Norfund and CDC Group join forces to back renewable power development in South Africa
● The development finance institutions (DFIs) are investing ZAR 600 million in H1 Capital.
● Investment to add c. 2.4 Gigawatt (GW) of gross renewable capacity in South Africa, expanding access to power and contributing to the avoidance of 6,2 million tons of carbon dioxide annually.
● The commitment will enhance the economic participation of wider communities, and marks CDC’s first direct investment in a Broad-based Black Economic Empowerment (BBEE) company in South Africa.
● The deal will be the first investment under Norway’s new Climate Investment Fund, managed by Norfund.
Cape Town – 3 March 2022 – Norfund, the Norwegian investment fund for developing countries, and CDC Group, the UK’s development finance institution (DFI), are today announcing a commitment to invest ZAR 600 million in H1 Capital (Norfund 360 million and CDC 240 million) – a South-African black-owned and managed renewables investment and development company.
The transaction represents a joint vision by the DFIs to mobilise climate finance to Africa and back clean infrastructure projects across the continent. The investment from Norfund and CDC, which will soon be renamed British International Investment (BII), will help to improve access to clean and affordable energy in South Africa. The increase in clean energy supply will provide consistent power to cities, villages, townships, businesses and farms, thereby increasing productivity and encouraging economic growth.
South Africa has tremendous economic potential. The government has set an ambitious target to generate 20GW of new renewable capacity over the next decade to address power shortages and decarbonise the power generation fleet, where 86 per cent of the country’s energy mix is thermal.
This investment will support the country’s clean energy goals, as it will enable H1 Capital to fund a pipeline of over 2.4 GW of new wind and solar projects, generating approximately 6,400 GWh per year. This will contribute to avoiding annual emissions of 6,2 million tons of CO2, and help to accelerate South Africa’s transition to clean energy.
H1 Capital is a development partner of choice, owing to the company’s expertise on several renewable power projects and its deep commitment to energy sustainability. As a Broad-based Black Economic Empowerment (BBEE) company, H1 Capital’s inclusive approach provides clean energy solutions that enhances the participation of the wider communities in the economy, helping to transform the lives and livelihoods of marginalised groups in South Africa.
The investment in H1 Capital demonstrates commitment by the UK and Norway to act on pledges made at COP26 – scaling climate finance to Africa and deepening collaboration on solutions that will meet the continent’s needs and address the climate emergency. At the summit, Norway announced the creation of a new climate investment fund to be managed by Norfund, and this capital to H1 Capital will be the first investment under the new fund.
This commitment from the DFIs helps contribute to the UN’s Sustainable Goals (SDG 7) on affordable and clean energy, (SDG 8) on good jobs and economic growth and climate action (SDG 13). The transaction also qualifies for the 2X challenge, which seeks to support businesses that provide women in emerging economies with access to leadership opportunities, quality employment, and products and services that enhance their economic participation and inclusion. Moreover, the investment aligns with South Africa’s ambitions and steps toward securing a just transition to a low-carbon economy.
Tellef Thorleifsson, CEO of Norfund, commented: “At Norfund we are honoured that the Norwegian government has entrusted us with the responsibility of managing the new climate investment fund. We are delighted to be able to put the money to work quickly and effectively through what will be the first investment under the new mandate, with our existing partners in H1 and CDC, in projects in line with the energy plans of the South African government”
Anne Beathe Tvinnereim, Norwegian Minister of International Development, commented: “I believe that the new Norwegian climate investment fund managed by Norfund will be our most efficient tool to help accelerate the global clean energy transition, making it possible to base necessary development on renewable energy and limit the climate crises devastating impacts on the world’s poor. I am confident that this first investment under the new climate mandate will be the first of many mutually beneficial partnerships that contribute to a just transition in South Africa and in the other markets that Norfund aims to prioritize.”
Nick O’Donohoe, Chief Executive of CDC Group, commented: “We are delighted to once again partner with Norfund on this investment in H1 Capital, which will help increase clean energy access for people, communities, and businesses across South Africa. This investment marks another key step toward fulfilling our pledge to devote greater capital to fund clean infrastructure and to support markets like South Africa on their path toward a just transition. This investment signals our strengthened relationship with South Africa and clearly signals Britain’s commitment to help accelerate economic productivity and inclusive growth for Africa’s green recovery.”
UK Minister for Africa, Vicky Ford, said: “South Africa’s target to generate 20GW of new renewable capacity over the next ten years is indicative of the country’s bold steps toward securing a net-zero future for itself. $16million of UK investment in H1 Capital demonstrates our continued commitment to remaining a strong partner for Africa, to help address the urgent climate challenge, and promote clean and equitable growth that will ensure African economies can build back better.”
“Investments like this reaffirm and follow on from the commitment we have made to South Africa’s low-carbon transition through the $8.5 billion multi-donor Just Energy Transition Partnership.”
