Merafe Resources Limited - Integrated Annual Report 2015

SOCIAL CAPITAL AND STAKEHOLDER RESPONSIVENESS

SOCIAL CAPITAL Social capital is any value added to the activities and economic outputs of an organisation by human relationships, partnerships and cooperation. Organisations rely on social relationships and interactions to achieve their objectives. Externally, social structures help create a climate of consent or a licence to operate, in which trade and the wider functions of society are possible. Organisations also rely on wider socio-political structures to create a stable society in which to operate, e.g. government and public services, effective legal systems, trade unions and other organisations. To enhance social capital we: • contribute to open, transparent and fair governance • source materials ethically and treat suppliers, customers and citizens fairly • respect and comply with local, national and international law • pay our taxes • invest in the social infrastructure • provide communication • minimise any negative social impacts of our operations and maximise the positive impacts they can have • support the development of the communities in which the Venture operates Socio-economic development Both Merafe and the Venture are committed to working with local authorities, community representatives, inter-governmental and non-governmental organisations and other interested parties, to develop and support community investment projects. Both the Venture and Merafe focus on sustainable projects, with their focus being on education, infrastructure and health issues in the communities in which the Venture operates. See Stakeholders of this report for a review of stakeholder engagement.

KEY POINTS

The Venture spent R30 million on corporate social investment and enterprise development in 2015 (2014: R18 million)

57% of the Venture’s expenditure on capital goods was on BEE spend in 2015 (2014: 48%)

81% of the Venture’s expenditure on services was on BEE spend in 2015 (2014: 75%)

63% of the Venture’s consumable expenditure was on BEE spend in 2015 (2014: 69%)

Corporate social investment (CSI)

The Venture, which contributes to a number of CSI projects in the vicinity of its mines and smelters, spent R30 million on CSI projects and enterprise development in 2015. The amount budgeted for these projects is R77 million of which to date R76 million has now been spent. They include community health programmes, a crop and hydroponics project, community centres, crèches, youth programmes and school nutritional programmes. They also include infrastructure programmes including the construction of housing and school rebuilds. The Venture has also contributed to the establishment of catering enterprises, food banks and business support centres.

In addition to Merafe contributing to CSI and enterprise development through the Venture (where it contributes in accordance with its participation interest of 20.5%). it independently supports CSI initiatives.

Merafe Resources’ CSI projects in prior years involved the renovation and building of ablution blocks at Boitekong and Meriti Secondary schools and the mentorship of six up and coming entrepreneurs. The projects were finalised in 2014. The Company was impressed with the excellent manner in which this project was carried out as well as with the excellent quality of the buildings and commended the Adopt-a-School team and the schools management teams. Boitekong and Meriti Secondary schools are located in the Bojanela district of the North West province. When Merafe visited the two schools in 2010 and 2013, the lack of suitable and sufficient infrastructure at the schools became apparent to the delegation. In 2014, Merafe made the decision to conduct a further needs assessment on the two schools to better understand how to assist them.

Following the needs assessment in 2014 at Boitekong and Meriti, the Company agreed to support the two schools in respect of two further projects at a cost of approximately R4.5 million. The scope of work of the two projects (to be completed in 2016) included the construction of a feeding scheme kitchen and six classrooms for Boitekong and a feeding scheme kitchen and five classrooms for Meriti. Since the project started 81 temporary jobs have been created for individuals from nearby communities. Further, small businesses in the areas are being used to supply materials and services. The projects have been slightly delayed due to certain challenges including delays in obtaining approval, difficult soil conditions, access to water and necessary work stoppages during exam periods to avoid noise disturbances. The projects however will still be completed in 2016 and are expected to reduce overcrowding at the schools. The amount spent on the two projects in 2015 was R1.5 million and the balance will be spent in 2016. On completion of the projects in 2016 the Social and Ethics Committee of the Company will conduct a site inspection and meet with the principals and key stakeholders at the school.

Job creation and skills development

The Venture recognises that its commitment to employing local people whenever possible is to the advantage of both itself and the local communities. Direct employment at the Venture’s operations, indirect employment through contractors and its use of local suppliers provides an income for thousands of families.

