Loaded for Bear: The trouble with community trusts and the mining industry

29 Jan 2024

Community trusts are one of the tools the mining sector uses to win the hearts and minds of the people who live in the vicinity of its operations. The trouble is that no one seems to trust the trusts.

Richards Bay Minerals (RBM) last week struck a deal to bring more transparency to its community trust deeds while removing some of the flashpoints that bedevilled them. But the company, a unit of global mining giant Rio Tinto, needed to crawl through a social minefield to reach that point.

The trusts were initially established in 2009 as part of RBM’s BEE requirements, and things went pear-shaped — a typical feature of such trusts, which often involve traditional leaders.

In this case, the traditional leadership in the area was both a direct beneficiary and had control over how the funds were to be allocated— a clear conflict of interest. Projects aimed at social upliftment are the usual raison d’etre of such trusts, but a lack of transparency fuelled concerns that the trusts were uplifting only a select few.

Against this backdrop of simmering community discontent, RBM faced outright criminal threats by mafias seeking a piece of its procurement pie. This included attacks by gunmen on public buses taking employees to work as well as company trucks late in 2019.

Moment of truth

The boiling point was reached when GM Nico Swart was murdered in May 2021 while en route to work, leading RBM to declare a force majeure that lasted nine months.

Last week, just ahead of a scheduled court hearing into the matter, a deal was reached.

“The Trustees of the Sokhulu Community Development Trust and Sokhulu Public Benefit Trust, along with Inkosi Mthiyane and members of the traditional council, entered into negotiations with RBM to consider how to strengthen the trusts’ ability to deliver on their objectives,” RBM said in a statement.

“Working together, various improvements have been identified to align the trust governance structure and project delivery tools with current best practice. The focus remains on the delivery of broad-based public benefit to the members of the Sokhulu community, as informed by the needs of the community itself.”

The court proceedings initiated in November 2022 are continuing against the remaining trusts, Mbonambi, Mkhwanazi and Dube.

The full details have not yet been published, but Werner Duvenhage, MD of RBM, fleshed things out a bit further in an interview with Daily Maverick.

“The Inkhosi (chief) is no longer a beneficiary. There are provisions put in to still respect his role, but in a much more reasonable way,” Duvenhage said.

The $463-million Zulti South expansion project has also been hanging in the balance. C-suite types would generally prefer not to deal with the Sopranos.

RBM’s operations mine mineral-rich sands for zircon, rutile, and other minerals that are vital ingredients in a range of products from toothpaste to sunscreen. There is demand for this stuff and the delays in the expansion project— now running at close to six years and counting— have cost KZN badly needed investment and job creation. This is also a loss for South Africa’s gross domestic product, underscoring how crime and social unrest constrain economic growth.

Duvenhage said the price tag of the expansion project has since risen, and it remains to be seen if the Rio Tinto board will sign off on it.

“We are updating the feasibility study of the Zulti South expansion project because six years have passed and costs are clearly not the same,” he said.

“The suspension was always around the stability and security of the project and we feel we have achieved a lot around that. We have much better support from national government now with dedicated police support. This gives it sustainability over the long run.”

RBM’s arduous journey through trusts and traditional leaders stands out for the sheer scale of the train wreck— a project worth almost half a billion dollars on ice which may or may not see the light of day.

Many such examples

But it is one of many such examples. Mixing community trusts with traditional leadership in South Africa is often a toxic combination.

One example was Anglo American Platinum (Amplats) and the R175-million Mapela Trust linked to its flagship Mogalakwena operation in Limpopo.

Things came badly unstuck there around 2016/17, with protests disrupting production as local communities felt the proceeds were not being spent transparently, with too much power vested in the local chief, known as the Kgoshi.

Amplats eventually agreed to a more transparent structure and while “community issues” remain a thing there, that flashpoint seems to have been largely doused.

This is precisely the pattern that RBM saw unfold and it has repeated itself several times. Impala Platinum had a similar issue involving traditional leadership around its Marula mine in Limpopo a few years ago.

The bottom line is that people simply don’t seem to trust the trusts. This is perhaps an indication that traditional leaders— who have long comprised a key pillar of ANC political support— don’t hold iron-clad sway over their rural subjects.

But the mining industry often feels compelled to give the chiefs an outsized role in such trusts because a surprising amount of South Africa’s minerals and metals wealth happens to lie beneath the overgrazed soil of the former homelands.

This is especially the case with platinum group metals (PGMs). RBM’s current operations are not even in the former Zulu homeland. But traditional leaders’ reach extends beyond those boundaries.

Among other things, the example of RBM and others suggests that for communities to trust the trusts, they can’t follow the previously used opaque models with embedded conflicts of interest. DM

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Business Maverick

Moment of truth

Many such examples