Wild Coast on knife’s edge over mining plans

Wild Coast residents and landowners have been promised billions if an Australian operation is allowed to mine the communal land, but the shady dealings of the empowerment company involved have roused suspicions. With government about to rule on the mining application, Stephan Hofstätter unravels the murky deal.
Issue date : 04 July 2008

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The worldwide commodity boom has left millions of South Africans occupying mineral-rich land in an unenviable position. While the Mineral and Petroleum Resources Development Act seeks to balance national interest in exploiting SA’s mineral wealth with promoting benefits for local communities and respecting their environmental rights, corners are being cut in the scramble for minerals. Far from being guaranteed any advantages, landowners and occupants are often the biggest losers.

This is illustrated by the controversial application by the Australian heavy metals producer Mineral Commodities (MRC) to excavate 313 million tons of titanium ore from Xolobeni on the Wild Coast. MRC was awarded prospecting rights to a thin strip of land between the Coast Sun near Port Edward and Mkambati Nature Reserve 22km further south in 1996. It immediately ran into stiff opposition.

The five mining blocks separated by rivers are all inside the Pondoland Centre of Endemism (PCE), an area of international ecological importance that contains more plant species than the UK. Greens are vehemently opposed to any part of the PCE being mined and their zeal in opposing any perceived environmental threat has successfully halted other developments, including the building of a tolled highway through the area, a proposal that enjoyed widespread local support.

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This was seized upon as evidence by mining supporters that elitist nature lovers – urbanised, wealthy, mostly white – are determined to preserve their playground in its pristine condition at any cost, even if it condemns locals to raising malnourished children. By contrast, the mining lobby is able to portray itself as the only credible bringer of economic upliftment to the area in the form of a massive cash injection for social projects, lucrative contracts in spin-off industries, jobs, roads, schools, clinics and electricity – all with minimal disruption to the environment.

There’s no doubt there’s national value in mining Xolobeni, which contains the world’s 10th largest titanium deposit worth an estimated R11 billion. To the minerals and energy department, it must seem absurd not to mine it at a time of low world inventories and high demand. department probably hopes approving Xolobeni will set a precedent for several other rich titanium deposits along the Wild Coast.

Titanium is mostly used in paint pigments and aircraft manufacture and in a recent report, the department identified it as one of six base metals driving the world commodity boom. Promises to the community Local benefits are less clear. Demonstrating public support becomes critical when applying for a mining license, but there’s no contractual obligation to guarantee benefits.

Claimed spin-offs of mining at Xolobeni include over 557 permanent direct and downstream jobs, 60% of which must go to locals, R1,25 billion in wages, a procurement contract giving preference to local entrepreneurs and improved bulk infrastructure. Local mining supporters interviewed also believe communities will be paid R130 million a year in dividends from their stake in the venture, which would amount to R2,86 billion over the mine’s 22-year life.

Communities would probably have backed the proposal if the company had supplied proof to support their claims. Instead, it sidelined legitimate structures, held secretive elections for bodies claiming to represent the communities’ interests and drummed up support for mining in inland districts unlikely to be adversely affected. This has created deep divisions on the ground that threaten to turn violent, as Farmer’s Weekly witnessed first-hand.

Many villagers interviewed at Xolobeni are deeply suspicious of the company’s motives, threatening to burn huts should the application succeed. The controversy has deepened as the deadline for approval approaches. In the last year, Xolobeni residents sent several petitions to government, demanding that the Minerals and Energy rejects the application, because they fear they’ll lose rights to their ancestral land and become squatters on a mine dump. At the same time, local business leaders organised two pro-mining demonstrations in Pretoria.

On 6 May this year, together with local traditional leaders, they met the Minerals and Energy director-general Sandile Nogxina and handed over a petition with 4 200 signatures, demanding mining approval be fast-tracked. Meanwhile, Environmental Affairs and Tourism earlier this year, warned Minerals and Energy that the mine’s visual impact and damage to ecosystems would be permanent and irreversible.

Opposition and human rights abuse claims Legally, surface rights and impact must be taken into account. Mining license applicants are compelled by law to conduct studies that satisfy the authorities that the impact on water, soil, fauna and flora will be kept within acceptable limits and that affected areas will be rehabilitated afterwards. A social and labour plan must also convince government there will be socioeconomic spin-offs for people living in the mining area.

A final decision that was scheduled for February has been postponed to this month. Minerals and Energy says it wants to consider all the input and ensure its decision isn’t open to legal challenge from either side. Officials deny that stiff opposition from Environmental Affairs can sink the project, following an amendment to legislation that will make the latter the final appeal authority for mining applications. “The amendment will not apply retrospectively, not just for this application but all those in process,” says the director of mining titles, Rebone Nkambule. Meanwhile, the Human Rights Commission (HRC) is investigating a complaint that abuses perpetrated by mining supporters were rife during public participation hearings in Pondoland.

In May, the HRC subpoenaed the minerals and energy minister Sonjica Buyelwa after her officials failed to supply documents that were requested, opening her department up to criticism that it doesn’t take the social impact of mining seriously when considering applications. “This is completely off the mark,” Nkambule says. “The social and labour plan submitted will be critical to any decision.”