Our commitment to employing local people includes providing training opportunities that enable community members to meet the Venture’s competency requirements.

Enterprise development

Small, medium and micro enterprises (SMMEs) play a key role in job creation in South Africa and our investment in their development is an important part of the contribution both Merafe and the Venture make to the socio-economic capacity of communities. It also increases our ability to procure from black-owned enterprises. The Venture has enterprise development commitments in terms of the Mining Charter Scorecard. The Venture spent R4 million on enterprise development in 2015.

See Human capital of this report for further information on the range of skills training the Venture provides and its investment in this training.

Procurement

In terms of the discretionary procurement targets set in the Mining Charter Scorecard the Venture performed well as can be seen in the table below:

	Total procurement spend R	Non- discretionary spend R	Discretionary spend R	BEE spend R	BEE spend %
Capital	1 019 767 380	292 932	1 019 474 447	581 674 390	57.06
Services	8 189 264 411	4 911 301 128	3 277 963 283	2 658 757 746	81.11
Consumables	4 044 104 437	7 953	4 044 096 484	2 557 942 264	63.25
Total	13 253 136 227	4 911 602 013	8 341 534 214	5 798 374 400
Multinational capital spend	60 592 457
Total procurement spend	13 313 728 684

Public health and HIV and AIDS
The Venture favours a united approach to public health, whereby we collaborate with government, international organisations and NGOs, to make the most impact at community level. The public-private partnerships formed by the Venture provide communities access to prevention, treatment and care for HIV and AIDS, as well as other communicable and associated diseases. The Venture supports the government’s HIV counselling and treatment (HCT) campaign by providing funding and testing sites. It has also funded health clinics and hospices in the communities in which it operates, including an HIV and AIDS clinic in Lydenburg in Mpumalanga province. There is also a health clinic at the Lion ferrochrome plant in Limpopo province.

During 2015 the Venture supported a number of health and community projects and programmes. These included the Thekwane Trauma Centre, the Ratanang Orphanage Centre, the Lydenburg Rusoord old age home and a number of school and community nutritional and health programmes.

Respecting the rights of communities
Both Merafe and the Venture do not tolerate any form of discrimination and our policies clearly state that we do not tolerate any form of discrimination and that all our employees and stakeholders are to be treated with dignity and in a manner that is culturally appropriate, irrespective of gender, background or race.

Human rights and ethics
Merafe subscribes to the fundamental principles of human rights as enshrined in our country’s Constitution and Bill of Rights. Our policies and practices have been aligned with both to ensure that all our employees and stakeholders are treated with dignity and in a manner that is culturally appropriate, irrespective of gender background or race. Further, Glencore is a signatory to and has accepted the Voluntary Principles of Security and Human Rights.

Ethics
The Merafe Code of Ethics governs the way we do business and the way our directors and employees engage with our stakeholders. The Code, which is binding on our directors and employees and contractors, provides guidelines for behaviour which is above reproach.

Stakeholder responsiveness Merafe and the Venture address material issues we have identified that could impact negatively or positively on our key stakeholders. These stakeholders include national, provincial and local government in their roles as regulators and partners; the trade unions in their role as representatives of the Venture’s employees who are from local communities; and our investors and business partners who are affected by all aspects of our business. The impact of our most material issues in regard to human, natural and social and manufactured capital on our stakeholders, together with our responsiveness on these issues, is outlined in this report. While Merafe has direct relationships with certain key stakeholders in connection with community matters, we also have indirect relationships through our partnership with Glencore in the Glencore-Merafe Chrome Venture. As managers of the Venture’s day-to-day operations, Glencore takes responsibility for engaging with the Venture’s stakeholders. All the Venture’s operations and projects are expected to review the stakeholder engagement plans every year. The Venture’s operations held formal community stakeholder meetings during the year. In 2015 the Venture focused on identifying issues material to communities and stakeholders that will assist with preparing its social and labour plans for the five-year period from 2015 to 2020.