https://www.moneyweb.co.za/mineweb/3-court-judgments-that-have-changed-the-face-of-mining-in-sa/
Three recent court judgments have radically altered the mining landscape. Two deal with the need for miners to engage with local communities and take a hardline stance on the eviction of locals, and the third slapped down the mining minster for allowing coal mining in an environmentally protected area in Mpumalanga.
The case that has perhaps the greatest import is the decision of the Constitutional Court to overturn an eviction order against 37 members of the Lesetlheng Community in North West Province to make way for mining on the land they had occupied for generations. The judgment in this case requires mining companies not just to consult with communities prior to commencing mining – but to also obtain the written consent of the individuals directly affected. This goes beyond what is required in many other countries, where consultation, but not consent, is sufficient.
Ancestral land
The occupants in the so-called Maledu case say their ancestors purchased the land in 1919 but were unable to legally obtain title due to previous racial discrimination, so the land was registered in the name of the minister of rural development, who held it in trust. Like many communities in SA, proving their title to the land is a complex and legally fraught issue. A separate case is underway to establish the ownership of the Lesetlheng community land.
The respondents in the case were Itereleng Bakgatla Mineral Resources and Pilanesberg Platinum Mines, both of which have mining rights over the area. They argued that they had complied with the Mineral and Petroleum Resources Development Act (MPRDA) requirement to consult with the Bakgatla Ba Kgafela community before mining and had received the necessary permissions.
But the 37 applicants in the case argued they formed a subset of the wider Bakgatla Ba Kgafela community, and it was their forebears who purchased the land, not the wider community. The wider Bakgatla Ba Kgafela community had no right to dispose of land rights that did not belong to it.
The ConCourt agreed, invoking a clause from one of the briefest acts on the statute book, the Interim Protection of Informal Land Rights Act (IPILRA), which says “no person may be deprived of any informal right to land without his or her consent”.
Mining companies’ sordid practice
According to community activists, mining companies in SA have a sordid reputation for playing off one section of a community against another to secure mining rights. This is what happened in another case brought by 128 members of the Amadiba community living in Xolobeni on the Wild Coast, who have fought a multi-year battle to stop the mining of titanium sands on their traditional land. Australian-owned Transworld Energy and Mineral Resources (TEM) has applied for the rights to mine a 22km coastal strip in the area. One faction of the community is in favour of mining, another is against it.
The question then arises, who are the legitimate representatives of the community? Even where a majority of the community supports mining, this is not sufficient to consent to mining on ancestral land under customary law. The Pretoria High Court outlined the importance of land under the customs and traditions of the indigenous inhabitants of Xolobeni. A residential plot is far more than a place to live, “it is a symbol of social maturity and social dignity. Each residential plot further serves as a critical conduit for the preservation of relations of inter-linkage and mutual dependence between the living and the dead …”.
The minister of mineral resources imposed a moratorium in June 2017 on TEM’s application for mining rights in the area due to the volatility of the situation in the area, where an anti-mining activist, Bazooka Rhadebe, was gunned down in 2016 by assailants who remain at large.
Consent
The Amadiba, like those in the Maledu ConCourt case, rely on the consent clause embodied in IPILRA. In other words, the ministers of mineral resources and rural development and land reform must obtain the affected community’s full and informed written consent before mining rights may be granted in terms of the MPRDA. TEM argued that the MPRDA trumps the IPILRA, and that no land owner can have the right to refuse mining.
The Pretoria High Court said the MPRDA must be read with the IPILRA to protect the informal rights of customary communities. “As such they may not be deprived by [of] their land without their consent.” The court found that the granting of a mining right would constitute deprivation and declared that the minister of mineral resources lacks the authority to grant a mining right to TEM unless the consent provisions of IPILRA have been complied with. The consent, held the court, must be obtained by the minister of mineral resources, the minister of rural development and land reform and the deputy director-general of the department of rural development and land reform – not the applicant for a mining right.
Dingleton eviction attempt
Another case that throws a boulder in the road for miners involves Sishen Iron Ore’s attempt to evict a number of people who had lived on a proposed mining site in Dingleton, Northern Cape, for 30 years. Sishen is a subsidiary of Kumba and ultimately of Anglo American. This judgment is a consequence of the Maledu case decided just weeks before in the ConCourt.
Relocations must comply with local and international laws, including the International Finance Corporation’s standards for resettlement, which require resettled people to be placed in a position as good as or better than previously.
