Messages of hope

Lessons on shared value

Archbishop Makgoba, Neal Froneman, and to everyone present.

Thank you for offering me the privilege of speaking to you today at the 5th Marikana Memorial Lecture. I recognise the past speakers at this annual event, and the role it is intended to play in bringing new thought on the challenges and opportunities we face in mining, in South Africa, and even beyond our borders.

What many of you may not know is I am born of a mine worker. My father worked on the mines for over 30 years from 1961 to 1991. My life has been touched by mining. I grew up, and still call home, the Eastern Cape, a province with no mines but strongly affected by mining as generations of mineworkers made up a large part of the gold, platinum, diamond and coal mining workforces. When I completed my matric, I also spent a year working on the mines before I could raise money through a bursary to go to Rhodes University.

Thus I speak to you as a person who used to be a mining executive, as a person who used to work in a mine, and as a son who could eat because his father mined. I speak to you, in short, as a typical South African – a person whose life has been shaped by mining.

The stark news surrounding the Marikana tragedy enveloped South Africa and changed the perception of our then still young democracy forever. It transmitted across wire services and beamed across television networks around the entire world.

And it is something on which I have reflected a great deal ever since.

There has been much analysis and attribution of blame since that time, but there has also been – I believe – much soul searching and introspection.

The title of my lecture today: Lessons on the power of shared value has very strong links to my observations over the past decades, and the research that I have been undertaking in the past few years towards my doctoral work on the asymmetric power relationships between mining firms and community stakeholders.

Let me start first with the concept of shared value, popularised by Professor Michael Porter and Mark Kramer of Harvard Business School in 2011, they defined shared value as the policies and operating practices that enhance the competitiveness of a company while simultaneously advancing the economic and social conditions in the communities in which it operates.

Shared value creation focuses on identifying and expanding the connections between societal and economic progress.

I would argue that the desire to drive shared value has been an integral part of the mining industry in South Africa even before the advent of democracy, driven by necessity.

I am not suggesting that this was always, or even often, achieved, but just that the building blocks were there. What is of great interest to me is why then, if the intention is there, things so often go wrong.

Let me take a step back.

When relationships between a business and its stakeholders work optimally, they drive sustainable business performance, create social value, attract investment, improve harmony and cooperation and more. Not everyone gets what they want, but everyone gets a share.

Nowadays one doesn’t find many business leaders, especially in our part of the world, and especially in the mining industry, who would disagree with this.

Yet it may not be obvious – to the CEOs, the managers, and indeed the workers, their unions, the community members and their organisations – that there are obstacles that need their active and conscious efforts to be overcome in order to achieve such a happy state of affairs.

The main source of the obstacles is power asymmetry, or the imbalance of power.

Relationships, whether at work, or at home, or in societies, are very rarely equal. No single cause or definitive condition creates power asymmetry in stakeholder relationships. It is likely to exist wherever there is interdependence between the firm and its stakeholders.

And power, both actual and perceived, will determine the way in which we – as fallible human beings – behave and react, particularly when under pressure.

If asymmetry is not effectively addressed, it will likely engender conflicts or schisms.

First, the literature on power and power asymmetry is both interesting and limited. Previous studies have historically been focused on the attributes of either the firm or of stakeholders, rather than on the relationship between them. A firm’s greater power implies that conflict will exist regardless of whether it exploits power relations to the detriment of specific stakeholders or not.

And the stakeholders may, in response, use the power that they have in a highly adversarial manner. This was the case in the days leading up to the Marikana shootings, and was aimed at disrupting the activities of the business.

My research has provided some particular insights, which may seem at first glance to be self-evident.

• When firms flex their authority in exercising power over stakeholders, they rarely live up to the expectation that they should promote goals based on shared interests. Such a situation is not amenable to creating sustainable socio- economic value for stakeholders.
• When stakeholders tolerate power asymmetry, they give the firm and its shareholders an outsized advantage over how engagements are constructed and relationships between the parties defined.

So, what can be done about this? To reduce power asymmetry and create balance, the firm needs to be intentional and committed to achieving collaboration with stakeholders with different power sources and divergent and opposing interests.

