On Zuma’s threat to revoke Lonmin’s mining license

David Christianson says holding companies to the inflexible implementation of outdated plans can be injudicious

Government and miners worlds apart on Social and Labour Plans (SLPs)

15 December 2016

The statement by the presidency last Sunday, that platinum mine Lonmin is in danger of losing its mining rights if it does not accelerate implementation of its housing plan, was a shock only in its crudeness. It confirms, yet again, a long-standing attitude on the part of Jacob Zuma’s government. At the same time, it underscores the failure of political office holders in South Africa to appreciate what the industry offers the country in terms of growth and jobs.

Lonmin is, of course, the company that was at the eye of the storm in 2012. It was on its property that the South African Police Service (SAPS) shot 34 mineworkers, in what was labelled the ‘Marikana Massacre’. Among the many causal factors identified by the Farlam Commission was the slow implementation of housing and the conversion of single-sex hostels for family accommodation. Lonmin was directed to amend its Social and Labour Plan and had done so by October 2014. However, in late 2016, the issue is in the news again, with reports of tensions over the allocation of housing opportunities and the death, in mob violence, of a community leader.

The rights and wrongs of matters on the ground are not clear at this point. But it is clear that the company has, like all mining rights holders in South Africa, put considerable effort into the housing issue. After Marikana, it committed R100 million per annum towards housing. In 2015, the company spent R305 million, excluding procurement, on Social and Labour Plans (SLPs). It has completed the conversion of all hostels into 1 908 single and 776 family units.

While all of this has been going on, markets have turned heavily against the platinum industry. Lonmin had previously pointed out that it is imprudent to regard SLP commitments made, when applying for mining rights, under certain market conditions, as binding, under the conditions that prevail several years later. It need hardly be pointed out that, over time, conditions on the ground change, developing in response to the implementation of SLPs, among other factors.

Communities grow, develop and organise themselves. Wage-earning mineworkers are a magnet for enterprises seeking markets, including some decidedly shady operators. The preferences of even the same individual may shift over time – the ties of migrant workers to their communities of origin are often weaker as younger workers replace older ones.

Under these circumstances, what mining companies need from government is understanding and flexibility. Holding them to the inflexible implementation of outdated plans is simply injudicious, especially given the lack of support provided by government’s own local institutions. Lonmin believes it is engaged in an on-going process with the Department of Mineral Resources. Yet Zuma’s statement seems to indicate that attempts to explain the complexities have been greeted with a deaf ear.

Previous threats to remove mining rights – such as that faced by Glencore over Optimum Coal Mine – have either been implicit or private. The heavy-handed threat by Zuma’s office was the most naked exercise of this power so far. This may have been something of an administrative slip, as Zuma is known for avoiding decisive statements. Yet the option exists, had been chosen and recorded in the President’s office, and is now on the public record. Any mining company still looking at South Africa as an investment destination will have had its doubts confirmed.

The threat to remove mining licences is, however, a well-known feature of the jurisdiction. What may be more revealing is what the statement tells us about government’s expectations of the industry. Government wants mining companies to build sustainable communities. It expects them to offer not only employment, but also housing, municipal services and social amenities. This meshes with the widely reported shortcomings of government’s own municipal institutions in this regard, especially in the distant areas where mines tend to be located.

It is in the nature of resource extraction that communities fail when the mining commodity is exhausted, something attested to by the existence of Australian ghost towns where once-thriving mines existed, from Queensland to West Virginia. But the current demands have more to do with government ‘delivery’ imperative, part of the patronage rationale of the Zuma regime. Miners believe, with good reason, that getting on with the task of extracting minerals will generate sufficient social goods in taxes, jobs and contributions to the country’s current account. The current pressure, exemplified by the statement from Zuma’s office, undermines all of that.

Institute of Race Relations