The families claimed Sishen was attempting to “creatively evict” them by carrying out blasting nearby, which was only stopped when local media reported on the matter. It then delayed negotiations with the community for nearly a year and, instead of referring the matter to arbitration as previously agreed for disputes of this nature, the company applied to court for an eviction order, claiming this was necessary for the safety of their homes. To buttress its claim for urgency, Sishen provided the Kimberly High Court with photos of homes that appeared to be structurally unsound, and should therefore be vacated. The families countered that their homes were safe, and the photos presented to the court were of other buildings.
“To the extent that Sishen is genuinely worried about our safety, we welcome its support in eliminating any risks and improving our living conditions. Instead, Sishen prefers to use these risks to motivate for our forced removal,” deposed Evelyn Hunter, one of the residents of Dingleton under threat of eviction, said before the court.
The Kimberly High Court threw out Sishen’s case on the grounds that it lacked urgency. Sishen had been in negotiation to relocate the Dingleton residents when it sprang an urgent eviction order. The Dingleton residents are demanding the company provide them with homes with title deeds.
Sweet no more
“Historically, negotiating mining deals with communities in SA has been like stealing sweets from a baby. Communities lack the capacity to negotiate these deals, so they generally end up getting very little out of them. I think these recent cases swing the balance of power more in the direction of communities, which is how it used to be before the MPRDA came into being,” says attorney Richard Spoor, who has been involved in three of the cases on behalf of community interests.
What about the claim that these cases will drive away mining investment? Mining attorney Manus Booysen of Webber Wentzel says the Xolobeni judgment and the requirement to obtain communities’ consent prior to the grant of mining rights, which is likely to be appealed by the minister of mineral resources, will damage an already battered mining sector.
Spoor disagrees: “I don’t see it being much more difficult to obtain mining licences and to attract investment. I believe market forces will prevail. If the mining project makes financial sense, and the communities consent, then mining will occur.”

AUTHOR PROFILE
Ciaran Ryan

Ciaran Ryan is a Johannesburg-based freelance writer who has a background in finance and mining, having previously headed up a gold mining operation in Ghana. He currently writes for several SA and overseas journals on matters ranging from mining to investment

The critical new dimension to community consultations is that of issuing shares to a community. The question is one of how to implement this new aspect as set out in the New Mining Charter?
Read how Kumba did it.
Ref: https://www.angloamericankumba.com/media/press-releases/2008/05-12-2008.aspx
The Sishen Iron Ore Company (SIOC) Community Development Trust, is set to generate hundreds of millions of Rands for community development in the Northern Cape and Limpopo in coming years. Since its establishment just over two years ago the trust has earned R211 million from its shareholding in SIOC.
IThe trust, popularly known as the “Super Trust”, was officially launched by Ms Dipuo Peters, Premier of the Northern Cape, at a function in Sandton on 4 December 2008. It was established when the former Kumba Resources was unbundled in September 2006 to form Exxaro and Kumba Iron Ore (Kumba). Kumba is the majority shareholder in SIOC, which owns iron ore mines in Thabazimbi (Limpopo) and Sisheng (Northern Cape).
The trust is the sole beneficiary of a 3% ordinary shareholding in SIOC held by a Special Purpose Vehicle (SPV) on its behalf. Thanks to the strong performance of Kumba Iron Ore over the past two years the R458 million in preferential shares issued to pay for the trust’s SIOC shareholding may be redeemed as early as 2010, well in advance of the original projections, said Chris Griffith, Chief Executive of Kumba, at the launch. “This will free up an estimated more than R100 million per annum for community development projects.”
He said that of the dividends paid to date, R196 million was used to redeem the preferential shares. He presented the trust with a cheque for the remaining R15 million. This includes R5 million for projects already initiated since the establishment of the Trust.
Connie Molusi, Chairperson of the Board of Trustees of the “Super Trust” said that the mines’ neighbouring communities were the main beneficiaries of the trust. Five independent community organisations operating in these areas have been identified as beneficiary trusts for channelling funds and resources to these communities:
The Gamagara Development Forum was the beneficiary trust for the communities around Sishen mine, including Olifantshoek, Dingleton, Sishen, Mapoteng and Deben. The Tsantsabane Development Forum would service Postmasburg and its surrounding areas; while the Kgalagadi Poverty Node Charitable Trust would service Kuruman and the surrounding rural areas; and the Thabazimbi Development Forum the communities around the Thabazimbi mine. The Maphalane Trust for the Disabled People was the fifth beneficiary trust. While it was based in Kimberly, it operated in the whole of the Northern Cape, Mr Molusi said.
