team 10 presentation

Investing in the Future of Mining in South Africa

Shreya Agrawal -- Framework Development and Summary Jingjing Kanik -- Environment and Housing Fanni Li -- Workers’ Compensation; Case for Industry Ffyona Patel -- Workers’ Safety Sarah Xu -- Workers’ High-Risk Health Issues

Critical Need to Address Mining Issues Synopsis Strategy Recommendation Summary

∗ Miner unrest at boiling point ∗ International scrutiny of South

African mining conditions and limited human rights

∗ Environmental consequences of long-term mining coming to surface

∗ Enacted policies for improvement but limited implementation

Entities at the Table

Sustainable mining industry

Government

Mining workers

Mining company

Synopsis Strategy Recommendation Summary

Health Economic Business Human Rights Environment

Economic Development

Health

Housing

Environment

Safety

4-Pronged Approach Synopsis Strategy Recommendation Summary


Health

Housing

Environment

Safety


4-Pronged Approach: Health

Several High-Risk Health Issues


Long Term Health Problems: ∗ Silicosis ∗ Tuberculosis (especially for co-infected HIV workers) Deficiencies: ∗ Lack of Prevention, Screening and Treatment ∗ Adherence to treatment ∗ Accessible health care facilities


Reducing TB, HIV, & Silicosis Synopsis Strategy Recommendation Summary

•↓ silicosis: silica masks, ventilation & wet drilling •TB prophylaxis

•Refer to worker compensation

• Confirm treatment results

•Directly Observed Therapy for TB

• Support HIV patients with ART

• Counseling & patient education

• Create health posts • Screen for TB, silicosis

and HIV

Screening Treatment

Prevention Compensation & Support

Model Health Care Posts Synopsis Strategy Recommendation Summary

Type of cost Number Unit cost (per year)

Total cost (per year)

Depreciation/addition over time

Total cost (10 years)

TB Drugs (normal)

170,000 miners $172 $29,240,000 70,000 more workers $200 over time

$432,400,000

TB Drugs (MDRTB)

30,000 miners $650 $19,500,000 10,000 more workers $800 over time

$275,000,000

TB Prophylaxis 300,000 miners $100 $30,000,000 $300,000,000 Community workers

16,000 $1,400 $22,400,000 $224,000,000

Nurses 8,000 $7,000 $56,000,000 $560,000,000 Education material

varies varies $20,000,000* $200,000,000

Medical equipment**

4,800 $300,000 $1,440,000,000 (One-time cost)

Total costs $3,431,400,000 *Based on estimate of education material of $40 per worker for the year **Mining industry should invest the remaining amount for equipment to monitor TB and HIV interventions

Health Budget Synopsis Strategy Recommendation Summary


Health

Housing

Environment

Safety

4-Pronged Approach: Housing Synopsis Strategy Recommendation Summary

∗ Currently living in shacks ∗ No electricity, no running water, no sanitation facilities, no

garbage removal ∗ Wealth disparity

Current Housing Issues



∗ South African government’s ‘Housing for All by 2014’ ∗ Section 26 of the Constitution of the Republic of South Africa,

1996, states that everyone has the right to have “access to adequate housing”

Addressing the Issues

Housing Costs


∗ Three-fold contract between government, mining companies and mining workers ∗ Government creates subsidized housing for all miners ∗ Mining companies will pay the rents for all miners ∗ Miners will be able to live comfortably

Housing Collaboration Synopsis Strategy Recommendation Summary

∗ Assumptions: ∗ Approximately 500,000 workers ∗ Two or three mining workers can live in same swelling ∗ Total demand for houses 250,000

Housing Budget Synopsis Strategy Recommendation Summary

Costs to government Costs to mining industry

Construction of house $11,500 Rent per year per house $575

Number of houses to construct 250,000 Number of houses 250,000

Total upfront cost to government $2.875B Total annual rental costs (government income)

$143,750,000

Additions over 10-year period (20%) $575M Maintenance costs over 10-year period $43,125,000

Total cost over 10-year period $3.45B Total costs over 10-year period $1.5B


Health

Housing

Environment

Safety

4-Pronged Approach: Environment Synopsis Strategy Recommendation Summary

∗ Land degradation ∗ Obliteration of finite

resources ∗ Pollution

∗Acid Mine Drainage (AMD)

Environmental Challenges



∗ Investigation and research fund: $1 Billion ∗ Tax credit for the mining company: 2% ∗ Capital cost of the facilities ∗ Operating cost to neutralize the water ∗ Estimation of government tax lose: $1 Billion /year ∗ Contributed portion: $ 3 – 5 Billion over 10 years

