Abandoned, unrehabilitated mines do SA’s image as a country serious about ESG (environmental, social and governance) no favours, says specialist Jayne Mammatt, who has been appointed by Deloitte to boost its ESG consulting work in the private and public sectors.
“It’s a big problem for the country.”
The proliferation of such mines has been highly publicised since the rape of eight women last month, allegedly by illegal miners in Krugersdorp.
“A lot of these abandoned mines relate many years back to companies that in some cases don’t even exist now,” says Mammatt.
“The challenge is how do companies and the government put it right now?”
Global ESG fund managers, who are only allowed to invest in countries that demonstrate ESG compliance, will be watching.
“A lot of our existing mining houses have very good [plans in place for] environmental rehabilitation and closure of their mines, but there’s this massive legacy going back decades that needs to be resolved”, she says.
I think the intention is there to enforce these laws and encourage companies to see their rightness — that it's not just a compliance issue, but the right thing to do to make sure mining and construction — whatever it might be — is [undertaken responsibly] from environmental, safety and societal points of view
Mammatt, a chartered accountant who has helped African governments deal with sustainability for the past 20 years, says there's a need for more ESG reporting and compliance in South African SOEs and government departments.
“There’ve been challenges over the last few years operating in that environment, but our commitment is to work with the public sector in these areas.”
Deloitte recently started working as a financial and sustainability auditor for Eskom.
She “can't comment” on whether they'll be doing the same for the department of mineral resources and energy (DMRE), which has, for many years, ignored warnings by the auditor-general to deal with the country's more than 6,000 abandoned and unrehabilitated mines whose environmental and social consequences are devastating.
Does the DMRE need help with ESG?
“Possibly. We haven't engaged with them yet to know exactly what's going on. South Africa does have good environmental legislation. It’s about making sure it's enforced and dealing with legacy issues. It’s a department that has got a lot of work to do.”
Capacity and skills shortages make it difficult to enforce much environmental legislation in the public and private sectors, she says.
“I think the intention is there to enforce these laws and encourage companies to see their rightness — that it’s not just a compliance issue, but the right thing to do to make sure mining and construction — whatever it might be — is [undertaken responsibly] from environmental, safety and societal points of view.”
The application of a sovereign ESG ceiling by global investors “creates challenges for our companies”, she says.
This is because no matter how well they perform individually, investment decisions are influenced by a country's performance in terms of governance, corruption and high carbon emissions.
“But I’d like to think a lot of global investors are seeing what’s going on and local investors who are based or operate here are aware of the context and can [see] what companies are doing to ensure the right decisions are made.
“There’s a lot of good work many of our companies are doing on the social and governance side of things, as well as on carbon emissions. A lot of our larger companies are reducing their carbon footprints, their reliance on ‘dirty’ fuels, because [carbon tariffs] are impacting their ability to export.”
What about smaller businesses which can’t afford the same levels of compliance as larger, better resourced companies?
That shouldn’t stop them from looking at sustainable development, ESG and climate risk to understand how it impacts their business and supply chain, says Mammatt.
They need to look at their strategy and value chain and see where it creates risk and opportunity for long-term viability. And understand that managing ESG issues is not a luxury but makes good business sense.
Upskilling employees and contributing to the education and upskilling of people in the communities in which they operate is also a big part of ESG that companies have to address
“Instead of looking at ESG from a narrow compliance viewpoint they need to start looking at it from a business perspective and demonstrate that to the investors and banks they need money from.”
Consulting firms have been criticised for covering up bad governance, labour and environmental practices by clients because they don’t want to lose them. Should they be doing more to call them out?
“As financial auditors there’s very much an ethical and regulatory need for us to report stuff,” says Mammatt, who worked with EY and PwC before joining Deloitte.
“We would always want to do the right thing. [With] a lot of the companies we do a client acceptance to make sure we’re comfortable working for that client and have the same level of responsibility.”
Companies’ remuneration policies are part of ESG governance, she says.
Given SA has the lowest level of income equality in the world, is wage disparity between executives and employees something that needs to be addressed?
“South Africa has the highest Gini Coefficient disparity globally, so it is a big challenge. A lot of companies are looking at how it gets addressed and how it is built into their policies. A fair wage, a living wage, is a real issue for South Africa as a whole, not just for individual companies.”
To what extent do our glaring wage disparities constitute a failure of ESG?
“I don’t think it’s a failure of ESG per se. I think it’s a lot of challenges that have built up over decades.
“Upskilling employees and contributing to the education and upskilling of people in the communities in which they operate is also a big part of ESG that companies have to address.”
Are they doing it fast enough?
“We’d all like things to happen a lot quicker, but it’s not an easy fix. There are so many different role players who need to be involved. It’s a big societal issue.”
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