Transformation Trust

Recent Mining Charter developments

An important development was the gazetting of the revised Mining Charter by the Mineral Resources Minister in June 2017, amid controversies surrounding the lack of consultation between the government and other stakeholders, including labour and the mining industry, as well as concerns about specific impositions in this new charter. The revised Mining Charter announced in June 2017 was subsequently suspended in July 2017, and is the subject of discussions by the respective industry stakeholders. Pan African Resources is supportive of a constructive engagement that results in a Mining Charter geared to revitalise the mining industry, support job creation and create much-needed economic growth. While we closely monitor developments regarding the revised Mining Charter, we are proud of the progress made in transformation during the past years, which includes our involvement in the communities within which we operate and the establishment of employee ownership structures at all our gold operations.

Pan African Resources acknowledges that integrating genuine transformation is critical for the sustainability of its business in South Africa. We are committed to integrating real transformation throughout the group, under the auspices of the MPRDA, Mining Charter and SLPs. The group does not currently rank its B-BBEE contribution at group level, but per operation. Current contributions are rated as per the Mining Charter requirements. Oversight of progress against transformation targets is monitored by the SHEQC committee.

OWNERSHIP

Pan African Resources strategic BEE partner Shanduka Gold (subsequently renamed PAR Gold) holds 19.53% of Pan African Resources’ shares. By applying provisions of the MPRDA and Mining Charter to the Pan African Resources’ share register and including all qualifying BEE shareholders and discounting shareholders who qualify as organs of state and public entities, we calculate as at

30 June 2017 that this equates to an effective 24.2% BEE ownership at a holding company level for purposes of the MPRDA.

EMPLOYEE SHARE OWNERSHIP PROGRAMMES

The group’s employee share ownership programmes aim to align the aspirations of employees, management and shareholders. Value is created for beneficiaries based on the profitability of each operation’s performance. If these operations declare regular dividends, beneficiaries will receive dividends from the scheme from year one.

OPERATIONAL OWNERSHIP

Share ownership programmes at Barberton Mines and Evander Mines are in place and paying dividends to employees. Employees effectively own 5% of the issued share capital of the gold mining operations.

A portion of dividends issued is retained to repay the notional financing. The portion retained ranges from 50% to 80% over the period of the scheme. The total BEE ownership of Barberton Mines and Evander Mines equates to approximately 26% by combining the Pan African Resources BEE ownership and the employee share ownership programme per operation respectively.

MANAGEMENT AND CONTROL

Our board includes one black male board director as at 30 June 2017. The group has approved a diversity policy to promote race and gender diversity at a board level.

EMPLOYMENT EQUITY

Historically disadvantaged South Africans (HDSAs)

The Mining Charter requires that 40% of specialised functions be filled by HDSAs. Our operations made progress in achieving this goal, especially at management level.

Supply chain management

Our primary procurement objective is to control costs, initiate savings and manage inventory across operations through centralised sourcing. In addition, we are committed to increasing spend from black-owned and black women-owned businesses. We are always looking to uplift the communities where we operate through proactive projects and strategic sourcing.

The table below shows the allocation of procurement spend according to the Mining Charter targets for the group’s gold and platinum operations.

 

Procurement governance

Pan African Resources’ procurement governance process ensures maximum efficiency and ethical conduct when procuring goods and services within operations. A group procurement policy is in place, and relevant employees at each operation are trained in its procedures and practices. The tender process is governed by a tender committee at each operation to ensure Pan African Resources and its operations comply fully with all relevant regulation, including the UK Bribery Act 2010. Monthly procurement reports are sent to the corporate office for oversight.

 

Centralised contracts

The group has a procurement plan for its high-value commodities to meet the procurement objectives mentioned above.

 

Transformation trusts

Wherever possible, the group promotes responsible and ethical supply-chain management by encouraging suppliers to support socio-economic development. Transformation trusts for Barberton Mines and Evander Mines generate additional funds to invest back into the community through encouraging its suppliers to contribute up to 1% of their contract value to these trusts. The objective of these trusts is to improve the quality of life of the local community, create jobs and promote socio-economic development. A total of ZAR1.5 million (2016: ZAR1.2 million) was collected from suppliers on behalf of Barberton Mines Transformation Trust (BMTT) during the 2017 financial year. The Evander Mines Transformation Trust (EMMT) has collected ZAR0.5 million from suppliers since inception in 2016, with an additional 0.5% contribution committed from suppliers involved in the construction of the Elikhulu Project, which is estimated at approximately ZAR7 million, to be used for local economic development projects.

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