Mining sector’s winter of turmoil

Mining sector’s winter of turmoil

MASERU – LESOTHO’s mining industry faces a long winter of turmoil amid fears that political hawks are circling to take over mines.
The political hawks are alleged to be instigating communities to pile pressure on the mines with a battery of demands, some of which are not within the mines’ control.
The involvement of lobby groups fanning the fires have not helped matters.

Mine officials who spoke to thepost this week said they see a storm on the horizon as communities that seem to have the backing of politicians clamour for more goodies from the companies.
“We are preparing ourselves for trouble. It doesn’t look good at all,” said a senior official with one of the mines.
Another said: “There seems to be a broader game plan to cause trouble for the mines.”

Across the mining sector companies are bracing themselves for what executives call “politically instigated disturbances”.
Kao Mine, which has borne the brunt of most of the violent disturbances in recent months, has alleged that some ministers working hand-in-glove with some investors want to muscle their way into the lucrative mining sector.

thepost has not independently verified these allegations but has launched an investigation.
In February a protest by a community around the mine left one person dead and two critically injured after a mob allegedly clashed with the police.
In April some disgruntled workers and community members sabotaged the mine’s water supply, bringing operations to a standstill for two days.
The mine says it has reported the culprits to the police but nothing seems to have happened.

thepost is investigating allegations that some politicians have shackled the police on the matter.
The company says it has not refused to discuss matters with the community but it sees a hidden political agenda in the skirmishes and alleges that it is being hit by acts of sabotage which the police are not doing anything to stop despite being given the list of suspects.

The community accuses the mine of not hiring from the area and failing to implement development projects to empower the locals and make their lives easier.
Kao Mine however says while it admits that there are some issues to be addressed it has built roads, schools, toilets, improved water supply to the village and compensated villagers for their crops. It also says it has built more than 200 houses for employees and hired locals.

The disturbances have imperilled the 600 jobs at the mine, the company says.
thepost has been told that tensions are also simmering at Letšeng Diamond, the country’s biggest mine by production and employment. a community recently submitted a litany of demands to the mine management.

This is despite the fact that the company has invested millions in community projects.
There is also tension at Liqhobong Mine in Butha Buthe, Kolo Mine in Mafeteng and Mothae Mine in Mokhotlong.
Mine executives fear that the disturbances and allegations of political interference might spook existing and potential investors in the sector they describe as “on the verge of a boom”.
Any slowdown in the mining sector could hit the government hard in the pocket.

The mining industry is now the second largest contributor to the budget after taxes collected by the Lesotho Revenue Authority (LRA).
Letšeng Diamond is an example of how much the sector can contribute to the fiscus.

In 2015 it contributed M1.3 billion to the budget through dividends, taxes, royalties and lease fees. Last year it contributed half a billion maloti to the budget.
That was made up of M238 million in royalties, M60 million in dividends and M63 million in corporate tax.

There was also M35 million in Pay As You Earn (PAYE) tax, M14 million in withholding tax on dividends and M68 million in tax the company withholds on every payment it makes to a supplier.
The other mines like Kao, Mothae, Kolo and Liqhobong are yet to declare dividends as they are still in development stages. But they still contribute in Royalties and lease fees.
This is in addition to the corporate, PAYE and withholding taxes.

For every loti the companies get through the sale of diamonds to the international market the government receives eight cents in royalties.
Like Letšeng, these mines also support other ancillary sectors that employ several thousands.
Former Mines Minister, Lebohang Thotanyana, said the government needs to tread carefully when dealing with the mining sector because investors are sensitive.
“It’s a highly critical sector because of its contribution to the national economy in terms of revenue and employment. But it is also quite fragile,” said Thotanyana who was once involved in the local mining sector as a businessman.

He says as minister of mines he saw how tough it was to attract investors whose pockets are deep enough to build a mine to full production stage.
“So when you do get them you must handle issues with caution because they have options,” he said.

“This is a serious industry because for the first time we have something that we are selling apart from water. It’s an industry that is still in sunrise so we need to handle its issues with care.”
“If there are issues between the companies and the communities they should be addressed peacefully. You cannot involve politics in such a sector because you will quickly destroy it,” he said.
Dr Motšelisi Mokhethi, a senior lecturer in the Department of Business Management at the National University of Lesotho (NUL), said the disturbances at the mines could be a result of lack of clarity of government policy.

Mokhethi, a former board member of Kao, said the problem is that no one is referring to what the law says when there is a dispute between the mines and the communities.
What should guide that relationship are the regulations and laws, she said.
“There should be a reference point. You cannot rely on a social contract between the mines and the communities because those are always likely to change depending on the circumstances,” Mokhethi said.

“Such laws should state clearly how the mines and the communities coexist. They should be clear on what are the responsibilities of the mines and the communities in the relationship. The expectations should be clear.”
“In addition they should have clear dispute resolution mechanisms so that matters don’t have to boil over like is happening now. A relationship that is not governed by a clear regulation or law is bound to run into problems.

“It is government that put in place systems that manage the social contract between the mines and the companies.”
That is what the Minerals and Mining Bill 2017 trudging its way in parliament is meant to address.
Unveiled by Mines Minister Keketso Sello late last year, the Bill proposes tough measures to compel mining companies to do more to help communities.
The Bill seeks to impose penalties on mining companies that neglect their corporate social responsibility programmes.

“Every holder of mineral rights shall set aside one percent of the gross income for corporate social responsibility purposes,” the Bill says.
The Bill proposes that companies that fail “to implement corporate social responsibility obligations” shall be fined an equivalent of 50 percent of the amount which was to be remitted as part of its corporate social responsibility obligations plus the principal sum.

If a company repeats the offence “the Mining Authority shall forfeit the licence.”
If the company does not pay the fine, the Authority shall confiscate its assets to pay for the unpaid fines and outstanding fees.
Under the Bill the Mining Authority shall be the chief regulator of the mining industry whose role is to oversee the implementation of the provisions of the Act and all regulations and guidelines.
The Bill also seeks to compel mining companies to give preference to local companies when buying goods and services.

But until that Bill becomes a law it seems mines will have to fend off what they see as unjustifiable and ever-shifting demands from the communities, politicians and lobby groups.
It would seem that part of the problem is with the way the mining leases are granted.
During the application phase companies have meetings with communities to discuss what they will do for the area. What comes out of those meetings is then submitted to the Ministry of Tourism and Environment as part of the Environmental Impact Assessment (EIA) report.

The EIA deals with the impact a project will have on the environment as well as the social and economic situation of an area.
The trouble, though, is that those meetings with the communities don’t result in a contract with the company applying for a lease. At best there is a handwritten list that is endorsed by the chief’s stamp.

The list does not form part of the subsequent lease. Also, while the EIA report remains with the Ministry of Ministry of Tourism and Environment it is the Ministry of Mines that then has to monitor the implementation of what the company has agreed with the communities.
In the absence of a clear agreement chaos ensues as communities have their expectations which in most cases the mining companies claim they never promised to meet.

Staff Reporter

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