Black economic empowerment initiatives in South Africa

The blueprint for the transformation of the mining industry in South Africa is set out in the Mining Charter, published by the South African Government in 2002. The charter's stated goal is "to create an industry that will proudly reflect its promise of a non-racial South Africa". Transformation describes the ongoing process to develop a sustainable, equitable society and economy in South Africa and, as one of the nation's major sectors, the mining industry has a leading role to play in this transformation.

Xstrata's Transformation Committee, chaired by CEO Mick Davis and founded in 2004, seeks to ensure Xstrata's South African business transforms in line with the spirit of the Mining Charter and Minerals and Petroleum Resources Development Act, and where possible, in advance of legislative requirements. Our aim is to be at the forefront of securing broad-based black economic participation and involvement in our industry.

Samuel Mahlangu, participant in Xstrata Coal's commercial farming project, South Africa

Samuel Mahlangu, participant in Xstrata Coal's commercial farming project, South Africa

Sibongile Mokwana, student at Xstrata Coal's basic adult education and training centre

Sibongile Mokwana, student at Xstrata Coal's basic adult education and training centre

HDSA ownership and participation

The Mining Charter sets out the aim for each mining company to achieve 26% Historically Disadvantaged South Africans (HDSA) participation in its business by 2009.

In 2004, Xstrata Alloys established a pooling and sharing venture with Merafe Resources, a black-owned and controlled company. Merafe currently has a 17% participation in the venture; this interest will increase to 20.5% from 1 July 2006 and the venture is on track to satisfy the 26% participation required by the Mining Charter before the stipulated deadline.

In 2005, Xstrata Alloys and Anglo Platinum formed a 50/50 joint venture to develop a platinum group metals mine and concentrator on the Eastern Limb of the Bushveld Complex in Mpumalanga Province. In February 2006, Xstrata Alloys formed a black economic empowerment (BEE) partnership with Kagiso Trust Investments whereby Kagiso will acquire 26% of Xstrata's 50% share in the project. The agreement introduces meaningful black ownership of, and management participation in, Xstrata's share of the Mototolo Joint Venture.

In February 2006, Xstrata Coal signed an agreement with African Rainbow Minerals Limited to establish a new black-controlled company, ARM Coal, to be 51% owned by ARM and 49% by Xstrata. This will provide ARM Coal with an effective interest in Xstrata's South African coal business of more than 26%. To enhance ARM's participation in the South African coal industry, we have also agreed to grant ARM an option to increase its participation in Xstrata's South African coal business by up to a further 10%, resulting in total HDSA control of 36% of Xstrata's South African coal business.

Negotiations are currently being advanced to secure broad-based HDSA participation in Xstrata Alloys' Rhovan vanadium operation and are expected to conclude in the second half of 2006.

Employment Equity (EE)

The charter prescribes that HDSAs should constitute 40% of management positions in mining companies by 2009.

At the end of 2005, HDSAs represented 26% of all management positions at Xstrata's South African operations, a rise from around 20% at the end of 2004. Equity targets have been set and are monitored on a monthly basis. Our target is to increase this proportion to 45% by the end of 2007, well in advance of the 2009 target set out by the Mining Charter. Managerial positions held by HDSAs include senior supervisor, head of department, specialist manager, senior specialist, director and general manager. During the year, Xstrata Coal appointed its first black general manager and held a transformation Indaba (conference) to discuss the Mining Charter's workforce diversity targets.

The Mining Charter requires that women should account for 10% of our South African workforce by 2007. At the end of 2005, women represented 8% of the South African workforce, and 9% of management positions.

BEE procurement

The Mining Charter stipulates that procurement expenditure from BEE companies should be progressively increased and reported and defines procurement in three categories: capital goods; services; and consumables.

Wherever possible, we give HDSA-owned or controlled supply companies a preferred supplier status in all three categories. In order to promote the number and capability of HDSA suppliers, we provide various types of support for HDSA suppliers, including management training, transfer of technology and other forms of expertise where appropriate.

