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Assore strongly endorses the broad-based black economic imperatives contained in the Minerals and Petroleum Resources Development Act (the MPRD Act) and the Broad-based Socio-economic Empowerment Charter for the South African Mining Industry issued thereunder (the Mining Charter), and since their inception has embarked on a number of initiatives aimed at meeting these requirements at its mining operations, as set out below.
In terms of the MPRD Act, which came into effect on 1 May 2004, the state has assumed sovereignty and custodianship of all mineral rights in South Africa and grants prospecting rights and mining rights to applicants based on the merits of their applications (which are designated as new-order rights). A transitional period from that date to 1 May 2014 was provided for, during which holders of existing mineral and exploration rights (designated as old-order rights), upon meeting certain requirements, could convert such existing in-use old-order rights into new-order rights or, in the case of unused rights, could apply for new-order rights.
The Mining Charter is intended to facilitate the entry of historically disadvantaged South Africans (HDSAs) into the mining industry. The scorecard which the state issued pursuant to the Mining Charter required, inter alia, that mining companies should achieve 26% HDSA ownership of mining assets by 1 May 2014. The Mining Charter also requires, inter alia, that mining companies provide plans for achieving employment equity at management level, and procuring goods and services from black empowered organisations on a preferential basis, in accordance with the predetermined criteria set out in such plans.
Assmang has secured new-order mining rights for all its operations. Pursuant to the acquisition from ARM of its effective 50% share in Dwarsrivier, Assore owns 100% of Dwarsrivier with effect from 1 July 2016. The new-order right was registered on 30 June 2016 (refer note 35.1 to the consolidated annual financial statements for more detail).
Wonderstone has successfully converted and executed its old-order mining rights to new-order mining rights for pyrophyllite. The group has implemented a preferential procurement policy at all its operations (refer “Preferential procurement” in this report) and has developed social and labour plans (SLPs) for each of its operations, as well as local economic development (LED) projects which support the integrated development plan of the relevant local authority. The plans, which have received the approval of the relevant departments, include the construction of schools and crèches, food security projects, and presentation of programmes on adult education, health and safety, and environmental awareness (refer “Sustainability report“, located on the group’s website under “Annual reports” in the “Investor centre”).
The extent of compliance with the charter is reported on and monitored on a regular basis, both at the executive level and by the board, through the Social and Ethics Committee and specifically with regard to new-order mining rights, which are subject to audit by the DMR. To date, the DMR has not reported any significant non-compliance issues.
Following the introduction of the MPRD Act Assore has, specifically at a holding company level, entered into empowerment transactions, which have resulted in HDSAs holding 26,07% of Assore’s ordinary shares, as follows:
The Boleng and Fricker Road trusts (the trusts) have been established for the benefit of HDSAs and broad-based HDSA community groupings residing in the areas in which the Assore group’s mines and beneficiation plants are located. Since the objectives of the trusts are very similar and they have the same trustees, the Boleng Trust is a beneficiary of the Fricker Road Trust.
In terms of agreements between Assore and the trusts, the Fricker Road Trust qualified for dividends (after dividends tax) of R21,8 million (2016: R7,5 million) during the year, while the Boleng Trust is entitled to a flow-through payment of at least R2 million per annum, irrespective of the commitments to the Assore group with regard to the funding of the transaction provided by Assore. The boards of trustees of these trusts are as follows: Dr TG Sibiya (Chairman)* RN Lekgatle# Ms K Makhaya* M Mtshali* Ms TPJ Ngxulelo* CE Walters#^
* Independent trustee. # Founder trustee. ^ Founder trustee appointment in process.
Assore has concluded agreements with the trusts in order to regulate the relationships between the respective parties to ensure the continued compliance by the trusts (as the Assore group’s BEE partners) with the direct ownership requirements of the Mining Charter and the appropriate restrictions on the transfer of Assore shares by the trusts.
During the 2017 financial year, and pursuant to the trust deeds, the trustees have approved expenditure on its major projects amounting to R14,7 million (2016: R13,8 million) and have committed themselves to spending a further R33,1 million on these and other projects, details of which are as follows:
Further detail of the expenditure on these projects is included in the “Investor Centre” of the group’s website, www.assore.com. The group acknowledges the contents of the report entitled "The Empowerment Endowment", published by Intellidex in June 2017, which ranked Assore's value created by for empowerment entities at number two (out of 35), at R5,5 billion.
Independent trustees
The Assore Employee Trust was established by Assore for the economic benefit of the non-managerial employees of the Assore group by facilitating their participation in the dividend income distributed by Assore (dividend rights) and also participation in the increase in the value of Assore’s ordinary shares listed on the JSE (equity rights). The beneficiaries of the Assore Employee Trust are full-time, permanent non-managerial employees of the Assore group who do not participate in pre-existing incentive schemes or performance bonus arrangements. Senior management and board members are precluded from participating in these benefits. The trust is overseen by a board of trustees, the majority of whom are independent HDSAs. The board of trustees is constituted as follows: M Pillay‡* (Chairman) T Bizure‡^ Ms MC James‡# GN Lavielle^ Ms NP Mngomezulu‡* Ms WT Mnisi‡^ I Phalane‡*
‡ HDSA trustee * Independent trustee ^ Employee representative trustee. # Founder trustee.
During the 2017 financial year, the trust made dividend rights distributions to employees totalling R10,5 million (2016 : R6,2 million). The increase in these distributions is due to higher dividends declared by Assore (2017: distribution based on R11,00 per share; 2016 distribution based on R5,00 per share). An independent valuation performed as at 30 June 2017 indicates that the fair value of equity rights granted to date to employees amounted to R11,7 million (2016: R9,6 million) (refer note 16, “Share-based payment liability”, to the consolidated annual financial statements).
Preferential procurement
Assore is committed to bringing previously disadvantaged South Africans into the mainstream of the economy and specifically the mining industry by identifying and developing business opportunities and by making them available to broad-based black economic empowered (BBBEE) suppliers at all its operations and activities. Assore has adopted a policy of precluding vendors who do not have valid empowerment credentials from supplying goods and services to its operations. A summary of the percentage BBBEE procurement measured against total discretionary procurement is presented in the table below:
The percentage of BBBEE expenditure as tabled above has, in general, been adversely affected due to the implementation of the amended dti Codes of Good Practice, which came into effect on 1 May 2015.
The decline in the percentage of BBBEE expenditure within Assmang is due mostly to a lower proportion of level 4 expenditure (decline of 7,78%), with corresponding increases in levels 5, 7 and 8.
Expenditure in Rustenburg Minerals and Zeerust declined significantly, due to these mines ceasing production, while the expenditure in Wonderstone and African Mining and Trust declined due to once-off purchases made from suppliers that are not empowered.
