Black economic empowerment status report

Assore strongly endorses the broad-based black economic imperatives contained in the Minerals and Petroleum Resources Development Act (the MPRD Act) and the Broad-based Socio-economic Empowerment Charter for the South African Mining Industry issued thereunder (the Mining Charter), and since their inception has embarked on a number of initiatives aimed at meeting these requirements at its mining operations, as set out below.

The MPRD Act has changed the previous common law and statutory position in South Africa in terms of which mineral rights could be held privately. Instead, pursuant to the MPRD Act and with effect from 1 May 2004, the State has assumed sovereignty and custodianship of all mineral rights in South Africa and will grant prospecting rights and mining rights to applicants based on the merits of their applications (which are designated as new-order rights). A transitional period commencing in May 2004 and ending in May 2014 is provided for, during which holders of existing mineral and exploration rights (designated as old-order rights), upon meeting certain requirements, may convert such existing in-use old-order rights into new-order rights, or in the case of unused rights may apply for new-order rights.

The Mining Charter is intended to facilitate the entry of historically disadvantaged South Africans (HDSAs) into the mining industry. The scorecard which the state has issued pursuant to the Mining Charter requires, inter alia, that mining companies achieve 26% HDSA ownership of mining assets within 10 years (ie by 1 May 2014). This has been maintained by the Department of Mineral Resources (DMR), following a review of the Mining Charter in September 2010, as the target required to be achieved by mining companies. The Mining Charter also requires, inter alia, that mining companies provide plans for achieving employment equity at management level and procuring goods and services from black empowered organisations on a preferential basis in accordance with the predetermined criteria set out in such plans. Since 2004, with a view to meeting the Charter’s requirements, Assore, through its various group companies, has achieved the following empowerment milestones:

  • Concluded an empowerment transaction with Mampa Investment Holdings (being the commercial arm of the Mankwe Development Foundation) (Mampa) in April 2004, pursuant to which new-order mining rights for the chrome operations in Rustenburg Minerals Development Company Proprietary Limited (Rustenburg Minerals or Rustenburg Minerals) on the farms Groenfontein, Zandspruit and Vogelstruisnek were obtained;
  • Through Assmang, has secured new-order mining rights for all of its operations. The rights for the manganese deposits at Black Rock (comprising Assmang’s Nchwaning and Gloria mines) and the chrome ore rights (Dwarsrivier) have been executed and lodged for legal registration;
  • Successful conversion and execution of old-order mining rights to new-order mining rights for pyrophyllite (Wonderstone);
  • Implemented a preferential procurement policy at all its operations (refer “Preferential procurement”); and
  • Developed social and labour plans (SLPs) for each of its operations, as well as local economic development (LED) projects which support the integrated development plan of the relevant local authority. The plans, which have received the approval of the relevant departments, include the construction of schools and crèches, food security projects and presentation of programmes on adult education, health and safety and environmental awareness (refer pages 73 to 75).

The extent of compliance with the Charter is reported on and monitored on a regular basis, both at the Excom level and by the board, through the Social and Ethics Committee and specifically on new-order mining rights, which are subject to audit by the DMR. No significant issues of non-compliance have been reported by the DMR.

Following the introduction of the MPRD Act, Assore has, specifically at a holding company level, entered into empowerment-related transactions, which have resulted in control by HDSA’s comprising 26,07% of Assore’s ordinary shares as follows:

Shareholder   %
shareholding
Boleng Trust   14,28
Fricker Road Trust   11,79
    26,07

The Boleng Trust (previously the Bokamoso Trust)


The Boleng Trust (the Trust) was established for the benefit of HDSAs and broad-based HDSA community groupings residing in the areas in which the Assore group’s mines and beneficiation plants are located. The majority of the Board of Trustees (the Trustees) are independent and, in terms of the shareholders’ agreement between Assore and the Trust, the Trust is entitled to an annual flow-through payment of at least R2 million per annum to the beneficiaries irrespective of the commitments to the Assore group with regard to the funding of the transaction. The Board of Trustees of the Trust is as follows:

 
Dr TG Sibiya
Chairman
Independent trustee
  K Makhaya
Independent trustee
     
 
M Mtshali
Independent trustee
  TPJ Ngxulelo
Independent trustee

Dr TG Sibiya (Chairman)*
CJ Cory#
RN Lekgatle#
Ms K Makhaya*
M Mtshali*
Ms TPJ Ngxulelo*
*Independent trustee
# Founder trustee

Assore concluded a relationship agreement with the Trust in order to regulate the respective relationships between the parties to ensure, in so far as is possible, the continued compliance by the Trust (as the Assore group’s BEE partner) with the direct ownership requirements of the Mining Charter.

