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Southern Africa: Responsible Mining Companies?
AfricaFocus Bulletin
May 12, 2010 (100512)
(Reposted from sources cited below)
Editor's Note
"It is clear that South African companies are not behaving any
differently than western and Asian companies ...South African
mining companies are taking advantage of regional governments' weak
legislation framework and lack of capacity to monitor the
development agreements to disregard some of the most basic human
rights." - Southern Africa Resources Watch
Corporate responsibility, as this new study from Southern Africa
Research Watch (http://www.sarwatch.org) notes, is much more widely
honored in word than in practice. Nevertheless, the authors argue
that standards in place, along with greater efforts for governments
and civil society to monitor compliance, can potentially have
significant impact. Their studies, including South African mining
companies operating in Mozambique, Namibia, Zimbabwe, and the
Democratic Republic of the Congo, as well as the role of South
African Banks, show that this promise is still far from
realization.
This AfricaFocus Bulletin contains excerpts from the introduction
and the concluding essay, by Claude Kabemba and Roger Southall
respectively. The full text of the book is available on the SARW
website (http://www.sarwatch.org).
For previous AfricaFocus Bulletins on economic issues, see
http://www.africafocus.org/econexp.php
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South African Mining Companies in Southern Africa
Southern Africa Resources Watch
http://www.sarwatch.org
Introductory Overview
Claude Kabemba
[Excerpts. Full text available on http://www.sarwatch.org]
...
The world appears on the edge of an economic recovery following the
2009 financial crisis. The demand for African mineral resources is
expected to rise again to support the current wave of
industrialisation in emerging countries, especially in Asia. In
turn, the scramble for resources in Africa has seen the arrival of
emerging powers such as Brazil, India and China as buyers and
investors. ... The subject of this research project, the corporate
governance and social responsibility of South African mining
companies and their financiers, is likely to become a major issue
of public debate as the former increase their presence in the SADC
region and elsewhere in search of new resource opportunities.
The South African mining sector has been in decline over the past
two decades. Consequently South African companies are increasingly
looking for investment opportunities in the wider SADC region in a
bid to benefit from favourable international markets for minerals,
in competition with western and Asian companies. These investments
have social and environmental impacts on people working in, and
living around, mines. In recent times, attention and pressure has
been mostly put on Chinese companies to adhere to best standard
business investment in the extractive industries; very little
pressure has been put on other players (including South Africa).
...
Considering South Africa's ambition to play a leading role on the
continent, there should be consistency between the country's high
morals when it comes to respect for human rights and democracy as
indicated by its constitution and proclaimed policies, and the
practices of its businesses outside its borders (not least because
today many South African businessmen were themselves members of the
liberation movement). Thus it is that people in Southern Africa
expect South African companies to contribute to governments' tax
revenues without compromising on safety, health, the environment
and work conditions
The research included four countries: The Democratic Republic of
Congo (DRC), where the focus was on Metorex (Rushi mining);
Namibia, where the study looked at NAMDEB and NAVACHA; Zambia,
where the focus was on Metorex (the Chibuluma mine); and Zimbabwe,
where the interest was on Zimplat and Mimosa. These countries were
selected because of the firm presence of South African mining and
gas companies. They also represent a mixed set of internal state
structural and organisational capacity that gives different
environments within which South African companies operate in the
region. For comparative purposes a case study on South Africa is
also included. Given the role that South African commercial banks
play in providing funds to mining companies, the research also
covers their adherence to international best practices when lending
money to mining companies - banks around the world are under fierce
criticism for providing funding to many environmentally damaging
projects. The role of the South African government is also
discussed. The study assesses whether the South African government
has policies of compliance for companies working outside South
Africa.
The different chapters in this book attempt to answer questions
such as: to what extent South African mining companies respect host
countries' legislation and regulations as they relate to corporate
governance? To what extent are South African companies contributing
to economic development and the improvement of social conditions in
countries where they invest in SADC. Are South African companies
falling short of good governance when doing business in SADC? Do
South African companies use the same standards of corporate social
responsibility to protect African communities and their environment
where they invest in the region? Do South African companies respect
and apply the host country's legislation?
A qualitative research methodology was adopted for all the
chapters. However, we need to recognise two major problems which
confronted the research. First, the research capacity and skills in
this sector are still weak in the region; second, mining companies
and governments were reluctant to engage with the researchers and
answer questions; they also refused to make available documents
such as development agreements. They argued that these documents
contained commercial secrets, and that disclosure would not only
impair economic credibility, but would also amount to a breach by
states of their sovereign commitments under the said agreements.