He emphasised that the major portion of the dividends was currently used to service the debt for the initial purchase of the SIOC shares, while the remaining balance was used to fund the operation and projects of the “Super Trust” and its five beneficiary trusts. Both the Gamagara and Kgalagadi beneficiary trusts were allocated 30% each of the available funds, while the Tsantsabane and Thabazimbi beneficiary trusts were allocated 15% each, and the Maphalane beneficiary trust the remaining 10%.
Ms Peters said that the launch of the trust was a milestone event in the history of Kumba and the Sishen Iron Ore Company (SIOC), as well as the Northern Cape and Limpopo provinces. “This initiative is bound to impact greatly on the development of the mentioned areas. More importantly, however, it is will touch the lives of thousands of our people and create a better tomorrow for them.”
She congratulated Kumba on its decision to make the host communities of its mines, co-owners of the company through the establishment of the “Super Trust”. “This is true empowerment where it is needed the most… at grassroots level.”

Mining company Kumba Iron Ore’s 6 209 worker shareholders, who became pretax half-millionnaires in 2011, when the company paid out R2.7-billion during the first phase of the ten-year Envision employee share ownership plan (Esop), can look forward to an interim dividend payout in March, while awaiting the second maturation point payout, which is due in November 2016.
Worker shareholders at Kumba, 70%-held by mining major Anglo American, each received R576 045 for their holding of 3 365 units in Kumba’s Envision Esop, which equated to an after-tax payout of R345 627.
In addition to the initial payout, which came on the back of good production and share prices in 2011, the worker shareholders have received interim payout dividends exceeding R100 000.
Established in 2006 as part of Kumba’s broad-based black economic-empowerment (BBBEE) initiative, Envision was designed to promote economic empowerment among historically disadvantaged permanent employees below managerial level through an increase in broad and effective participation in the equity of the Sishen Iron Ore Company(SIOC) by workers, who contribute daily to meet production targets, explains Kumba capital projects manager Zelda Nel, who helped bring the Envision Esop to fruition and was the project leader during its implementation.
Envision is only one part of Kumba’s three-part empowerment programme, with the second being the SIOC Development Trust, which targets community growth and poverty alleviation through investment in and support of local projects for health, education and enterprise development.
The trust’s work also ties in with Kumba’s own statutory social and labour plans and the company’s partnership with the JSE-listed black-controlled Exxaro, which is also working to deliver real empowerment, particularly in skills development and equity participation.
The success of the Envision Esop depends on the share price at the time of the maturation point and successful company performance, as well as several external influencing factors, says Kumba corporate communication manager Gert Schoeman.
“I can confidently state that Kumba is doing well and that the company will continue to do well in the future. If dividends continue to flow and the share price continues to rise, the share- holding employees stand to benefit at the next maturation point,” he says.
National Union of Mineworkers (NUM) spokesperson Livhuwani Mammburu says the union is pleased with the way in which the Envision Esop has benefited its members and would like the Esop to be an example for other mining companies to follow.
“The Esop payout at Kumba made a difference in the lives of the workers and we are, therefore, placing pressure on all mining companies in South Africa to follow the same route and share their wealth with their employees.”
Mammburu stresses the need for mining companies to take Esops seriously as a way of empowering mineworkers by giving them a stake in the company, as Esops are a way of ensuring that mineworkers feel that they are part of the company.
Meanwhile, trade union Solidarity, which previously described Envision as “the most successful Esop in South Africa’s history”, continues to regard the Esop at Kumba in a positive light, says Solidarity spokesperson Gideon du Plessis.
“It is currently on the same growth trajectory as it was three years ago and we expect that employee shareholders will receive another substantial payout in 2016. We are also pleased with the yearly dividend payouts.”
Solidarity commends Kumba and the Envision trustees for the effective management of the Esop and for valuing and adhering to Solidarity and NUM’s input.
Du Plessis believes that the Esop at Kumba has set a benchmark for the rest of the mining industry.
Making It Work
With the implementation of the Envision Esop, Kumba wanted to broaden the base of the black economic-empowerment (BEE) model which, in 2006, made a relatively small amount of people extremely wealthy, but did not do much for the rest of the population, says University of Pretoria honorary professor Dr Con Fauconnier.