At the end of 2005, 42% of Xstrata Alloys' discretionary expenditure (including Merafe through the Xstrata-Merafe Chrome Venture) was from BEE-owned or controlled suppliers (or 40% on a standalone basis), while 32% of Xstrata Coal's discretionary expenditure was from BEE suppliers. These results mark an improvement over the previous year, in which Xstrata's total discretionary expenditure from BEE suppliers represented 29% of the total. This was driven, in particular, by the adoption of a procure-to-pay procedure and policy by Xstrata Alloys and its BEE partner Merafe Resources to:

  • set a framework that will assist in our compliance with the targets set by our HSEC and BEE policies;
  • set a minimum policy standard that will allow our operations to strengthen existing management procedures or assist with the development of improved procedures; and
  • preserve the principles of good corporate governance.
Matthews Ramerula, Joel Chauke, Abihaar Magodielo and Alfred Makgetle at Boshoek ferrochrome smelter

Matthews Ramerula, Joel Chauke, Abihaar Magodielo and Alfred Makgetle at Boshoek ferrochrome smelter

Workers at a walnut, grapevine, peach, olive and quince orchard in Belén, Argentina, which has benefited from enterprise development projects supported by Minera Alumbrera

Workers at a walnut, grapevine, peach, olive and quince orchard in Belén, Argentina, which has benefited from enterprise development projects supported by Minera Alumbrera

Human resource development and education

Xstrata is committed to ensuring every employee has the opportunity to become literate and numerate, and extends facilities to community members. We develop defined training and career paths for HDSA employees. Xstrata also plays a leadership role in making education available to the broader South African community and we support education at every level.

Seventy-one per cent of our employees are functionally literate and numerate and all employees have the opportunity to attend adult basic education and training. Xstrata Coal's Group Training Centre in Witbank is used by the various divisions. In addition, computer training is provided for employees and community members, with 102 community members enrolled at the end of 2005 and a further 120 who have completed training. Secretarial learnerships are provided for community members through an in-house development programme.

A community Adult Basic Education and Training (ABET) and skills centre in Kwa Guqa, Witbank, will be opened in the second half of 2006 to offer skills training to unemployed people as well as our employees. This learning and trade centre was developed in conjunction with the Emlalahleni Local Council.

To enable existing employees to progress into management positions, career path flow charts and individual career paths have been developed and skills matrices are completed to ensure any gaps are addressed. High potential employees are identified and 'fast tracked', including 25 Xstrata Coal employees for whom individual career development plans were developed and 89 Xstrata Alloys employees. To encourage women to join the mining industry, Xstrata has a Sustained Gender Specific Recruitment Programme in South Africa and has made a number of bursaries available to female applicants.

Overseas placements and training programmes are provided for HDSA employees including technical visits and experiential training elsewhere within the Xstrata Group.

In 2005, Xstrata invested ZAR25.8 million in education programmes in South Africa, to support education at the primary, secondary and tertiary levels, as set out in the Apprenticeships, tertiary education, bursaries and scholarships section.

Housing and living conditions

We aim to ensure that all Xstrata South Africa's employees have the opportunity to live with their families in a normalised and sustainable social environment and to participate in wealth accumulation through the ownership of property.

Xstrata aims to eradicate all single sex hostels for employees. In 2005 we had one hostel remaining at a coal operation, which houses around 169 employees, mainly migrant workers, who are not permitted to settle in South Africa. Housing loans and education materials about the benefits of property ownership are made available and we encourage all employees to leave hostels and take up our funding offers wherever possible.

Migrant labour

Xstrata's global policies and procedures comply with national treaties and agreements on migrant labour. Our policies and procedures target the fair and equitable treatment of all employees, regardless of their place of birth.

An Alexander Forbes audit in 2003 confirmed that there is no discrepancy between the rates of pay we offer local or migrant workers in South Africa.