∗ Monitoring the implementation: $1 Billion over 10 years Total budget: $5 – 7 Billion

Potential Solutions to AMD Synopsis Strategy Recommendation Summary


Health

Housing

Environment

Safety

4-Pronged Approach: Safety Synopsis Strategy Recommendation Summary

∗ Approach ∗ Use technology before people ∗ Increase industry engagement in

international safety ∗ Heighten awareness of on-the-ground

conditions ∗ Current problems

∗ Cost ∗ Distance from international mining safety

communities ∗ Lack of accountability ∗ Incentives

Industry Investment in Safety



Proposed Solutions and Budget Synopsis Strategy Recommendation Summary

∗ Mining robots ∗ Engagement in International Council

on Mining & Minerals ∗ Learn and share best practices

for safety ∗ International accountability

∗ Stakeholder exposure to mining conditions

Total Budget: $1 Billion

ODMWA Enforcement

Problem: •ODMWA requires mine owners to

pay for medical expenses for occupational-related industries

BUT •only around 2% of claims are

actually paid


Occupational Injury Insurance

Solution: •Mine owners must contribute to occupational injury insurance

•Government can match employer contribution or reduce taxes/royalties to aid industry profitability

•Insurance company will pay employee in instances of occupation-related injury or illness

(Assumed average compensation of 3 years’ pay)


Promoting Insurance

Cost: $168M/year or $1.68B for 10 years1

Implementation:

1. Estimate = Number of Employees Percent that are directly employed miners and machine operators*Percent injured or with mining-related health problems *Expected compensation for injury/Avg # years in industry *10 years= 498,141*30%2*18,000USD3 /8years* 10years= $1.12B If government pays ½, then total cost of program is $560M. Around 30% of miners had TB/Silicosis based upon case materials, Compensation is 3-year salary, assuming $6000USD per year 2. http://www.bdlive.co.za/business/mining/2012/11/09/anglogold-warns-of-dire-consequences-for-jobs

Benefits Risks

• Ensures that injured employee gets paid

• Incentivizes employers to invest in safety to reduce insurance premiums

• Helps industry avoid strikes (net profit at AngloGold Ashanti down 41%; production down 6%.2)

• Forces additional costs onto mining industry despite shrinking margins

Synopsis Strategy Recommendation Summary Cost: $168M/year or $1.68B for 10 years1

Implementation:

http://www.bdlive.co.za/business/mining/2012/11/09/anglogold-warns-of-dire-consequences-for-jobs


Health

Housing

Environment

Safety

Economy-Centric Development Synopsis Strategy Recommendation Summary

∗ Problem: •Mining industry facing unattractive margins and higher than

inflation wage growth

• Miners strike over compensation among other issues • General sentiment that foreign companies are coming in to take “our

resources”; reminiscent of colonialism4

Low Margins and Worker Unrest

Input Change in Cost1

Labor +9% (above inflation wage increase)

Consumables Expected to show above-inflation increase

Utilities +23.6% in utilities, includes a 25% increase in power

Royalties 0.5% to 7% royalty added in 20082

Equates to 2% of total operating costs3



∗ Recommendation for Profit Sharing/Equity Compensation •Convince employers to set up profit-sharing scheme with employees

•Wages can remain close to current levels while increasing overall compensation via benefits

•Variable compensation is percentage of total firm profits or equity shares

Benefits of Profit Sharing Synopsis Strategy Recommendation Summary

∗ Cost: Minimal; Includes cost of conducting meetings with leading mining companies

∗ Implementation:

Risks of Using Variable Pay

Benefits Risks

• Enable mining industry to be continue operating profitably; decreases risk from fluctuating wages

• Allow workers to feel sense of ownership and alignment with organizational goals

• Exceed goals for 26% black ownership by 2014

• Need to convince industry as well as workers about benefits of scheme.

• Base-level compensation must ensure basic needs of workers and their families


10-YEAR PROJECTION OF BUDGET

Components Total Budget for each component

Housing $3.5 Billion

Health $3.5 Billion

Environment $5 to $7 Billion

Safety $1 Billion

Workers’ Compensation $1.7 Billion

Total Budget for 10 years $14.7 - $17.7 Billion

Overall Budget Summary Synopsis Strategy Recommendation Summary

Summary Synopsis Strategy Recommendation Summary

∗ Sustainable interventions to address complex social issues

∗ Remedying poor health and working conditions – making things work at work

∗ Alternatives to increasing workers' wages

∗ Curbing increasingly urgent tide of environmental issues

∗ Increasing industry engagement

Appendix

∗ "Compensation Systems For Occupational Diseases." National Health Laboratory Service. National Institute for Occupational Health, n.d. Web. 28 Oct. 2012. <www.nioh.ac.za/?page=topical&id=13&rid=19>.

