Deloitte: Inclusive growth is key to the future of mining

10-02-2016
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Have to appreciate that everyone wins, or loses, together.

CAPE TOWN – Everybody accepts that the South African mining industry is in a challenging place. However there appear to be very divergent views on what should be done about it.

Perhaps because of the historical realities of the industry, it is still seen very much as a site of contestation. Business, labour and government are constantly pulling in different directions.

The seriousness of the current environment might however be a necessary catalyst to force all parties to reconsider their approach. It is becoming apparent that unless there is a better appreciation from all sides that creating a sustainable industry is a shared responsibility, there may be very little, if anything, of an industry left to struggle over.

Speaking on the sidelines of the 2016 Investing in Africa Mining Indaba, partner at Deloitte South Africa Tony Zoghby, said that what is needed now is a focus on inclusive growth. All parties should appreciate that they are in a symbiotic relationship with the others, and work towards solutions where everybody benefits.

“I think the whole concept of growing together and working together as labour, industry and government is absolutely key to the future and development of the mining industry,” Zoghby said.

He pointed out that the Minister of Mineral Resources Mosebenzi Zwane, suggested as much in his keynote address at the opening of the Indaba on Monday.

“The minister made the point that treating labour with respect and dignity would increase productivity, and I think that is absolutely right,” said Zoghby. “I couldn’t agree more.”

A lot of distrust has built up over many years between labour and the mining houses, but it is crucial for this relationship to become more positive.

“At the end of the day the unions do want what is best for workers, and the worker wants to be paid a fair wage for doing a decent job with dignity,” said Zoghby. “But unions also need to understand what companies can and can’t do.”

He said that it is vital that unions and workers are educated to better understand the finances of mining companies, and that mining companies develop a better understanding of what unions and workers want.

“I think we need to ensure that labour, through the unions, is better educated in the workings of the companies,” said Zoghby. “That means understanding the financial impacts that a strike might have, or a wage increase might have, and that in some cases you have to take tough decisions in which some people might lose jobs, but in doing that you are preserving jobs for others.”

While he conceded that it might still be a controversial idea, he suggested that companies should consider whether there wouldn’t be benefits to having representatives of labour sitting on their boards. This would include them in the decision-making process, give them a better understanding of the workings of the companies and they could then feed that information back to their members.

Zoghby added that finding a sustainable middle ground for the industry must be the responsibility of all three parties – business, labour and government – and he even added a fourth – shareholders.

He said that mining companies derive value for shareholders by driving up profitability and paying dividends. However, if shareholders accepted that these could be impacted in the short term to ensure that steps were taken to ensure the long-term sustainability of the industry, that would be significant.

“Perhaps shareholders and investors have to come to terms with the fact that returns might have to be a little lower in South Africa than what they might expect in another market,” said Zoghby. “That of course might raise the question of why they would then invest here, but it’s a tight line within which you have to work. We have world class infrastructure, we have the resources, so there has to be some kind of pay-off for what you are getting.”

Zoghby also acknowledged that everyone in the industry has to appreciate the historic context in which they are operating.

“I think our history does prevent mining companies from necessarily taking the really tough choices such as closing operations, reducing labour, and moving quickly to mechanisation,” he said. “If you were in a country where you didn’t have that background and where job creation wasn’t as significant an issue, mining companies would have much more freedom to act and take the tougher decisions.”

This shows that already the sensitivities are there, and this needs to be built on so that people can work from a shared determination to make things work.

“We need to cut out the rhetoric and cut out the politics, because that is the only way that we are going to move forward,” Zoghby said.