Are mining profits ethically earned?

By John Capel Time of article published Feb 8, 2012

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Just why do a hundred civil society leaders from across the continent get together each year around the African Mining Indaba in what is called the Alternative Mining Indaba? Civil society has difficulties in accessing the mainstream event due to the exorbitant entry fee of R12 000 a delegate.

The Bench Marks Foundation, one of the participating organisations, has long held the view that, while there is much talk about the need for investment, very little thought is given to how this investment should be undertaken. With investment, especially in mining, there are winners and losers. The winners are shareholders and executive management who get all the benefits, and the losers are communities. How can this be true when we hear all the time that mining creates jobs, that communities are better off and that taxes are paid to the state that benefit people?

So why are civil society groups excluded from the official mining indaba? The Alternative Mining Indaba believes that this exclusion is carefully designed because civil society will tell a different story, one of affected communities who live in despair, who suffer cultural shock, lose access to livelihoods, and then have to deal with a wide range of environmental and social problems.

With mining comes a host of environmental issues. Contamination of both underground and service water deprives subsistence farmers and big agricultural businesses of water. Cattle and grazing land is affected, depriving communities of an income. Air quality deteriorates and results in respiratory infections. In Rustenburg, where platinum mining is big, nearly 60 percent of people reporting to local clinics suffer respiratory diseases. This externalisation of cost is not captured in the financial records of the companies but is passed on to communities, who have no voice to protest, or influence policy.

The jobs on offer never materialise, migrant labour is attracted to mining areas, putting strain on amenities. This places an increasing burden on local government services. Rarely is this considered a cost to mining. In South Africa, with the living allowance, migrant workers live in back shacks or overpopulate informal settlements. Women who have lost access to their livelihoods turn to sex work with migrant workers, resulting in the proliferation of HIV/Aids. This further contributes to overburdening hospitals that can’t cope.

Mines often relocate people, not fully taking into account the rural lifestyles or subsistence livelihoods, and remove people to suburbs, from what we call a rural existence into the market economy. Contrary to illustrious and flashy sustainability reports, we have yet to find a community that will tell you that they are better off.

The context we operate in is governed by a structural problem. The structural problem that relates to corporate doctrine in brief is: “The mighty do as they please and the weak suffer as they must.” Corporations have immense influence over governments’ investment policy, especially over regulations governing operations, labour, communities and often lowering standards, whether environmental, social or economic.

Partly this is a structural problem of the present economic model, rampant profiteering at any cost, and what Joel Bakan calls the psychotic nature of corporations. This psychotic nature comes from pursuing its material self-interest at any cost. In this economic model, the ecosystem has been viewed as a subsystem to take from, exploit, save costs and increase profits.

So, if we were at the Mining Indaba in any numbers, we would be calling on mining companies to internalise all the costs they pass on to society; doing business in a way that considers the broader environment in which they operate. This includes people, the ecosystem, the social crisis of unemployment, deepening poverty and inequality, and the looming crisis of climate change and a heating planet. We will be calling for a redistributive path, a just economic and democratised system, where the interests of all people, present and future, are considered above all else.

We would challenge the dominant theory of trickle-down benefits and growth at any cost, that permeates the thinking at the Mining Indaba, while not considering the finite resources or that it is only world elites that benefit, pushing more people into absolute desperation and poverty and pushing our planet towards extinction.

We would talk about corporate social responsibility and the truth, and contest these corporations in their sustainability reports, where they tell us how good they are, ignoring the voices of communities; communities who are more often than not worse off, whether they are local mining communities or broader society. We would tell the world that profit beyond all else, material greed and shareholder returns dominate resource extraction and not sustainable development.

The Alternative Mining Indaba raises issues that the African Mining Indaba deliberately refuses to raise – issues of poverty, the lack of job creation, tax holidays, tax avoidance by mining houses, secrecy of mining agreements, shoddy environmental impact assessments and social and labour plans that don’t address communities.

