2004 Van der Bijl lecture

Hendrik van der Bijl Lecture 2004

University of Pretoria
26 May 2004

The Platinum Highway

Ralph Havenstein


 

 

 

Ralph Havenstein

 

Honoured guests, ladies, and gentlemen.

Born in November 1887 and passed away a little under 56 years ago, Hendrik Johannes van der Bijl’s name lives on, not only in the name of a town in the south of Gauteng and the legacy of this lecture, but in the things he achieved in his remarkable life. It is fitting that, as an ex-chancellor of this fine university, the theme of the lecture bearing his name should be ‘the role of engineering in society’; because while there should be no doubt in any of our minds that he was a fine engineer, he is nonetheless remembered most fondly for his contribution to the social upliftment of and concern for his fellow South Africans.

Tracing the footsteps of Hendrik van der Bijl and other great engineers of our history, I wish to speak to you today about how our roles as engineers have changed and how society’s expectations of us have shifted. In particular, I’d like to refer to the role of engineering in the mining industry and how the recent shift towards the importance of platinum in South Africa will allow society to reap rich rewards – if it is sensible and learns the lessons that are there for all of us to profit from.

Understanding the role of engineering in society is quite clearly not the same thing as social engineering: paradoxically, another ‘Hendrik’ was famous, or infamous, for his experiments on the latter during the dark years of Apartheid, but he got it the wrong way round. In essence, our duty – one understood by our more enlightened role models – is not to pretend that we can engineer society, but rather to accept society’s influence for the better in our mindsets and approaches to our professional lives.

Let’s stay with history for a minute or two. In 1886, one year before Hendrik van der Bijl’s birth, George Harrison discovered the Witwatersrand goldfields. In the 118 years since that time, we have mined over two billion ounces of gold from this massive ore-body, making South Africa the source of half the gold the world has ever produced. The value of all this gold, in today’s terms, is over US$800 billion.

What happened to all this money? George Harrison and his progeny certainly don’t have it. Neither do I, I can assure you.

It is tempting for many to conclude that little of this money went to the betterment of society as a whole. We’ve read the stories: in those heady days soon after the discovery of gold, many millions were made and lost. Those were the times of the wealthy Rand Lords – Oppenheimer, Rhodes, Barnato – who many believed at the time had acquired inordinately large fortunes at the expense of everyone else.

Johannesburg, the largest city in Africa after Cairo, was built on gold. Apart from a few mountains of tailings here and there – an ugliness that, thankfully, Pretoria was spared – the gold has largely disappeared and has been mined out, and the Rand Lords are long dead. We have since developed world-renowned mining and processing industries, technologies, and skills, which have sustained the vibrancy of that city long after we closed the mines.

Johannesburg, which for a long time was nothing much more than a glorified mining town, is full of wealthy people who have never seen a gold mine, let alone worked in the mining industry.

But before we become carried away by the sustainable nature of Johannesburg’s success, let me sound a note of warning: we have many instances – think of Welkom in the Free State – of unsustainable community development, and it is important that we understand what pitfalls we need to avoid from these examples.

Gold mining in South Africa gave birth to an effective financial system and robust economy that have been used not only for developing new mines in other parts of South Africa and in other minerals, but have also formed the basis for the many secondary and tertiary industries that typify a modern, developed economy.

Now, Johannesburg’s streets may be paved with gold, but just a short distance north of here in Pretoria, we have the Platinum Highway. Where does it lead? To Rustenburg, or to something far more profound and meaningful as we ponder our roles as engineers in society?

Not so long after George Harrison’s discovery, in 1924, Dr Hans Merensky outlined the existence of PGM-bearing reefs in the Bushveld Igneous Complex and had already shown a 150-kilometre continuation only two years later.

For many years after that remarkable discovery and until quite recently, the platinum industry played the part of little brother to gold. Since 2000, the exports of the two industries have become comparable – at around R30 billion each – and as platinum burgeons with new industrial uses, I’m sure that it will soon overtake gold.

