This post comes from South Africa, where yesterday I attended the final day of the mammoth African Mining Indaba (investment conference).
The final day focusses on sustainability issues in large-scale mining -- but the 'A' to 'Z' title of this post over-promises, since I have no intention on summarising the conference.
I propose only to mention two thoughts I had while listening to experienced CEOs, the ICMM and others on sustainability / mining-for-development / mining-as-development issues. One ('A') is an Australia-related thought (or attempted analogy); the other ('Z') is Zimbabwe related. Mining has been a big part of the industrial history of both these vastly different countries that have in common only that I happen to have lived in each!
Scaling-up social investment
How do firms under pressure to improve livelihoods balance payments to appease individual workers (and so the collective labour-force), with large-scale social investment that benefits such a group but in a less direct fashion?
The Australia example is this. In 2009, in an effort to stimulate consumer spending and stave off recession, the government offered individuals small packages of cash that together amounted to billions of dollars. I was able to buy the predecessor to this laptop. Yet the pay-outs were criticised on the basis that one-off cash to individuals could not be justified relative to the large, once-in-a-generation infrastructure project that the same cash total could fund (with ancillary job-creation and other benefits).
Major South African platinum (and other) mining firms last year offered wage increases in response to stoppages partly caused by complaints about cost-of-living and access-to-basic-services issues in the mine site area. Such strategies may come at the cost of longer-term ones, where the same funds are used to build shared infrastructure (such as water and sanitation). The latter strategy raises a host of difficult, familiar issues about distinguishing corporate from government duties. Nevertheless, yesterday's discussion at times seemed apolitical: it will be intensely political, for example, to persuade local authorities in the Rustenberg area of South Africa to build (or allow companies to build) more permanent housing for a workforce that local residents sees as foreign (being heavily comprised of migrants from the eastern Cape, Lesotho and elsewhere).
Scaling up research on social investment
The Zimbabwe analogy is this -- and it relates to the need, in my view, for more research on the empirical links between social investment and reduced political risk.
It is routinely -- as at Indaba -- stated that increased corporate investment in social services builds the social license to operate, and it is inferred that this lessens the overall risk of sudden or catastrophic governmental interference with a mining asset. As well as reducing the prospects of local friction and resulting disruption (although spending and local procurement or hiring can create or worsen local grievances and competition, too), it is certainly arguable that investment that consolidates the social license also reduces the likelihood that a mining or oil/gas site will provoke local political energies that lead to national adverse political attention, thus putting the overall formal license to operate at risk of political scapegoating.
Yet this link is not a necessary one -- hence the need for more empirical studies. It is not necessarily the case (look at platinum firms' experiences in Zimbabwe recently) that a better social performance profile immunises a firm from high-level political pressures. Many of the processes at work are driven by issues and forces far bigger than an individual site or firm; the company's reputation and goodwill might be irrelevant in terms of how government treats it.
The actual Zimbabwe analogy I meant is from white commercial farming in the 2000s. Others have studied this far more closely, but it seems to me that there was no necessary link between farmers who had refrained from developing their workers' livelihoods (electrifying compounds, water, clinics, etc) and the likelihood of their properties being subject to formal compulsory requisition (or informal and illegal seizure by political elites or groups). Being a better citizen farmer might have helped reduce the scope for scapegoating any individual, but most farmers were at the mercy of a much wider and more complex, irresistible set of forces. In that process, their responsible actions in social investment terms often had little impact on whether they retained their property or not.
The point is that social investment strategies are both right, and make business sense. Yet more research is needed on the link between them and reduced political risk. Indaba speakers merely asserted this link.
So what?
Each year that I've been, the Indaba highlights how intensely political, ultimately, it is to enter another country and extract its resources. Navigating the risks and opportunities involved is part of my day job; thinking about the duties and dilemmas of the private sector (vis a vis government) is this blog's subject. No-one has a monopoly on solutions to these pressing, difficult issues.
Input welcome!
Jo
See previous posts on resource nationalism and other topics for discussion of related issues, both in South Africa's (rather unique, yet also not) context and more broadly.
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