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Prioritising the 'S' in ESG can lessen disputes between mining companies and adjacent communities. Here's why.

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Prioritising the 'S' in ESG can lessen disputes between mining companies and adjacent communities. Here's why.

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4th November 2021

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Accentuating the 'S' in Environmental, Social and Governance can help mining companies deliver better business outcomes, lessen costly disputes, and help rebuild stakeholder trust.

Disputes between mining companies and their neighbouring communities are on the rise. It was estimated in 2018 by the South African Police Services (SAPS) that approximately 35 protests take place across South Africa's mining communities monthly. These community-based protests against the mining companies are, however, often caused by poor service delivery by local governments and/or poor performing municipalities – with local community pressure being put on mining companies to step into what really should be the government's role to provide water, sanitation, education, job creation, infrastructure development, health care, etc. For mining companies, such protests for whatever reason, result in loss of finances, productivity, lost opportunities, lost time, and adverse impacts on reputation. They also increase the trust deficit between mines and these communities. 

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Most mining companies have some form of community structure in place; they have, however, not been leveraging these existing structures appropriately and creating opportunities for these structures to participate in or partner with the mining company or its contractors in socio economic opportunities around their mines. This has resulted in neighbouring communities mobilising legally and/or illegally, to demand participation in the industry. A pro-active solution is crucial to mitigate the occurrence of disputes between the mining companies and neighbouring communities.

Defining a community

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Given the rising issue of informal settlers mushrooming near mining operations, it is critical to identify the communities that are closest to and most affected by mining operations. Doing so is a complex process, as there are layers of people affected and the degree to which they are affected is not uniform. 

The Mineral and Petroleum Resources Development Act (MPRDA) defines a community as a group of historically disadvantaged people with interests or rights in a particular area of land where they are living communally. In comparison, the Interim Protection of Informal Land Rights Act defines a community as any group or portion of a group of persons whose rights to land are derived from shared rules determining access to land held in common by such group.

The 'S' in ESG

Environmental, Social and Governance (ESG) factors have become a critical consideration for businesses, investors, and shareholders across all sectors of the economy. Climate change is frequently emphasised in the conversation about ESG concerns however, social issues are becoming increasingly prominent. In 2021, President Cyril Ramaphosa’s clear intention, expressed in his keynote address to the 27th Investing in African Mining Indaba, that the mining industry should foster inclusion, especially of women, and that Social and Labour Plans (SLP's) are critical to ensure the flow of benefit from mining operations.  South Africa is set to receive around ZAR 131 billion to help end its reliance on coal following a deal announced at the recent COP26 climate summit. This forms part of the commitment to avert the impending environmental catastrophe by limiting global warming to 1.5°C, and to prioritise and/or safeguard the environment, human health and wellbeing of communities now and in the future.

When investors look at social criteria, they're interested in how a company manages its relationships with employees, suppliers, customers and communities where it operates. Mining companies are increasingly becoming aware that a failure to address these community disputes can be detrimental to their businesses, both financially and reputationally. For instance, the following are recent cases involving community and mine disputes:

Tendele Coal Mining Case

In this case, the applicants alleged that Tendele Mining’s Somkhele anthracite mine near Mtubatuba in KwaZulu-Natal was operating without certain statutory authorisations and consequently asked the court to interdict Tendele Mining from continuing with its operations. The relief sought by the applicants was not granted by the High Court. The Supreme Court of Appeal dismissed the appeal brought but ordered that Tendele Mining pay the costs of application notwithstanding the overall result.

Rural Limpopo women protest against Sefateng Chrome Mine

Recently, women in the Limpopo Province slept outside ongoing mining operations to stop what they considered mineral theft by the Sefateng Chrome mining company. The residents had been protesting for weeks trying to stop trucks from leaving the mine - accusing the mining company of failing to fulfil promises such as the provision of water, maintenance of streets, compensation for the loss of agricultural land and relocated graves. This protest, although not violent, would naturally cause frustration to the mining operations.

Mitigating the probability of disputes

Thinking and acting proactively on ESG has lately become even more pressing. Consequently, we advise mining companies and companies in general to:

  • involve legal counsel at an early stage in the planning, preparation, submission, integration and implementation of SLP's and/or any similar instrument;
  • foster an inclusive approach in all aspects of mining with specific emphasis on ownership, participation in management and procurement;
  • ensure strict compliance with SLP's and the reporting of such compliance to neighbouring communities and authoritative bodies;
  • undertake a comprehensive stakeholder mapping exercise in order to identify key role players with whom inclusive dialogue and engagement should be established;
  • continuously engage with key stakeholders, including the neighbouring community to understand what socio-economic issues are facing the community which issues should form the basis of an SLP or any similar instrument;
  • involve a negotiating team in community engagements which has the necessary demeanour, capabilities, authority and temperament; 
  • incorporate the elements of ESG into all company policies and ensure compliance therewith;
  • in the event of a suspicion of a breach, a foreseeable breach or an actual breach, involve ESG-focused legal counsel to assist with crisis management; and
  • ensure close collaboration between the company, its suppliers, the local community, local SAPS, local and provincial government and private security, around mining operations to foster an adequate response to any community-based protests which occur

It is clear from the above that an increased emphasis on ESG will mitigate the risk of frustrated operations, unlawful protests and loss of revenue. ESG should be treated as a guiding principle not just an industry trend.

Written By Merlita Kennedy, Jared Ishmael and Tobia Serongoane from Webber Wentzel

 

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