Fauconnier, a former CEO of the then Kumba Resources, Exxaro Resources and Iscor Mining, was one of the architects in the unbundling of Kumba Resources and Mittal from former State-owned integrated steelmaking corporation Iscor, and the subsequent unbundling of Kumba Iron Oreand Exxaro from Kumba Resources.
“While planning the development of the Esop, we felt that there were other ways in which we could broaden the base of benefits flowing to a greater number of people,” he notes, adding that through the implementation of a worker shareholder scheme, Kumba would be able to benefit the company’s own employees and the people whose livelihoods were affected by the mining operations in the area, such as the community.
Fauconnier says the implementation of Envision meant that Kumba was treading into the unknown, as the Esop was established on the premise that Kumba would succeed.
“Based on the fundamental business running well, we thought the chances were good that the company would prosper – and it did just that.
“While one hoped for fairly modest gains, in the least, Kumba’s management had no idea that the Esop was going to do as well as it did in the initial phase, and the dividends paid out to workers exceeded Kumba’s wildest expectations at the time,” recalls Fauconnier.
Despite not knowing how the after-effects of the recession and the state of the economy will impact on the payout at the next maturation point, the Kumba worker shareholders are still motivated in having shared in the previous benefits of the Esop.
Fauconnier favours any scheme with a substantially broad base of empowerment, as he is still concerned with the level of benefit that flows down to workers and the community in the current model of BEE in South Africa.
THE PROS AND CONS OF EMPLOYEE OWNERSHIP
South African corporate finance advisory firm Transcend Capital director Shaun Smit says Esops are an effective way of addressing BEE and Mining Charter requirements, which include 26% ownership by historically disadvantaged South African’s for mining companies; strengthening relationships with labour; and providing increased economic benefits for employees.
The implementation of an Esop also helps to better align employee and shareholder interests, recruit employees and reduce staff turnover, reduce downtime and improve the overall relationship with employees, as Esops have a positive effect on employee motivation.
Esops enable historically disadvantaged employees to effectively invest in the company with little to no input cost. They also provide a means for existing shareholders to dispose of shares.
Meanwhile, Smit says, despite the many benefits of Esops, the main challenge in implementing an Esop is managing labour expectations – at inception and throughout the life of the scheme.
“Communication and education are vital in achieving this, as employees often have high expectations from the start and a sense of entitle- ment, which poses a threat to the success of an Esop,” he warns.
Further, a challenge of implementing an Esop can be that its success relies largely on business performance, which is not always fully under the control of management. “When a company performs poorly and there is low related value creation, the benefit to employees will, subsequently, be less than what they had expected it to be,” explains Smit. This outcome may, in turn, negatively impact on the business’s relationship with labour, which may also dent employee morale and retention.
With Esops creating additional potential benefits for employees, Smit believes that stronger relationships can be forged between mining companies and employees, and this should decrease the existing conflict.
However, he notes that this strengthening of ties is only one step in a longer journey, which should be more focused on resolving the demands for higher wages and benefits in an environment where mining companies appear to already be under significant cost pressure.
“A shared commitment to and understanding of key businessdisciplines will ultimately determine the success of the business, which will, in turn, impact the economic outcomes of the scheme,” Smit reiterates.
To further improve the likelihood of Esop success, Smit suggests managing employee expectations, involving unions in the design of the scheme and obtaining management’s full commitment to the scheme.
THE FUTURE OF BROAD-BASED EMPOWERMENT
Smit believes there will most likely be a shift away from schemes with a defined one-off payment. The next wave of schemes will rather focus on providing benefits over a longer, more sustainable period, which will facilitate a sustained improvement in the lives of workers.
“Perhaps evergreen schemes, with lower payouts for a longer period, will be the way forward,” he says.
Further, Smit notes that there has been a move towards establishing other types of broad- based initiatives, such as community trusts, charitable foundations, enterprise development trusts and educational trusts.
Fauconnier agrees with this, adding that a scheme from which more people can benefit needs to be developed. Workers should, at least, benefit to the point where they can fend for themselves and their families.
“While the implementation of an Esop is a small step in the right direction, going forward, we need a mindset change regarding the imple- mentation of the current system so that the benefits flow to all the people who never really fully benefited from the mining industry in South Africa,” he suggests