Public-Private Alliances for Sustainable Commodity Supply Chains

Social tensions in the mining sector

The involvement of mining companies in the vaccination campaign in South Africa can be considered one of the latest exam­ples of successful public-private coopera­tion. It also illustrates how sustainability can be shaped in a country where conflicts in the extractive sector are frequent.

The extractive industry plays a central role in the South African economy. With over 450,000 employees, it is one of the country’s largest employers and in 2020 it accounted for 8.2 percent of the country’s gross domestic product.

South African mining legislation sets high social and environmental standards, and companies voluntary commit to spe­cific sustainability targets. The regulation of mining in South Africa is therefore com­patible with the regulatory frameworks of European supply chain legislation.

Nevertheless, massive conflicts surround­ing industrial mining occur frequently in South Africa. A particularly dramatic exam­ple that received international attention was the Marikana massacre that saw the killing of 34 mine workers by the South African police during a “wildcat strike” in 2012. The conflict was centred around poor working and living conditions in the settle­ments surrounding the Marikana platinum mine in the Rustenburg municipality, which was operated by the British company Lon­min. German companies were also involved in the supply chain, as Lonmin’s main customers.

The escalation of violence at Marikana may be an isolated and extreme case, but it is a manifestation of an ongoing conflict. A comprehensive report by Human Rights Watch published in 2019 describes the atmosphere in many mining communities in South Africa as an “environment of fear”, in which people who criticise mining projects are threatened, fear for their lives, and are subjected to state repression.

This lays bare the massive gap between regulatory aspirations and reality in the South African mining sector, especially con­sidering the high expectations of mining-affected communities regarding developmental outcomes, such as the creation of jobs or the improvement of infrastructure. A good understanding of the conditions for successful alliances between the state, companies and non-profit organisations is therefore of the utmost importance.

Cooperation to minimise Covid-19 risks in mining

Even during South Africa’s strict lockdown, in April 2020 the government decided to resume mining operations at half capacity. This required comprehensive measures to combat the pandemic. Indeed, the risk of infection and severe disease progression are heightened in the narrow and poorly ventilated mines where social distancing is difficult and employees already exhibit widespread pre-existing conditions. Par­ticu­larly high levels of work-related mobility and precarious living conditions, especially in informal mining settlements with inad­equate infrastructure, further complicated the pandemic response.

Against this backdrop, intensive negotiations were taking place between the Depart­ment of Mineral Resources and Energy (DMRE), companies, and trade unions since the beginning of the pandemic. The DMRE responded by adopting initially voluntary, later binding, occupational health and safety guidelines for the mining companies and announced occasional inspections to monitor their implementation. The Miner­als Council of South Africa (MCSA) – the country’s leading industrial association rep­resenting its largest mining companies – engaged in extensive cooperation and played a pivotal role in combatting the pan­demic within the sector. The MCSA not only agreed to the strict Covid protocols but also established a number of voluntary meas­ures. In January 2021, the association pub­licly announced its support for the national vaccination campaign – and successfully implemented it in the mining sector.

Companies in the extractive sector have built high capacities for Covid testing and ensured that vaccinations have been easily accessible for workers. Testing occurs twice as frequently in the mining sector com­pared to the national average. The industry relies on broad information campaigns on Covid-19 and vaccination and establishes targeted incentives to get the vaccine. Mine­workers can get immunised at 75 vaccina­tion centres, often close to the mine sites. According to the MCSA, as of mid-January 2022, the industry had carried out 324,029 employee and contractor vaccinations among the 450,000 employees in the sector. This means that more than two-thirds of the workforce has been vaccinated. The mining sector thus performs significantly better than South Africa as a whole, where only 46 percent of adults are currently vaccinated.

Conditions for the success­ful implementation of the vaccination campaign

Several factors facilitated the constructive cooperation between the state, companies and trade unions.