Reyburn Hendricks, Chief Executive Officer of H1 Capital, commented: “H1 is excited to be able to partner with Norfund and CDC to achieve our purpose of improving the quality of lives. South Africa needs access to long-term, patient capital to develop the large-scale energy projects required for reliable, clean power supply and economic development. H1 hopes that the partnership fostered with Norfund and CDC can be replicated with other players and projects in Sub-Saharan Africa”.View more
INVITATION: Young Engineers Webinar Series
INVITATION – Paper Manufacturers Association of South Africa – The pulp and paper sector has partnered with the Department of Science and Innovation (DSI) through the Sector Innovation Fund to promote research, development and innovation.Continue reading View more
Minister Didiza praises Illovo South Africa for life-changing development project
The Minister of Agriculture, Land Reform and Rural Development Thoko Didiza has praised the sugar giant Illovo South Africa for the successful culmination of its R127-million life-changing Small-Scale Grower Cane Development Project that has created over 860 sustainable jobs in KwaZulu-Natal while empowering women to participate in the rural economy.
The Minister was visibly pleased after being taken on a site visit on the KwaZulu-Natal South Coast to witness first-hand the development of 3 000 hectares of cane on communal land by small-scale growers using a sustainable model of development aligned to the national transformation agenda. With a R63-million grant from the National Treasury’s Job Fund matched by R63-million funding by Illovo Sugar South Africa, 119 local contractors have increased the supply of sugarcane for Illovo’s undersupplied Sezela factory by doubling the original 150 000 tonnes per annum forecast.
“The contribution of black commercial farmers in the country’s agricultural economy was still low and these low levels of inclusion call for serious intervention from both the Government and other stakeholders in driving inclusive growth” said Minister Didiza.
“We need more public-spirited players like Illovo Sugar who are willing to work with government in order to leverage our resources in the commercialisation of black farmers, while we ensure that we give meaningful support to those who are beneficiaries of land reform.”
The Minister added that after recognising different challenges constraining the growth and development of commercial and emerging farmers in the country, the Agriculture and Agro-processing Master Plan (AAMP) had recommended the adoption of a “Theory of Change” to train farmers and grow the agricultural sector in an inclusive manner.
The theory advocates for a co-existence of commercial and emerging farmers to promote the agricultural and food sectors on a new growth trajectory that can ultimately contribute to taking South Africa’s economy out of the “Middle Income” trap. The conceptual framework for this Master Plan has been concluded, and the sector partners are to meet for consultation in June 2021. This Master Plan is complementary to the Poultry and Sugar Master Plans.
Illovo Sugar MD Mamongae Mahlare said the Small-Scale Grower Cane Development Project is clear validation of the great potential that exists for partnerships between businesses and their host communities on the one hand, and government on the other, to reduce poverty and stimulate economic activity. “We could not have achieved this level of success alone. The confidence of the Jobs Funds which met us halfway with concessional funding, and the support of other stakeholders including the SA Canegrowers Association and the South African Farmers Development Association, have been integral to this revolutionary project.
“The collaborative multi-stakeholder approach to bring a local system of innovation to life in just three years has resulted in 1 704 growers being given the opportunity to develop cane on their land.”
Mahlare said the small-scale grower development project created direct jobs in rural communities while implementing socioeconomic and enterprise development initiatives and the transfer of valuable farming and business skills. By leveraging on the built capabilities and securing a spot in the Illovo Sugar value chain, communities will earn upwards of R80-million in income annually.
“Since the capacity to work the land resides within the communities in the form of the upskilled local contractors, there is a multiplier effect as this new money is spent within the community and is catalytic to broader economic activity,” she added.
Najwa Allie-Edries, head of the Jobs Fund who also attended the celebratory event, said building the capability of smallholder farmers must move beyond the debate about land ownership. The imperative now is to find creative solutions to long-term access to land, while providing appropriate support to build sustainable new-era farmer capability, she said.
“In spite of significant growth potential in the agricultural sector, opportunities and benefits are not widespread. The sector is characterised by a huge capacity gap between commercial and smallholder or emerging farmers, placing the latter in a disadvantageous position in terms of accessing opportunities, markets and value chains.
“Robust and localised agriculture and agro-processing systems are crucial for food security, economic diversification and creating jobs. Hence, more than 30% of the Jobs Fund’s portfolio of projects are implemented within the agricultural sector.
“Developing a sustainable sector means growing both the farm and the farmer and expanding the opportunities available to them. It can’t be one or the other; the same level of effort put into crop development must also be put into the farmer and his or her business.
“Illovo Sugar must be commended for reducing barriers to entry for emerging farmers and addressing challenges that hamper their ability to grow sustainably,” she said.
Nomanesi Ngcobo, a small-scale grower who was developed through the Illovo project told Minister Didiza that she took over her late husband’s role and sugarcane that had been planted years before was no longer growing.
She said: “The project came at a crucial time for us because the eMalangeni area had run out of sugarcane and many growers were struggling. Sugarcane farming is our bread and butter – it allows us to pay for our children’s education.
“This has been a life-changing experience and we are so grateful to Illovo Sugar for empowering us and enriching our lives.
