Xstrata Alloys

The trickle-down effect
The South African government is asking existing businesses to improve the lot of the wider black communityÔÇödemands which have changed the face of the countryÔÇÖs mining industry, as Jeff Daniels discovers.
Without first-hand observation, itÔÇÖs impossible to fully understand the conditions under which many black South African men used to live and work for the countryÔÇÖs mining operationsÔÇömany of which were owned by renowned international business names.

Labour was often recruited long-distance from around South Africa and even neighbouring countries, on contracts that obliged workers to leave their families and live in hostel rooms with 10 or 20 other men in the most primitive of conditions.
Even where mining operations were developed around existing communities, other than wages, little or nothing of the wealth being created benefited the community. Some employment was created but only ever in labouring grades. Generally, very little was done to uplift the community, develop local businesses or protect biodiversity. Not surprisingly, mines were invariably seen as unwelcome neighbours and conflict occurred all too often as frustrations came to a head.
When the black majority government was elected in the 1990s, black empowerment was high on the agenda and to their credit, boards of directors have ensured that change has been real and introduced in a realistically short timescale.
One such successful South African operation is Xstrata Alloys, which runs a string of mines from Rustenberg in the north-west to Swaziland in the east. Although Xstrata can trace its roots back to the 1920s, it was only in 2001 when the current management team took over what was a relatively small Swiss-listed mining company that the business as known today emerged. Under the guidance of CEO Mick Davis and CFO Trevor Reid, Xstrata plc was floated on the London Stock Exchange, raising just under £1 billion but oversubscribed by a factor of seven and immediately entering the FTSE100 index!
Today, Xstrata is the worldÔÇÖs largest producer of export thermal coal; one of the top five producers of coking or metallurgical coal; the largest producer of ferrochrome; the fourth largest global copper producer; the fifth largest global nickel producer; and one of the worldÔÇÖs largest sources of zinc.
Perhaps fulfilling its ideals has come easier to Xstrata thanks to starting with a clean sheet; but its programme has been recognised as a working model thanks to winning the sustainability category of the Nedbank Capital Green Mining Awards for 2008.
The need for such a programme was based on three fundamental pillars: it provided a moral licence to operate from all its stakeholders; it reduced the risk of socio-environmental damage; and it enhanced its overall reputation. Essentially, Xstrata wants to be welcomed as a neighbour in all the communities in which it operates, as well as in the broader South African society. 
Embarking on a corporate sustainability programme is no easy task for any large organisation but to ease its way, Xstrata appointed an executive director who established the necessary new departments and oversaw their activities. To ensure Xstrata personnel were close to community stakeholders, liaison learners were hired and trained in the art of social entrepreneurship. The resources created included skilled personnel, systems and procedures to engage all aspects of corporate sustainability.
To fund these activities, Xstrata spends a minimum two per cent of net profit after tax per annum on community development, and up to three per cent of the salary bill on training and education. A number of targets have been set, covering a wide range of endeavours from health and safety, through biodiversity conservation, to water management. Not all of the targets have been met; but the majority have, and even where shortfalls have occurred, the performance gap is closing.
In addition, Xstrata measures itself against the South African Mining Charter scorecard, which monitors a companyÔÇÖs actions in improving the lot of what are collectively referred to as historically disadvantaged South Africans. All too often, black students leave school with little education, so many employers provide Adult Basic Education and Training (ABET). Xstrata has ABET facilitators at all its plants.┬á
Xstrata has already met its initial target of having HDSAs in 40 per cent of management positions and employment equity plans are in place at all the operations to increase that penetration even more. In addition, there is a move to accommodate more women in mining, with a target last year of 10 per cent of the total workforce.
On a social level, none of XstrataÔÇÖs mines have hostels. Instead, employees receive a housing allowance and, in order to promote ownership, housing subsidies are awarded to all home owners.
Throughout South Africa there is an ongoing struggle with the extremely high incidence of HIV and AIDS. In 2007, a wellness programme was rolled out across all operations creating ÔÇÿchampionsÔÇÖ who will teach employees about avoiding the illness and offering voluntary counselling and support to those who have it.
South Africa also has a programme of developing new entrepreneurs by encouraging established businesses to buy from HDSA-owned companies. Already, Xstrata buys almost half of what it needs in this way, with nearly two thirds of this expenditure being on capital equipment. Rather than buying from anywhere in the country, Xstrata has a policy of encouraging start-up companies within the vicinity of the individual mines.
Xstrata also believes in going beyond simple compliance and recognises the learning curve all business managers must go through in order to gain experience. In the past, it has divided its needs between a couple of suppliers where one would have sufficed, helping new contractors to learn the ropes while developing a wider business infrastructure in what are often very isolated geographical areas. Where the creation of a new business isnÔÇÖt feasible, Xstrata is trying to encourage existing HDSA businesses which have developed around the major commercial centres of Johannesburg and Pretoria to open branches near to the mine locations.
No one denies that South Africa still has a long way to go; but compared with just 15 or 20 years ago, conditions have changed beyond recognitionÔÇöat least for the former occupants of those notorious mine hostels.