Report says Lonmin unsustainable

Miners return to work at the Lonmin Platinum mine after Lonmin resolved a five-week strike by agreeing to pay raises of up to 22 percent, in Marikana, Rustenburg, South Africa, Thursday, Sept. 20, 2012. (AP Photo/Denis Farrell)

Miners return to work at the Lonmin Platinum mine after Lonmin resolved a five-week strike by agreeing to pay raises of up to 22 percent, in Marikana, Rustenburg, South Africa, Thursday, Sept. 20, 2012. (AP Photo/Denis Farrell)

Published Oct 15, 2013


Johannesburg - Platinum producer Lonmin is running an unsustainable operation, according to a report released on Tuesday.

In a study, the Bench Marks Foundation (BMF) said Lonmin claimed to be the "best in class" in sustainability, but that if this were true, platinum mining in South Africa was not environmentally, socially or politically sustainable.

The BMF is an independent organisation monitoring corporate performance in the field of corporate social responsibility.

Lonmin spokeswoman Natascha Viljoen said that although Lonmin had been given a copy of the report, it did not participate in its compilation.

"We have started going through the detailed analysis to understand the context and veracity of the assumptions properly, but given the 10 year span and the changes in reporting methodology we need more time," Viljoen said.

Once Lonmin had completed the review it would engage Bench Marks to discuss its interpretation of the data.

The study on corporate social responsibility and mining focused specifically on Lonmin.

It looked at Lonmin's reporting of itself over a period of about 10 years, between 2003 and 2012, in its corporate social development reports, the BMF said in a statement.

The report focused on a limited number of areas, including the use of contract workers, wages, "social capital" reporting, and housing programmes.

According to the report, the country's platinum mining industry had rapidly grown to 30 percent of the whole mining industry's contribution to GDP from 10 percent 15 years ago.

"After the 1990s, it experienced an extended period of extreme profitability," BMF said.

"Since 2008, profitability has been significantly lower, prompting cuts in Lonmin's social labour plans and retrenchment plans at Anglo American Platinum."

Contract workers in the sector numbered around 30 percent of the workforce. The gold mining sector, by comparison, used between 10 and 15 percent contract labour.

"Since 2002, 20 to 25 percent of Lonmin's workforce has been contract workers, and the proportion grew to over 30 percent in response to the 2008-2009 crisis," the report found.

"In the platinum industry, there is no accurate reporting of contract worker numbers and their wages. This is in breach of the legislation."

Regarding wages, the last year had shown that mineworker income was crucial towards social and political sustainability.

"The wordy SDRs (sustainable development reports) are completely silent on this issue.

"Rough calculations based on total employment and total labour cost per year reported by Lonmin give an erratic curve, but indicate successful cuts in average pay increases per Lonmin employee between 2009 and 2011, probably as a result of the contract worker strategy."

Lonmin SDRs displayed value added tables to show the distribution of new income every year to different stakeholders.

"During the good times for shareholders, 30 percent of value added accrued to wages. In times when new value production decreased, the wage share increased to 70 percent."

The generally higher and fluctuating wage share at the three big platinum mining companies indicated a stronger position for labour there than in the rest of the platinum industry.

The report noted that, according to StatsSA, the wage share of value added for the whole industry had been stable at a low 30 percent since 2002.

From 2003 to 2012, around R6 billion had been paid out as dividends to Lonmin shareholders, including in 2012.

No dividends were paid in 2009 or 2010, and the 2012 level of three percent of value added was low compared to pre-crisis levels.

The portion of the value added paid to the state in corporate taxes dropped from over 16 percent in 2007 to less than four percent in 2010, and to just over two percent in 2011.

The study found that Lonmin was not a leader in executive pay, but it would take an average worker 325 years to earn the value of the CEO's remuneration.

The amount spent by the company on "social capital", as reported in the SDRs, was less than what was paid to its directors until 2010.

There were between nine and 12 directors, but the community targeted by the "social capital" numbered tens of thousands of people.

The company's SDRs contained many commitments to the provision of housing, including being involved in two RDP projects, and it had also repeatedly committed to its own housing projects.

However it had not met its commitments under the Mining Charter, the study found.



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