Mining and Corporate Social/Environmental Responsibility

Building a company and a community
By CNN's Diana Magnay



SISHEN, South Africa (CNN) -- Located on the edge of the Kalahari Desert in South Africa's Northern Cape province, Sishen is the world's largest single open pit iron ore mine.

The ever-widening 11-kilometer crater, one of 11 mines around the world owned by Pretoria-based Kumba Resources, produces 28 million tones of iron ore every year.

With annual revenues totaling $1.3 billion, Kumba plays a vital role in South African industry, producing 80 percent of the country's iron ore exports and helping to feed a growing global appetite for steel.

By 2009 it hopes to raise production at Sishen to 47 million tones a year.

But economic success has brought other responsibilities. Sishen already employs 3,000 people, and the expanding crater demands an expanding workforce.

While Kumba's miners have roofs over their heads, most settlers drawn to Sishen in search of work end up living in illegal shantytowns. And one day Sishen will close, leaving an economic hole in the surrounding community as large as the exhausted mine itself.

"Mining is unique in the sense that the one thing you know about the mine, is that the day you open it, one day you're going to have to close it," Kumba CEO Con Fauconnier told CNN.

"And you cannot let the mine just pull the plug one day and have quite a large community sitting there that over the years has been attracted to the mining operation."

South Africa's mining history is littered with examples of corporations that have made money and moved on, leaving shattered communities in their wake. Fauconnier says that's no longer acceptable.

"A lot of our work is to make sure that from an environmental point of view and from a social point of view we leave something behind that makes sense," he said.

Under the banner of sustainable development, Kumba claims it is committed to long-term stable and mutually beneficial relationships with its stakeholders. What's more, it is matching those words with figures.

Fauconnier says the company spends six percent of its wage and labor bill on training and development -- 50 percent higher than the industry average.

That money has funded a training center, where local villagers can learn vocational skills such as carpentry and leather tanning.

"Adult basic training and education is one of the cornerstones of our social investment effort, not only for our own people, but also for people in the community," said Fauconnier.

"If I can train them, then I can offer them jobs and the wealth of the community will increase and it will become self sustainable in the longer term. That is one of the highest priorities for Kumba."

Another priority for the company is the problem of the hostels where most of the mine's poorer-paid employees are housed. Relics of the Apartheid era, when the South African mining industry relied on and exploited migrant labor, the supposedly single sex hostels attract prostitutes and illegal residents and have become breeding grounds for HIV and AIDS.

Gerrit de Kock, Kumba's community development officer at Sishen says Kumba hopes to convert the hostels into family units and is working with local authorities to re-house those facing eviction.

"At this stage we still have the problem of getting illegal people out of the hostels. And we are doing that in conjunction with the local municipality to see how we are going to get these people into alternative housing," said de Kock.

But Ralph Hamann of the African Institute of Corporate Citizenship says it is more than just social conscience that is forcing companies to change.

Regulations introduced since the advent of democracy in 1994 aimed at promoting racial equality, along with tougher health and safety regulations, labor rules and environmental laws, have made companies more accountable, says Hamann.

In addition they have been influenced by an international business climate in which Corporate Social Responsibility is becoming the rule rather than the exception.

"What has happened in South Africa which is so crucial is that the government has taken a much more pro-active role in pushing a role for companies, in poverty alleviation and transformation in trying to redress the problems of apartheid," said Hamann.

While Kumba's commitment to social responsibility goes beyond the requirements of law, like all South African mining companies it is under a deadline to convert its hostels into family units.

Perhaps the lesson from Sishen is that companies can do good, but often only when prompted to do so by government legislation. Shareholders, while impressed with a socially responsible company, are still more impressed by a profitable one.

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http://edition.cnn.com/2005/BUSINESS/02/15/csr.sishen/index.html