‘Everyone is to blame for Marikana’ In the 10 years to September last year, Lonmin paid $931 million (R9.3 billion) to the tax authorities and $852m in dividends to shareholders. In 2003, it was providing employment for 20 296 people; by 2012, this figure had increased to 28 222. For shareholders, some of the benefit from the dividend payments has been diluted by two rights issues, made necessary by the volatile conditions in the platinum market combined with a balance sheet that is not as robust as the other major players in the industry. Lonmin generates all this tax, pays all these dividends and creates all this employment while staving off a host of potentially crippling dangers. Every year its annual report outlines a list of what it calls “principal risks”. In 2012, these included failure of safety strategy, poor employee relations, poor community relations, funding risks, social licence to operate/reputational risk, resource nationalism, commodity price and currency volatility, uncompetitive unit costs, access to secure energy and water, skills shortage, theft of explosives and copper cable, failure to deliver shareholder value, failure in internal controls, ineffective contractor management and bad ground conditions causing loss of reserves. Until 2009, Lonmin attempted to deal with all these issues by remote control from London, where most of its investors were located. The board members and senior executives did make regular visits to South Africa to meet with management. It is likely that in most cases the closest these meetings got to the Marikana operations, which provide much of Lonmin’s platinum, was its conference centre on the verdant hills overlooking the R27 a few kilometres from the Moonooi Golf Club, where many Marikana mine managers go to relax between shifts. Lonmin is, of course, not alone in the substantial contributions it makes in terms of job opportunities, tax payments and creation of shareholder value. Anglo American Platinum (Amplats), which is 80 percent owned by Anglo American, employs just under 60 000 people and pays hefty sums in tax each year. Impala Platinum (Implats), which is owned by a large number of institutional shareholders, employs more than 60 000 people and makes hefty tax payments. In addition to tax and jobs, over the past four decades South Africa’s platinum companies have generated attractive returns for their shareholders. The steady flow of dividends from Amplats was one of the major reasons parent Anglo was able to undertake its massive – and ill-considered – $11bn share buyback between 2006 and 2008. Similarly, Implats was long regarded as Gencor’s cash cow, helping it to build up a considerable base of mining assets. According to one analyst’s report, since 1991 the average return on equity for these three high capital expenditure firms has been around 30 percent. Even today, four years into a slump in international demand for platinum and facing considerable cost pressures, these mining companies remain exceptionally valuable. Lonmin has a market capitalisation of R30.7bn; Implats’s market capitalisation is R68bn; and Amplats, which controls about 35 percent of the world’s known platinum reserves, has a market capitalisation of R103bn. Additional and considerable plusses to this industry are the thousands of jobs created in the supplier industries and the substantial amounts of foreign exchange earnings generated by platinum sales each year. And then there are the negatives. If Marikana were a corporate entity the negatives attached to platinum mining would show up on its balance sheet rather than those of Lonmin, Implats and Amplats. Despite their protestations to the contrary, the three companies have managed to externalise much of the cost associated with mining platinum in a once-pristine, sparsely populated region. Forty years after the arrival of the platinum companies, Marikana is a dystopian wasteland where the lucky members of the now very large population can be seen rushing to or from an arduous day’s work at a rockface underground. The unlucky ones spend the day scratching above ground looking for work. A pall of noxious gas hangs over the town and nearby squatter camps and sewage testifies to the fact that, it if were a company, Marikana would be bankrupt. Since the early 1970s, hundreds of thousands of people have been shipped into the area to provide labour for the mines. Despite the evident long-term nature of mining activity the three companies operating in the region have adopted a continuous short-term approach to their labour needs, seemingly too fixated on generating returns in the current six-month reporting period to undertake appropriate long-term investment. It seems that for 40 years the mining companies have felt they would not be around for long enough to undertake the sort of investment needed to ensure an appropriate level of infrastructure for the people needed to serve their industry. Dysfunctional government departments and often corrupt officials – at all levels – all too often provide justification for companies failing to achieve even the most basic of housing or sanitation targets. It is increasingly evident that the billions of rands of tax they have paid earn them little in the way of government support for infrastructure development. Everyone is to blame; so no one is responsible for the tragedy that is Marikana. - Business Report iol.co.za/business/features/mining/everyone-is-to-blame-for-marikana-1.1563160#.Ug3ssdJHLaJ
Posted on: Fri, 16 Aug 2013 09:13:39 +0000
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