“To be part of the cane grower’s community as a black woman makes me happy, especially having come from an impoverished background,” said Ngcobo.
What is the background of the project?
An under-supply of sugar cane into the South Coast mills necessitated action to be taken to re-establish sugar cane in the Small-Scale Grower areas that were lying fallow and within a close proximity to the affected mills. A sustainable development model was sought to ensure the future cane supply in the SSG areas.
What was the overall aim of the project?
To ensure equitable, inclusive and sustainable growth, leveraging sugarcane as a catalyst for rural development, while ensuring a secure supply to the Illovo mills. To this end, Illovo Sugar SA committed to:
- Develop contiguous areas of tribal land to sugar cane
- Develop and empower previously disadvantaged cane growers and contractors
- Create employment and contribute to development in the rural areas
- Create SMME service providers; and
- Increase cane supply to the Illovo Sugar mills
What was initiated to address this problem?
In partnership with National Treasury through the Jobs Fund, Illovo Sugar SA initiated a project to develop up to 3 000 hectares of small-scale grower cane land around all the areas within which it operates on the KZN South Coast resulting in the creation of 1 188 new jobs and the training of 1 630 people.
What were some of the challenges to be overcome?
- How to introduce economic activity on communal land
- The high cost of entry and lack of suitable, continuous funding
- Lack of grower and service provider capability
How was funding sourced?
Operating under the Department of Trade & Industry, the Jobs Fund was launched in June 2011 and an amount of R9 billion was set aside. The objective of the Jobs Fund is to co-finance projects by public, private and non-governmental organisations that will significantly contribute to job creation. This involves the use of public money to catalyse innovation and investment on behalf of a range of economic stakeholders in activities that contribute directly to enhanced employment creation in South Africa.
In partnership with the Jobs Fund which provided 50% of the R127-million capital, Illovo launched the project to develop 3,000ha of small-scale grower cane land whilst contributing to stimulating activities in deep rural areas, create sustainable employment for black growers and their families, and provide training opportunities for rural households. Illovo put up 15 % of the capital. The remaining 35% was taken as loans by the growers from MAFISA, with Illovo underwriting the debt. The project has created a thriving small-scale growers project on Ngonyama rust land.
Was the project a success?
Illovo’s Small-Scale Grower Cane Development Project is clear validation of the great potential that exists for partnerships between businesses and their host communities on the one hand, and government on the other, to reduce poverty and stimulate economic activity. The collaborative multi-stakeholder approach to bring a local system of innovation to life in just three years has resulted in 1 704 growers being given the opportunity to develop cane on their land.”
What are the outcomes of the project?
The Small-Scale Grower Cane Development Project has created direct jobs in rural communities while implementing socioeconomic and enterprise development initiatives and the transfer of valuable farming and business skills. By leveraging on the built capabilities and securing a spot in the Illovo Sugar value chain, communities will earn upwards of R80-million in income annually. Since the capacity to work the land resides within the communities in the form of the upskilled local contractors, there is a multiplier effect as this new money is spent within the community and is catalytic to broader economic activity.
Purpose of lllovo’s celebratory event
The event is planned to relate Illovo SA’s successes in contributing towards creating thriving rural communities through revealing how the joint programme has and can further act as a blue print for small-scale cane grower development in KZN as well as help other regions and sectors build thriving communities through similarly structured public and private partnerships.
What progress has Illovo made on land redistribution?
To date, Illovo’s own land redistribution initiative has resulted in the sale of 28 086 ha, comprising 55% of its own land portfolio, to black people and resulting in the establishment of more than 50 black commercial farmers.
Cite an example of a successful small-cane grower
Nomanesi Ngcobo took over her late husband’s role and sugarcane that had been planted years before was no longer growing. She said: “The project came at a crucial time for us because the eMalangeni area had run out of sugarcane and many growers were struggling. Sugarcane farming is our bread and butter – it allows us to pay for our children’s education. This has been a life-changing experience and we are so grateful to Illovo Sugar for empowering us and enriching our lives.”View more
Deputy Minister S’dumo Dlamini: Agriculture, Rural Development and Land Reform Dept Budget Vote 2021/22
13 May 2021
Today as we present this budget, we want to pay tribute to all the families who have lost their loved ones as a result of Covid-19 and we also want to salute health workers and people living in rural communities who had to face and fight the Coronavirus under conditions in which there were fewer health resources.
It has been inspiring to observe how despite these challenges, some rural communities have worked in partnership with government, private sector, non-governmental organisations and traditional leaders to spread the correct healthcare-related messages in relation to this pandemic.
This is what rural development should be about. Rural Development is a sustained multi-sectoral participatory process aimed at empowering those residing in the former homeland areas, in farming areas, in defined rural spaces within urban areas and metros, in peri-urban areas, in small rural towns and in villages.
It is about government intervening at all levels to ensure a people-driven and people-centered process of building sustainable communities through agricultural and non-agricultural interventions to achieve productive, healthy, economically vibrant, socially cohesive, equitable and sustainable spaces and livelihoods based on the unique conditions and attributes of the people’s material conditions and self-articulated needs. This is what this budget is about today!
