COMMUNITY DEVELOPMENT AGREEMENTS
| Jurisdiction | United States |
(Apr 2015)
COMMUNITY DEVELOPMENT AGREEMENTS
Partner
Fasken Martineau
Johannesburg
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LUCAS MOALUSI is a Partner with Fasken Martineau in Johannesburg. He specializes in mining law and traditional communities governance. He is an expert in traditional leadership legislation, the law applicable to traditional communities structures, and the structuring of Black Economic Empowerment transactions. He has particular expertise in advising mining companies and traditional communities in their governance structures including corporatization of their affairs, and has extensive experience in advising both the mining companies and the surface rights holders. He advised the Bakwena Ba Mogopa traditional community on corporatization of their affairs, and served as counsel to the Bapo Ba Mogale traditional community in its acquisition of an equity stake in Lonmin plc and as counsel to the Bakwena Ba Mogopa Traditional Community in its acquisition of 26% participation interest in Xstrata's (now known as Glencore) Rhovan business. His presentations include an Update on South African Mining, Labour and Community Engagement Issues, Global Mining Group Seminar (PDAC 2014); Emerging Issues in Corporate Social Responsibility, Corporate Social Responsibility (CSR) law group (2013); and Does Transparency Matter?, The Corporate Social Responsibility (CSR) Event Series (PDAC 2013). His publications include "Mineral Beneficiation in Africa: the Elephant in the Room," Mining Weekly 28 July 2014; "Platinum Belt - Where to Now?" Mining Weekly 11 July 2014; and "Getting the Deal Through - Mining 2014 -- Canada," Law Business Research Limited, June 2014. Lucas received his LLM in Tax Law from the University of Johannesburg, and Certificates in Environmental & Sustainable Development Law and Prospecting & Mining Law from the University of Witwatersrand. He is a Member of the Law Society of the Northern Provinces, and is fluent in English and Setswana.
Introduction
The subject of development of mine impacted communities has become an issue of concern in most developing countries. As a result, the issue has rightly received increasing attention in recent years both from governments and mining companies. This has also resulted in community development programmes achieving prominence in the corporate social responsibility ("CSR") activities of mining companies.
Although the mining industry contributes significantly to the economies of various developing countries, host mining communities are often the most impacted by the negative externalities of mining operations. In an ideal world these host communities should benefit from the extraction of finite natural resources. However, the reality of the situation is that the benefit of a positive economic contribution from mining operations is negated by the negative effect that mining has on local surrounding communities.1 Host communities in most developing countries do not benefit from any socio-economic development initiatives nor are the royalty taxes paid by mining companies to the host communities' respective governments seen to be utilised for the benefit of these host communities.
Agreements between mining companies and host communities are becoming more common in most developing countries as a means of addressing development in these mine impacted communities. These agreements represent a new institutional pathway used by mining companies as a means to better define the relationship and obligations between the mining company and the impacted community.
The aim of this paper is to examine the status and emerging trends on the law and governance of the "Community Development Agreements" ("CDAs") in developing countries. It will also look at the role that that CDAs can play in the mining industry as a means of addressing the development of mine impacted communities and the empowerment of host communities in developing countries.
Community Development Agreements in developing countries
The World Bank Group2 ("WBG") has advocated for CDAs as instruments that can be adopted by the mining industry, governments and host communities to address the development of mine impacted communities.
CDAs can be defined as any negotiated agreement between the mining sector and the communities agreeing how these communities will access development initiatives.3 CDAs have
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the effect of promoting and ensuring that there is sustainable social, cultural and economic well-being of host communities and mutual beneficial benefits from mining operations. The general vision of a CDA is to improve relationships between companies, host communities, governments, civil society and other stakeholders.4 The primary objective of mine community development is to meaningfully contribute towards community development, both in terms of size and impact, in keeping with the principles of the 'social license to operate'.5
According to the EMR Report "[mining] companies have realized that improved relationships with stakeholders are an important way in which not only to manage risk but to create business value; incorporating issues of equity into business efficiency".
It cannot be denied that there is an imbalance of power regarding the relationship between mining companies and host communities. The implications of the unequal bargaining relationships between host communities and mining companies have historically resulted in a lack of engagement and lack of sustainable community development for the benefit of the host communities. Recently host communities have found a means of exerting pressure on mining companies to undertake and/or comply with community development initiatives. This can be attributed to, amongst others, host communities being better informed and educated on their rights and interests. This has resulted in mining companies as well as governments taking note of the importance of the involvement of host communities in the mining projects and ensuring that host communities mutually benefit from mining projects.
The mining industry adds significant value to most developing countries' economies with regards to GDP contribution. However, the main issue is whether this wealth has benefited any of the mining communities affected and whether any sustainability measures have been put in place to ensure that the benefits are far-reaching.
According to the EMR Report despite the proliferation of international guidance and standards pertaining to community engagement and development there is no widely accepted international standard, or regulatory framework, for the design and implementation of CDAs within the mining sector.
While some countries with large mining sectors such as Nigeria, Papua New Guinea ("PNG"), and South Africa have adopted mining laws that mandate community development, the legislative requirement for CDAs in most developing countries are still rare.
Within some of the developing countries, CDAs appear under several different guises. For example in South Africa, CDAs can be likened to Social and Labour Plans ("SLPs") and Broad-Based Socio-Economic Empowerment Charter for the Mining Minerals Industry6 ("Mining Charter") requirements. Under the South African legislative regime (the Minerals and Petroleum Resources Development Act 28 of 2002 ("MPRDA")), the regulatory requirements
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placed on every mining company in South Africa are set out in the mining company's SLP, which must be approved by the Department of Mineral Resources ("DMR")..
The objectives of SLPs are to promote employment and advance the social and economic welfare of all South Africans, contribute to the transformation of the mining industry and petroleum industry, and ensure that holders of mining...
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