What is driving this interest in platinum and its sister metals? The answer lies in the unique blend of applications of platinum. Not only is it a noble metal with a special allure in jewellery, platinum also possesses – together with its sister metals palladium, rhodium, and others – a bewildering array of catalytic and high-temperature characteristics. This enables us to adopt a unique combined strategy of developing both created and derived demands.

Let me explain the concepts: demand is created in jewellery applications, where the industry – in this case through the Platinum Guild International – can influence consumer market-pull through promotion and advertising. This intervention has been most successful over the last ten years, spectacularly so in China, and jewellery worldwide now represents 37% of platinum demand.

Derived demand comes from the myriad of industrial uses where the wonderful catalytic and high-temperature characteristics of PGMs are used. The biggest and most well known example of this is the use of platinum, palladium, and rhodium in catalytic converters, where the PGMs convert motorcars’ pollutants into less harmful gases. This use is continually expanding as environmental standards become more stringent each year. In 2003, autocatalyst consumption represented 38% of platinum demand.

Other industrial uses represent 25% of platinum demand. These include diverse examples, ranging from platinum used in high-temperature moulds for glass manufacture to anti-cancer drugs.

Exciting future industrial uses include the use of platinum in fuel cells, extending the positive impact PGMs have on the environment even further.

On the supply side, South Africa is uniquely positioned: 76% of platinum is produced in South Africa and, more importantly, all of the world’s platinum that is produced for platinum’s sake, i.e. as primary product, comes from South Africa. In the rest of the world, it is a by-product of nickel and palladium production. This has important implications for the viability of platinum mining in South Africa, as well as on our duty to ensure that the world has trust in the future availability of platinum. It also begs the question of whether the cost of production in South Africa can be divorced from the market price, especially in the light of a continuing strong Rand.

While it seems unlikely that platinum mining is possible at the depths of five kilometres reached in our gold mines, because of the extra heat in the Bushveld Complex, I think we can assume that a three-kilometre mining depth is possible over the next 100 years.

This then means that the Bushveld Complex has the potential of producing one and a half billion ounces of platinum group metals, worth over US$900 billion and more than even South Africa’s famous gold industry has contributed, at today’s prices. This is not to mention the chrome, manganese, and vanadium that the Bushveld Complex also plays host to.

Let me put this another way: we started developing the very fabric of modern South African industry a little over a hundred years ago from the wind-swept flapping tents of the original gold diggers on the grasslands of the Highveld. US$800 billion of gold in the ground helped us, from those humble beginnings, build what is arguably the most sophisticated nation on the continent: and we still have over US$900 billion of valuable minerals left in the ground for us to continue our contribution to society! So those who believe that South Africa’s mineral wealth was a nice-to-have but no longer available as an engine of growth, think again.

Until recently, the platinum industry was merely scratching the surface of this vast treasure. Like Beowulf or Bilbo Baggins the Hobbit, we have been picking at this treasure from under the dragon that protected it, but now this great heritage is being developed at a demanding pace.

So if Johannesburg and modern South African society represent the legacy of George Harrison’s discovery in 1886, what will our inheritance from the remarkable Bushveld Complex be in a hundred years’ time and beyond?

The Bushveld includes some of South Africa’s poorest regions and, by contrast, some of its most beautiful scenery. I find it hard to believe that we cannot develop other Johannesburg’s over the next 100 years, sustainable centres of more than just mining excellence.

Let me dwell for a moment on this concept of sustainability, or as we prefer to say, sustainable development: the term ‘sustainable development’ is preferable to ‘sustainability’, pretty obviously – even to an industry such as ours – because mining as an activity is inherently unsustainable; sooner or later, the minerals will run out.

Luckily for us, we still have hundreds of years of platinum reserves left in South Africa. So we in the platinum mining industry need to ensure that we deliver sustainable benefits to South Africa, particularly that part of it in our communities and in our country that will compensate for the eventual depletion of their mineral endowment.