But, to achieve this, the firm needs to capacitate vulnerable stakeholders, giving them the power to exercise direct influence on the firm. Of course, this needs to be done in a co-operative manner, but will include economic, regulatory, and market-related aspects of the relationship.

Turning to South Africa, and the mining sector in particular, the history of the mining industry in South Africa – and, in particular, the relationship between mining firms and mine host community stakeholders – has been characterised by conflicts.

These include confrontations due to the deliberate and intentional disempowerment by mining firms of mine host community stakeholders through, among others, forced land dispossession, the payment of below-market amounts for mining royalties and land leases and the poverty wages paid to black African mine workers.

Both the system of colonialism and the apartheid government, across the period from 1867 to 1994, further aided, abetted, and intensified the dominant power of mining firms over their mine host community stakeholder counterparts.

Marikana remains a grim reminder of what can happen when power asymmetry and its resulting conflicts escalate and the parties involved have approached it in ways that fail to promote the shared interests of all. Sibanye-Stillwater’s and stakeholders’ current efforts to address the legacy of Marikana are welcome and remarkable. It is to be hoped that a further outcome of the legacy serves to teach other businesses and stakeholders of the potential dangers.

The reality is that power is a central determinant, as stakeholders and the business often find their interests unaligned. Where there is a failure to acknowledge and manage power asymmetries, stakeholder engagements as tools for solving complex social problems may not live up to expectations.

Social stakeholders form the bedrock of stakeholder relationships with the business and have an integral role to play in the process of creating sustainable value for the business. Yet they often enter the relationship under some degree of coercion. The power asymmetry constrains their ability fully to express their potential as business partners.

Stakeholders’ interests are legitimate. This is true even where they diverge from the business’s interests, and even where their aspirations cannot be fully met by the business. Overlooking or undermining those interests will harm the business. A relationship where legitimate stakeholders feel excluded, with their interests disregarded, is inevitably going to be counterproductive and unsustainable.

Stakeholder dialogue and engagement cannot and will not eliminate inherent power asymmetries. Rather, what is rather required is to develop or introduce mechanisms between stakeholders and the business that reduce the impact of power asymmetry on the overall relationship.

From their side, stakeholders need to engage with mining firms in ways that do not exacerbate conflict and instead use problem-solving methods. From the business’s perspective, these engagements need to be conducted in a way that seeks to:

• address power asymmetry;
• empower stakeholders to express their full potential as business partners;
• contribute to the decision-making of the businesses on matters that promote their interests; and
• facilitate stakeholders’ participation in the engagement processes and protocols of the firm to promote their interests using engagement themes.

Because circumstances of relationships between mining operations and local community stakeholders differ from one to the other, no single, uniform set of desirable practices can be imposed or recommended. Rather, guiding practices and principles for conduct, supported by underpinning mechanisms must be developed. These require the foundations of common humanity, the promotion of shared interests and long-term value creation to mitigate socio- economic risks.

It is important to remember that mine-host communities have limited access to information. As the Centre for Environmental Rights has said, they are not empowered to know their rights or understand mining law. They often lack the skills and expertise to find out about their rights and they lack the financial means to access the knowledge that could empower them to understand and assert their rights. We know how well-equipped mining companies are in this regard. When not remedied, this knowledge disparity further compounds the power asymmetry between mine community stakeholders and the mining firms.

The Benchmarks Foundation, in its 2018 annual report, highlighted that mining firms do not engage with mine-host communities or their representatives as equals. It is good to see co- operation between former Bench Marks leaders and some mining companies working to remedy these issues.

Mine host community stakeholders legitimately expect mining firms to develop and co-create long-term strategic plans with them, predicated on the promotion of their stakeholder interests. I have read about Sibanye-Stillwater’s efforts to address this legacy, and they are welcome and most appropriate. But having to be doing this still 12 years later is part of the grim reminder of what better, more timeous solutions could have prevented.

Mining companies need to think about how better to develop and establish engagement processes. They need mechanisms to resolve conflicts by reaching consensus with stakeholders on dealing with grievances, disputes, and conflicts. These processes need to be characterised by openness on how conflicts are to be resolved and by establishing mutually agreed principles to underly conflict resolution.