National Integrated Rural Development Strategy
According to Statsa, the provinces with the highest headcount of adult poverty are Limpopo (67,5%), Eastern Cape (67,3%), KwaZulu-Natal (60,7%) and North West (59,6%). For these four provinces, significantly more than half of their population was living in poverty. It also says that almost two-thirds of agricultural households are in KZN (24,4%), EC (20,7%) and Limpopo P (16,3%) combined. It is, for this reason, the implementation of our National Integrated Rural Development Strategy will pay special attention to these provinces without downplaying the required intervention for rural development in other provinces.
This year we will be visiting our provinces not to ask what our people want because they have told us what they want since 1994. We are going there to work with them towards ensuring rural development on their own terms.
As the department, we are currently adopting an intergovernmental approach and we are re-strategising on how to optimally utilise existing government programmes and other funding to unlock economic opportunities in the various rural districts.
We have recently tested this approach when we had an interdepartmental collaborative intervention program in Eastern at Steynsburg and in a few months from now we will be working with young people on the Narysec programme, in ICT projects, work to support cooperatives in various projects which include poultry, piggery, the bakery project, water harvesting and we will be providing sewing machines and agricultural tools and implements including other different forms of support.
The revised National Integrated Rural Development Strategy considers the central thrusts proposed in Chapter 6 of the National Development Plan, which includes the following:
- Capitalising on agriculture as one of the main economic drivers of the rural economy through the Agriculture and Agro-Processing Master Plan (AAMP);
- Making land reform work through improved rural governance systems, improved land administration; land access for further economic opportunities, proper beneficiary selection processes utilising existing rural and farming networks and improvement in the living conditions and rights of farm dwellers and other rural citizens;
- Developing non-agricultural activities with key sectors including technology, mining and tourism;
- Building human capital, social security, food security and basic services;
- Revitalising rural towns; and Improved rural governance.
Part of the practical work we will undertake as part of our Rural Development strategy will include :
- Linking emerging rural producers (especially women and youth) of farm and non-farm products to markets and appropriate value chains through the Agriculture and Agro-Processing Master Plan (AAMP) and the implementation of Farmer Production Support Units;
- Facilitating business development services for rural enterprises through programmes such as the Comprehensive Agricultural Support Programme (CASP); and
- Assisting rural women, people with disabilities and youth through targeted capacity building and enterprise development support and actively promoting a procurement policy that favours women and youth.
In the last financial year, several consultations have taken place within government, through the South African Local Government Association network and via a multi-stakeholder policy platform coordinated by civil society on how to effectively implement these objectives over the MTSF period and beyond in support of Vision 2030.
We have conducted our studies , consulted our people both from inside and outside of government , it is now time for testing our policies and strategies in the court of real life.
Work undertaken in the 2020/2021 Financial year.
1. Farmer Production Support and Rural Infrastructure
Honourable Speaker, in the last financial year we committed to support 15 farmer production support centres with the necessary infrastructure to make them functional. We are pleased to announce that we have supported:
- One project in the Eastern Cape in Zanyokhwe;
- Three in the Free State namely in Odendaalrus, Springfontein and Kroonstad;
- Four in KZN in Pomoroy, Malenge, Mkhuphula and Hluhluwe;
- Two in Limpopo Vleischboom and Masalal, three in Mpumalanga at Sybrandskraal, Mkhuhlu and Kameelrivier;
- one in Taung in the North West and with irrigation infrastructure at Ebenheser in the Western Cape.
- A total of 64 infrastructure projects to support production and other socio-economic infrastructure we implemented.
2. NARYSEC work
The department created 800 rural jobs and provided skills development opportunities to 1 926 NARYSEC Youth through the District Development Model.
3. Flagship socio-economic projects
- One of our flagship socio-economic projects is Die Poort Primary School Development. The programme was aimed at constructing a proper learning facility in the Hekpoort area, Gauteng and was hatched to merge the two primary schools within the area. The learners from the FJ Kloppers Primary School moved to Die Poort Primary Farm School. The Department in collaboration with the Gauteng Department of Education was able to provide 16 classrooms, an administration block, Grade R facility, male and female ablution blocks, a caretaker house and a combination court.
- Another socio-economic project was the construction of houses and basic services using alternative building technology for the relocation of evicted farm dwellers in Donkerhoek, Mpumalanga. This led to the utilisation of off-grid energy solutions and solar geysers, an off-grid sanitation solution, water supply and reticulation as well as a 4km gravel access road.
- The Department in partnership with the Council for Scientific and Industrial Research (CSIR) implemented the Mt Fletcher Spring Water Harvesting, Protection, Development, and Reticulation project between March 2017 and July 2020 in the Fairview villages of the Joe Gqabi District Municipality in the Eastern Cape. Local labourers were also contracted from the three targeted villages in the district and skilled by the service provider. Due to standpipes that are now closer to their homes, women and children do not have to walk far to collect water, which saves time for other activities.