Common interest: a key condition for the successful public-private effort to contain the coronavirus was the three actors’ shared interest in keeping up production in the mining sector in order to maximise profit from the currently high raw material prices. Despite pandemic-related restric­tions, the industry has been able to con­tinue to supply international markets. Accord­ing to the South Africa branch of Pricewaterhouse Coopers (PwC), the South African mining sector was very profitable in the 2021 financial year (July 2020 – June 2021). Compared to the 2019 financial year, revenues in the sector increased by 33 per­cent to about 793 billion rand (44 billion euro), generating an estimated 229 billion rand (12 billion euros) for the depleted national budget. In the 2021 fiscal year, resource extractors reaffirmed their role as a major employer in the country, directly employing around 2.3 million workers in the mining sector or in upstream or down­stream industries.

From voluntary to a corporate standard: the success of the vaccination campaign builds on continuous processes of cooperation and negotiation in the mining sector. The Mine Health and Safety Council (MHSC) – which includes representatives from the DMRE, companies and trade unions – served as an important institution in coordinating the fight against the pandemic. While most of the workers’ representatives in the Council supported the DMRE’s and industry’s ap­proach, the government-critical Association of Mineworkers and Construction Union (AMCU) chose a different path. Through a court case in April 2020, the AMCU ob­tain­ed legal recognition of Covid-19 as a matter of occupational health and safety, thereby obliging the DMRE to issue binding health and safety guidelines for companies in the extractive sector.

Health and safety rights: another key driver of the productive public-private coopera­tion in the fight against the pandemic was the already established legal framework. The adoption of the Mine Health and Safety Act in 1996 not only created the MHSC but also established comprehensive health and safety standards in the sector. For example, annual preventive medical check-ups are required for mine workers to ensure early detection of potential health risks and to monitor existing diseases. As mentioned above, preventing the spread of Covid is now considered a matter of occupational health and safety, therefore precautions have become an integral part of work routines at mines.

Health infrastructure: to meet occupational health and safety requirements in the face of poor public services, most companies have established their own health centres and equipped them with qualified staff. In addition, the sector benefits from many years of experience in the fight against tuber­culosis and HIV/AIDS, and it has drawn on this private health infrastructure during the pandemic. Employees in the mining sector were therefore not dependent on the weak and highly fragmented public health system. The South African govern­ment requires companies to present Social and Labour Plans in order to obtain mining licences. Within these plans, some com­panies have been obliged to improve or construct health facilities in mining com­munities, which have then been used throughout the pandemic.

Limitations of the vaccination campaign

The limits of the vaccination campaign begin to be observed beyond the company gates. While the majority of the workforce has been vaccinated, many people in the communities surrounding the mine remain unprotected – and their dissatisfaction is growing.

Mining communities are not represented by South African trade unions, nor are their interests adequately addressed by the DMRE. Mining-affected communities also lack access to established forums such as the MHSC. Following the April 2020 court ruling, community representatives are to be included in multi-stakeholder consulta­tions, but communities complain that their voices continue to be excluded. The ability of communities and their representatives to exert influence and to draw attention to their concerns through strikes and protests has been severely restricted by government measures to curb the spread of Covid-19.

While the MCSA has announced the extension of the vaccination campaign to mining communities, it seems that this commitment has yet to be put into practice fully. Although there are several reports about vaccination campaigns in these com­munities, figures are not yet available. Min­ing communities’ lack of access to formal institutions, combined with high levels of frustration at the weak redistribution of profits generated by the extraction of raw materials, increases the potential for (vio­lent) conflict in and around mining sites. The struggle against the pandemic in the mining sector demonstrates once again that voluntary corporate responsibility is very limited in its ability to compensate for short­falls in the state’s duty of care.

Securing production

Crises such as the current Covid-19 pan­demic incentivise actors within an industry – namely, the state, companies and trade unions – to collaborate in order to main­tain the productive capacity of “their” sec­tor. By continuing mining production, the South African state benefits from additional fiscal revenue; and by securing urgently needed jobs, it is able to maintain its com­modity-based development model. Mining firms, in turn, avoid financial losses caused by disruptions in production. Trade unions, which occupy a central position in South Africa’s corporatist system of government, play their part in safeguarding jobs and in receiving continued membership dues. In addition, unions secure their political posi­tion by asserting workers’ interests.

