South African mining industry snapshot: improving black economic empowerment

South Africa’s mining industry is doing more and more to promote and foster broad based black economic empowerment (BBE), a report has found.

“Transformation Continues,” a snapshot of the mining industry’s performance in 2016 from the Chamber of Mines South Africa, is an independent audit into the South African mining industry’s BBE performance.

The audit saw a survey of 28 mining and mineral exploration companies currently operating in South Africa, which represents 70% of the industry by production and 67% of employment.

In 2016, ownership of the industry by Historically Disadvantaged South Africans (HDSAs) stood at 39%, a notable increase over the targeted 26%.

During this same period, empowerment transactions to HDSAs and HDSA entities reached more than R2bn. This is a significant figure as the Chamber points to the financial crisis of 2008, which the country is still feeling the ramifications of to this day.

The audit looked closely into the key areas of the mining industry, Ownership, Procurement, Employment equity, Human resource development and Mining community development.

Procurement

Arguably the lifeblood of a mining operation, particularly one that intends to promote the empowerment of HSDAs, is the work and commitment to partnering with local suppliers.

The proportion of procurement from HSDA entities “comfortably” to exceed targets in capital goods, which saw 69% expenditure on all capital goods with HDSA companies. This equated to around R11.1bn.

75% of expenditure was spent with HSDA suppliers, which was just over R60bn, while 68% of all consumables were purchased from HSDA suppliers. This totalled R40.7bn.

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Employment equity

Mining companies continue to focus on workplace transformation with appreciable improvements being achieved in two of the four categories. The 2010 Charter specified a target of 40% HDSAs in all reporting categories by 2014.

 •  Top management (including boards of directors): In 2016, 49.3% of top management were HDSAs (50.4% in 2014).

• Senior management: In 2016, 48.3% of senior management were HDSAs (41.9% in 2014).

•  Middle management: In 2016, HDSAs made up 49.8% of middle management (50.9% in 2014).

• Junior management: In 2016, HDSAs made up 58% of junior management (54% in 2014).

•  Core and critical skills: In 2016, HDSAs filled 84.4% of core and critical skills positions (75.5% in 2014).

Mining community development

Of the 28 companies surveyed, 25 spent more than 1% of NPAT. Their total spending in 2016 amounted to R1.14 billion. The entire industry’s NPAT for the period amounted to R34 billion, of which 1% is R339 million. So, the 28 companies alone spent triple the total 1% of NPAT standard.

Notably, 16 of the 66 operations managed by the 28 companies reported financial losses in 2016, yet they collectively contributed more than R180 million to mining community development