Achieving Equity in South African Mining

Ryan Boyko Javier Cepeda Hilary Rogers

Jordan Sloshower Bingnan Zhang Yi Zhou

November 10, 2012

Salovey & Sons Consulting (Team #6)

Mining in South Africa - Inequitable and Untenable

Crisis of INEQUITY =

Insufficient wage and benefit

Unsafe working conditions

Squalid living conditions

Unacceptable burden of disease

Unfair corporate practices

Unemployment and social problems

Mining

Finance

Health

Major Stakeholders

Strategic Approach

Empowerment

Strategic Approach

Empowerment

Alignment

Strategic Approach

EQUITY

Action plan

Complement existing HEALTH initiatives

Align CORPORATE objectives

Promote equity through SUBSIDIZED HOUSING

Empower community through PEER EDUCATION

Complement existing health initiatives

Chronically underfunded Behind Millennium Development Goal

High TB, silicosis, and HIV rates Highly mobile population

Landscape Unique challenges

South African Declaration on TB in

Mining Sector

Health Passport

GeneXpert

Rapid distribution

Local focus group Best practice share Annual auditing

Gene Xpert

Free cellphone minutes

Health Passport Preferential rehiring

Follow up

Complement existing health initiatives

Align corporate objectives

Compensation Fund

Tax and Deductibles

CSR

HSSE audit

Conflict of interest

Ince

ntiv

e Punitive

Increased productivity and worker satisfaction Reduce TB

Private-public partnership

Benchmarks to reduce infectious/occupational diseases burden (HIV,

TB, silicosis etc.)

Performance based government subsidy

Promote equity through subsidized housing

Provide low cost, quality housing for 250,000 migrant workers

Empower community through peer education

Recruitment and training Peer Educators

Step 1 Material development MoH, Peer Educators, NGOs

Step 2

Community-based education Prospective & Ex-Miners, Family

Step 3 On-site education and peer support Current Miners

2013 2014 2015 2016 2017 2018 2019 2020 2021 2022

Implementation roadmap and costs

Projected Annual Expense (US$ M)

Total costs (base) = US$8.5 B Total costs (high) = US$9.4 B

1,783

111

904

GeneXpert expansion and cellphone incentives (US$2.6 B)

Tax incentive (US$0.7 B)

Housing (US$4.0 B)

Peer education (US$1.2 B)

Limitations

Uncertain global economy

Contextual heterogeneity

Implementation challenges

TB rate reduced among miners to 1% Integrate HIV/TB care across borders Wage equity in mining sector

Alignment

Empowerment

Adequate housing for all migrant workers Health programs driven by and responsive to community Strengthen social networks

Outcomes

Increase mine productivity Responsible business practice Humane working conditions

Thank You!! Questions?

Appendices

Salary – high industry profit, little shared by workers

67% 46% 38% 33%

23% 17% 11% 10%

Kumba Iron Ore (SA)

BHP (SA) Gold Fields (SA)

SA Mines Avg.

P&G GE Shell Toyota

EBITDA/Sale Revenue

Source: SA Mine, PWC, Nov 2011; Yahoo Finance; Companies’ financial reports

345 300 385 451 625

786

Lonmin SA Gold Fields SA Anglo Gold

Salary split between workers and management

Management

Workers

Mining industry in SA enjoys very high pre-tax profitability × Estimation shows majority of the salary benefit goes to management

Supplement – Align business objectives

Compensation Fund: restructure its management and directly accountable to DOH, and enforce private funding

Tax: 1% tax deduction (US$0.1 B) to complying companies

Tax Deductible: full deductible on HSSE/CSR CAPEX

CSR: priority in awarding government contracts

HSSE audit: mandatory, penalties on failing companies 1st failure – warning

2nd failure – remove CAPEX

deductible from tax (9% NI)

3rd failure – revoke license

Conflict of interest: prohibit local officials from investing in mining companies

Ince

ntiv

e Punitive

Migration

• For decades South African mines have attracted thousands of migrant workers from neighboring states, mainly from Lesotho, Mozambique, and Swaziland, who cross the border in search of jobs (Lancet). – According to SA ministry of labor, in 2006, 38% of miners were foreign migrants – many South Africans also migrate to mines in search of labor

• Migration-related problems – complicates TB prevention and treatment

• All of these countries feature in the ‘Top7’ for per capita incident TB (MoH) • Each migrant worker who returns home with tuberculosis spreads the disease to an

estimated 10 to 15 people in his community, – migration creates a housing crisis at mining sites – migration disrupts social fabric

Empowerment through peer education

• Step 1: Recruitment and training – mining unions and CBOs guide recruitment and training – paid salary of senior miner to avoid creating hierarchy

• Step 2: Development and adaptation of educational materials – overseen by MoH in conjunction with peer educators and NGOs working in this field

• Health Education (TB, HIV and silicosis) for prospective, current and former miners and their communities. – Community-based education for prospective miners and community members

• Recruitment agencies provide basic education on TB and silicosis risks and other mining-associated safety risks • Already-existing structures in communities such as HIV/AIDS support groups would serve as good platforms for

conducting such educational activities – particularly for the families of miners, who are also at risk, and for former miners in Lesotho.