Let me say up front, however, that there needs to be balance and reasonableness in society’s expectations of what is ‘sufficient’ benefit. I will talk about what we are doing in the platinum industry – specifically from Anglo Platinum’s perspective – over the next few minutes; but before I do, I wish to say in no uncertain terms that the National Treasury’s proposed royalty of 4% on revenues is too rich by far, especially when seen against our total spend on social investment and taxes. I trust that Government and we can come to a more amicable arrangement on this score that does not only help deliver much-needed investment in social infrastructure and empowerment, but also does not kill the ‘platinum goose’.

Another way of defining what we mean by sustainable development is to say that we need to maximize the positive benefits of mining, while minimizing the negative impacts. This is an industry imperative. If we are not successful, Government tends to use regulation to force compliance. Laws such as the National Environmental Management Act and the Occupational Health and Safety Act require us to act responsibly or face punitive consequences.

On the positive side, Government and the mining industry successfully negotiated the Mining Charter, which in turn led to the Mining Scorecard, whose primary aim is to maximize the positives of mining in South Africa. When one compares the mining scorecard with the Global Reporting Initiative’s sustainability parameters, one is struck by the how the two dovetail so neatly, confirming that, in many ways, South Africa is leading the way in its positive approach to sustainable development issues.

For us, as platinum miners, the Mining Scorecard is our commitment to applying our best efforts to nine areas that will help us play our small part in transforming South African society. I believe that the Scorecard is a helpful tool, and it is worth the effort of all engineers, not just those in the mining industry, to consider it a template for their own roles in society.

