Mining Charter Impact Assessment: Transforming the Mining Sector

1. STRICTLY CONFIDENTIAL

2. PRESENTATION TO THE PARLIAMENTARY SELECT COMMITTEE ON FINANCE: MINING CHARTER IMPACT ASSESSMENT 12 OCTOBER 2010 STRICTLY CONFIDENTIAL

3. PRESENTATION LAYOUT • The Mining Charter in context • Impact of the Charter on the industry and the economy • Mineral Rights structure • Employment • Investment • Economic Indices • Assessment of progress against the Charter elements – Extent of transformation of the mining sector • The amended Mining Charter 13 September 2010 • Concluding remarks STRICTLY CONFIDENTIAL

4. THE MINING CHARTER IN CONTEXT • The Mining Charter is a stakeholder negotiated document • Established in terms of Section 100 of the MPRDA, 2002 • First sector instrument to effect transformation • Objectives of the Charter: • Promote equitable access to the nation’s mineral wealth • Substantially and meaningfully expand opportunities for HDSAs to benefit from exploitation of the nation’s mineral resources • Utilise the existing skills base to empower HDSAs • Expand the Skills base of HDSAs • Promote employment and advance the social and economic welfare of mining community and the major labour sending areas • Promote beneficiation of RSA mineral commodities STRICTLY CONFIDENTIAL

5. ELEMENTS OF THE CHARTER • Ownership and Joint Ventures • Human Resource Development • Employment Equity • Mine Community and Rural Development • Housing and Living Conditions • Beneficiation • Procurement • Reporting STRICTLY CONFIDENTIAL

6. MINERAL RIGHTS STRUCTURE • Pre MPRDA and the Mining Charter, Mineral Rights were vested in private hands – thwarting the potential for investment • This regulatory framework (MPRDA) vested custodianship of mineral rights in the hands of State, unlocking the inherent potential for mineral development • Regulatory framework enabled diversification of mineral commodities and their socio-economic impact (from depleting Gold resource development) • More than 26 000 applications have been received by the DMR since the promulgation of the new regulatory framework – RSA Mineral Rush STRICTLY CONFIDENTIAL

7. EMPLOYMENT TREND – MINING INDUSTRY DMR StatsSA STRICTLY CONFIDENTIAL

8. MINING INVESTMENT SARB STRICTLY CONFIDENTIAL

9. Investment Growth Rate, 1998-2003 SARB STRICTLY CONFIDENTIAL

10. Investment Growth Rate, 2004-2008 SARB STRICTLY CONFIDENTIAL

11. MINERAL EXPORT SALES DMR StatsSA STRICTLY CONFIDENTIAL

12. StatsSA STRICTLY CONFIDENTIAL

13. StatsSA STRICTLY CONFIDENTIAL

14. SA GDP PER CAPITA R Thousand GDP per Capita growth = 9.1% (1998 - 2003) = 11.2% (2004 – 2008) Source: StatsSA STRICTLY CONFIDENTIAL

15. SA GINI COEFFICIENT South Africa the most unequal society in the world in terms of income levels by Class, Gender and Race. STRICTLY CONFIDENTIAL

16. PROGRESS AGAINST THE CHARTER TARGETS • METHODOLOGY: • Records in the Department • Records from the mines • Questionnaires • Detailed analysis of data • Services of external consultants • Interrogation of the Charter 2002 construct STRICTLY CONFIDENTIAL

17. OWNERSHIP Measure: Has the mining company achieved HDSA participation in terms of ownership for equity or attributable units of production of 15 % in HDSA hands within 5 years and 26 % in 10 years? STRICTLY CONFIDENTIAL

18. OWNERSHIP STRICTLY CONFIDENTIAL

19. HUMAN RESOURCE DEVELOPMENT Measures: (i) Has the company offered every employee the opportunity to be functionally literate and numerate by the year 2005 and are employees being trained? (ii) Has the company implemented career paths for HDSA employees including skills development plans? (iii) Has the company developed systems through which empowerment groups can be mentored? STRICTLY CONFIDENTIAL