Conflicts of interest within the state

The South African government’s strong focus on seamless economic production cycles is reflected in the country’s mining legislation. By streamlining processes and limiting the mechanisms through which external actors can appeal decisions, min­ing law aims to enable companies to con­duct business without disruption. The DMRE is responsible for the implementation of the law, and its regional offices review applications for mineral rights, which are in turn approved by the Minis­ter of Mineral Resources and Energy. The DMRE also approves companies’ Social and Labour Plans, monitors occupational health and safety in the mines, and since 2014 it is also responsible for the implementation of environmental laws in the mining sector. The Department of Environmental Affairs only serves as an appeal authority.

This arrangement creates a conflict of interest within the DMRE. The Depart­ment’s mandate and its key priority is to promote mining in South Africa and to attract new investments in order to in­crease government revenue. Against this backdrop, the enforcement of comprehen­sive environmental standards is perceived as a potential barrier that could create delays.

The weak enforcement of social and en­vironmental standards is further aggravated by the lacking capacity and resources of involved ministries to thoroughly monitor compliance with standards. This situation is exacerbated by corruption within the minis­tries, especially the DMRE, and at the municipal level. For these reasons, it is dif­ficult to adequately monitor the potential negative effects of mining activities, such as water or environmental pollution. The implementation of legal standards in min­ing regions therefore increasingly depends on the will of mining companies while the state loses important competencies as well as room for manoeuvre as public tasks are outsourced to private companies.

Risks for companies

At first glance, the assumption of public responsibilities may be attractive for min­ing companies. However, in doing so they engage in activities that fall outside of their core business competencies – the extrac­tion and processing of raw materials. Pro­moting development at the local level requires a high level of sensitivity and expertise, which mining companies have difficulty in acquiring, usually through trial and error. This comes at a high cost for com­panies, and the expected positive im­pacts of these hefty investments in mining-affected communities – so-called corporate social investments – often fail to material­ise. This also explains why many social pro­tests start at the factory gates and not at the local municipalities.

Mining companies in South Africa follow a compliance-oriented approach to imple­menting their socio-economic obligations, i.e. they seek to adhere to the minimum legal requirements. In many cases, this ap­proach does not meet the needs of affect­ed communities or lead to noticeable improve­ment of their living conditions.

This shortcoming is exacerbated by the fact that companies’ Social and Labour Plans are often not aligned with the mu­nici­palities’ integrated development plans that set out modernisation goals every five years. Aligning these two documents would help to prevent the circumvention or dis­regard of communities during the process of drafting Social and Labour Plans, and thus combat dissatisfaction at the community-level. The current lack of coordination makes disputes between mining companies and municipalities inevitable when it comes to certain responsibilities, such as the main­tenance of infrastructure financed by com­panies including roads, schools or hospitals.

To mitigate risks, many mining compa­nies are voluntarily investing in infrastructure and public service provisions. This is because the so-called “social licence to operate” is nowadays considered to be the greatest potential for disruption within their supply chain. A lack of social accept­ance for the activities of mining companies often leads to conflicts in mining-affected communities; strikes and protests can dis­rupt production, exacting a high cost for all companies along the supply chain.

The challenges posed by the lack of in­volve­ment of affected communities are well illustrated in the case of Xolobeni. In 2008, the DMRE granted Transworld Energy and Minerals (TEM) Resources, a subsidiary of an Australian mining company, the right to mine sands containing titanium in the Xolo­beni area. To this day, production has not started, as the community – with the sup­port of civil society organisations and law­yers – has been successful in publicly chal­lenging the project. In 2018, the Pre­toria High Court ruled that the Minister of Min­er­al Resources must obtain the full and formal consent of the Xolobeni com­munity before granting mining rights. Two years later, the same court confirmed that min­ing-affected communities have the right to see applica­tions for mining licences. TEM had denied the Xolobeni community access to informa­tion about its planned mining opera­tions which the community required to make in­form­ed decisions about mining in their area.