Most African countries have had independence for 50 years, have listened to the International Monetary Fund and World Bank prescriptive policies, but have failed to industrialise and develop their economies. In Tanzania 12 years ago, there were over 200 000 artisanal miners making a living out of gold mining. Today the country is dominated by Barrick Gold and AngloGold Ashanti, which employ fewer than 10 000 workers. The beneficiaries are shareholders. In Zambia’s copper-belt region, towns were flourishing as mines sourced various services from local industry. Today they are ghost towns, local businesses have disappeared, and unemployment and destitution are rife as mines import services.

One just has to look at towns like Welkom in South Africa; once a thriving mining city, Welkom is now a shadow of its former self. But if we look at Ndola in Zambia in years gone by, we have some idea of the developmental role mining can play, but no longer does. Glencore, the world’s biggest commodity trader, sources most of its minerals cheaply from artisanal miners and declares its revenue elsewhere, thus depriving the Democratic Republic of Congo (DRC) of taxes and proper benefits.

The Alternative Mining Indaba recognises that mineral extraction in just about every African country is corrupt, with government officials complicit and enriching themselves at the expense at community interests.

The province of Mpumalanga is rife with former government officials who have strong interests in coal mining, but who do not have the necessary know-how, but milk the province dry. Many mines do not have water licences. Farmers can wake up in the morning and, like communities in Limpopo with mining rigs on their land, be informed that their land is being prospected for minerals.

Whether we look at the DRC or South Africa, the communication with affected groups is weak. They are merely informed of decisions but their consent is not sought.

Communities across Africa at the Alternative Mining Indaba state categorically that communities want a bigger share in mining, that they want community capital to be developed, to be the beneficiaries, and in South Africa, to be the preferred black economic empowerment partner.

It is in this context that calls for nationalisation occur and Julius Malema’s call for economic freedom in our lifetime finds a receptive audience. Communities that are affected and that make way for mining, are no longer prepared to accept the status quo. They want real development that incorporates their needs, jobs, skills and their human development potential.

Many at the Alternative Mining Indaba consider the African Mining Indaba as the looters’ conference with short-term profit maximisation and shareholder returns as the true intent, not meaningful sustainable development of host countries. If we were present at the indaba, we would be talking about long-term, sustainable development that incorporates communities’ interests; how to cost the true value of mining by pushing for accounting procedures that cost social, economic and environmental impacts on to companies’ balance sheets.

We would be talking about ethical business practices and not the present practices at the expense of other interest groups and communities.

The Alternative Mining Indaba theme is “Just Mining or Just Profits”, and we need to ask, is it mineral extraction at any cost? Are profits ethically earned, with ethical practices dominating?

The UN’s John Ruggie process on human rights states that governments have the responsibility to protect human rights, and corporations must respect and remediate any negative impacts. However, governments are failing in this regard.

We believe there is a role for independent monitoring and evaluation and a role for community monitoring to hold mining corporations accountable.

But to do so we need independent funds to capacitate communities to engage with mining houses on a level playing field. To back this up we need an independent grievance mechanism, independent of the company, supported by an independent fund contributed to by mining corporations. It must be quick and easy to use, bring redress, be able to hold corporations accountable and must address any adverse impacts on communities.

Prior to business operations beginning, a local barometer should be used, using expertise from civil society to ascertain potential human rights impacts as they pertain to the social, economic and environmental consequences of operations.

Corporations need to go beyond host government rules and standards, and measure themselves against all the UN declarations on human rights, International Labour Organisation and other applicable international standards that include civil, political, economic, social and cultural rights. International finance institutions and private equity investors need to do their own due diligence when providing funds. We need an economy that serves the interest of people, meeting their needs.

Perhaps the Alternative Mining Indaba is idealistic, but what alternatives do we have other than to promote an agenda that incorporates the interests of communities? It is no longer acceptable to dig for resources in our back yard, leaving nothing but a hole behind. We need a developmental path that lifts Africa out of its doldrums, which gives returns and addresses marginalisation and exclusion.


John Capel is the executive director of Bench Marks Foundation and Alternative Mining Indaba.

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