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  • 1. MINING FOR GROWTH AUSTIN JASPERS, ERINMA KALU,cture: 2011 African ArgumentsKEVIN GANDHI, JESSICA BONTHIUS, MICHAEL PALISANO, RAVI GUPTA
  • 2. Overview Current Climate of Mining Sector Planned Course of Action Execution Conclusion
  • 3. Current Climate
  • 4. Stakeholders GOVERNMENT MINERS COMPANIES
  • 5. Government Natural Resources – $2.5 trillion Mining – 20% of GDP Mining & Other Industries Mine Workers – 1 Million High Inequality & Unemployment Increased Role & Political Will
  • 6. Mine Workers Poor Working Conditions Low Wages High Incidence of Disease Migrant Lives Lack of Community "Its difficult. I dont make a lot of money here," Mthembu, miner.
  • 7. Mining Companies Human Rights Violations Environmental Negative Externalities Loss of Production - $1.2 Billion Opportunity in South Africa
  • 8. Planned Course of Action: Four-ProngApproach Labor Health Housing/Community Environment
  • 9. Work Environment
  • 10. Key Components of the Work Environment Internal Organization Skills Work Pay Structure Development Environment Non- Monetary Benefits
  • 11. Addressing Internal OrganizationDialogue throughout the workforce Ensure multiple Solicit the Conduct routine Meetings Emphasize Small Teams Initiate Leadership Enable Feedback levels of feedback of all meetings responsibility, workers on their among all team allowing growth superiors and leaders and within the reportees, to management, to company and promote encourage opportunities to accountability transparency be awarded by throughout and trust advancement
  • 12. Pay StructureProviding attainable incentives Attendance Initiative Quantitative QualitativeEfficiency Output Confidence Attitude
  • 13. Non-Monetary BenefitsIncentives, requiring minimal financial input, serving to increase employee satisfaction Identify Common Values of Workforce Change Values into Feasible Benefits Award Benefits Based on Merit
  • 14. Skills DevelopmentBuilding more skilled, productive individuals and teams • Communication Trainings • Cross – Training between employees • Leadership Training • Life skills training • First aid training • Incorporate ICT (Innovation Slide).
  • 15. The Bogawantalawa Plantation Success Situation Intervention Strategies Rigid hierarchical management  Formation of Self-Managed Groups system (5-7 employees) with elected SMG Low work motivation Leaders Poor communication skills of  Assessment of leadership capabilities supervisors of employees through secret ballots Lack of ownership sense among  Introduction of a wage system tied to workers output Out-migration for more attractive  Distribution of additional work- employment safety equipment Frequent strikes over wages and poor conditions  Life skills trainings Worker absenteeism as high as 50%  Creativity and ownership exercises
  • 16. Results – Increase in Labor Productivity
  • 17. The Bottom Line… A positive work environment empowering individuals has been shown to increase productivity and worker satisfaction Though, in an environment that has a history of discrimination, transparency and consistency are crucial for trust building
  • 18. Health Care
  • 19. Increase Health Care Access andAvailability Government intervention  Governmentfunding of medical infrastructure  Company bears cost of worker’s health care  Emphasis on primary care; TB treatment; HIV ARVs Oversight: Department of Health  Yearly inspections  Continued monitoring and feedback for infection rates and work-related injuries
  • 20. Increase Health Care Access andAvailability Government provides incentives  Taxbreak for successful health programs  Worker retention  Lowers TB infection rates. Eliminate loopholes  Cannot fire a miner because of illness  Miner termination comes with a 6 month pay package and health costs are covered by company for 18 months.
  • 21. Detection/prevention of TB and HIV Enforce mining company responsibility  TB and HIV screening as prerequisite for renewing mining license  Improved infrastructure of work conditions  Mine ventilation, gas masks Government Funding and Oversight  Government funding of HIV and TB awareness campaigns  Private-public partnership of funding housing  Oversee company responsibility setting five-year benchmark and ten year benchmark Research promotion  Transparency of disease incidence of miners  Cross-border migration analysis – urban sprawl led to commuting and long- distance commute from home->work (apartheid laws)
  • 22. Short-term cost over two years $900 million medical infrastructure $15 million tax breaks $17.6 million for oversight, awareness, research TOTAL $923 million
  • 23. Total cost over ten years: $3.1 B $2.9 B medical infrastructure $195 million tax breaks $41 million for oversight, awareness, research
  • 24. BUILDING COMMUNITYTHROUGH HOUSING
  • 25. Community Investment by Mines Royal Bafokeng Nation  150,000 residents  High standard of living  Quality housing  Company-driven Royal Bafokeng Holdings  $2.92bn in holdings  Spent $69mn in 2010 for community services
  • 26. Community-based Investment Funds Portion of profits Public assistance Tax Incentives >10% Administrative
  • 27. Current Housing Problems Decreased Productivity Unaccommodating to families Encourages continued migration High levels of TB transmission Housing allowance not effective Lack of urban planning
  • 28. Community-centered Housing Present Future
  • 29. Community-centered Housing 200,000 units for $2bn Affordable and Cost-effective 1 person per room Family-friendly Public-private funding Integration
  • 30. Water as aHuman Right. S.A.Constitution
  • 31. Who and What AMD effects?Not only a consumption issue.