During the 2013 financial year, and pursuant to the trust deed, the Trustees have approved expenditure amounting to R7,2 million (2012: R3,7 million) and have committed to spending a further R8,9 million, details of which are as follows:

      R’000
Operation   Description Expenditure Commitment*
Zeerust Chrome Mines   Mmasebodule Primary School 6 893 4 967
Rustenburg Minerals   Imfundo Likusasalethu, primary educational
intervention
288 2 673
Rustenburg Minerals   Makgope Primary School Media Centre 1 300
      7 181 8 940
* The Group intends to supplement the commitment of the Trust, with those funds that are due to become available from the Fricker Road Trust (refer below)

Further detail of the expenditure on these projects is included in the “Sustainability report” (refer “AMT CED initiatives”, page 75).

The Fricker Road Trust and the Assore Employee Trust

Pursuant to the completion of Assore’s third empowerment transaction, these trusts have been established, the activities of which are summarised below:

The Fricker Road Trust

As part of Assore’s commitment to the social and economic development and empowerment of the beneficiaries, the sole object of the Fricker Road Trust is to facilitate the group’s activities pursuant to its trust deed, with specific focus on the areas of health and education. The beneficiaries of the Fricker Road Trust are the members of the communities comprising HDSA persons who are living, working or operating in and around the mining and beneficiation operations of the Assore group. At current dividend levels, and allowing for necessary expenses, the Fricker Road Trust will have approximately R10 million available for distribution per annum.

The Assore Employee Trust

The Assore Employee Trust was established by Assore for the purposes of economically benefiting the non-managerial employees of the Assore group by facilitating their participation in the dividend income distributed by Assore (dividend rights) and also participating in the increase in the value of Assore’s ordinary shares listed on the JSE (equity rights). The beneficiaries of the Assore Employee Trust are full-time, permanent non-managerial employees of the Assore group, and exclude senior management and board members. During the 2013 financial year, the Trust effected dividend rights distributions to employees totalling R13,2 million. An independent valuation performed as at 30 June 2013 indicates that the value of equity rights granted to employees amounted to R2,0 million (refer note 14 to the consolidated financial statements).

Preferential procurement


Assore is committed to bringing previously disadvantaged South Africans into the mainstream of the economy and the mining industry by identifying and developing business opportunities by making them available to BBBEE suppliers at all its operations. Without compromising on quality, Assore has adopted a policy of precluding vendors who do not have valid empowerment credentials from supplying goods and services to its operations. A summary of the percentage BBBEE procurement measured against total discretionary procurement is presented in the table below:

    Total
discretionary
procurement#
R’million
Aggregate
BBBEE
expenditure*
R’milliion
Aggregate
% BBBEE
2013        
Assmang   11 166,3 10 114,9 90,6
Rustenburg Minerals   184,6 118,0 63,9
Zeerust   42,0 17,9 42,6
Wonderstone   48,0 39,2 81,7
African Mining and Trust   61,5 75,8 123,3
2012        
Assmang   11 071,5 10 258,5 92,7
Rustenburg Minerals   187,0 70,1 37,5
Zeerust   75,9 11,8 16,2
Wonderstone   33,6 24,0 71,4
African Mining and Trust   93,9 67,2 71,2
# Total discretionary procurement is defined as total procurement less procurement effected through related entities (intercompany transactions)
*  Aggregate BBBEE expenditure is recognised based on the respective recognition levels of the suppliers, in accordance with the codes published by the Department of Trade and Industry (dti)
 Expenditure of Level 1 to 3 suppliers is recognised at more than 100% in terms of the dti codes

The percentage of BBBEE expenditure within Assmang remains at a very pleasing level, where the slight decline in the BBBEE percentage mostly emanates from the smelting operations, which are not measured in terms of the Mining Charter.

The improvement in the preferential procurement in the group’s subsidiary operations has been achieved by entrenching its Preferential Procurement Policy. The improvement in the aggregate percentage BBBEE in African Mining and Trust has been brought about mostly due to a higher concentration of Level-3 suppliers being awarded expenditure, resulting in the recognition of expenditure in excess of 100% for the purpose of calculating the aggregate.