The behaviour of South African companies in the extractive
industries in the five countries shows the same characteristics. In
all five case studies, companies have not respected their
development agreements fully. Although the evidence indicates that
the companies are profitable in their operations and that they have
made an economic impact in terms of job creation, payment of taxes
and royalties, there is a debate about whether these companies are
meeting their tax obligations in full. A major finding of the study
was the contested status of the official figures presented in
companies' annual reports. Many of the claims made regarding the
companies' contribution to community development were refuted by
community representatives. Allegations made by the latter appeared
to be confirmed by evidence presented to the research team when
they made visits to the mines. These include indications of poor
management of the environment, which has negatively impacted on the
livelihoods of villagers, as well as the opening up of marked
differentiation in income between mine employees (notably those
permanently employed) and ordinary members of impoverished
communities, and between South African employees and national
employees. It is clear that South African companies are not
behaving any differently than western and Asian companies, making
a mockery of the African Renaissance. South African mining
companies are taking advantage of regional governments' weak
legislation framework and lack of capacity to monitor the
development agreements to disregard some of the most basic human
rights. Equally, South African banks (which contribute to the
investment capital of these companies, and which have incorporated
some the best international principles and standards into their
risk assessment procedures used in loan approval) have not been
concerned with how South African companies behave outside.
... the South African government, as with other mining countries
which have strict environmental and human rights guidelines for
their companies investing abroad, has the responsibility to guide
and regulate the behavior of its mining companies outside its
borders. After 1994, South Africa's capital and expertise were
expected to bring economic revival to the continent in general, and
to Southern Africa in particular. Indeed South Africa has increased
its trade and investment on the continent since 1994, and South
African companies (especially in the extractive industries) are
competing fiercely with western multinationals. Our research
reveals, however that the perception on the continent is that South
African companies' actions in the economic rim are not that
different from those of western powers. ...
The exclusion of local communities from the benefits of the
extraction of vital mineral resources appears to make a case for
increased monitoring and regulation by governments and civil
society organisations. However, governments themselves form part of
a wider problem, as they lack the necessary capacities to undertake
such a role. Civil society in general also lacks the necessary
skill, both material and technical, to monitor the behavior of
these companies. Without pressure, it is unlikely that South
African investment will benefit poor communities situated close to
the mines.
Some of key recommendations emerging from this study include:
- South African banks must make public their lending practices,
partners, and the agreed process of monitoring mining projects they
fund in the SADC region.
- The South African government must design guidelines for its
companies investing outside its borders, especially in the area of
environmental protection and human rights. Alternatively, it could
simply embrace the OECD guidelines.
- South African mining companies must respect and implement in full
their development agreements when operating in the SADC region.
- To ensure transparency and accountability in revenue collection
and sharing, regional governments and South African mining
companies must sign-up and implement the Extractive Industries
Transparency Initiative (EITI).
- The procurement policies of South African mining companies in the
region must privilege local businesses where they operate instead
of South African businesses. Where capacity does not exist, they
must create it through education and training.
- Host SADC governments must review their mining laws and contracts
to raise revenues. This should not only target South African
companies, but all companies, including their own national
companies.
- Corporate social responsibility must cease to be a Public
Relation exercise (as it is for most South African companies) and
become an integrated policy for social and economic and sustainable
development of communities in the SADC region.
- South African companies must engage and provide the necessary
information to civil society organisations in these countries to
allow them to do their job of monitoring extractive activities. For
this to be effective, governments in SADC must have in place access
to information acts which compel every institution to provide
information to citizens when they need it.
Conclusion Corporate Governance and Social Responsibility in the
African Context: Contemporary Reflections
Roger Southall
[Excerpts: full text available on http://www.sarwatch.org
...
CSR and responsible capitalism in Southern Africa
The term corporate social responsibility may have commonly employed
only over the last two to three decades, but of course the general
ideas lying behind it are nothing new. ...it is worth recalling
that Adam Smith (from whom many drew inspiration) was acutely aware
that economics operated in a societal context, and warned of the
dangers of capitalists ignoring morality and social justice.
Furthermore, although during the long history of industrial
capitalist expansion, capitalists were guided by the twin goals of
cost minimisation and profit maximisation at the expense, in
particular, of the conditions and demands of labour, there was
always what we might term an "in-house capitalist critique" arguing
the wisdom as well as the rightness of companies' wider obligations
to society.
