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Modernising the mining industry

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Neal Froneman. Picture: Mary-Ann Palmer
Neal Froneman. Picture: Mary-Ann Palmer

Aligning stakeholders for a successful future is essential for the economic sustainability of the local industry.

Sibanye is the largest individual producer of gold in South Africa and is one of 10 largest gold producers globally. The company was created in 2013 through the unbundling of Goldfields’ non-core assets.

While mechanisation is a necessary part of modernising the mining industry, Froneman explained that even with significant technological development, the nature of local ore bodies and reefs dictate that mining will remain a labour intensive industry for some time to come.

As the Sibanye business is primarily focused on South Africa, Froneman said it is essential to recognise the importance of all stakeholders to its operations: “The days of just being focused on shareholders are history.”

“Modernisation means that as an industry we must take cognisance of the fact that we have stakeholders who need to benefit from the resources that belong to all the people of this country,” he said. As such, mining activities have to benefit the local community and the economy of the country.

“I am acutely aware of what our responsibilities are in terms of service delivery, and what government’s are, but as a mining industry we have to do more. Whether we like it or not we have to get involved and be good corporate citizens.”

Froneman added that global mining companies looking to operate in South Africa would need to invest in the country’s social development: “If you want to benefit from South African resources, you have to invest in the future as well.”

Diversification and value creation

While Sibanye’s operations are all currently focused in South Africa, Froneman said this does not rule out investments outside of the country.

“If you are going to be a South African champion, you have to compete globally and we look forward to increasing our stake offshore.”

The miner’s recent entry into platinum through the purchase of the Rustenburg and Aquarius mines has transformed it into a multi-commodity business. However, this was part of the group’s value creation strategy, resulting in commodity diversification, and not a direct attempt to move away from gold.

Lessons learned in the gold industry on how to optimise operations using infrastructure and “taking down farm fences” to create synergies and remove duplications would serve the group well in the platinum sector he said.

Stakeholder cooperation

Despite high levels of labour militancy and a difficult regulatory framework, Froneman maintained he was optimistic about the South African mining industry. “For the first time in 20 years we are beginning to see portions of business and government working together. Everyone is tired of poor governance and there are green shoots of stakeholder cooperation.

The road to a better future for all mining stakeholders lies in collaboration and partnership.”

However, he spoke to a lack of trust between stakeholders, which is preventing the industry from moving forward.

“The government gets the importance of the economics of mining, the unions get it, but there is a mistrust which has led to policy uncertainty, a desperate need to overregulate the industry with little regard to investor sentiment and unrealistic demands. Unless we tackle the issue of trust, this won’t change.”

The South African mining industry is ranked as the worst in Africa in terms of labour militancy, which Froneman said was not a sustainable position.

“Damaging industrial action is a thing of the past. Organised labour must focus on protecting member interests in the context of fostering the economic stability of the industry. We have to create the understanding amongst unions that a growing industry benefits all stakeholders.”

Froneman said business must allow organised labour to participate in business decisions, especially when these involve sustainability. Business could also improve by becoming more transparent with other stakeholders and ensuring that engagement forums are more inclusive, he added.

The alignment of stakeholders is essential for the modernisation of the local mining industry, Froneman said in conclusion. “We are going nowhere unless we break through this very vicious and toxic environment in which we find ourselves, and start creating superior value for all stakeholders.”

» City Press is a media partner of the Gordon Institute of Business Science forums.

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