20. HUMAN RESOURCE DEVELOPMENT STRICTLY CONFIDENTIAL

21. EMPLOYMENT EQUITY • Measures: • Has the company published its employment equity plan and reported on its annual progress in meeting that plan? • Has the company established a plan to achieve a target for HDSA participation in management of 40% within five years and is implementing the plan? • Has the company identified a talent pool and is it fast tracking it? • (iv) Has the company established a plan to achieve the target for women participation in mining of 10% within the five years and is implementing the plan? STRICTLY CONFIDENTIAL

22. EMPLOYMENT EQUITY STRICTLY CONFIDENTIAL

23. MINE COMMUNITY AND RURAL DEVELOPMENT • Measure: • Has the company cooperated in the formulation of integrated development plans and is the company cooperating with government in the implementation of these plans for communities where mining takes place and for major labour sending areas? • Has there been an effort on the side of the company to engage local mine community and labour sending area communities? (Companies will be required to cite a pattern of consultation, indicate money expenditure and show a plan) STRICTLY CONFIDENTIAL

24. MINE COMMUNITY AND RURAL DEVELOPMENT STRICTLY CONFIDENTIAL

25. HOUSING AND LIVING CONDITIONS Measures: • For company provided housing, has the mine, in consultation with stakeholders established measures for improving the standard of housing including the upgrading of hostels, conversion of hostels to family units and promoted home ownership options for mine employees? Companies will be required to indicate what they have done to improve housing and show a plan to progress the issue overtime and is implementing the plan? • For company provided nutrition has the mine established measures for improving the nutrition of mine employees? Companies will be required to indicate what they have done to improve nutrition and to show a plan to progress the plan over time and is implementing the plan? STRICTLY CONFIDENTIAL

26. HOUSING AND LIVING CONDITIONS STRICTLY CONFIDENTIAL

27. PROCUREMENT Measures: • Has the mining company given HDSA’s preferred supplier status? • Has the mining company identified current level of procurement from HDSA companies in terms of capital goods, consumables and services? • Has the mining company indicated commitment to a progression of procurement from HDSA company over a three (3) to five (5) year time frame in terms of capital goods, consumables and services and to what extend has the commitment been implemented? STRICTLY CONFIDENTIAL

28. PROCUREMENT STRICTLY CONFIDENTIAL

29. BENEFICIATION Measure: • Has the mining company identified its current level of beneficiation? • Has the mining company established its baseline level of beneficiation and indicated the extent that this will have to be grown in order to qualify for an offset? STRICTLY CONFIDENTIAL

30. REPORTING • Measure: • Mining companies undertook to report on an annual basis as per the provisions of section 28(2)(c) and section 29 and the measure was as follows:- • Has the company reported on an annual basis its progress towards achieving its commitments in its annual report? STRICTLY CONFIDENTIAL

31. REPORTING STRICTLY CONFIDENTIAL

32. Amended Mining Charter 2010 • The review of the Mining Charter was aimed at strengthening and sharpening its effectiveness in driving transformation and competitiveness in the mining sector, • Improve the construct of the language, the scorecard and remove ambiguities • The Amended Charter retains all original element and introduces a new element on SD; • Mining Charter amendment concluded under the auspices og MIGDETT, a tripartite mechanism established in December 2008

33. Amended Mining Charter 2010 cont... OWNERSHIP • 26% of HDSA ownership by 2014 • Emphasising meaningful BEE ownership • Entrepreneur, employees & Communities • Evaluates the financing structure • Offsetting permissible against value of beneficiation

34. Amended Mining Charter 2010 cont... PROCUREMENT AND ENTERPRISE DEVELOPMENT - Procure from BEE entities: - minimum 40% capital goods by 2014 - 70% service by 2014 - 50% consumer goods by 2014 - Contribution of 0.5% of annual income by multinational suppliers of capital goods into social fund

35. Amended Mining Charter 2010 cont... EMPLOYMENT EQUITY Companies to achieve minimum of 40% HDSA demographic representation by 2014 at: • executive management (Board) level • senior management (Exco) level • core and critical skills • middle management level • junior management level Companies to fast track existing talent pools to ensure high level operational exposure in terms of career path programmes.

