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Social Investment in Mining

Edited By Lulama Afrika

Rohitesh Dhawan suggests, in the report “Getting more out of social investment in the mining sector”, that mining companies are finding it difficult to quantify their mandated social investments. Vast sums of money are being put into infrastructure, education and training, healthcare, sports and recreation, but the mining companies are struggling to demon- strate the effectiveness of their expenditure. Social investment plans are integral to being granted mining rights, but are they achieving what they set out to? Quantity over quality could be to blame. With 52 different types of investment programmes available to the mining industry, there could be a lack of focus on priority sectors.

A recent KPMG survey suggests that many organisations struggle to demonstrate the effectiveness of their social investment expenditure. In 2013, the 10 metals, mining and engineering companies in the study had combined social investments of 1.2-billion US dollars. Although they all quantified the inputs and outputs, these were primarily in terms of volume, namely the financial contri- butions made and the number of participants in a programme. But only one of the 10 reported any quantified outcomes, suggest- ing a lack of debate over the true impact of programmes, both internally and with the communities they are serving.

The strategy in social investment

Despite growing pressure for better reporting, few mining companies publish a detailed social investment strategy. In South Africa, businesses must have a Social and Ethics Board sub-committee to govern their social investments.

For operational managers, the task of choosing a programme can be daunting. Mines are incredibly complex operations, spread across wide geographical areas. Unless a detailed business plan is in place, their money is at risk of disappearing into the black hole of “charitable donations” under the broad categories of health and safety, social welfare, education and sustainability. These investments are valuable, but rarely take into account the specific needs of the community and so it can be difficult to quantify what is actually being achieved by the investment.

Mining companies need to find a balance between the glamour events, such as school, hospital and road openings, and the practical options, such as teacher training or safe sex education. Cutting ribbons can make a big impression on the community, but doesn’t always bring the best return on capital. Training and education can potentially have a greater, long term, positive effect, but are a less obvious boost to the company’s short-term reputation than an event.

Those responsible for allocating social investment budgets need to exert a stronger influence over the organisations involved in prioritising programmes, by engaging earlier with local economic development forums and other groups, and resisting demands for vanity projects. This closer working relationship will also ensure that authorities are aware of the value being added by the social investments of the business, without them having to create awareness around this through active PR activities.

According to Dhawan, once programmes have begun, they tend to suffer from a lack of professional performance management, with ill-defined outcomes and measure- ments, and inadequate data reporting. The personnel assigned to run the initiatives may not always have the technical skills and capacity to carry out the required level of financial and operational analysis and moni- toring commensurate with a major project. With rewards often linked to activity rather than outcomes, project teams lose sight of the true project goals.

Unlocking value

Beginning at board level, the social investment strategy has to be aligned
with local development plans as well as wider business goals, and designed to produce the maximum benefit to the target groups and the mining organisation.

Considerable research and discussions are required to uncover the optimum choices for social investment. For example, investment in local farm sourcing can cut the cost of food, resulting in a healthier, more energetic workforce, while education and counselling on alcohol and drug abuse could reduce absenteeism. It is equally important to play

a long game, avoiding quick wins in favour of deeper partnerships with the community, local businesses, non-governmental organisations (NGOs) and government.

But how do you measure something
like employee self-esteem? Sophisticated tools are available to quantify and monitor the economic and business value of social, behavioural, health, environmental and infrastructure improvements. Sometimes it comes down to a manager’s assessment
of an employee on a scale of one to 10. Patience is also needed, as some benefits can take years to materialise. An early years’ education programme will not lead to over- night change. Over time it could produce an increase in literacy, which in turn generates a long-term increase in employment rates and reduced poverty. This is why it is so important to manage the expectations of
all stakeholders, including local authorities, effectively, in order to create a realistic idea of timeframes and outcomes.

Finally, it is important to communicate the concept and the results of shared value
to the board, investors and stakeholders, including project partners, using a combination of quantitative and qualitative information to tell the story. At a macro level, all parties will want to see how any achievements are improving the local economy and environment. By treating social investment like any other commercial initiative, companies can demonstrate the return for every rand spent, identify under-performing programmes and reinforce relationships with community stakeholders and partner organisations.

For mining and other industries, creating value for society must be a top strategic priority—whether it is seen as simply a cost of doing business or by looking at it as an opportunity for growth. Simply investing more money, or outsourcing it to someone else, is not the answer. Leaders need to be personally invested in seeing the business create value for communities and apply the same rigour to these investments as one would to “mainstream” investments.

Source: Green Economy Journal 


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