Complaints include intimidating and victimising mining opponents, failing to tell people in the immediate mining area they will lose grazing land and have to put up with 40t trucks transporting ore every hour, every day, for 22 years, and refusing to disclose financial details relating to the murky deal struck between MRC and Xolco, the local empowerment company that’s supposed to represent the community. Murky deal MRC has hailed its BEE deal with Xolco as unique in that locals are given a major stake in the mining project and downstream processing.

Xolco claims all its shares will be distributed among eight community trusts representing constituencies ranging from the youth to the disabled, mandated to spend dividends on community projects. Xolco’s directors are appointed by trustees elected at annual meetings and can be removed if people aren’t happy with the way their money is being spent. But on closer inspection, most of MRC’s claims collapse. Late last year, it dropped the smelter from their application, citing costs concerns, which means the number of jobs created and wages earned can be slashed by half. Neither MRC nor Xolco could supply any evidence, including a procurement contract, of preferential treatment for locals.

Most disturbing is Xolco’s complex, opaque share deal with MRC that commits the community to paying R135 million for its 26% stake in the venture. This is almost three times more than experienced BEE titanium miner Ehlobo Heavy Minerals was prepared to fork out for a 50,5% stake in Xolobeni and MRC’s much smaller project Tormin in the Western Cape.

Ehlobo unexpectedly pulled out of the deal early last year without ever disclosing reasons and was replaced by Xolco. It remains unclear when Xolco, let alone the people whose ancestral land is being dug up, will see a cent of mining revenues. MRC’s MD Mark Caruso initially said 60% of Xolco’s dividend stream would go towards paying its debt and 40% would go to communities. But this is not provided for in the shareholders’ agreement seen by Farmer’s Weekly. Moreover, there’s no evidence of a legally binding agreement obliging Xolco’s shares or any revenues to be ceded to the trusts, or that the trustees must appoint the directors of Xolco and its operating company, or that trustee elections are legitimate. Xolco declined to provide any documents supporting its claims.

Irreparable damage to ecosystems Mark Caruso’s insistence that environmental dangers are grossly exaggerated is also questionable. He says all ecologically sensitive areas were deliberately excluded and that post-mining rehabilitation would actually halt damage being done to estuaries and coastal thickets by stabilising dune areas created by poor farming practices.

This was rubbished by Environmental Affairs and Tourism. Its objection, seen by Farmer’s Weekly and sent to Minerals and Energy, warns that mining in the PCE will cause “irreparable damage” to ecosystems, the extinction of rare aquatic fauna and become a permanent eyesore for the neighbouring Mkambati Nature Reserve and Wild Coast Sun. Mining geologist Dr Stefan Cramer, currently Nigeria’s country director of the Heinrich Böll Foundation, says the dunes can never be fully rehabilitated. “The current level of biodiversity, which makes the coastal forests in Xolobeni so unique, evolved over thousands of years.

No amount of time and engineering will restore them to their pristine condition.” Political connections Most locals interviewed at Xolobeni don’t care about pristine dunes. Their poverty and desperation could rival any corner of Zimbabwe’s. All they want is development. But none were invited to take part in trustee elections or Xolco appointments, or given the chance to examine Xolco’s books. Many are worried the local elite with political connections is simply intent on feathering its own nest with directors’ fees as well as mining, catering and transport contracts sure to come its way.

The project has strong backing from local ANC heavyweights, including Zoleka Capa, the OR Tambo Municipality mayor with jurisdiction over most of the Wild Coast who was elected to sixty-second place on the ANC National Executive Council (NEC) at Polokwane. “Limpopo and Mpumalanga are famous for their tourism and mining,” she says. “Why can’t we have mining here, where there is so much poverty?” She stresses she hasn’t pulled any strings to make it happen. “We have never discussed this issue in the NEC.” She also insists that she has no commercial interests in the project. But a close associate of Capa, Zamile Qunya, does.

Qunya is a former ANC mayor from Xolobeni who refers to himself as a businessman and politician. He apparently still calls the shots with local ward councillors. “They have to toe the line or lose their ANC position,” says one local. Qunya is a founding member of Xolco, but claims to have no remaining interests since resigning as a director last year, or any influence over officials. “Otherwise the approval would have been granted long ago.” But recently appointed Xolco chairperson Zeka Mnyamana refers all queries to Qunya, who still represents the company at high-level meetings including in Pretoria.

No consultation or transparency Xolco is accused of bypassing legitimate structures representing people living on the mining blocks. “I would support this process if the people in power talked to those directly affected,” says Lunga Baleni, the traditional leader for all five mining blocks. He has yet to be consulted, wasn’t invited to the pro-mining mission to Pretoria led by one of his junior headmen and no trust elections were held at the mining area’s only community hall, which means they lack legitimacy.

He also believes the mining petition was fraudulent. “Those people thought they were signing for jobs and electricity – not mining.” Qunya rejects the charge. “It’s been discussed out of context. We spoke of a lack of electricity, roads, HIV, various things hindering the people,” he says. Farmer’s Weekly was unable to verify any names on the petition because Minerals and Energy declined to supply a copy, citing legal and security concerns.

Human rights lawyer Richard Spoor, who was consulted on a possible court challenge to the application, says Xolco’s lack of transparency should set alarm bells off for mining authorities. “They need to look at the share deal to see if it holds any value for the community, but they lack the capacity,” he says. “It’s obvious the revenue will go into large directors’ fees and the people this is supposed to benefit will end up with nothing.” |fw