1. Department of Mineral Resources
Mining Charter Assessment Report
05 August 2015
Presentation to Parliamentary Portfolio Committee on Mineral Resources

2. Content Background Background Reporting system
Process
Reporting Framework
Results
Concluding remarks
Recommendation
Background
Project Assessment Methodology
Process
Reporting Framework
Results
Concluding remarks
CONFIDENTIAL

3. Background The Mining Charter was implemented in 2004.
The Mining Charter was amended in 2010 to facilitate sustainable Growth, Development and Transformation of the South African Mining Industry.
The 2010 amendments introduced:
Effective HDSA ownership through Meaningful Economic Participation and full shareholder rights (broad based)
It also introduced the concepts of ring fenced elements (i.e. Reporting, Ownership and Housing and Living Conditions) and weighted elements
CONFIDENTIAL

4. Background cont.…
The year 2014 marked the 10th year anniversary of the Mining Charter and the period at which all targets set should have been met.
The Department developed a reporting templates through a consultative process with the MIGDETT task team.
The department developed a Web-based system to collect the data from mining right holders.
The reporting template is aligned with the Mining Charter score card.
CONFIDENTIAL

5. PROJECT ASSESMENT METHODOLOGY
CONFIDENTIAL

6. Reporting system The templates Original solution EXCEL based
Challenges
Inability of EXCEL to collate large volume of data in a short period of time.
Revised solution
WEB based
Outcome
Database of information where different analysis can be drawn.
CONFIDENTIAL

7. Data
The data was assessed with the assistance of an Actuarial Scientist
For this assessment, the mining industry and the DMR agreed on the various data fields to be populated and submitted by the industry to the DMR;
The DMR augmented the industry data with the following:
Data for assessment of Housing and Mining Community Development ; and
Employment numbers against each mining right;
CONFIDENTIAL

8. Data Weighting
For each element, the presentation of the results include a brief outline of the method applied to assess achievement of the Mining Charter targets
The aggregate industry results are presented on the following basis:
Not-weighted
This approach aggregates the industry on a basis that mines of different sizes have equal significance in the output i.e. whether the industry has achieved the targets.
Weighted by Size of Mine
Weighing the output by the size of the mine provides a better assessment of the significance of the results as larger mines carry more weight than smaller mines in the aggregation of the industry performance.
Employment figures have been used as a measure of size of mine. This measure was selected as it is viewed to better capture the social impacts of mining operations, which significantly cuts across all elements of the Mining Charter
CONFIDENTIAL

9. Size Categorisation
The different mining right holders were categorised by size
The size was determined by the number of employees per mining right
Categories were therefore:
Large employers – mining right holders employing more than people
Medium sized employers - mining right holders employing from 101 to 5000 people
Small employers - mining right holders employing equal or less than 100 people
CONFIDENTIAL

10. Process: -
Reasonableness check was conducted on the data.
Mining companies that were due for assessment were identified.
Further consultations were conducted with stakeholders to clarify issues.
Feedback was given to stakeholders through MIGDETT.
CONFIDENTIAL

11. Reporting framework
The framework used to assess the current transformation status is the reporting template of the mining charter scorecard.
The scores for: Reporting, Ownership, Housing & Living Conditions are ring-fenced and targets of 100% must be achieved.
The following scores are weighted and aggregated :
Procurement & Enterprise Development
Employment Equity
Human Resource Development
Mining Community Development
Sustainable Development & Growth
CONFIDENTIAL

12. Reporting framework Element Scoring principle
Determination of percentage of companies that have reported. Scoring is Yes if the company has reported and No if the company has not reported.
Measured through Meaningful Economic Participation and Full Shareholder Rights. The data was categorized as follows:
Category 1: Equal or greater than 26% HDSA ownership credits, but does not have all three identifiable beneficiaries i.e. Entrepreneurs, ESOPS & Communities.
Category 2: Equal or greater than 26% HDSA ownership credits and broad-based, but no trickle cash flow to HDSA.
Category 2+: Equal or greater than 26% HDSA ownership, broad-based, with reported trickle cash flow to HDSA.
Category 3: HDSA ownership below 26%
Reporting
Ownership
CONFIDENTIAL

13. Reporting framework Element Scoring principle
Housing and living
conditions
The Mining Charter has clearly set a target of 100% conversion of hostels using the following measures:
Reduction in occupancy to one person per room; and
Conversion of hostels into family units
If progress achieved is 100% then the score is Yes.
If progress achieved is less than 100% then score is No.
CONFIDENTIAL

14. Reporting framework Element Scoring principle
Procurement and Enterprise
Development
Calculation of percentage expenditure from BEE entities on capital goods, services and consumables, respectively targets are
Capital goods = 40%,
Services = 70%,
Consumables = 50% and ;
0.5% of annual spend on procurement from multinational suppliers
CONFIDENTIAL