  • 32. Immediate Problems to address withAcid Mine Drainage Abandoned Mines Prevent Decanting (Over Flow)  Pumping water out Monitoring current AMD
  • 33. Where are the immediate areas ofconcern? Gauteng Province: •Western Basin •Central Basin •Eastern Basin
  • 34. Immediate Costs (Years 1-2)(Detailed in Appendix) Pumping  Capital Costs:  Pumps: $ 550,000  Pump Installation: $ 920,000  Operating Costs:  Running Costs: 2.8 Million dollars per/year = $5.6 Million (2yrs) Monitoring Costs of Basins  Ground water monitors, shaft level monitors, surface water quality monitoring, surface water monitoring, data compilation.  3.3 million per/year =$ 6.6 Million (2yrs) TOTAL IMMEDIATE (SHORT TERM) COSTS: $13.7 Million
  • 35. Med/Long Term Investments•Medium Term Solution: -Neutralizing Treatment Plants•Long Term Solutions: -Water Reclamation Plants (e.g. eMalahleni)
  • 36. Med/Long Term Investment Costs Years (3-10) (Detailed in Appendix) Neutralization Treatment Plants  Capital Costs: $9M per mine/basin  Operating Costs: $2.3M per mine/basin per yr 5 years = $20.5M USD per mine/basin Water Reclamation Plants  $35M USD per mining siteTOTAL Med, Long COSTS for 14 Mining Sites: $780M USD for years 3-10TOTAL Short, Med, Long COSTS: Approximately $800M USD over 10 years
  • 37. Stakeholders: NGOs, Gov’t, Companies
  • 38. Opportunity for South Africa In Gauteng Province by 2015, water demand will outstrip supply. eMalahleni water reclamation plant produces 24 Million Liters of potable water a day.
  • 39. Innovation – “Digital Miners”By Miners For Miners using Information Communication Technology (ICT)  Miner Group Formation  Video Production  Feature a “star” miner  Video Dissemination through small projectors.  Job training  Health habits  Social issues.
  • 40. Digital Miners – Cost/Benefit Cost $1.1M USD per yr = 11 Million over 10 years (Appendix for details) Benefits:  Capacity building of miners.  Group dynamics created.  Health education simplified and cost effective.  Dissemination of information and training are standardized.
  • 41. Execution: Budget Item Cost Labor 4 Health 3.1 Housing 2 Environment .8 Innovation .01 TOTAL 10 Billion
  • 42. Execution: Challenges Migrant Workers Persistent Racial Segregation Frayed Relationships Entrenched Systems / Inertia Consistent Enforcement
  • 43. Conclusion Increasing Productivity Increasing Longevity Building Community Mining as an opportunity for all South Africans
  • 44. THANK YOU.
  • 45. Appendix: Investment Fund Budget Year Mining Company Investment Public assistance Total holdings 2013 100,000,000.00 50,000,000.00 150,000,000.00 2014 100,000,000.00 50,000,000.00 300,000,000.00 2015 100,000,000.00 50,000,000.00 450,000,000.00 2016 100,000,000.00 50,000,000.00 600,000,000.00 2017 100,000,000.00 50,000,000.00 750,000,000.00 2018 100,000,000.00 50,000,000.00 900,000,000.00 2019 100,000,000.00 50,000,000.00 1,050,000,000.00 2020 100,000,000.00 50,000,000.00 1,200,000,000.00 2021 100,000,000.00 50,000,000.00 1,350,000,000.00 2022 100,000,000.00 50,000,000.00 1,500,000,000.00 Total Public Cost 500,000,000.00Assumption: Mining companies will increase community investment because of taxbenefit. Most spend around $5mn per year in 2012.
  • 46. Appendix: Housing GoalsCase Study – Upgrading of South African AngloGold Ashantiresidences (2008)“The key objectives for the near future are for AngloGold Ashanti to: speed up home ownership by constantly improving or redevelopment of new Home Ownership Models; increase formalisation; initiate community re-integration programmes; manage the rising demand for residences; and enter into joint ventures with public and private partners in an attempt to source sufficient accommodation for its employees.”http://www.anglogold.com/subwebs/informationforinvestors/reports08/ReportToSociety08/f/upgrading_AGA_res.pdf
  • 47. Appendix: Housing Strategy Encourage and fund housing developments that are affordable, safe, and lower costs of social services. Formal urban planning lacks in many mining towns. Many miners choose to build informal housing, using the housing allowance for other needs. Promote family dynamic, curbing negative effects of familial isolation.Implementation type: Public-private partnership. For some mines, public will take full responsibility. For others, private required to do more in order to reach IntegratedDevelopment Plan of community.Time Frame: Begin needs assessment immediately. Within 6 months begin design. First wave of construction starts in Year 3. Second wave starts Year 8.Feasibility: Firms such as Affordable Living Solutions Africa already begun building in mining communities housing designed for individuals that make $170-$1,700 per month.AngloGold Ashanti admits one of key priorities is to “enter into joint ventures with public and private partners in an attempt to source sufficient accommodation for itsemployees.”Limitation: Difficult to prevent workers from living in informal housing.Examples:Lonmin is already working to convert hostels to single and family unitsMultiple mines have stated 1 person per room as goal (Lonmin, Anglogold Ashanti)Anglogold Ashanti provides $137 monthly housing allowanceInnovation: Miners permitted to use housing allowance on already subsidized government-sponsored housing. Provide tax incentives for private sector development.