  1. Firstly, we develop our human resources by at least offering all our employees the opportunity of becoming functionally literate and numerate. We also formulate and then provide career paths for all our historically disadvantaged South Africans. In addition, where we identify talent within our workforce, we provide a mentoring mechanism.
  2. Next on our to-do list is a comprehensive employment equity plan, and in Anglo Platinum’s case, we are striving to have 40% of our management comprised of historically disadvantaged South Africans by 2009, a stiff challenge, especially in the technical disciplines where the history of neglect in black education created a shortage. Even more challenging is our target of 10% of employees being female, although we’re making good progress; but you know, I remember my forefathers fighting for the removal of women and children from the mines, so we have some barriers to cross in this respect, I think, not least of which is that of cultural resistance.
  3. Thirdly, we ensure non-discrimination, especially against foreign migrant labour. Non-discrimination is not the same thing as employment equity: while employment equity goes some way to forcing the reversal of historically unfair discrimination – and our commitment to this principle is visible and publicly stated in a variety of media – it is an unfortunate fact of life in South Africa that residual racial and gender biases linger in our cultures and value systems, as indeed it does in most countries. This is an ‘invisible’ and largely uncontrollable element of discrimination, and while we can only play our part in South Africa to reconcile its peoples slowly and cannot force the pace of change of our employees’ hearts and prejudices, we are nevertheless in a position to tackle discrimination in the workplace when detected.
  4. The fourth thing we need to ensure is cooperation with Government, particularly with municipalities, in the formulation and implementation of their integrated development plans. Here, it is worth noting that no one has said that we should spend vast sums of money that ought rather to be sourced from our tax payments. Rather, the emphasis is on the word ‘cooperation’. The government has enacted the Local Government: Municipal Systems Act, which requires all levels of Government to formulate and implement development plans for their areas of control. Whereas, in the past, many large companies were guilty of making charitable disbursements to communities without any reference to Government plans over the long term, we now ensure that whatever we do is undertaken as part of a broader strategy for the areas in which we operate. This makes eminent sense; it is no good building a school on one street, when Government or some other company may be planning a now-superfluous school on the adjacent street. Government, business, unions, and communities need to work together to help rationalize our joint social investment efforts.
  5. Fifthly, we need to constantly monitor and strive to improve the standards of both housing and nutrition for our employees who live in hostel accommodation. The mining industry on the Highveld back in the 19th century was powered by a largely migrant workforce, and it’s taken us an awfully long time to begin moving towards a local staff that lives with its families. Many of us in the platinum-mining industry are working with local banks, such as ABSA, to provide and access finance for our employees to build decent homes. The banks, after all, are now starting to govern themselves by their own Finance Charter, part of which requires them to assist in this housing transformation.
  6. Sixth, we give preferred supplier status to historically disadvantaged South African, preferably local, companies. This requires a procurement policy that recognizes the empowerment status of suppliers and an extensive database. This is one area in which we can glean obvious commercial benefits: by encouraging black entrepreneurs to qualify, in terms of quality, price, and governance factors, to supply us with goods and services, we are introducing competition into our supply chain and hopefully improving the cost of running our mines.
    It was this kind of benefit to the early gold mines of Johannesburg that eventually led to the relative independence of that city from mining, and thus its sustainability once the gold was mined out. I believe that it will be largely through the same process that the provinces of North West and Limpopo will ultimately thrive, even when the platinum has been depleted.
  7. The seventh requirement is the one that most people have focused on, which is to have 26% of either our equity or units of production in black hands by 2014. The minister has made it clear that this requirement is but one of the nine that I am talking about today, and that the challenge is broad-based empowerment encompassing all nine elements of the Mining Scorecard. However – if I may talk about Anglo Platinum for a moment – we have already achieved levels of success in empowerment deals that most felt were impossible or outrageously expensive when we first set out on this path. We’ve all read about these so-called BEE transactions, and although there are some who still question the whether true ‘empowerment’ has yet taken place, I remain convinced that we are going the right direction and that broad empowerment and social upliftment will eventually be far more visible an outcome than it is at present.
    Not only this, but it is incumbent on us to create capacity in our new joint venture partners’ hands, transferring critical mining, processing, and management skills. That is why we believe that the Anglo Platinum way of reaching the empowerment goals through joint ventures on new projects is more meaningful than geared up equity deals. We are fortunate that the Platinum market is growing to make this approach possible.
  8. Eighth on our list is the local beneficiation of our mining products. This is one area where none of us in the mining industry has historically made much headway, and for good reason. Focus on the core business has always been our most sustainable option, while downstream diversification has more often than not resulted in value destruction because of lack of industry knowledge by the mining industry and dilution of focus. We await first publication of the Beneficiation Bill, and I trust that this will prove to be a piece of logical, non-punitive draft legislation that seeks to place the responsibility for beneficiation where it best lies. I wish to emphasize that this is not with us as producers, who at most should be encouraged to play a supporting and facilitative, rather than an operational, role. Rather, established beneficiators, such as jewellery designers and fabricators, logically stand to gain from the development of their sector and are best positioned to take the lead.
    But while I believe that we are platinum miners who ought to stick to our knitting, we have begun to encourage platinum beneficiation here in South Africa. Most people know of, for example, the PlatAfrika annual platinum jewellery award function, which has become a major event among Southern Africa’s jewellery fraternity and is centred on the Pretoria Technikon now part of the Tswane University of Technology, jewellery training. South Africa already produces over 10% of the world’s catalytic converters for cars and this may rise to 20% in the medium term. Catalytic converters use not only PGMs, but also our stainless steel. In time, who knows, the platinum-bearing fuel-cell industry may also establish some component-manufacturing capacity here in South Africa.
    It is also worthwhile pointing out that, unlike gold, the use of platinum and its sister metals is dominated not by jewellery, but by its industrial applications. Thus, the beneficiation of PGMs provides a downstream opportunity that can be seized upon by something that South Africa has a demonstrable talent at, which is engineering and technological innovativeness.
  9. Finally, we must report on our progress in achieving our social and labour ambitions annually. We produce a sustainable development report as an integral component of our annual report. As engineers, not only have we now begun honing a more refined social conscience, we’ve also started developing our writing skills.

Sustainable development is not a sole effort. Neither is it a matter of just ticking the boxes on a nine-point scorecard and being reluctant compliers with a charter. It is something that we undertake in partnership with Government, our communities, our employees, our suppliers, our customers, and our business partners. We as South African companies are also subject to increasingly intense scrutiny by our international stakeholders, and sustainable development is a key imperative from their perspective also. Sustainable development is also not something new to South Africa. Sir Ernest Oppenheimer, the founder of Anglo American and an icon of our history, had a definition of it long before the concept became as fashionable as it is today. He said that the ‘aim of this group is, and will remain, to make profits for our shareholders, but to do it in such a way as to make a real and lasting contribution to the communities in which we operate.’ We are certainly not recent converts to the precepts of sustainable development.