15. Reporting framework Element Scoring principle
Calculation of percentage HDSA representation to represent country’s demographics at levels specified by the Charter targets for Top Management = 40%, Senior Management = 40%, Middle Management = 40%, Junior Management = 40% and Core Skills = 40%
Calculation of percentage payroll expenditure on training as per target target is 5% of total annual payroll (excluding mandatory skills development levies) to be spent on HRD
Employment Equity
Human Resources
Development
CONFIDENTIAL

16. Reporting framework Element Scoring principle
The element measures progress against implementation of mine community project commitments by December 2014
Calculation of percentage implementation of the tripartite plan on mine health and safety, approved EMPs and utilisation of SA facilities for analysis of samples targets are EMPs = 100%, Tripartite Action Plan = 100% and Percentage of samples in South African facilities = 100%
Mine Community Development
Sustainable development and Growth
CONFIDENTIAL

17. Spread of Employment across Mining Rights
The below chart provides an indication of how the employees of the sector are spread across mining right holders used in the analysis.
Section 28(2)(c) of the MPRDA, 2002, requires every mining company to report its level of compliance with the Charter annually
In total data from 375 mining rights was assessed
In terms of employment these mining rights account for 95% of total employment by rights that were due for assessment
68% of the employees are amongst 15 operations
CONFIDENTIAL

18. Ownership
The analysis is based on 442 mining right holders, being the information extracted as at 31 March 2015;
Of these, 7 claimed HDSA ownership of more than 100% and 60 mining rights were linked to other mining rights and therefore 375 operations were analysed
This analysis on ownership is estimated to cover approximately 95% of employment of those rights that were due for assessment
Total employment of out of for companies subject to the Mining Charter
CONFIDENTIAL

19. Ownership
79% (not-weighted ) and 90% (weighted) of mining right holders reported meeting the 26% HDSA ownership target with simple total industry average HDSA owners hip of 30.6% (not-weighted ) and 32.5% (weighted) respectively.
However when this report is analysed for meaningful economic participation as required by the Charter:
Only 6.3% (not-weighted) and 20% (weighted) of the right holders met this criteria
Analysis also took into account the continuing consequences of previous deals claimed by mining right holders where it was reported in the system
CONFIDENTIAL

20. Ownership
Reported data shows that most of the right holders had deals that had one or two of the three identifiable beneficiaries as per the charter requirement
For not-weighted data, mine workers are the most excluded category of identifiable beneficiaries followed by communities
CONFIDENTIAL

21. Ownership
For weighted data, BEE entrepreneurs were the most excluded category of identifiable beneficiaries followed by communities
CONFIDENTIAL

22. Ownership
15% of companies have accrued Economic Benefit to HDSA in excess of 26%
64% of the deals have not accrued any value to HDSA
These results are not weighted by the size of mine
CONFIDENTIAL

23. Ownership
Company Value estimated from current value of BEE shareholding
36% of industry has accrued Economic Benefit to HDSA in excess of 26%
37% (i.e. just under 4 out of 10) of the industry deals have not accrued any value to HDSA
CONFIDENTIAL

24. Ownership
Level of Indebtedness is Value of BEE Shareholding less Current Value of loan
Company Value estimated from current value of BEE shareholding
222 operations had NAV to HDSA of zero
These results are not weighted by the size of mine
CONFIDENTIAL

25. Housing
Decent housing and living conditions are the core to a healthy workforce and enhanced productivity
45% of the affected mining operation have FAILED to either convert the hostels to family units OR to reduce the occupancy as required
CONFIDENTIAL

26. Weighted Elements Combined
Procurement & Enterprise Development
Employment Equity
Human Resource Development
Mining Community Development
Sustainable Development & Growth
CONFIDENTIAL

27. Weighted elements combined
The Mining Charter has clear score targets under each of the FIVE elements and its sub-categories.
The various elements are combined through weightings (points out of 100) applied to the elements and their sub-categories.
CONFIDENTIAL

28. Weighted elements combined
Only 1 Company met all targets (Exarro: Leeuwpan)
16.4% of companies are within 10% of targets.
42.2% of companies are within 25% of targets.
57.5% are more than 25% away from the targets.
CONFIDENTIAL

29. Weighted elements combined
Only 1 Company met all targets (Exarro: Leeuwpan)
47.7% of companies are within 10% of targets.
77.1% of companies are within 25% of targets.
22.5% are more than 25% away from the targets.
CONFIDENTIAL

30. Procurement & Enterprise Development
39.1% of the right holders meet the 2014 target of 40% of their procurement spend on Capital Goods with BEE entities
60.4% of the companies have failed to meet the target
CONFIDENTIAL

