Martin Mbuyazi, administrator of one of the four community development trusts in a joint venture with mineral sands producer Richards Bay Minerals (RBM), has accused the company of bully tactics after it approached the high court last month to seek reform of the trusts.
RBM wants the court to change the trust deeds of Mbuyazi's Mbonambi trust and the three others, Sokhulu, Dube and Mkhwanazi, amid corporate governance concerns that include the mismanagement of funds.
The court action was lodged at the high court in Pietermaritzburg.
Mbuyazi told Business Times this week that RBM wanted to withhold benefits for the community after extracting minerals from its ancestral land for more than 40 years.
“At the time when they [RBM] are supposed to pay out, now they want to manage the community trust and as a result they are holding out and do not want to pay,” said Mbuyazi.
RBM, which extracts heavy metals from sand dunes along the KwaZulu-Natal coast, is a joint venture between Rio Tinto, which owns 74%, and Blue Horizon — a consortium of investors and host communities of Mbonambi, Sokhulu, Mkhwanazi and Dube — which own 24%. The remaining 2% is held in an employee participation trust.
Mbuyazi said RBM had no control over community trusts.
“Everyone knows that the community trusts have their own processes. RBM manages 74% in the operation and the stake of the communities is not through RBM but Blue Horizon. So RBM has no direct link with the communities. They are just bullying the communities because they can.”
However, RBM MD Werner Duvenhage told Business Times that RBM had no desire to disempower the host communities and had been focused on improving trust governance so that host communities received their rightful share of benefits from the funds.
“To achieve this, we have given the trusts every opportunity to engage meaningfully on trust reform, which they agreed to do in the August 2021 memorandum of understanding. However, in July 2022, the trustees unilaterally reneged on the agreement, leaving us no option but to seek legal action. We remain open to a court-mediated process and to find a solution based on consensus and mutual trust.”
In 2018, RBM operations were suspended twice due to violent protests by contractors at the mine and again in December last year when an employee was shot. Last year general manager Nico Muller was killed in an alleged assassination.
“We really need to see the benefits for the communities,” Duvenhage said.
“The trusts have up to date received R530m. It is a huge amount of money. There has been a lot of violence. It is because controls are not strong. Stronger [governance] controls and more independence from trustees are needed. Mines have a finite life. We would love to rather leave a legacy that is tangible and right now we are worried that it is not happening.”
Alex Khumalo, head of social performance at Minerals Council SA, said only a handful of community trusts set up as part of BEE transactions had been able to truly deliver benefits to communities.
All we are asking for is that the majority of the trustees be independent. We are not trying to take control of the trusts
— RBM MD Werner Duvenhage
“The vast majority might be delivering but no-one can really say the benefits those trusts have delivered have been optimal for communities,” said Khumalo.
Khumalo said the council was concerned about a lack of governance in community, public and private institutions.
“In theory, community trusts should be partners in development with mining companies by, for instance, partnering with mines in funding social and labour plans. Or they could partner with local municipalities in the execution of their integrated development plans.
“In the best possible outcomes, community trusts could become significant economic players by investing in key job-creation industries, in much the same way that the Royal Bafokeng Nation has become a notable investor in the South African economy,” he said.
Asiphe Funda, an attorney at Corruption Watch, said there had been a lack of administration and oversight and a lack of capacity to administer trusts effectively as well as corruption scandals over the years at trusts. She said often traditional authorities and local elites ran the trusts.
“Advocacy for an ombud in this area of the sector must be seriously considered to ensure accountability and a reporting institution which is independent,” she said.
Duvenhage said the court action was RBM’s last option to resolve a protracted governance issue. “All we are asking for is that the majority of the trustees be independent. We are not trying to take control of the trusts. We are not trying to remove the involvement of the traditional council; all we are saying is that the trustees should be mostly independent. They should have the skills trustees in those roles [need to] have.”
Duvenhage said RBM would remain in South Africa despite the challenges.
“The way to solve problems is not to run away from them. As RBM and Rio Tinto we are long-term investors in South Africa. This mine started its operations in 1976 and we have other operations in South Africa as well. We have no intention to pack up and leave. We believe we have a role to play in addressing challenges and we will do our part to contribute like what we are doing with the trusts.”
Last month the mediation session with Glencore, the Kgosi, the Bakwena-ba-Mogopa Traditional Council and the Royal Family for a functional and legal trust structure to be put in place, was terminated. Glencore also appealed a September high court ruling which recognised trustees appointed by the traditional council.
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