“Post the strike of 2014,much effort has been made to return production to pre-strike levels

Production pressures and power supply

Post the strike of 2014, much effort has been made to regain production to pre-strike levels. However, the continued disruption to power supply resulting in load curtailment has significantly impacted the production cycle. Of significance are the increased input costs associated with power, and the proposed 25% tariff increase recently proposed by Eskom. Our mines continue to go deeper and will require additional power for underground workings. These constraints counter all efforts towards economic growth and job creation, and as such continuous engagements towards finding solutions with all stakeholders remain a key focus area.

Coupled with this challenge has been the increased issuing of section 54s and 55s which have resulted in a significant impact on production levels.

Various efforts are in place to improve productivity as well as engage with the Department of Mineral Resources around the nature and length of instructions issued, and to ensure speedy responses to remedial actions required.

Responding to shifting community expectations

The challenging business environment was exacerbated by the growing demands and expectations in particular of our neighbouring communities. In South Africa, many communities have been protesting against what they see to be poor service delivery by local municipalities. Increasingly, they have been looking to mining companies to address these shortcomings by providing employment, investing in infrastructure, and supporting local businesses through their procurement activities. Their calls have been strengthened by local community-based organisations that are becoming more active in holding companies to account. Collectively, these events suggest a groundswell of community expectations and activism that have significant implications for how mining companies seek to retain their social licence to operate.

The recent election to parliament of the Economic Freedom Fighters (EFF), and their strong appeal to many of the economically disenfranchised through their fight for social justice and economic parity, is having an important impact on local political dynamics. The growing support of the EFF in the northwest mining communities, and the continuing rivalry between NUM and AMCU – which raises additional political complexities – has heightened the need for effective community engagement processes.

While traditional structures for engagement and communication have served us well in the past, the changing landscape, informed by an increasingly vocal youth, many of whom reject the use of traditional structures, has reinforced the need for a new approach. This has been complicated in some communities by the power play between municipalities and traditional authorities, with each of them claiming greater legitimacy as the guardians of community interests.

The slow pace of delivery on basic services has further exacerbated this complex dynamic. In-migration and unemployment are putting considerable strain on limited resources, raising expectations for mining companies to deliver on education and health, employment and skills development, infrastructure, procurement and other key services.

Collectively, these expectations are changing the nature of our social licence to operate. Not only have we been prompted to revise our traditional models of communication and engagement, but we are needing also to revisit aspects of our corporate social investment initiatives. We are placing a greater emphasis on assessing the social impact of our investments, and on ensuring closer alignment both with the national developmental imperatives of the country and with the Company’s strategic growth objectives. In addition, we have been exploring opportunities to collaborate across the mining sector and with neighbouring municipalities to build local government capacity and assist in delivering much needed services.

Continuing policy uncertainty

Reduced commodity prices and tough market conditions have seen an increase in resource nationalism globally, with governments seeking new opportunities for revenue generation as they struggle to meet growing social expectations. This has resulted in policy initiatives such as changes in royalty and tax rates, mandated beneficiation strategies, and an increased emphasis on localisation and the legislation of social delivery expectations.

In South Africa, mining companies are facing regulatory uncertainty on a range of fronts, with increasing legislation, for example, on environmental performance, climate change mitigation, tax reform, health and safety, and black economic empowerment. One of the main regulatory challenges facing the sector is the continuing disparity between the Mining Charter and the Broad-Based Black Economic Empowerment (B-BBEE) Act, with the greater demand to comply with both presenting significant administrative and implementation costs. A key concern relates to government demands for greater ownership equity in mines, with the concept of ‘once empowered always empowered’ not being accepted by government. This poses significant challenges for the sector, with many mining licences at risk given the dilution that has occurred over the last few years with the sale of black owned equity stakes. We have also faced challenges this year with the Department of Trade and Industry evaluating developmental pricing of PGMs. 


In Zimbabwe, there is continuing uncertainty regarding policy developments relating to indigenisation, beneficiation, land tenure and taxation. A recent legislative change has made royalty payments non-tax deductible and a 15% export levy has been added to un-beneficiated platinum, which affects our Mimosa operation. While we have implemented various measures to drive indigenisation and localisation, and are refurbishing our base metal refinery in support of beneficiation, the continuing uncertainties in the fiscal and regulatory regime are constraining our capacity for long-term planning. We support the government’s attempts to grow the local economy and continue to engage with regulators on these issues.

Developing partnerships to address challenges in society

The challenging social context in our two countries of operation highlights the growing need for business in general, and the mining sector in particular, to play an active and informed role – in partnership with government, labour and civil society – in ensuring that mineral wealth is generated more responsibly, and that its benefits are shared more equitably between shareholders, workers and the country as a whole. We have continued to work throughout the year with the Chamber of Mines, industry bodies, relevant government departments, labour representatives and community organisations in the hope of finding solutions to some of the collective challenges that we face. In doing so, an important objective has been to ensure strategic alignment with the relevant national imperatives outlined, for example, in the South African National Development Plan and the framework agreement for peace and stability in the mining industry.

The fundamental changes needed to address some of the shortcomings within the current business model – be it progressive mechanisation, the effective introduction of performance incentive schemes, or measures to address the migrant labour system – will not be possible until there is a significant shift in the nature of the dialogue between business, government and labour, to an approach based on cooperation, trust and mutual respect. Through effective dialogue, collaborative partnerships and agreement on a conducive policy environment, the mining sector has significant potential to contribute to the economic growth and development of the region.