- The department is also contributing towards the implementation of the Presidential Employment Stimulus Initiative (PESI) in which 1434 former NARYSEC youth and agricultural graduates were employed on a three-month contract to assist farmers with applications for the PESI funding as part of the Covid-19 interventions by the department.
Programme for the 2021 /2022 Financial Year
For the 2021/2022 financial year we plan to undertake the following programs :
1. Farmer Production Support Units
- We plan to further support 25 projects that would lead to functional FPSUs. From these functional FPSUs rural households and villages in general will be able to obtain a wide variety of support to improve their productivity including mechanization (tractors), implements, inputs (seeds and fertilizers) and storage facilities etc.
- This includes the renovation of livestock auction facilities at Kwafene in the Thembisile Hani Local Municipality at Nkangala, Mpumalanga province.
2. Rural infrastructure
- We will implement a further 50 infrastructure projects to support production and six socio-economic infrastructure projects continuing from the Die Poort Primary School Development project mentioned above. A total of 500 jobs are projected to be created in such rural development initiatives and this speaks to our revised strategy of optimising intergovernmental resources.
3. Access to reliable and good quality water
- We will continue from where we ended in the Mt Fletcher Spring Water Harvesting, Protection, Development, and Reticulation project and in this financial year there will be an additional 5 innovative technology research projects which will be implemented.
- In the 2021/22 financial year, the National Rural Youth Services Corps (NARYSEC) programme will shift gear to place a greater emphasis on recruiting and skilling youth for workplace opportunities within and outside government, entrepreneurship and further education and skills opportunities as part of a basket of services offered to the youth exiting the programme. This change will position NARYSEC Programme to better contribute in dealing with the challenge of high youth unemployment.
- To this end, the programme has now committed to training 1409 youth across all 9 provinces and budget of R62.4 million has been allocated in this financial year. This youth was recruited during the 2019 and 2020 financial years, but due to Covid-19 the training programmes have been delayed. In addition, the following initiatives are underway:
- 188 NARYSEC youth will be trained as traffic ffficers in Mpumalanga and the Free State respectively. The intention is for the youth to be absorbed by their local municipalities and these municipalities have already signed commitment letters for employment of these youth upon the successful completion of the training;
- 93 NARYSEC youth from EC, GP, NC and WC are currently undergoing training with Clicks Pharmacy Group. These youth have been absorbed by the company which is a successful private-public partnership initiative;
- 98 (73 EC and 25 KZN) youth recruited as part of piloting the District Development Model (DDM) will be trained in Environmental Waste Management Qualification. The King Sabata Dalindyebo District Municipality has provided business opportunities for these youth and they will be absorbed in their waste management unit. The KZN youth will also provide similar services to the eThekwini Municipality. This means that 98 young people from the rural areas will have an opportunity to pursue their small enterprises leading to further socio-economic spin-offs.
5. Presidential stimulus initiative
In contributing to the second phase of the Presidential Stimulus Initiative project the department has extended the contracts of 1209 PESI verifiers for another 12 months (1 April 2021 to 31 March 2022) with a budget of R64 293 072,48 which will go towards paying stipends and allowances.
6. Improving spatial planning in rural areas
Honourable Speaker and members, rural development without ensuring spatial transformation will be equal to maintaining Bantustans and our approach to rural development is linked to ensuring spatial justice.
You are acutely aware that the Department as the custodian of the Spatial Planning and Land Use management Act 16 of 2013 (SPLUMA) has embarked on various programmes, initiatives and activities towards its implementation. Significant progress has been made and the Department continues to support municipalities in undertaking their responsibilities in terms of the Act.
The NSDF is currently being finalised and will be presented to Cabinet for consideration in the first half of the year. The current Medium-Term Strategic Framework emphasises the need for spatial integration through Priority 5 focussing on Spatial Integration.
To address the Spatial inefficiencies and to promote Spatial Transformation, the Department, in partnership with the Department of Planning, Monitoring and Evaluation, had developed the Draft National Spatial Development Framework (NSDF) which has gone through the extensive consultation as per the requirements of the National Development Plan and the SPLUMA.
The Draft National Spatial Development Framework National Spatial Development Framework ( NSDF) has provided a national spatial schema to inform, direct, prioritize and guide all future infrastructure investment and development spending decisions by government, civil society and the private sector; to optimise place-based potentials and spatial interdependencies, and to realize the 2050-National Spatial Development Framework Vision.
Spatial planning remains key in guiding Departmental programmes and to further ensure that these are integrated into municipal Integrated Development Plans and the One Plan process as an outcome of the District Development Model approach being implemented by government.
Initiatives of spatial planning support for land reform include amongst others the implementation of a Strategically Located Land tool which encompasses a myriad of existing spatial planning tools and systems that assist the Department in identifying where Land Reform initiatives should be targeted.
The Department is also on a clear path to improve the quality of life and economic well-being of communities living in rural areas.
Employing a broad array of geospatial data provided for through the implementation of the Spatial Data Infrastructure Act, the department is performing innovative geospatial analysis, simulation and modelling to formulate spatially balanced and eﬃcient rural development plans that contribute towards accomplishing a low carbon and climate-resilient rural economy.
