The debate on mining has reached an unparalleled level of interest and discussion since our transition to a constitutional democracy. The question frequently asked is: does mining lead to development or underdevelopment? The issue of who benefits and who loses is what we want to investigate today. Listening to the communities, it is apparent that the vast majority of people have experienced mining as a disaster. These are forgotten people, voiceless, discarded, left on the scrap heaps of dead mines, without effective recourse to justice.
Mining is a very difficult subject to discuss in today’s South Africa, never mind at the continental level. It is usually portrayed as investment for development, source of jobs and a contributor to gross domestic product (GDP). It is seen as the holy cow of economics and sacrosanct. Not to be questioned or challenged, in spite of the fact that hundreds of thousands of poor people live in abject poverty because of loss of arable land, livelihoods, aggravating health conditions, cultural and social upheaval, all of which manifest in unemployment and pushes poor communities to the margins of society.
The challenge presented by mining would not be insurmountable if mining would contribute to a sustainable society. Our theme, “Mining -Development or Disaster?”, explores this understanding of mining from the perspective of communities, poor people, those who are most negatively impacted on, and we ask a profound question as to who is really gaining?
Mining across the world is suffering a crisis of legitimacy for two simple reasons. Firstly, because of its negative impact on climate change. And secondly, for its great cost on communities and rural life styles, which gives rise to serious health concerns. Africa has an extractive economic model, with South Africa, which once had a proud record of manufacturing stemming from mining, now importing 80 percent of mining machinery and exporting 80 percent of its gold and platinum refining, while having little local manufacturing capacity where the true value of mining is realised.
Ten years of Bench Marks Foundation (BMF) reports, the Policy Gap series, show that mining pretends to be doing good in communities, whereas its story is mostly fiction. Our Policy Gap studies have exposed the so-called intentions Âwritten down on paper versus the reality. To date mining houses have not disputed our findings, but are quick to question certain portions that make them uncomfortable.
Communities say that dust contaminated with poisonous materials is getting into their clothes and, most dangerous of all, their lungs. Bad roads, dust from haulage, livestock deaths, polluted air, contaminated water, unauthorised mining activates, absence of water licences and or environmental management plans - these are just some of the complaints.
The corruption of tribal chiefs and local authorities, political beneficiaries, and the close alignment of government officials with mining undermines human rights while at the same time others benefit enormously. As long as the industry is built on the profit motive, extracting for profits and short-term gain at the expense of communities and society as a whole, we are slowly but surely walking to our death. Sustainable development and profit-taking do not go together. Profit kills and capital is too powerful while society is too weak. All this is compounded by the government’s conflicting interests in the sector.
Given the above scenario, we must ask questions such as: can corporations, particularly mining, really promote sustainable development? Can they act responsibly with the interest of the community at heart? Can they distribute wealth generated in an equitable manner? Captains of industries can argue that they can do so, but people tell a different story. It is not possible because the corporation, they argue all the time, has a legal duty to serve shareholders interest, at any cost.
The BMF believes that the only time big business will do the right thing is when the issues confronting them become a risk, because for business, corporate responsibility is risk management and public relations a tool and nothing more can be expected.
Development dictates
Therefore, our suggestion is that we should also target the audit and financial sector, because the audit sector validates companies while the financial sector promotes mining and does not adhere to sustainable development dictates.
In addition, business-friendly Fitch and other rating agencies rate us on the basis of the investment climate. Very few social, economic and environmental considerations are taken, because the findings are based on business-friendly perceptions without consideration of the impacts. A business-friendly environment entails low taxes and little red tape such as strong environmental regulations.
South Africa has the highest rate of inequality in the world. If we try to really get business to do things differently, we will get a downgrade. So how far has South Africa progressed in 22 years of democracy? We know that things are getting worse as corporate interests supersede those of society. Lonmin was a prime example, as worker grievances were ignored and instead 34 workers were killed in one day. The social safeguards put in place in South Africa in the form of social and labour plans do not work.
The profit takers are not the profit makers. Yet the International Monetary Fund (IMF) found that South Africa’s non-financial returns on investment are high, ranking South Africa third among 19 developing countries, and with Paul Whitburn estimating a 14 percent return on investment against a global average of 8 percent. So something is very wrong. Illicit financial flows, estimated at 20 percent of GDP, are huge.
Financial Integrity put the mining Âsector in the lead when it comes to trade mis-invoicing, finding South Africa with the highest illicit capital export. In 2012, illicit capital outflows amounted to R300bn or close to 10 percent of GDP. Price transference also takes place, and the AIDC report shows how this takes place between company branches to shell companies in low tax jurisdictions, depleting funds or wages. This is an area needing further investigation.
The dominant form this takes is under-invoicing exports and over-invoicing imports. In 2011, South Africa lost R237bn that could have built 18 million Reconstruction and Development Programme houses, created 6.6 million youth jobs, or funded 1.1 million student scholarships.
New models of socialisation of mining by removing profit from the equation allow us to begin a new debate. Let us say we removed the short-termism where profits must always rise, but at a huge social cost to society, how could mining then benefit people and countries? Perhaps we need models that give community ownership, where surpluses made are reinvested, and excess distributed for community development. And build manufacturing capacity to realise the wealth that is now leaving our shores to rather benefit Africa. In the case of platinum, it is an excellent alternative clean energy source and could be used to address our energy crisis.
We are in a crisis, and mining is under immense pressure all over the continent.
The BMF believes that as a country we need political will to enforce binding regulations with strong implementation. We also advocate a rethink around mining models and fundamental change of the paradigm to one of a people-centred development and participatory approach. We strongly believe that this will only happen when people, that is, communities in which mining takes place, take ownership, distribute the benefits evenly and have a long-term plan of mining for people and development.
Rev Dr Jo Seoka is chairman of the Bench Marks Foundation. This is an extract from his keynote address.
IOL