Corporate Social Responsibility: The Role of Extractive Corporations in Poverty Alleviation

Written By: Daniel Hertog

Introduction

As many as 30.4 million people are estimated to live below the upper-bound poverty line of R1 417 per month, while 13.8 million people are estimated to live below the food poverty line of R663 per month in South Africa. Informed by the principles of corporate social responsibility (CSR), this blog discusses the potential role extractive corporations must play in alleviating poverty.  

Principles of Corporate Social Responsibility

CSR is premised on extractive corporations considering the effects of extractive operations on all affected stakeholders and making efforts to ameliorate the impact of such operations.[1] The principles informing how extractive corporations are expected to do so include, inter alia, integrated sustainable decision-making, meaningful engagement with relevant stakeholders, community investment, local shareholding as well as ensuring high levels of transparency and accountability throughout a project’s life cycle.[2]

Whilst voluntary in the past, the principles of CSR have been subsumed under the regulatory frameworks governing South Africa’s extractives’ sectors. One of the primary reasons for this is to redress the historically discriminatory policies and practices under the old order, which enabled large-scale mining corporations to benefit certain racial groups at the expense of most black South Africans.

Regulatory Frameworks on CSR in the Extractives’ Sectors

To ensure that integrated sustainable decisions are taken throughout a project’s lifecycle, as envisaged by s 24(b) of the Constitution of the Republic of South Africa, 1996,[3] extractive corporations must comply with several provisions. These include the requirements that extractive corporations integrate “social, economic and environmental factors into the planning and implementation of prospecting and mining projects in order to ensure that exploitation of mineral resources serves present and future generations”.[4] Such requirements necessitate conducting environmental impact assessments (EIA) and preparing environmental management plans (EMP) as well as social and labour plans (SLP).[5]

In addition to the obligation to ensure integrated sustainable decisions, extractive corporations must meaningfully engage with relevant stakeholders and invest in communities affected by extractive operations. This includes engaging with landowners and lawful occupiers as well as other interested and affected parties.[6] Furthermore, as a measure to protect stakeholders and redress land deprivation under the old order, consent must be obtained prior to depriving any person of their informal right to land.[7] As such, given that the extent of land dispossession under the old order occurred with the very purpose to impoverish a certain class of people, meaningfully engaging with stakeholders and protecting indigenous peoples’ land rights and interests must lie at the heart of poverty alleviation.[8] For this reason, when investing in affected communities, extractive corporations are also mandated to contribute to the development and social upliftment of such communities.[9]   

Furthermore, in redressing the disparities in ownership and equality, the principles of CSR necessitate local shareholding in extractive operations. Guidance as to how extractive corporations can ensure this is gleaned from the Mining Charter, which recommends a minimum of 26% shareholding by historically disadvantaged South Africans.[10] Additionally, extractive corporations are expected to procure local goods and services from companies owned by historically disadvantaged South Africans.[11]

Lastly, the elements of transparency and accountability must permeate every stage of a project’s life cycle. In particular, this necessitates that extractive corporations retain and disclose records pertaining to extractive activities and revenues.[12] Furthermore, extractive corporations are also expected to submit reports indicating compliance with certain requirements, such as that pertaining to social and labour plans under reg 45 of the MPRDA Regulations. Failure to comply with such requirements may result in a suspension or cancellation of extractive rights, pursuant to s 47 of the MPRDA. As such, these requirements are illustrative of a shift from an era in which extractive corporations could conduct exploitative practices, devoid of any imperatives to consider the impact of their operations, to an era in which equitable access to and sustainable development of mineral and petroleum resources must lie at the heart of extractive operations.

Conclusion

South Africa is plagued by poverty and inequality as a result of discriminatory policies and practices under the old order. Whereas CSR may have been voluntary in the past, there is an increased shift towards mandatory compliance with its principles. This is articulated in various provisions within the regulatory frameworks governing South Africa’s extractives’ sectors. For example, this is borne out of provisions prescribing sustainable development, meaningful engagement and investment in affected communities to local content, transparency and accountability requirements. Thus, there is a marked shift from an era in which extractive corporations could conduct their activities as they so chose, to an era in which extractive corporations are subject to the strictures of South Africa’s constitutionally democratic order.