In consultation with Department of Forestry, Fisheries and the Environment, the department is also compiling Climate Change Response Plans for the Agriculture, Land Reform and Rural Development sector.
We want to take this opportunity to announce to our people in the rural areas that this department cares for you. We want to see and hear every village and every rural community including everyone in South Africa talking about rural development. The real test will be in what we do to transform the rural economy and build sustainable rural communities.
Courtesy: www.gov.zaView more
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Mining at the crossroads: developing a road map aimed at achieving sustainable development outcomes
It’s been 152 years since diamonds were discovered on the Orange River and 133 years since gold was struck on the Witwatersrand, but the mining industry continues to make a significant contribution to the national fiscus. What’s different now is that mining – done right – is also pivotal to the sustainability of many communities and many regional economies across the country. That’s right – as the 21st century moves into its third decade, mining has taken the sustainability bit firmly between its teeth.
The big picture of the new mining – as well as the contours of the challenges it faces – was shared by AngloGold CEO Mark Cutifani at the Joburg Indaba in October this year. “We need to think differently about mining if it’s going to achieve its full potential of being a cornerstone of uplifting South African society in a broader sense. We can only do this by creating a paradigm where mining shifts from merely sharing value to helping create enduring value for all – value as our stakeholders see the value, not as we perceive they should see the value. The difference lies in seeing how the value we create stands the test of time, not just in the short term.”
Whereas life-of-mine seems long, at anything from five to 100 years, life-of-community is much longer – 100 years is just the beginning. A key question then becomes how mines today can help create a very different life in a community.
The creation of enduring value entails three immediate tasks:
“We need to work to focus on creating an enabling environment for investment in the sector.”
“We need to embrace modern mining with all the opportunities it brings, with open eyes and understanding of unintended consequences, because we have to manage both sides of that equation. We need to find compromises and solutions to navigate a transition that is consistent with our current social and financial complexities.”
Although “mining has been a cash-starved industry for most of a decade”, South Africa’s geological endowment means there is no shortage of opportunity: We have the resources – the question is what can we do with people, communities and government to turn resources into reserves. We have to be the best of the best and engage in the tough conversations that need to be had to create the best mining industry in the world.
“The Minerals Council of South Africa is now of the view that even in the absence of greenfields exploration, mining investment could almost double in the next four years if the country was to return to the top quartile of the most attractive mining investment destinations,” adds Cutifani.
This resurgence can only happen if the critical foundations are right. A stable, investor-friendly political climate, long-term regulatory clarity and, above all, “an aligned voice” on the part of all stakeholders to promote the South African mining industry.
“Modern mining is an opportunity for South Africa to regain its competitive edge and put itself at the vanguard of the mining industry across the globe. This demands a fundamental remodelling of the South African mining sector so that it embraces new technology and new skills in a globally competitive manner,” Cutifani concludes.
Social license to operate
Perhaps the most important of the “compromises and solutions” that Cutifani alludes to is the achievement of a social license to operate. This is what will make the difference between the all-too-familiar low-road scenario where communities near mines experience degraded soil, polluted water, broken communities, unemployment and disease, and that high-road where value is created for all.
Mpho Ndaba, Chief: External Affairs at Vedanta Zinc International, comments:
“The high road is based on effective stakeholder participation in the development planning process of community development programs. The mine, government and the community must collaborate towards developing a road map aimed at achieving sustainable development outcomes linked to the mining project.
“An additional critical ingredient in achieving positive social outcomes is for regulatory bodies to collaborate with investors to ensure capital markets thrive to guarantee future investment flows into our communities as an assurance for the realisation of commercial ventures, which will contribute towards localised socio-economic and employment multipliers.”
Remi Piet, senior director at Americas Market Intelligence (AMI) and co-leader of the firm’s Natural Resources and Infrastructure Practice, says:
“Mining is the only sector that is able to create conditions of development in rural areas provided that the projects are well designed. In Africa and South America, one of the key problems is migration to huge urban centres where rural people live dead-end lives of poverty.
“Mining companies have to work where the minerals are, so it is in the best interests of the mining sector and communities to generate long-term investment in those areas. It’s a boots-on-the-ground sector where you have to invest for the next 10, 15 years. Social, politic and economic conditions tend to force stakeholders to work together. Without security around the site, for instance, there is a low capacity for projects to succeed.
“The only possibility for mining companies to succeed is to gain a social license to operate. Through stakeholder mapping and understanding the unique linkages between actors, mining companies can actually build alliances – not only to gain short-term support but to really turn communities into partners for local sustainable economic development. If well-mentored, communities can participate in economic development and environmental maintenance activities.”
Significance of sustainability
The consensus is emerging that sustainability is critical for mining to remain viable, and this means co-creating a shared vision of value creation with local communities. Ndaba puts it succinctly: “There is increasing understanding and acceptance that long-term sustainable success is premised on addressing urgent local development challenges, which include climate change, disease and poverty. The International Finance Corporation’s (IFC) recent performance evaluation of its equity portfolio in emerging markets confidently illustrates the correlation of a company’s positive community and environmental contribution with positive financial performance.
