South Africa’s Mining Industry Fit For Purpose

As plunging commodity prices squeeze South Africa’s mining industry, CNBC Africa’s Godfrey Mutizwa caught up with Lord Michael Hastings, Global Head of Citizenship at KPMG International, to get insights on how creating value can be a game changer for the industry.

MUTIZWA: As people have been suggesting, is the model that we have broken?
HASTINGS: The uncomfortable reality of the traditional model is it led to many of the tensions around the maritime strategy of some years ago. The overall mining culture is not in full repair. The lack of a mature two way dialogue which had its roots over many years exploded into a tragedy which right now we are still trying to put the pieces back together again. Part of our conversation in our mining business forum is to explore what the solutions can be.

MUTIZWA: Whose fault is it, that this mature dialogue is not present?
HASTINGS: I think everybody has to take their share of the blame; the companies have previously and historically stepped aside from the kind of interactive, open, honest and transparent dialogue with workers. There have been too many buffers in industrial relationships and the government to a large extent has been standing back historically simply being the tax receiver and imposer of regulations without necessarily putting the entities into a common space. When this is not in harmony, it means the responsibility lies in three different corners of the operation; it is very hard to build it back again after such tragedy.

MUTIZWA: Are you saying that the Government needs to do a very important introspection as well as the investor community? Who has gained from this?
HASTINGS: Not many people have gained from this. Too many jobs have been lost, incomes have been lost, companies are struggling, and so far, their profit base is weakened. It would have been far better if a more mature working dialogue preceded decision making and this we believe is the model being adopted by the mining companies to put their businesses back on track not only in South Africa but widely across the rest of the continent and in the mining world as a whole. Mining businesses cannot work in isolation and cannot be distant from a collective society that requires the good will of all. In my opinion, this business has to be run effectively with a profoundly transparent social purpose and that purpose is to empower the community to be free and wholesome with good working conditions, fair employments, sound education and stable health.

MUTIZWA: What about the mind-set of two key constituents- the workers and then the investors?
HASTINGS: I can understand the cry for cash from individuals who may feel they don’t have a working relationship with the company, it is understandable but unhealthy. It is not just about payment, it’s about building a holistic community.

MUTIZWA: What about the ESG approach, Is that module not close to the approach of doing business with purpose?
HASTINGS: It begins to answer that, looking after environmental, governance and social processes, procedures, policies and programmes. It will be a way of integrating basic human rights considerations into a business operation. Very often, ESG is seen as a mechanism for ensuring the right kind of reporting of the companies and their functions as well as their market outcomes. It goes more deeply than that, it has to be at the core of a business strategy, for a mining company, which exists to serve, to process and to profit and it also exists to secure the community that it extracts from towards the future so that no damage is done. It should provide for the health and wellbeing of those in the community.

MUTIZWA: Who needs to change in terms of building transparency in business?
HASTINGS: The change has to be drastic. Investors are there to secure the business until long term. Good business is done over a long time. The investor community is lacking the kind of forward approach we have been discussing but we are seeing a number of movements there, a large amount of global investor funds are now recognised by the principles laid out by the United Nations. Transparency needs to become much more apparent which will hold companies to greater account, we should start with the investors but the executives of the business have to own the fact that they are there to make sure the business delivers for the investor and the stakeholder- the society and the employees- the security of the community and return resources back to the investors. This is the way to avert any turbulence and tragedy ever again.

MUTIZWA: Do you see any evidence that suggests that the mind-set has shifted in the community and investors
HASTINGS: Yes we are clearly seeing that. There is an undeniable shift towards the integration of all the values that should lie between investor responsibility, public duty and shareholder returns. Those things are undeniably taking place but we are yet to see that as an industry wide standard.
MUTIZWA: Thank you very much indeed.