly affected by mining will not find a foothold in their objection to the continued exploitation of workers, communities and the land in general.
This is not to say that mining is not a challenging industry and that it is not capital intensive, with all the concomitant difficulties that it implies. Rather, the profusion of lamentations about mining are indeed an indicator of the technicality of both its financing and operations.
It would however appear to me that the super profitability of mining remains an issue which does not attract headlines. Seldom have I seen headlines shouting about the super profits made or the increased share of mining profits absorbed by shareholders and management.
According to a recent report by the Boston Consulting Group, JSE-listed Exxaro Resources delivered an average return to shareholders of 39.2 percent between 2001 and 2011, placing it seventh out of 34 leading mining companies surveyed. This compared with an average total shareholder returns (TSRs) of 18% for the global mining industry as a whole between 2001 and 2011.
The Price Waterhouse Coopers (PWC) 2012 report for trends in the mining industry, in which it tracks the financial results of 39 mining companies with a primary listing on the Johannesburg Stock Exchange (JSE), as well as those with a secondary listing whose main operations are in Africa, and which included companies with a market capitalization of more than R200 million at the end of June 2012, claims that mining operations in these companies achieved an increased Net Profit of 25% over 2011, totalling R65 Billion for the period. It is important to note that BHP Billition and Anglo American results were excluded from this report due to its “international operations and the difficulty in separating the South African contributions”. These 39 Companies increased shareholder dividends from 12% of value created in 2011 to 18% in 2012. The distribution to shareholders more than doubled from the prior year. From 17 billion in 2011 to 36 billion in 2012 or by 116% in Rand terms., while employee share of the value created by the companies decreased from 29% in 2011 to 28% in 2012.
The report goes on to say “The 25% increase in net profit is an impressive performance on the back of good adjusted EBITDA growth. Some companies achieved an EBITDA of more than the average. Petmin achieved 74.0% over the previous year’s 63.0%, Kumba Iron Ore achieved 70.0% against 67.0% the previous year.
Contrast this with reports from communities and the exploitation and degradation they experience and suddenly the reason for this subterfuge becomes apparent. In 2008, in its report, titled, Precious Metal, The impact of Anglo Platinum on Poor Communities in Limpopo, ActionAid uncovered several contradictions between specific claims made by Anglo Platinum and the reality of its operations and in many instances these contradictions were in violation of the constitution. Among others it found possible violations of community’s rights to food, water, housing and a healthy environment as well as a failure by the mining house to promote sustainable development as required by the mineral Petroleum Resources Development Act, of 2002. The report went on to call on government and Anglo Platinum to take immediate action including giving communities greater rights to be fully consulted and for communities to give informed consent before mining concessions are awarded. Needless to say, none of the requests were entertained, and today the Farlam commission sits in the aftermath of Marikana, while a growing discontent brews within mining communities.
So it would appear that the business media, mining houses and its research and policy advocates may in fact have had it right all along, but for the wrong reasons. If we hope to provide a sound and stable policy environment in which mineral extraction can occur, then the brutal extraction of minerals can no longer only be based on economic reasons, but must be based on a balanced policy of accountability to the communities affected by mining, good governance and a redistribution of the proceeds of mining so that communities are able to develop and benefit from the activities taking place in their backyards in a sustainable and environmentally friendly way . ActionAid calls on government and the mining houses to develop policy in conjunction with mining affected communities, not as an “experiment without logic”, as claimed by one mining executive, but as a logical process to avert instability. Failure to engage with communities can only lead to increased instability within the sector and further relegate us down the minerals policy log.
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