36. OCCUPATIONAL DISTRIBUTION IN THE MINING SECTOR

37. Amended Mining Charter 2010 cont... HUMAN RESOURCE DEVELOPMENT Industry to invest % of annual payroll in essential skills development reflective of demographics as follows: • 3% by 2010 • 3.5% by 2011 • 4% by 2012 • 4.5% by 2013 • 5% by 2014

38. GRADUATES STATS IN CORE SKILLS (ENGINEERING)

39. Amended Mining Charter 2010 cont... MINE COMMUNITY DEVELOPMENT - Stakeholders to adhere to international best practices and guidelines, - Invest in ethnographic community consultative and collaborative process prior to implementation of mining projects, • Conduct assessment to determine developmental needs in collaboration with mine community and, • Identify projects for contribution towards community development in line with IDPs proportionate to investment

40. Amended Mining Charter 2010 cont... HOUSING AND LIVING CONDITIONS • Companies to implement measures to improve standards of housing and living conditions for mineworkers as follows; • convert/upgrade hostels into family units by 2014, • occupancy rate of one person per room by 2014, • Facilitate home ownership by miners in consultation with labour by 2014

41. Amended Mining Charter 2010 cont... SUSTAINABLE DEVELOPMENT AND GROWTH IN MINING INDUSTRY • Mining companies to implement elements of sustainable development commitments in Stakeholders’ Declaration, • Improve on environmental management • Improve on industry’s health and safety performance, • To utilise S.A based facilities for analysis of samples across mining value chain.

42. Amended Mining Charter 2010 cont... BENEFICIATION - Companies to facilitate local beneficiation by adhering to s26 of MPRDA and Beneficiation Strategy - Offset value of level of beneficiation against portion of HDSA ownership but not exceeding 11%

43. Amended Mining Charter 2010 cont... REPORTING (MONITORING AND EVALUATION) - S47 MPRDA, suspension/ cancellation of rights - S99 MPRDA, penalties

44. CONCLUDING REMARKS • The Mining Charter – precursor of all sectoral Charters (all of which are premised on the identical elements originally identified) • The extent of transformation of the mining sector against the Charter elements is grossly inadequate • The construct of the Charter 2002, as a negotiated and compromise document presented gray areas in the elements and measures (scorecard) – unintended consequences of exploitation • Lack of capacity within the DMR compromised the extent of vigilance on implementation of the Charter • The Charter focused on transformation of the sector – lack of focus on sustainable transformation and growth of the sector STRICTLY CONFIDENTIAL

45. CONCLUDING REMARKS • Development of Monitoring and Evaluation component • Companies must report levels of compliance annually • Review of MPRDA to beef up penalty provisions that may be imposed to companies for non-compliance.

46. CONCLUDING REMARKS • The mining industry regarded the Charter as a compliance requirement – not a business imperative • We, as policy makers presumed that everyone is committed to transformation • The amended Charter strengthened the construct of the language to obviate against any multiplicity of interpretations • The amended Charter introduces an element of sustainable development • The amended Charter introduces a scorecard with clearly defined target • Reporting mechanisms are well defined – annual reporting • Review of MPRDA to beef up penalty provisions that may be imposed to companies for non-compliance. STRICTLY CONFIDENTIAL

47. ENDS…. “A DROP OF WATER BREAKS A ROCK THROUGH CONTINOUS FALLING.” Unknown STRICTLY CONFIDENTIAL