  • 48. Appendix: Housing Budget Year Unit Cost Units Built Yearly Cost 2013 8,000.00 10,000.00 80,000,000.00 2014 8,444.80 20,000.00 168,896,000.00 2015 8,914.33 30,000.00 267,429,926.40 2016 9,409.97 40,000.00 376,398,707.08 2017 9,933.16 30,000.00 297,994,856.39 2018 10,485.45 30,000.00 314,563,370.41 2019 11,068.44 30,000.00 332,053,093.80 2020 11,683.84 10,000.00 116,838,415.27 USD Total 1,954,174,369.35 Inflation rate assumed to be constant at 5.56%Housing cost estimation: http://openarchitecturenetwork.org/projects/10x10_housing
  • 49. Appendix: references Prokopenko, J. (1999), Productivity Management: A Practical Handbook, Geneva, International Labour Office. ILO. 2004. Social Dialogue at Enterprise Level: Successful Experiences. Available online www.ilo.org/public/libdoc/ilo/2005/105B09_252_engl.pdf (accessed 09 November 2012). United Nations OHCHR. 2011. A Guide for Buisness: How to Develop a Human Rights Policy. Available online http://www.ohchr.org/Documents/Publications/DevelopHumanRightsPolicy_en.pdf (accessed 08 November 2012).
  • 50. Appendix: Projected Government Healthcare Expenditures for Mining 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 Medical .05 .04 .04 .04 .03 .015 .015 .015 .015 .015 .015infrastructu re Oversight .001 .001 .001 .001 .001 .001 .001 .001 .001 .001 .001Tax breaks .005 .10 .20 .20 .20 .20 .20 .20 .20 .20 .20 Research .002 .002 .002 .002 .002 .002 .002 .002 .002 .002 .002promotionAwareness 0.76 0.76 0.76 0.76 0.76 0.76 0.76 0.76 0.76 0.76 0.76campaigns Total .51 .41 .42 .42 .32 .17 .17 .17 .17 .17 .17 Cost/yearTotal Cost 3.1 *All Values in billion USD
  • 51. References "South Africa: Preventative TB trial disappoints | SAfAIDS." Welcome to SAfAIDS | SAfAIDS. N.p., n.d. Web. 10 Nov. 2012. <http://www.safaids.net/content/south-africa-preventative-tb-trial- disappoints>. BMW South Africa HIV/AIDS Project Budget, World Economic Forum, 2002. WHO-Choice Unit Cost Estimates for Service Delivery Estimation, 2007- 2008, South Africa. http://www.who.int/choice/country/country_specific/en/index.html
  • 52. Appendix: Picture Citations Water Picture: ghidularadean.ro Miner 2 Pic: businessinsider.com Hands at pump Picture: fullcircletravel.co.uk Acid Drainage: personal.psu.edu Girl with Water: Pbs.org Prometej.info Clinic Picture: Clintonfoundation.org
  • 53. Environmental Appendix
  • 54. Appendix: Digital MinersDigital Miners is a concept based on Digital Green (www.digitalgreen.org), whichworks on improving agriculture development and health development byincorporating ICT. All assumptions on budget above are based on prior experienceby a consulting member in this organization.
  • 55. Environmental Appendix
  • 56. Environmental Appendix Capital Costs: Pumps: 4800000 $551,724.14 Pump Installation 8000000 $919,540.23 Operating Costs: $0.00 Running Costs 25000000 $5,747,126.44 $7,218,390.80
  • 57. Appendix: Community InvestmentStrategy Portion of profits can be used for mini sovereign wealth fund, but unlike RBN, an elected local board should decide on allotment. Limit administration cut to under 10%, not 25% of RBN.Implementation type: Company, possible gov’t partnershipTime Frame: Effective immediately. Provides funding for other interventions we discuss.Feasibility: Many companies already spend millions for community development. This provides morestructured model.Limitation: How much local power you want to give over funding provided by government. Givenpower to local authorities on how funding is used may lead to corruption/mismanagementExamples: Royal Bafokeng HoldingsAnglogold Ashanti - only $3.2mn in 2010(http://www.anglogoldashanti.co.za/subwebs/InformationForInvestors/Reports10/supplementary-information/communities-community-investment.htm)Lonmin - about $4mn in 2011(https://www.lonmin.com/Lonmin_Annual_Report_2011/Root/business_review/sustainability_review/key_sustainability_performance_statistics.html)Innovation: Government supplements company’s contribution to fund. Provides tax incentives (i.e. notaxes on profits that are contributed to fund)