Beyond the factory gates: consequences of deficient public welfare

In the South African case, strong trade unions act as a corrective force, thanks to whom workers’ fundamental rights are protected – to a certain point. This is also in the interest of companies seeing that maintaining labour standards increases the resilience of production cycles. However, when certain rights and privileges are secured for unionised workers, there arises the risk that a two-tier society in mining-affected communities could be created. While the workforce benefits from addi­tional privileges at the workplace, the same is not necessarily true for other community members.

By law, mining companies can only be obliged to provide social, health and infra­structure services for the duration of the mine’s operation. In a similar vein, volun­tary service provision by companies only takes place as long as a mine is operational, as this averts negative impacts on a com­pany’s business activities and potential costs. In short, if the mine closes, the local population loses access to these services.

Lessons for Public-Private Alliances

Public-private alliances can certainly pro­vide positive incentives as a flanking measure to German and planned European supply chain law. However, the example of the South African mining sector illustrates that this instrument has certain limitations and can even set negative incentives when companies are legally obliged to take on state tasks in areas such as infrastructure, local development and health.

The German Supply Chain Act and South African legislation clearly establish that it is a shared responsibility among states and companies to respect human and environmental rights. However, this should not lead to companies compensating for the public administration’s weak capacity and limited resources at national and local levels in exchange for access to lucrative mining rights. This risk is particularly high in countries with weak governance struc­tures.

When promoting public-private cooperation, the German government should there­fore take into account the political and regu­latory environment. Where necessary, development cooperation can support capac­ity building at all levels of government and strengthen the corrective func­tion of public institutions whose focuses – not only in the case of South Africa – often target the promotion of the extractive sec­tor and less so the upholding of environmental and social standards.

Particular attention should be paid to monitoring sustainability goals, which are not directly linked to companies’ core busi­ness activities or trade unions’ areas of focus. These include, above all, environmental objectives. Air and water pollution – as consequences of industrial commodity extraction – often occur after a certain amount of time and are usually only ad­dressed by state institutions when they have already caused damage to people’s health.

In order to counteract the risks of selective representation, it is essential to pro­mote the interests of communities – either by strengthening local self-government or by supporting civil society. In addition, development cooperation should support independent institutions in partner coun­tries. These include human rights commissions or independent ombudsman offices, which can address and draw public atten­tion to the complaints of affected individ­uals or communities.

Still, Germany’s potential to influence South Africa is limited. While the country is one of Germany’s eight “global partners” in the BMZ 2030 reform concept, cooperation with South Africa does not focus on the extractive sector. As a result, Germany has limited entry points to influence the state’s governance in the mining sector via bilateral cooperation. The South African government continues to rely heavily on an extractive economic model, which is cur­rently particularly attractive due to high com­modity prices. Consequently, consideration should be given to expanding existing and planned projects of the Gesellschaft für Internationale Zusammenarbeit (GIZ) to include the field of governance and anti-corruption in the extractive sector. The aim should be to strengthen the state’s moni­toring capacity in this industrial sector at the national and regional levels. The Ger­man government should continue to strongly advocate for South Africa’s partici­pation in the Extractive Industries Transparency Initiative (EITI), as this would increase the transparency of financial flows in the sector, especially with respect to government revenues and their use. The creation of a multi-stakeholder group is a key element of the EITI standard, and this group would ensure that the interests of those stakeholders in South Africa who have not been sufficiently included in existing dialogue formats are taken into consideration.

At the European level, the German government should push for a risk-based approach in the planned EU supply chain law. Such an approach and its correspond­ing regulations would aim to minimise social and environmental risks, and en­courage private actors to go beyond meet­ing the bare minimum legal standards. A strong European supply chain law is an opportunity to correct existing weaknesses in the German Supply Chain Act.