... there was always a stratum of capitalists, many of them
adherents of sects which had their roots in radical protest, who
took their responsibility to society seriously. Amongst the most
famous were the founders of the family firms of Cadbury, Fry and
Rowntree, all of whom were Quakers, and who took to the industrial
production of cocoa in part because they wished to encourage its
consumption amongst the British working class as an alternative to
cheap alchohol (then a massive problem amongst the poor). All three
families went on to engage in 'socially responsible capitalism' in
terms of establishment of, inter alia, trusts (Rowntree and Fry)
which involved themselves in 'good works', and in the case of
Cadbury, of the building of a model estate (Bournville) for its
workers linked to its factory in Birmingham. ... they can correctly
be linked to a wider recognition amongst certain capitalist strata
that 'fair' treatment of workers and their families was not only
just, but that it was wise, and that the survival of industrial
capitalism required a social accommodation with the working class
if radical and socialist challenges were to be diverted. ... the
term 'CSR' might be relatively new, but the impetus behind it - a
recognition of the wisdom as well as the inherent virtue of a
devotion to social justice - is nothing new. Even so, times have
changed radically.
In the first place, the state under modern capitalism was itself to
assume much more social responsibility. ,,, Overall, whatever the
particular national outcomes under industrial capitalism,
capitalist firms were to find themselves subject to a much expanded
set of obligations in terms of tax demands (to fund social
programmes), pensions and of regulation of industrial relations.
,,,
Many social impositions upon capital in advanced industrial states
remain (and their extent would horrify the capitalists of an
earlier age). Nonetheless, it is notorious that, equally, many of
the social gains struggled for and conceded to labour by capital
have been ruthlessly eroded under late capitalism. From the oil
shock of the early 1970s onward, multinational capital has sought
to restore profitability and pursue profit maximisation by
variously, demanding that governments cut back social services (and
hence reduce taxes) and by cutting back on labour costs ,,, In
sub-Saharan Africa, this was to take the form of structural
adjustment plans imposed upon African governments ... structural
adjustment demanded a slashing of social expenditure and a
privatization of key sectors of industry, this often involving an
invitation to multinational capital to return. As globalisation
proceeded into the 1990s, African governments were to become
involved in what has been turned a "race to the bottom" as they
sought to outcompete each other to attract foreign investment by
offering favourable conditions to investors.
,,,
Bezuidenhout et al. (2007) detail how the notion of CSR was first
formally employed in South Africa in 1972, a Professor Meyer
Feldburg arguing in his inaugural lecture at the University of Cape
Town that while business was not responsible for the apartheid
system, it was important for its own enlightened self interest that
business take CSR seriously. Thereafter, large scale capital was to
respond to the campaigns for disinvestment and economic sanctions
against South Africa by setting up various voluntary initiatives.
The most prominent of these were the various codes of corporate
conduct: Sullivan (for US firms) and the European Community Code
for European firms and so on. Signatory firms committed themselves
to desegregation of facilities, development of black staff, equal
and fair employment practices, and improvement of housing, health,
transport and industrial conditions for employees.
Even though only a minority of corporations (reluctantly) embraced
these principles, they were significant in the sense that they
alerted capital generally to the need for social reform if a
political and social revolution were to be averted. ...
Detailed exploration of the relations between capital and the
democratic state are beyond the scope of this short reflection.
Nonetheless, a few basic points are in order. First, while the
political transition embedded the rights of industrial labour in a
comprehensive code (the Labour Relations Act of 1995 and its
subsequent amendments), large scale capital diverted the ANC away
from its socially redistributionist commitments in the
Redistribution and Development Programme (RDP) to the more
market-oriented Growth, Employment and Redistribution (GEAR)
programme. Broadly, via the latter, the government imposed its own
structural adjustment plan upon South African society. ...
Although, in time, the government was have to more somewhat in
reverse (by notably, expanding social security protection), this
was in considerable extent because the proposed outcomes of GEAR,
notably increased employment, failed rather dismally. In turn,
government was to look increasingly to business to assist with
support in filling in the gaps, by helping to bank roll various
forms of social investment ... This was to result in increasing
demands made upon large scale capital to display its social
responsibility.
Today, no large scale corporation in South Africa can afford to
ignore the wisdom and necessity of CSR, whether this be in the form
of responding to government's demands for realization of Black
economic empowerment or demands of social movements for
implementation of environmental standards. ...
Global work restructuring and CSR
The rapid pace of the internationalisation of capital and
capitalist production since 1945 has seen the massive growth of the
number and reach of multinational corporations and the creation of
a new international division of labour. Broadly, huge advances in
communications and production technology have enabled Northern
based multinational corporations to shift many production
operations to countries of the global South where the cost of
labour is cheaper, this accompanying the general change within
capitalist production towards greater capital intensity. Generally,
this has been associated with a decline in manufacturing employment
in the North, and the drawing into the employment market of
hitherto untapped sources of labour in the South, (inclusive of the
entry of more women on to the labour market). ... The "full
employment" era of northern capitalism has long since disappeared,
alongside the general assault led by governments upon social
programmes; 'structural unemployment' has become a permanent
feature of northern economies; while the social cost and conditions
of labour in the south are generally far lower than in the North.