“A mining company is expected to directly consult with its immediate community and devise a plan on how it will meet the community’s expectations. Once a community’s expectations plan has been devised and agreed upon, the mining company is expected to live up to its commitment and the expectations of the community.
Social due diligence
“To fully comprehend the community’s requirements a Social Due Diligence (SDD) needs to be conducted successfully before and continuously during the life of a mine to ensure uninterrupted and successful business practise.
“The SDD should be premised on micro-level details as opposed to a higher level approach and a need for mining companies to get a better understanding of the local environment; to ensure the fair and transparent sharing of the Mine’s benefits with the local population; to have a clear understanding of land rights; to understand competing interests between illegal and artisanal miners; to be aware of the potential environmental impacts which may emanate from the mining project and to safeguard the mining company’s reputation from other communities where it also has operations.”
Piet comments, “One flaw for many mining companies is the pressure to meet deadlines. This can cause them to underrate the importance of understanding the community. This calls for an approach that draws on the social and environmental sciences in addition to the traditional geology. Geologists are not well equipped to understand the various relationships at the community and regional levels. To date, companies have tended to focus on partnering and establishing key relationships with Government. Depending on the country, this can be a limiting factor. Basically, companies need to do a better job of understanding key stakeholders at a regional level and the linkages between them. This requires a specialised and well-trained approach at the community level. It is not enough to rely on local third parties or brute force.
“In this perspective, Africa is five to 10 years behind South America. Mining companies are pursuing what they see as their rights granted at the national level, but this doesn’t work anymore because now we have communities that have acquired a voice. A lot of community leaders have access to cellphones and there is an active NGO network against the well-documented illegitimate use of force.”
Increasingly, due diligence is extending to questions of transparency and traceability. Piet comments, “We work on value chains not only from extraction to processing of minerals to end recycling but also the value chain from the supply aspect. When you open a mine, you have to work with subcontractors on everything from transport to catering. Looking at a way to operate with transparent bidding and procurement selection of suppliers actually infuses best practices in the selection of suppliers. Not only does this set a standard for your suppliers to adhere to, but by practising transparency, you are showing that you will not be drawn into corruption or political patronage networks.”
Regarding the scourge of conflict minerals. Piet comments: “Currently in development is a series of traceability measures to quickly assess where minerals come from so that conflict minerals cannot be included in exports. A pilot project involving the Foundation for Community Development and Empowerment (FCDE) and a series of NGOs is currently underway. The major impact is expected in five to 10 years. Mining companies will have to invest in technology to show traceability. The question is how to ensure this level of technology becomes mainstream throughout the sector. In Switzerland, there is already a clear legal framework that will force the sector to set standards itself. These standards won’t be adopted by the entire industry overnight, but step-by-step malpractices such as smuggling conflict minerals will incur serious legal penalties as well as massive reputational damage.
“State actors will be responsible for providing guidelines for mining companies to follow and enforcing sanctions appropriately. This will send a strong signal to mining companies to follow a formal path for the exploitation of minerals. We are seeing strong traction for this within the sector because, very importantly, the various financial institutions are in turn sending a very clear signal that mining companies will need to adopt a more sustainable approach to secure investment.”
Clarifying the waters
Mining has frequently and justly been fingered as a major environmental villain. In South Africa especially, mining is seen as competing with agriculture for land. Additionally, mining is held responsible for large-scale water pollution from abandoned and derelict mines, active mines (underground and surface mining operations), mineral processing facilities, haulage roads, tailings and mine waste disposal facilities. However, the potential exists to turn this around, and some leading companies have already implemented promising measures.
Piet comments, “The mining sector has the capacity to address areas of strong environmental concern. The tailings dam disaster in Brazil springs to mind. It is therefore important to encourage companies to continue increasing the quality of their environmental policy. That is an area where we have seen improvement over the last decade. Look at different types of mining, some companies, especially the big majors, are able to set best practices at early development phases.”
Ndaba elaborates: “Mining and agriculture are mutually dependent sectors and both utilise extensive amounts of our limited water supply. In the South Africa context, mining operations are not a significant user of water when compared to other uses such as irrigation which accounts for approximately 60%, livestock watering and nature conservation 24%, municipal domestic (urban) water use accounts for 24%, while municipal domestic (rural) water use accounts for 3%, mining accounts for only 2.5% water use, while bulk industrial water use makes up 3%, power generation accounts for 2% and afforestation makes use of 3% of overall water available for industrial application.
Mining industry stakeholders are constantly working towards finding the optimum and cost-effective water treatment technology. The South African Government has conducted several feasibility studies to find the most sustainable solution. The Government has considered physical treatment, chemical, biological and passive acid mine water treatment options. The results of their assessment illustrate the following as the most viable options:
- Reverse Osmosis (RO) for desalination (physical treatment),
- High-density Sludge (HDS) for neutralisation and metal removal (chemical treatment) as a short-term intervention and it is being implemented in the Witwatersrand to deal with acid mine drainage; and
- Ion Exchange (IX) for uranium removal (physical-chemical treatment) if required.”