– On site education for current miners

• Mining and Safety Act Essentials

• the TB and silicosis risks associated with mine work, • general prevention and treatment literacy for TB and HIV, as well as site-specific health services

information • information on the health passport and cross- border policies and programs to address TB and

HIV in migrant miners. • Legal rights and responsibilities education

– TB guidelines that mines and miners are compelled to abide by – compensation policies – what to do if legal rights are not met.

• As Program scales up can move into peer support groups and advanced skill building

2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 Total of 10 yearsBudget for health program 83,275,000 79,275,000 103,057,500 133,974,750 174,167,175 226,417,328 294,342,526 382,645,283 497,438,869 646,670,529 2,621,263,959Budget for education program 27,500,000 35,750,000 46,475,000 60,417,500 78,542,750 102,105,575 132,737,248 172,558,422 224,325,948 291,623,733 1,172,036,175Budget for tax cut program 100,000,000 100,000,000 100,000,000 100,000,000 100,000,000 100,000,000 100,000,000 700,000,000Expense for housing program (worst) 0 224,000,000 336,000,000 504,000,000 672,000,000 672,000,000 672,000,000 672,000,000 812,000,000 812,000,000 5,376,000,000Expense for housing program (best) 0 112,000,000 266,000,000 364,000,000 378,000,000 532,000,000 588,000,000 644,000,000 812,000,000 812,000,000 4,508,000,000Average Revenue from Housing 0 (19,200,000) (28,800,000) (43,200,000) (57,600,000) (57,600,000) (57,600,000) (57,600,000) (69,600,000) (69,600,000) (460,800,000)Evaluation cost for overall programs 500,000 600,000 720,000 864,000 1,036,800 1,244,160 1,492,992 1,791,590 2,149,908 2,579,890 12,979,341Total budget (worst) 111,275,000 320,425,000 457,452,500 756,056,250 968,146,725 1,044,167,063 1,142,972,765 1,271,395,296 1,566,314,725 1,783,274,152 9,421,479,476Total budget (best) 111,275,000 208,425,000 387,452,500 616,056,250 674,146,725 904,167,063 1,058,972,765 1,243,395,296 1,566,314,725 1,783,274,152 8,553,479,476

Budget annual growth rate (health&education) 30%An nual growth rate (evaluation) 20%

Financials

References Aaron Motsoaledi, TB in the Southern African mining sector and across the sub-region, STOP TB partnership Board meeting http://www.stoptb.org/assets/documents/about/cb/meetings/21/1.12-0%20Outcomes/Presentations/1-12-03%20TB%20and%20the%20mining%20industry%20in%20SADC.pdf AIDS Rights Alliance for Southern Africa. (2008). The Mining Sector, Tuberculosis and Migrant Labour in Southern Africa (pp. 1–19). Baleta, A. Southern African declaration targets TB in mining sector. The Lancet, 380:1217-8. Declaration on Tuberculosis in the Mining Sector, South African Development Community (SADC), 2012 Department of Labour of South Africa. Labour Migration and South Africa:Towards a fairer deal for migrants in the South African Economy. Private Bag X117. Pretoria. 2007. ISBN No: 978-0-621-37625-8. Financial Statements of Anglo American, AngloGold Ashanti, De Beers, Exxaro, Gold Fields, Lonmin, Gold Mines, 2011, 2012

References Hamann, R. (2004). Corporate social responsibility, partnerships, and institutional change: The case of mining companies in South Africa, 28(4), 278–290. Wiley Online Library. Hutton J. “Mobile Phones Dominate in South Africa”. Nielson South Africa. 30 September 2011. Accessed on 9 November 2012. Available at: http://blog.nielsen.com/nielsenwire/global/mobile-phones-dominate-in-south-africa/ “Income Taxes, Mining Taxes, and Mining Royalties”, PWC Global Mining Group, December 2010 Jamasmie C. “S. African strikes drop annual mining production 8.3%”. 8 November 2012. Accessed on 9 November 2012. Available at: http://www.mining.com/s-african-strikes-hit-annual-mining-production-drops-8-3-25083/. “Lonmin Fact Sheet”, Lonmin website, August 2012 Mayer-Rath, G. et al. 2012. The impact and cost of scaling up GeneXpert MTB/RIF in South Africa. PLoS One, 7:e36966. “Mining and tax in South Africa Costs and benefit”, Mark Curtis, Feb 2009

References National Strategic Plan on HIV, STIs and TB 2012 – 2016, Ministry of Health, South Africa. Porter M and Kramer M. Strategy and Society: The Link between Competitive Advantage and Corporate Social Responsibility. Harvard Business Review. 2006. “SA Mine - Review of trends in the South African mining industry”, PWC, November 2011 South Africa: No HIV and TB Workplace Policy, No Mining Licence. (n.d.). South Africa: No HIV and TB Workplace Policy, No Mining Licence. irinnews.org. http://www.irinnews.org/Report/95169/SOUTH-AFRICA-No-HIV-and-TB-workplace-policy-no-mining-licence, Accessed 09.11.2012. South Africa Economic Update: Focus on Inequality of Opportunity. World Bank. 2012. http://siteresources.worldbank.org/INTAFRICA/Resources/257994-1342195607215/SAEU-July_2012_Full_Report.pdf “South Africa Mining Report Q1-2013”, Business Monitor International Ltd, October 2012 Take your medicine? http://www.economist.com/node/13725667, 2009 “Web-based Sustainable Development Report”, Lonmin Plc, September 2011