Integrated Annual Report 2019

Black economic empowerment status report

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).

The Minister of Mineral Resources released a revised Mining Charter, which was gazetted on 27 September 2018. The focus in this charter is on empowerment targets and benefits for mining communities. Any company to which a new Mining Right is granted after this date is required to contain a minimum of 30% broad-based black economic empowerment (BBBEE) shareholding. The Assore group will continue to endeavour to remain compliant under the MPRD Act and will assess the impact of the revised Mining Charter in due course.

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, while Dwarsrivier has a registered new-order Mining Right. Wonderstone has successfully executed its new-order Mining Right for pyrophyllite on 20 March 2019.

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 (SLP) 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 creches, 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".

The extent of compliance with the charter is reported 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 Department: Mineral Resources (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 controlling 26,07% of Assore's ordinary shares, as follows:

Shareholder %
control
 
Boleng Trust 14,28  
Fricker Road Trust 11,79  
Total 26,07  

The Boleng and Fricker Road Trusts

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 R33,4 million (2018: R27,2 million) during the year, while the Boleng Trust was entitled to a flow-through payment of R49,3 million (2018: R20 million), 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:

* Independent trustee.

# Founder trustee.

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 2019 financial year, and pursuant to the trust deeds, the trustees have approved expenditure on its major projects amounting to R28 million (2018: R9 million) and have committed themselves to spending a further R13 million on these and other projects, details of which are as follows:

Operation   Description Spend
to date
R'000
  Commitment
R'000
  Total
R'000
 
Dwarsrivier   Mobile school libraries 3 148   747   3 895  
Tertiary education preparation programme 2 327     2 327  
Early childhood development 1 279   346   1 625  
Sanitary solutions 2 485   2 721   5 206  
Soccer tournament 1 397   949   2 346  
Career assessments 181   181   362  
Boys2Men 410   438   848  
Mobile toy library 372   4 315   4 687  
Wonderstone   Boleng Trust Bridging school and related expenditure 4 791     4 791  
Tertiary education preparation programme 6 981     6 981  
Bursaries 1 608   1 459   3 067  
Letsopa Disabled Centre 753   145   898  
Candle making 244   20   264  
Graduate development 69   581   650  
Other projects   1 710   1 497   3 207  
27 755   13 399   41 154  

Further detail of the expenditure on these projects is included under the "Annual reports" tab on the group's website, www.assore.com.

BOLENG AND FRICKER ROAD TRUSTS

Independent trustees

Dr TG Sibiya

Chairman

PhD (IT&IS), Med (ISD), Pittsburgh, BSc (Information systems), Carnegie Mellon, USA

K Makhaya

BusAdmin (Finance), Gonzaga University, Washington

M Mtshali

BLaws, LLB, UCT

TPJ Ngxulelo

The Assore Employee Trust

Independent trustees

M Pillay

LLB LLM (Duke, USA)

NP Mngomezulu

LLB

I Phalane

LLB

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:

HDSA trustee.

* Independent trustee.

^ Employee representative trustee.

# Founder trustee.

During the 2019 financial year, the trust made dividend rights distributions to employees totalling R8,6 million (FY18: R7,6 million). The increase in the dividend distributions are mainly due to a higher dividends declared by Assore. An independent valuation performed as at 30 June 2019 indicates that the fair value of equity rights granted to date to employees amounted to R14,2 million (FY18: R12,8 million) (refer note 17, "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 BBBEE suppliers at all its operations and activities. Assore has adopted a policy of precluding non-empowered vendors from the inward bound supply chain to its operations. A summary of the percentage BBBEE procurement measured against total discretionary procurement is presented in the table below:

Total  
discretionary  
procurement#
R million  
Aggregate  
BBBEE  
expenditure*
R million  
Aggregate  
% BBBEE‡
 
       
2019
Assmang 8 438,8   7 790,6   92,32    
Dwarsrivier 2 056,4   1 735,9   84,4    
Wonderstone 51,7   44,9   86,8    
African Mining and Trust 137,7   131,3   95,4    
2018        
Assmang 10 824,6   10 544,6   97,4    
Dwarsrivier 1 710,5   1 450,2   84,8    
Wonderstone 65,5   53,2   81,2    
Rustenburg Minerals 20,3   11,6   57,3    
Zeerust 2,5   2,0   80,5    
African Mining and Trust 143,6   155,5   108,3    
# Total discretionary procurement is defined as total procurement less procurement effected through related entities (intercompany transactions) and procurement from state-owned entities.
* Aggregate BBBEE expenditure is recognised based on the respective recognition levels of the suppliers, in accordance with the codes published by the Department: Trade and Industry (dti).
Expenditure of levels 1 to 3 suppliers is recognised at more than 100% in terms of the dti codes.

The decrease in the percentage of BBBEE expenditure within Assmang is due mostly to changes in the status of suppliers based on the dti code and the availability of valid BBBEE suppliers.

Wonderstone's expenditure decreased as the expenses relating to the community development projects were paid out of The Boleng Trust.

The expenditure in African Mining and Trust decreased due to expenditure incurred in the refurbishment of Assore's head offices being completed in 2018.