However, what has changed is the need both to measure and to report on what we are doing. In order to manage these requirements, I think we need to consider some crucial issues.

We must recognize that our sustainable development efforts deserve the attention and specific supervision of the executive management of our businesses. Sustainable development is a values-based concept and so permeates just about everything we do, but the executive needs to ‘pull the strings together’, as it were, and be able to measure progress in key areas so that it is comfortable with the reporting process.

With this in mind, how do we combine business strategy with sustainable development? Anglo Platinum has seen that they are simply two sides of the same coin: we cannot develop a business strategy without reference to sustainable development; conversely, planning our sustainable development interventions is pointless without them being slotted into our business strategy. Both are long-term challenges.

While our corporate centre needs to provide air cover for our sustainable development troops on the ground, ultimate ownership and implementation belongs to operational people, to the engineers and managers who make things happen. One cannot set up vast separate structures for delivery of sustainable development and then hope that conflicts between operational targets and community concerns will resolve themselves. They simply won’t. Rather, our engineers and managers have undergone intensive transformational training, including first-hand experience of many of South Africa’s economic and social challenges, and have begun to grasp and then to empathize with them. An increasing proportion of our management’s time today is spent on sustainable development issues.

Our employees wear two hats: one as an employee and one as a member of the community affected by our operations. It is facile to believe that they wear only one of these when they go to work and then don the other when they go home. It is also patently clear that the corporate centre is less close to the communities in which our operations are based than our operational employees. Most of the great community and social investment interventions that we have undertaken or are busy with are the brain-childs of those two-hatted managers and workers.

We have also formalized our stakeholder engagement efforts. Of course, there will always remain an informal element of these engagements; every time our employees go home at the end of a workday, they are engaging with other community stakeholders. But there remain formal engagements that need careful monitoring if all participants are to benefit.

As our engineers and managers cooperate and deal with their stakeholders, I think one can articulate four key objectives in their efforts:

  • Identify who our stakeholders are. This is not as easy as it may appear at first. Our list was fourteen pages long at last count.
  • Understand the nature of our engagements with these stakeholders. For example, public meetings, the printed media, or a combination of many methods.
  • Keep a record of the information generated from these engagements. It is obvious that this must be complete and honest.
  • Lastly, decide what to do with this information. Should we change operational practices, for example, or should we perhaps identify new stakeholders who need to be included in future engagements?

 

Twenty years ago, we saw the emergence of a strong trade union movement in South Africa. Despite the sceptics at the time among mining companies, I venture to suggest that none today would rather return to the old days of weak unions. It is evident that relationships with our employees are enhanced by strong union involvement. In this vein, I would like to make particular mention of NGOs. Given my fourteen pages of stakeholders, it is beginning to emerge that strong NGOs will play a similarly important role in our quest to build meaningful relationships with stakeholders.

Indeed NGOs, although individually sometimes quite small, are nevertheless already very organized, as many recent world economic summits will testify. This has been made possible particularly as a consequence of the wonderful tool of the Internet. I hope that this trend to greater influence and cooperation continues.

I’ve already talked of the cooperative essence of sustainable development, the fact that we cannot go it alone. If you lived next door to me and I threw my garden refuse over the wall, you’d be none too pleased, would you? But if I took the time to get to know you and your family, and to show concern for your welfare and security, I’d like to think that you would return the favour.

We all want to move in the right direction and make as much good as we can from the positive impacts of mining on our society and economy, while at the same time reducing to a minimum any negative impact, particularly any relating to the environment. In the end, this is what sustainable development is all about. None of us are perfect, but we’re all trying – just to be good neighbours.

And on this note, let me end. While as a mining industry we’ve spent the last hundred years paving our streets and lining our pockets with gold, the next hundred is a platinum highway that at last begins to take us somewhere in respect of meeting our broader responsibilities as members of South African society. It took a while, and we’ve had the examples of such great men as Hendrik van der Bijl during this time, but our moment for making a real, lasting difference as engineers is now upon us.

Thank you