Improving Transparency and Accountability in the Flow of Benefits to Mining Communities, a report released today by Corruption Watch, and an accompanying Legal Review: Distribution of Mining Equity to Community Trust, highlights the persistent challenges regarding the flow of benefits paid to people in mining-affected communities, those most impacted by mining operations.   

The report identifies upfront the rightful beneficiaries, the households who have so often been overlooked in favour of traditional authorities, government officials, consultants, mining company employees and others that have in many instances reaped the financial advantages of mining at communities’ expense.   

The reality is that South Africa’s resource curse is not merely some unfortunate economic phenomenon, or the product of an intangible force, said Mashudu Masutha, legal researcher: extractives at Corruption Watch. 

“Our work in the mining royalties space illustrates that systematic looting is taking place, and the victims and beneficiaries of this large-scale corruption have names,” Masutha said. “This report aims to move a step beyond uncovering the system by providing legal mechanisms which can equip those most affected by mining development with agency to advocate for their rights and achieve sustainable economic prosperity.” 

Changes in legislation, namely the Minerals and Petroleum Resources Act (MPRDA) and the Mining Charter, have brought little material change to the living conditions of mining communities, which are still impoverished, vulnerable, and robbed of their livelihoods. Add to this the Traditional Leadership and Khoi-San Act, which empowers traditional councils to enter into partnerships and agreements with external entities, including mining companies, on behalf of communities. When traditional leaders abuse their power, the rights and interests of communities are disregarded. 

This report follows Corruption Watch’s 2018 Mining Royalties Research Report, which reflected widespread corruption in the failure to provide the most-affected communities with equity benefits and compensation flowing from mining on their land.   

The new report explores the best interventions to shape mechanisms designed to channel benefits to communities, while improving transparency and accountability, and rooting out the corruption and fraud that has dogged the industry for so long.   

It also makes an important distinction between compensation and equity, thereby shifting the conversation from merely highlighting the inadequacies and injustices of current arrangements, to providing concrete actions and recommendations for changing the status quo. 

The legal review provides a legal and policy analysis of community compensation arrangements, specifically community trusts and the financial vehicles that are intended to provide economic mobility. It seeks to close the gaps in interpretation to promote good governance in the way that community trusts are administered. 

The report homes in on the gaps inherent in existing financial and legal vehicles, namely the Mining Charter, MPRDA and the Broad-based Black Economic Empowerment Act (B-BBEE Act). In addition, it addresses the inefficiencies of social and labour plans, community trusts, and B-BBEE equity and other benefit-sharing arrangements that fall far short of providing real benefit. 

The case studies included in the report, namely Wilgespruit, Mogalakwena Platinum Mine, and Kumba, demonstrate some innovative approaches to ensuring that communities receive proper benefits and long-term sustainable support as a result of mining on their land. 

The final recommendations look at areas of existing legislation that can be strengthened to improve transparency, accountability and the flow of money to communities. Also included are recommendations around the amendments of instruments, the term of office, provision for democratic decision-making, management of the trust, matters of transparency, distribution and expenditure, diversification, accessibility, conflict resolution and other elements. 

The report ends with an emphasis on key points of law to be considered when creating better conditions for proper compensation of mining-affected communities.   

“The disparity between life in the places where resources are found and the places where they are consumed gives a stark indication of this policy failure in South Africa,” said Masutha. “This report provides an opportune moment to catalyse a significant shift from all key stakeholders, particularly industry and government, to begin to prioritise safeguarding the interests of those most affected.” 

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