31. Procurement & Enterprise Development
81.6% of the right holders meet the 2014 target of 40% of their procurement spend on Capital Goods with BEE entities
17.9% of the companies have failed to meet the target
CONFIDENTIAL

32. Procurement & Enterprise Development
32.0% of right holders met the 2014 target of 70% of their procurement spend on Services comes with BEE entities
66.8% of the companies have not met the target
CONFIDENTIAL

33. Procurement & Enterprise Development
64.8% of the right holders met the 2014 target of 70% of their procurement spend on Services comes with BEE entities
35.1% of right holders has not met the target
CONFIDENTIAL

34. Procurement & Enterprise Development
57.8% of right holders meet the 2014 target of 50% of their procurement of consumable goods with BEE entities
39.9% of right holders have failed to meet the target
CONFIDENTIAL

35. Procurement & Enterprise Development
82.7% of right holders meets the 2014 target of 50% of their procurement of consumable goods with BEE entities
14.8% of right holders have failed to meet the target
CONFIDENTIAL

36. Procurement & Enterprise Development
96.7% of right holders have failed to make contributions to a Social Fund that meets the target of 0.50% of their multinational procurement spend
CONFIDENTIAL

37. Procurement & Enterprise Development
85.0% of right holders has failed to make contributions to the Social Fund that meets the target of 0.50% of their multinational procurement spend
CONFIDENTIAL

38. Employment Equity
For each employment category, the right holders had a target of having 40% of the category belonging to HDIs.
% of right holders meeting target for each category are:
Board – 60.4%
Exco – 42.5%
Mid Management – 52.7%
Jnr Management – 67.0%
Core Skills – 76.5%
CONFIDENTIAL

39. Employment Equity
% of right holders meeting target for each category are:
Board – 72.1%
Exco – 53.7%
Mid Management – 57.2%
Jnr Management – 84.6%
Core Skills – 88.4%
For each employment category, the right holders had a target of having 40% of the category belonging to HDIs.
CONFIDENTIAL

40. Asian (Indian and Chinese)
Employment Equity
Category
African
Coloured
Asian (Indian and Chinese)
White
Foreign Nationals
Total HDSA
Male
Female
Top Management (Board)
32.0%
9.4%
3.9%
1.5%
2.8%
1.1%
37.4%
3.4%
8.5%
0.0%
54.1%
Senior Management (EXCO)
29.1%
5.2%
3.8%
0.7%
4.1%
2.1%
49.3%
5.7%
50.7%
Middle Management
26.3%
8.6%
4.4%
1.0%
0.9%
45.1%
1.8%
0.3%
52.7%
Junior Management
41.9%
9.0%
5.0%
0.6%
0.2%
33.1%
5.1%
4.0%
0.1%
62.8%
Core Skills
64.1%
1.7%
6.1%
0.4%
18.2%
75.2%
EAP Levels are: African Males (40%), African Females (35%), Coloured Males (6%), Coloured Females (5%), Asian Males (2%), Asian Females (1%), White Males (6%), White Females (5%)
Whilst the majority of mining right holders still meet the 40% EE target, further analysis shows that:
Females are still underrepresented at 10.5%, especially African and Coloured
White males still dominate most of the subject categories of employment
CONFIDENTIAL

41. Human Resource Development
35.3% of right holders have HRD spend that is equal or more than the targeted 5% of total annual payroll.
CONFIDENTIAL

42. Human Resource Development
56.8% of right holders have HRD spend that is more than the targeted 5% of total annual payroll.
CONFIDENTIAL

43. Mine Community Development
Only 35.6% of right holders have met their Mine Community Development targets.
CONFIDENTIAL

44. Sustainable Development & Growth
44.5% of right holders have met the target for 100% implementation of approved EMPs
CONFIDENTIAL

45. Sustainable Development & Growth
48.6% of right holders have met the target for 100% implementation of approved EMPs
CONFIDENTIAL

46. Sustainable Development & Growth
2.6% of right holders have met the target for 100% implementation of approved Tripartite Action Plan
CONFIDENTIAL

47. Sustainable Development & Growth
1.4% of right holders has met the target for 100% implementation of approved Tripartite Action Plan
CONFIDENTIAL

48. Sustainable Development & Growth
65.5% of right holders have met the target of 100% of their research conducted within South African facilities
CONFIDENTIAL

49. Sustainable Development & Growth
84.2% of right holders have met the target of 100% of their research conducted within South African facilities
CONFIDENTIAL

50. Concluding Remarks
A number of mining companies have not met the required 2014 target of implementation of the Mining Charter
Mineworkers and communities remain the least beneficiaries from empowerment transactions
The majority of empowerment transactions are not broad-based and there is limited economic benefit towards HDSA beneficiaries
The Charter does not prescribe in detail the mechanisms of funding empowerment transactions – thereby creating loopholes for unsustainable deals
CONFIDENTIAL