∗ “Broad-Based Socio-Economic Empowerment Charter for the South African Mining Industry.” “http://www.westerncape.gov.za/Text/2004/5/theminingcharter.pdf.” 2004.

∗ “Mining Health and Safety in South Africa.” The African Business Journal. ∗ “South Africa: Thembekile Mankayi v AngloGold Ashanti Limited- Media Summary.” allAfrica 3 Mar. 2011. ∗ “South Africa’s New Mining Charter.” SouthAfrica.info 14 Sept. 2010. ∗ Corbett, Charalambous, et al. “Human Immunodeficiency Virus and the Prevalence of Undiagnosed

Tuberculosis in African Gold Miners”. American Journal of Respiratory and Critical Care Medicine. 170. 2004. ∗ Corno and de Walque. “Mines, Migration and HIV/AIDS in Southern Africa.” Journal of African Economies. 21:3.

2012. ∗ Minerals, South Africa Dept of, and Energy. Housing and Living Conditions Standard for the South African

Minerals Industry. Government Printer, 2009. ∗ Murray, Jill, Tony Davies, and David Rees. “Occupational Lung Disease in the South African Mining Industry:

Research and Policy Implementation.” Journal of Public Health Policy 32 (2011): S65–S79. Web. 4 Nov. 2012.

References

Reference

∗ Sonjica, Buyelwa. "Keynote Address." 5th Mine Health and Safety Council Summit. Department of Minerals and Energy. N/A, Johannesburg. 5 Oct. 2007. Address.

∗ “http://www.westerncape.gov.za/Text/2004/5/theminingcharter.pdf.” 2004. ∗ AIDS and Rights Alliance for South Africa (ARASA). “The Mining Sector, Tuberculosis, and Migrant Labor in

Southern Africa.” ARASA Publications. July 2008 ∗ Alvarez-Rivera, Manuel. “Republic of South Africa General Elections Results Lookup (1994).” Election

Resources on the Internet. September 2010. ∗ Chamber of Mines of SA v The Compensation Commissioner for Occupational Diseases (448/11) [2012] ZASCA

87 (31 MAY 2012) ∗ Chamber of Mines of South Africa. “Facts & Figures 2010.” Chamber of Mines of South Africa Publications.

2011. ∗ CNN World. “Miners on Strike Over Death Toll.” CNN.com/world 27 December 2012. ∗ Garzarelli, Giampaolo, Lyndal Keeton-Stolk, and Volker Schoer. “Workers’ Compensation in the Republic of

South Africa.” 19 Mar. 2008. ∗ Garzarelli, Giampaolo, Lyndal Keeton-Stolk, and Volker Schoer. “Workers’ Compensation in the Republic of

South Africa.” 19 Mar. 2008. ∗ http://www.who.int/gho/countries/zaf.pdf

Reference

∗ Girdler-Brown, White, et al. “The burden of silicosis, pulmonary tuberculosis and COPD among former Basotho goldminers.” Aurum Institute for Health Research. 2008.

∗ International Council on Mining and Minerals. “Human Rights in the Mining and Metals Industry.” ICMM Publications. May 2009.

∗ McClenaghan, Maeve. “South African Massacre Was the Tip of an Iceberg.” Bureau of Investigative Journalism. 18 October 2012.

∗ Park, Girdler-Brown, Churchyard, et al. “Incidence of tuberculosis and HIV and progression of silicosis and lung function impairment among former Basatho gold miners.” American Journal of Industrial Medicine. 52:901-908 (2009).

∗ South African Legislature. “Occupational Diseases in Mines and Works Act.” Publications of South African Legislature. 1973

∗ State President’s Office. “Occupational Disease in Mines and Works Amendment Act, 1993.” Publications of State President’s Office. January 1994.

∗ Steen, Gyi, White, et al. “Prevalence of occupational lung disease among Botswana men formerly employed in the South African mining industry.” Occupational and Environmental Medicine. 54:19-26. 1997.

∗ Trapido, Mqoqi, Williams, et al. “Prevalence of occupational lung disease in a random sample of former mineworkers, Libode District, Eastern Cape Province, South Africa.” American Journal of Industrial Medicine. 34:305-313. 1998.

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