By Matshidiso Dibakwane and Mashudu MasuthaPublished on Transparency International Australia Over the last five years or so, the South African government has undertaken a process of formulating a new legislative framework with the aim of creating a blueprint for transforming the mining industry. The primary aim of the new framework is to benefit people who were disadvantaged under colonialism and apartheid. The sector was particularly exploitative and left a destructive legacy. Hence the need for a new social compact. A question that isn’t given enough emphasis in forging a new compact is how to move mining from an extractive industry to one that generates inclusive and sustainable economic opportunities. This is particularly true when it comes to local communities that are negatively affected by mining – and mostly insufficiently compensated. Two related issues account for this state of affairs. First, community members are often excluded from official decision-making. Second, the dubious deals that mining companies often strike with local leaders, be they political appointees or traditional leaders, result in disempowering those opposed to mining on their lands. The lack of rigorous public participation in forming mining policy is a ticking time bomb. This problem however is not intractable and can be overcome. The South African mining industry needs to streamline an inclusive model of community engagement which in turn will build on and improve the idea of shared value. A model that moves beyond philanthropy or corporate social responsibility. Rather, all stakeholders, especially host communities, become participants in decisions that affect their lives. See Corruption Watch’s research on the corruption risks in mining approvals in South Africa Courts lend weight to shared value The courts have held repeatedly that mining communities must be meaningfully consulted on every decision that directly affects them. However, the South African government and, to a certain extent, industry has continued to undercut this principle. Knowledge and implementation of meaningful consultation in the sector remains an elusive concept across various mineral-rich jurisdictions. Given the legal requirements enumerated by the courts, this is hard to explain. Either there remains, for some reason, uncertainty as to which decisions warrant meaningful engagement or government wilfully rejects communities’ right to meaningful engagement in its entirety. In South Africa, the courts seem to be the only accountability mechanism available to affirm the right of mine-affected communities to meaningful engagement. The landmark Baleni judgment, popularly known as the Xolobeni judgment, echoes the ideals of shared value. It confirms that the socio-economic and corruption vulnerabilities will be significantly mitigated if consultation is required across the entire value chain of mining. The judgment goes further by stating that consent by communities is required from as early as the mining approval stage, which questions the state as the custodian of mineral resources power to authorise mining rights. As a result the legal gymnastics that has arisen and will continue to arise from this judgment will be closely monitored by leading industry giants. The important aspect of this judgment is that it views consultation as a process rather than a result. This means consultation requires platforms to be established which ensures that the most affected communities will be able to freely discuss and conduct a decision-making process with the freedom of choosing their own culturally appropriate methods. Looking ahead Corruption Watch’s research into vulnerabilities into the South African minerals approval system has some significant findings. The research illustrates that industry and government ineffectively engage communities to ensure that shared value and meaningful socio-economic development through mining becomes a reality. This despite the fact that there is an increasingly obvious parallel between the lack of shared value in any given project and the heightened levels of social risk the project faces from local communities and society more broadly. Achieving shared value and sustainable socio-economic development is characterised by fraught relations between mining companies, host country governments, and mine-affected communities. As international financiers begin to insert social risk elements into financing processes, it will become increasingly important to understand which factors support effective shared value and which factors work against it. Indeed, many observers now understand social risk – with a failure to meet social and economic development expectations – as the leading risk. Shared value embodies the notion that all stakeholders, especially communities, should receive a fair share of the resource endowment and the economic opportunities it generates. Therefore, the need to rebuild policy and enforcement of communities’ public participation rights in the mining sector is creation of this shared value. If communities are continuously left out of key decision-making processes, it will exacerbate social instability and continue to challenge the sustainability of the sector.