Transformation Trust

Recent Mining Charter developments

The Incoming Mining Charter III, which is still being negotiated, remains topical yet, once finalised, it may address the prolonged regulatory uncertainty in South Africa’s mining industry

OWNERSHIP

Pan African Resources has successfully concluded restructuring agreements, replacing the current BEE equity shareholdings in the company held via interests in Concrete Rose Proprietary Limited (Concrete Rose) with BEE shareholdings in SA Holdco, a subsidiary of the company. SA Holdco will house all Pan African Resources’ South African mining operations, following implementation of the transaction. Where the previous BEE ownership structure terminates during December 2018, the new BEE structure will only terminate on
31 December 2021, which is a three-year extension of the term of the original BEE transaction.
The rationale and benefits of the transaction are as follows:
• Extension of the BEE ownership structure for a three-year period with limited IFRS charges, due to the extended structure terms, to the group
• The transaction provides flexibility to further restructure the BEE ownership of the South African operations, dependent on the outcome of the proposed third South African Mining Charter and other relevant regulations
• The transaction will avoid BEE ownership dilution, should Pan African Resources raise equity capital in the future
• The transaction will have limited dilution of group earnings.

Following implementation of the transaction, Pan African Resources’ BEE ownership is calculated at 26%, comprising 21% in SA Holdco and 5% from its on-mine employee ownership schemes.
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EMPLOYEE SHARE OWNERSHIP PROGRAMMES

The group’s employee share ownership programmes at our gold operations 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. Details of each operation’s share ownership programme are included in the additional sustainability information online.

OPERATIONAL OWNERSHIP

Share ownership programmes at Barberton Mines and Evander Mines are in place and distributing dividends to employees. Employees, through an employee ownership trust, effectively own 5% of the issued share capital of the gold mining operations. A portion of the dividends disbursed is retained to repay the notional financing structure. 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 26% by combining the Pan African Resources’ BEE ownership and the employee share ownership programme per operation respectively.

MANAGEMENT AND CONTROL

The board has set the following target for its non-executive director representation:
• 25% female
• 40% historically disadvantaged South Africans (HDSA).
Our board includes one black male and one female board director, as at 30 June 2018. The board is currently in the process of interviewing possible candidates to enhance the skills and experience of the board and to improve board representation. The group has also approved a diversity policy to promote race and gender diversity at board level.

EMPLOYMENT EQUITY

Historically disadvantaged South Africans
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.
Pan African Resources strives to ensure it has a workforce that is representative of the South African demographics.

PREFERENTIAL PROCUREMENT

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 strives to ensure 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. Tender processes are governed by a tender committee at each operation to ensure Pan African Resources and its operations comply fully with all relevant regulations, including the UK Bribery Act 2010.
Contract management
The group’s procurement process is decentralised to operations, however, high-value contracts and the procurement of goods and services common to all operations are negotiated and/or overseen by head office.
Transformation trusts
Wherever possible, the group promotes responsible and ethical supply chain management by encouraging suppliers to support local economic development. Transformation trusts for Barberton Mines and Evander Mines generate additional funds to invest back into the community by encouraging their suppliers to contribute 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 R1.2 million (2017: R1.5 million) was collected from suppliers on behalf of Barberton Mines’ Transformation Trust (BMTT) during the 2018 financial year. The EMTT has collected R0.06 million from suppliers during the 2018 financial year, with
an additional R4.7 million collected from suppliers involved in the construction of Elikhulu, to be used for local economic development projects.

HOUSING AND LIVING CONDITIONS

In line with the Mining Charter’s requirements, the gold mining operations continue to invest in upgrading and converting old hostels into single and family accommodation units at Barberton Mines and Evander Mines, respectively. Employees who do not live in company accommodation receive a housing allowance.