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MINING ROYALTIES RESEARCH REPORT 2018 Society Foundationforsouth Africa

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MINING ROYALTIES RESEARCH REPORT 2018 Society Foundationforsouth Africa MINING ROYALTIES RESEARCH REPORT 2018 Introduction 4 Overview of relevant mining legislation 6 and policy frameworks The communities, the casualties - Limpopo 10 Limpopo community engagements 12 The communities, the casualties - North West 14 Uitvalgrond 16 A right royal tragedy - a family’s story 18 Ventersdorp 20 North West community engagements 22 FIndings and recommendations 24 Findings 27 This report was funded by the Open Broad recommendations 36 Society Foundation for South Africa. Acknowledgements 40 References 41 Image credits 42 Useful information 43 Appendix 44 CONTENTS meetings in parts of Limpopo and the North West provinces. In North West, CW INTRODUCTION Limpopo focused on a number of the villages that province make up the Setswana speaking Bakwena South Africa possesses enormous mineral riches. Consequently the Ba Mogopa community that falls under the country’s mining sector has long been a source of both personal and traditional authority and traditional rule of national wealth, but also of controversy and pain, especially for those Kgosi Tebogo Motheo Mamogale and – mining-affected communities, for example – who are not part of the the royal family. The Bakwena ba decision-making process. Mogopa community – largely under As a country whose history and economy has been shaped largely by the shadows of the neighbouring North West mining activities, South Africa has experienced both the good and the bad traditional communities of Bakgatla province of this industry. ba Kgafela, Bapo ba Mogale and Royal Bafokeng – enjoys incredible minerals While mining has indisputably generated this report, detail some of the widespread wealth with platinum, vanadium and millions of jobs and contributed significantly abuse, corruption and unethical practices diamonds common extractives. their structural framing. At the same time to industrial development, it has also which have crept into the mining royalties contributed to corruption, environmental harm system over the years. In Limpopo CW focused on the traditional they speak to greed, competition for a finite and labour exploitation, while communities mining-affected communities that surround financial resource, deliberate exploitation, mismanagement of funds and resources, living on resource-rich land have been Mining royalties paid to communities who some of the country’s largest platinum own the land being mined are dispensed poor administrative oversight and a lack deprived of the benefits due to them. mines. The Sepedi speaking communities of will, accountability and commitment on in one of two ways – either directly into a include Magadimeng-Ntweng, Mampa various levels to repair and transform the This research report, funded by the Open D-account or development account, or by Serole, Monametse/Mokgotho, Magobading pay-out of mining royalties. Society Foundation (OSF) and undertaken the conversion of royalties into equity in the Resettlement, Mokopane Platreef, and over the course of a year by Corruption mining companies. Ngwaabe Village. These communities house This report concludes with recommendations Watch (CW), aims to facilitate and improve mining companies such as Bokoni Platinum and a call to action for government, mining transparency and accountability in the mining This report therefore focuses on two unique Mine, Twickenham Platinum Mine and the companies, traditional authorities, consultants royalties system, with particular regard to mining royalty systems; the former Lebowa Ivanhoe Mine; but the monies intended for and the community themselves to act monies that accrue to communities by virtue Minerals Trust administration of monies in the their development and empowerment have responsibly and to work to close loopholes for of having mining operations on community- traditional communities of Limpopo Province, not been realised. corruption and demand greater transparency, owned land. and the management of D-accounts, or clarity and accountability. There is also scope development accounts, for the traditional Homing in on these communities allows a for collaboration between civil society and It explores and examines the evolution communities of the North West Province. It more granular picture to emerge about the activist groups to raise awareness and to of South Africa’s mining royalties system, also discusses the growing trend of royalty realities and consequences of not being empower community members themselves to while investigating how royalties are paid to equity conversions across most traditional able to make the system of mining royalty communities in South Africa. hold each other and their traditional councils and how they are administered in specific pay-outs work. Some findings were plain to and leaders to account. mining-affected communities. In addition, see for CW researchers, some probing ran the report analyses the main legislative Finally, after fitting more of the puzzle pieces into dead-ends; sometimes what was kept CW believes that this report only touches and policy frameworks that exist to manage together, we reveal a fuller picture as to why hidden or deliberately omitted became the on the surface of deep problems that have and administer the payment of community the royalties and benefit sharing system telling of where and how corruption and a long fermented in the mining industry. The royalties, and establishes the veracity of appears to be failing and most importantly, system of abuse and blame, with or without organisation believes that while this report the challenges experienced by communities suggest interventions and reforms to pull substantiation, is taking hold. focuses on specific communities, corruption in revenue management – this applies back the system from a dysfunctional state. involving mining royalties is widespread and especially to traditional communities which It has to be acknowledged that the Along with desktop research and expert replicated throughout the country. also follow traditional laws and customs. interviews, the report includes community challenges inherent in the mining royalties system are socio-historical and political in Our results and case studies, presented in engagements and workshop group page 4 MINING ROYALTIES REPORT 2018 MINING ROYALTIES REPORT 2018 page 5 RELEVANT MINING LEGISLATION SOUTH AFRICAN on employment of HDSAs and on economic OVERVIEW growth and development. AND POLICY FRAMEWORKS MINING CHARTER Under the South African Mining Charter of With surface rights, a landowner retains the From its exponential growth in the 20th century, and its 21% contribution 2004 (Charter), companies are required to ultimate surface rights, but not the minerals ownership. Rights to prospect and mine 1 divest a portion of their investments to HDSAs, to GDP and employment peak in the 1970s and 80s , to today’s far smaller are granted by the State. The owner of the contribution of 8% and a reduced workforce, the realities of the mining as a condition of the conversion of old-order mining rights to new-order mining rights. land has to be consulted, following specific industry affect hundreds of thousands of mining employees and their guidelines set out by the DMR, and the owner dependants. In the Charter, mining company ownership is entitled to compensation for losses and targets for HDSAs are set at 15% during damages suffered or likely to be suffered as In South Africa, it is held at common law that ‘the owner of the surface of the the first five years and 26% in 10 years. result of the proposed prospecting operation. land is the owner of the whole land and the minerals underneath it’.2 However, A special case was made for state-owned The 2018 iteration of the Mining Charter was the law developed such that mineral rights ownership can be separated from rights where no mining or prospecting operations had previously been conducted. gazetted in the middle of September 2018; the land and held under separate title. it provides that the companies applying for Bilateral rights represent a parcel of rights including the rights to prospect The focus of the Charter is on sustainable new mining rights must have a 30% black transformation of the mining industry. It seeks shareholding, of which 5% should be held by and mine together with ancillary rights to do what is reasonably necessary in to achieve the following objectives: a community trust. order to effectively carry on prospecting or mining operations. This revised Charter has come under fire a) To promote equitable access to the from the likes of Mining Affected Communities MINERAL AND PETROLEUM transform the racial structure of mine ownership nation’s mineral resources to all the United in Action (MACUA), a body said to RESOURCES DEVELOPMENT ACT through preferential allocation of ‘new order people of South Africa; represent over 200 communities across the mining rights’ to historically disadvantaged b) To substantially and meaningfully country’s nine provinces. They have called Mining involves a complicated nexus of mineral South Africans (HDSAs) and companies. This expand opportunities for HDSAs to enter the consultation processes with the DMR rights, land rights and community governance is in addition to requiring historically white- the mining and minerals industry and a farce and also outlined shortcomings in structures. It is therefore vital to have strong dominated mining houses to meet the existing to benefit from the exploitation of the the Charter that don’t allow communities to legislation in place to regulate the industry. target of a 26%
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