These principles need to be enshrined in the values of the firm and in the purpose of the company and to embody an explicit, long-term vision. As one visionary CEO put it to me: “It is genuinely seeking the third way, that both of us can say that is not what I thought would initially be the outcome, but this is the similar outcome that I came to. That is what co-creation is all about. Co-creation is about you and me, engaging as stakeholders in a way that when we come up with a solution both of us can say, ‘This is the solution which is far similar to the one I started off with.”

This entails the firm undertaking deep introspection about the commitments it has made to its stakeholders. It must provide reasons for any failure to honour commitments and demonstrate humility in accounting openly and transparently to its stakeholders.

Businesses must additionally invest in building the capacity for and skills of leadership, negotiation, and collaboration for all stakeholders. Those skills need to stand alongside a shared sense of community, joint destiny and shared value.

While companies have things they need to do, both parties need to focus on finding common ground and co-creating solutions that work for all parties. When the interests of stakeholders and company diverge, agreement is, of course, more difficult to reach. What matters is that engagements are premised and predicated on the principles of openness, honesty, and transparency. A bigger goal remains shared, improving the lives of the marginalised and vulnerable communities where the mining firm operates. The nature of the journey of engagement is as important, perhaps more important, than the outcomes reached.

Community leaders have obligations too. They need to engage proactively with the firm to understand its plan for promoting stakeholder interests and its long-term growth strategies to create shared value.

The Farlam report recommendations offered valuable advice for companies, unions and employees (and of course the SAPS). They guide how to conduct labour relations, manage security staff, keep promises made (and not promise unattainable outcomes) and ensure that directors understand their responsibilities. This wise advice should not be allowed to be forgotten through the passage of time.

Once again, I thank you for this opportunity to share some perspectives. The purpose of days like today is to help us to not forget what happened. Days of this nature are to remind us of our common humanity. That we are capable of hurting each other. We are capable of inflicting wounds and pain on each other.

Today is to remind ourselves once again to never choose this method as a way of solving our problems and settling our differences. Rather, let us look at what is good amongst us. To use the moment of deep pain and sorrow to rid ourselves of deep-seated anger, sadness, emptiness and despair. To accept what was and cannot be changed. To always be reminded that there are days in our lives that we must never forget. To always tell each other to honour these days and moments of remembering of those who lived amongst us and are no longer with us. To pray together for their souls to find peace and to pray for our souls to find peace out of the grief and pain of Marikana. To remind us of what could go wrong if the power that we have as people is not checked and moderated.

We need, as we are seeing today, leadership visibility right up to the level of the CEO and Board. It is necessary for employees to appreciate and see for themselves the level of commitment to the values and the principles that the company says it stands for.

The interconnectedness of our sense of humanity is not to be to be taken for granted.

Our feelings, aspirations and ambitions need to be expressed, shared, embraced and respected.

We are more than work. We are more than a mine. We are more than our jobs.

We are connected by a deeper sense of humanity which binds us together to what is common amongst us.

We have dreams to see our children graduating, we all have dreams to see our children getting married.

We all have dreams to hold our grandchildren on our laps.

This is important and valuable for us and to us whether you are the CEO, the finance manager, the production supervisor, the cleaner or the security guard.

Events like today offer us a moment for reaching out to one another and to forgive each other. It is in the forgiveness of each other that true peace is ignited, embraced and cherished. Forgiveness is a process and a journey that cannot be rushed and is a very personal journey for each person. And so the pace and speed by which this happens cannot be regulated or modulated. It happens at the pace and in an organic way or order that is fitting and appropriate to each individual.

Relationships between stakeholders require constant rebuilding, deep reflection and outward-in and inward-out calibration to learn continuously of what is important and is to be celebrated together and collectively by the stakeholders.

The pain of Marikana will take a long time to heal. The memory of Marikana will take decades to be erased, if ever, because of the human loss. The historical learnings of this painful chapter should be our guiding light on the urgency to refashion stakeholder engagements and how to recalibrate the workings of these relationships.

Shared value is what must be the focus of the short, medium and long term of these relationships. But for true shared value to be created, it must be collectively defined and co-created.

And it must be communicated. Along with the commitment to its co-creation there has to be a deep commitment to accountability, transparency and openness.

I thank you for your time, and I hope that what I have shared may at least be thought provoking. Thank you very much.