...
... the post-apartheid era has seen a concerted move of South
African capital into neighbouring countries. Yet this shift has
been taking place in conditions whereby, first, structural
adjustment has seen a general erosion of labour conditions and
substantial increases in levels of unemployment; and second,
individual governments have gone to enormous lengths to put in
place attractive conditions for investment. In essence, this
suggests that, to some extent, South African (and other
international) capital is entering into something of a social
vacuum, where governments are prepared to sacrifice the rights of
labour to attract multinational corporations. Where, as in the
Zambian mining sector, there was once a powerful trade union
movement, union presence and influence has been significantly
eroded; where, as in the DRC, the social fabric has been torn apart
by decades of war, trade unions have never have had much salience.
Given massively high levels of unemployment, trade unions have
limited bargaining power, and in general, multinational
corporations opt for none-core (casualised and externalised) terms
of employment for the majority of employees.
In these conditions, the notion of CSR can play different roles.
First, it can serve as a substitute for (the more expensive)
extension of core conditions of employment to the majority of
employees.
Second, within this context, it can fill in some of the holes left
by a withdrawal (or failure of) government social services ...
Third, CSR can fulfill a vital public relations role, persuading
company executives themselves, shareholders and stakeholders that
a firm is operating responsibly.
Fourth, the notion of CSR can provide for an arena of contestation,
whereby local employees and communities, sometimes in alliance with
global supporters, can make demands and exert pressure upon
multinational and other companies. But to what extent are such
demands and pressures likely to be effective?
Policy and implementation
The broad thrust of the case studies in this collection is that
South African companies are falling short in both their commitment
to CSR and to its implementation. Two conclusions would seem to
follow.
The first is that companies can never hope to reap the rewards of
CSR unless they are trusted - and gaining trust is likely to demand
time, effort and expense. The overwhelming sense drawn from the
studies here is that the implementation of CSR is top down, dreamed
up by head offices and rarely involving extensive and adequate
consultation with employees and local communities. ... CSR cannot
be expected to work if it is regarded by local management as a
costly nuisance. Its successful implementation really does require
major commitment and sensitivity to local conditions. Only this
will provide for a basis of trust: an understanding, perhaps, of
why companies cannot provide more employment to local people, of
why cost wise it is necessary to place some employees on part-time
or to employ casually, or why companies cannot meet all the demands
for expansion of local facilities they encounter.
The second consideration is that as CSR is premised upon the notion
of firms' social accountability there is a need for proper
monitoring and evaluation. Each and every company in this study was
able to provide broad outlines of their programmes of CSR, details
being given on websites, in company material or in annual reports.
None was prepared to give serious, if any, time to the researchers
involved in trying to assess their programmes. ... this has led to
the views of local unions being heard without there having been
much of a response by the companies themselves. It could be argued
that if there is an anti-company bias in the reports offered here,
that that is largely the fault of the companies. Additionally, it
raises the issue of whether companies have something to hide, and
whether they prioritise the Public Relations value of CSR over the
reality of implementation.
The response must be that South African companies need to be
prepared to open themselves up to rigorous monitoring and
evaluation. It can be understood, perhaps, that companies will not
have the inclination to respond positively to every request made
upon them by the non-governmental sector for information and
access, for yes, time is money in capitalist production.
However, refusal of access to research upon CSR can only be
justified if the firms themselves are prepared to undergo some form
of independent evaluation. This might, for instance, be undertaken
by organizations of repute with social research expertise and a
methodology and goals agreed by all stakeholders: shareholders,
labour, communities and governments. It would also need to be
undertaken at agreed regular intervals. And above all, reports
would have to be open to public scrutiny. But until some such
agreement is reached, companies must be prepared to field
accusations that their programmes of CSR are, in essence,
counterfeit.
...
two points can be made in conclusion.
The first is that the 'new scramble' is very likely, in the short
term at least, to place African labour conditions under further
pressure, as governments compete wildly for new investment. The
implication is that, feeling under threat, western - and South
African - multinationals may well feel impelled to increase their
competitiveness by lowering costs, and hence in turn, to lower the
costs of their programmes of corporate social responsibility.
The second is that it has to be the task of trade unions,
non-governmental organisations and social movements to struggle to
ensure that instead of companies 'averaging down' they 'average
up': in short, that high standards of CSR be required of companies
across the board, regardless of national origin.
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providing reposted commentary and analysis on African issues, with
a particular focus on U.S. and international policies. AfricaFocus
Bulletin is edited by William Minter.
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