The Trouble With Mining In South Africa

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Written by Anna B. Wroblewska

Extraction industries are associated with some of the worst development outcomes on the African continent. 

There are many possible explanations for the issue. Corruption is an obvious one. Another could be the relatively low labor inputs into the industry compared to others, and the persistent underinvestment in value-added manufacturing. 

But there is also mining’s long history exploitation to contend with, and employment and ownership structures that have seen little improvement — even in South Africa. The two lynchpins in this platinum-rich nation: Land and workers.  

Mining has a long history in South Africa, which commands 77 percent of the world’s platinum reserves, according to the Africa Progress Panel (APP).

“The irony,” says Aninka Claassens, senior researcher and the director of the Rural Women’s Action Research Project at the University of Cape Town, “Is that just about all platinum is in the former homelands,” which comprise the nearly 15 percent of South Africa’s territories that were essentially set aside for black South Africans under apartheid. 

These are the nation’s poorest regions, and they are home to about one-third of the population.

Under apartheid, there were extreme limitations on land ownership by black South Africans, and in the past 20 years land reform policies — originally intended to provide restitution for this disenfranchisement — have evolved to primarily encourage commercial development.

That might not sound so bad in and of itself, except that “the policy has shifted towards giving only conditional rights, and [claimants] have to prove that they’re productive before they can develop to the point where they might get title.”

In other words, restitution — and ownership for the formerly disenfranchised — is not part of the equation.

According to Claassens, this conditionality, aside from further disempowering the majority of South Africans living in these areas, has opened the door to massive corruption due to its inherent subjectivity.

“This is absolutely the case with mining rights,” she says. “It’s broadly known that there has been absolute arbitrariness in who’s been given mining rights… It’s become a honey pot for corruption.”

Who benefits? The ruling elite, who are able to grant mining rights as a form of patronage, and the elite leaders of the former homelands areas, who are able to gain immense benefit from mining deals without any obligation to share information, wealth, or royalties with the populace that occupies that land. 

Lonmin and the Bapo de Mogale

For example, a recently finalized deal between Lonmin PLC, the mining company, and the Bapo de Mogale community of South Africa trades rights in platinum mined in the community’s territory for little more than common stock in the company.

While there are payments for “community administration” to the tune of R 1 million (about $93,000) over five years, Brendan Boyle, senior researcher at the Centre for Law and Society at the University of Cape Town, points out that there is no reason to believe this will go to the community, but rather to the administrators of the newly created company that will manage the shareholding. 

In other words, the Bapo have exchanged guaranteed royalties in a scarce and valuable resource for what amounts to a relatively nominal amount of cash, the vague promise of 300 jobs by 2015, according to Boyle’s report, and 2.5 ownership in a publicly traded company, according to Lonmin’s statement on the matter. If Lonmin decides not to pay a dividend or, even worse, goes bankrupt, the Bapo get nothing. 

Boyle also notes that, based on the mechanics of the deal and a previous statement by Lonmin, the company looks to be saving approximately R 35 million ($3.2 million) per year in community development contributions.

This appears to be a fabulous deal for Lonmin. The company suffered severe losses in the wake of the strikes that halted mining for five months, and it is now facing a 13 percent increase in labor costs owing to negotiated wage increases.

That Lonmin has so effectively reduced its cost burden vis a vis the Bapo can only be regarded as a victory — for the company.  

One has to ask who else is really benefiting from the transaction. 

Working conditions 

There is also, of course, the issue of labor. 

The APP’s 2013 Progress Report describes the labor conditions facing South African platinum miners: “Workers producing one of the world’s most expensive metals in one of Sub-Saharan Africa’s wealthiest nations live in abysmal conditions on wages insufficient to meet the basic needs of their households for shelter, nutrition and health.”

“There is a feeling of impatience to have transformation taking place. There’s a range of issues and some pent-up anger about residual issues that have come,” says Achieng Ojwang, NBI programme manager for the UN Global Impact South Africa

“The biggest governance risks in the extractive sector have been human rights and labour risks. There are residual issues from the past — around families, housing, around how the family units have broken down (because this is migrant labor).”

In other words, the conditions facing mine workers remain a major stumbling block for the industry.  Dissatisfaction among mine workers is “beyond wages,” Ojwang says, “There are bigger issues, and this is not confined to mining.” 

In other words, the issues facing extractives are immense and complicated, and in South Africa they touch on many historical sore points. Issues of expropriation of the people who should, one would think, be called owners, the mistreatment of those who are workers, and the opaque network of beneficiaries to rights and land deals all call up the problems of the past. 

The solutions, as Ojwang notes, are likely to be as complex as the problems. How does a government rectify past wrongs and encourage growth without further disenfranchising its populace? How do local leaders avoid the temptations of corruption? And how do mining companies ensure a reasonable standard of living and services for their workers? 

These are open questions with no easy answers.