Ndaba continues: “There’s a need for a strong commitment in the employment of biodiversity offsetting with specific emphasis on aquatic ecosystem restoration in all mining operations as a strategy to compensate for the negative residual impacts of mine development on biodiversity.
This will require constant monitoring of contaminated aquatic ecosystems to enable early detection of fine sediments and heavy metals. The Government needs to develop a framework that will enable it to collaborate with the mining industry to periodically evaluate aquatic ecosystem metal pollution and the employment of mitigation measures.
“Our company recycles and reuses water. We are committed to zero discharge. Our tailings dam located 3.2km from plant to store 3.55 mtpa of tails and has HDPE liner as per environmental regulations.”
Work the land together
With regard to mining and agriculture, Ndaba highlights several complementary areas between the two sectors. Notably, agriculture relies heavily on mining in that modern farming machinery and other products are derived from the beneficiation of minerals into finished products. Moreover, certain minerals are incorporated into fertilisers that include Lime Ammonium Nitrate (LAN), a formula used to grow and increase plant yield. Further, the mineral vermiculite is used to improve soil drainage, aeration and water retention, to the benefit of water-loving plants. This, in turn, enables rapid germination of seeds. Ndaba explains further:
“The mining project also provides a readily established large market for farmers to supply their produce. Mines also own large tracts of arable land and can utilise this land for the development of alternative employment opportunities as part of their Local Economic Development (LED) legislated Social and Labour Plan (SLP) projects. These projects should be commercial agricultural projects with the primary aim of replicating the local mining sectors economic and employment multipliers. Western Australia’s (WA) mining companies are displaying this awareness successfully.
“In the Pilbara, WA Citic Pacific Mining Sino Iron project operates one of the largest magnetite mining and processing operations which include downstream processing, consisting of six production lines. The company has a land lease in the Pilbara consisting of a free-range beef production operation, with over 8 000 head of selectively bred cattle in collaboration with the local population.”
“Rio Tinto is not only the world’s largest iron ore miner; in the Pilbara region, it also operates a land lease over 1 500 000 hectares of land. Five of the leases are managed by the miner managing an estimate of 24 000 head of cattle. Water from the mining dewatering process is being utilised for crop irrigation producing over 25 000 tonnes of hay averaging eight cuts per year, a good way to dispose of clean water from the mine dewatering process. The hay is used in cattle operations with the surplus sold to local farmers and to the Middle East.”
Ndaba calls for mines to “start seeing the co-existence of agriculture and mining as a profitable business opportunity to farm large open tract of non-mining or reclaimed land as an activity that can stimulate local employment, diversify the local economy, ensure the mine is not the only source of employment and to ensure a viable agriculture economy that can sustain the local economy beyond the life of the mine.”
In this regard, he says, the following aspects should be considered:
- Continued investment in Research and Development targeted at advancing knowledge of ecological reactions to heavy metals
- Recycling and reusing water
- The mining company using its capabilities to identify local, regional, national and international agricultural markets to assist with securing farming contracts and accessing of supply chains.
- Agribusiness training to be offered to mineworkers and mine community members as part of the SLP downscaling and retrenchment training programs.
- The mining company to use its capabilities to secure funding, to secure working capital to fund early-stage agribusiness enterprises along with making use of the funds already budgeted for the SLP
- Making available relevant mining company infrastructure that can be altered to agriculture needs such as packing and storage facilities
- Allow the agriculture project to make use of the mining transport and logistics infrastructure where feasible.
Looking to the future, Ndaba calls for the increased use of results-based Monitoring and Evaluation (M&E) techniques in the planning and execution of development projects. “This is important for operational and learning purposes and can easily be applied to socio-economic projects agreed by the mine and the community. The importance of M&E lies in its ability to track progress against targets and budgets, assists in the optimal allocation of resources for effective and efficient implementation of endeavours.”
For Piet, due diligence in pursuit of good social, environmental and governance practices will become increasingly important to the financial sustainability of mining companies. This means that managers will have to take due diligence more seriously than ever before. Piet comments:
“We do a lot of on-the-ground due diligence, discussing issues with different communities and connecting with investigative journalists. The problem is not obtaining information so much as relaying the information to the ears of investors and the company head office. Company managers tend to limit the amount of information in circulation in order to exercise damage control. However, due to the pressure from financiers, some mining companies are now hiring us directly to do due diligence. Further, because due diligence costs are often passed to sponsors, junior miners, especially, come under pressure to hire the correct expertise to do their due diligence. It is becoming much harder for a junior minter looking for social investment to get away with a watered-down report on risks and issues – if they are serious about attracting big finance, then they have to go through a reputable monitoring company.”
“Although mining has been a cash-starved industry for most of a decade, South Africa’s geological endowment means there is no shortage of opportunity.”