[miningmx.com] — FOR outsiders, the strike launched eight days ago by the National Union of Mineworkers (NUM) over an employee share scheme introduced by Xstrata’s mines would make no sense, but even a brief overview of the role of such schemes in recent years would make the situation much clearer.
These schemes, better known as Esops (Employee Share Ownership Programmes), are increasingly being seen by workers and trade unions as an instrument for black economic empowerment (BEE).
In fact, trade unions say Esops would be a far more effective instrument for the reallocation of ownership than most other BEE methods, such as allowing so-called entrepreneurs to get rich quick with debt-financed shareholding.
The first large mining-industry Esop driven by a trade union was AngloGold-Ashanti’s scheme, which was established under the guidance of Bobby Godsell in 2006.
This made provision for AngloGold’s 31,000 workers in South Africa to become owners of 1.4% of the company. The transaction had a market value of R2.1bn – by far the biggest Esop in South Africa at the time.
The beneficiaries were the members of three trade unions – NUM, Solidarity and Uasa.
FULL RECOGNITION
It is actually quite surprising that no other mining company had negotiated such transactions with their employees prior to this, because the mining charter for BEE, which was finalised in 2002, accords full recognition to ownership transferred to employees by means of shares.
Every mining company in the country was trying to transfer shares to blacks at the time, and ingenious, but risky, financing plans were used for the purpose.
AngloGold’s Esop made no distinction between employees. The scheme made no provision for favouring certain employees above others. Prior to this transaction, several companies outside the mining industry had introduced similar schemes based on race, because they had wanted to use it as a BEE instrument. This was naturally objected to strongly, especially by Solidarity. During negotiations, Solidarity had insisted that its members must share fully in the scheme. NUM supported Solidarity in this.
Five further large Esops have since been introduced in the mining industry – by Impala Platinum, Exxaro, Kumba Iron Ore, Anglo American Platinum and Gold Fields. The total value of the six transactions is R9.3bn – an enormous benefit for employees and undoubtedly an important step forward for real BEE in the industry.
Xstrata would have pushed the figure up to more than R10bn.
The six transactions differ from company to company, but they all have one thing in common: they apply to workers on job levels A to C, but no distinction is made in terms of the benefits received by the workers – they are all equal beneficiaries.
In contrast, Xstrata is insisting that its Esop offer greater benefits to workers on senior job levels.
In fact, it initially insisted on the benefits of the sop being divided on the basis of 14 different job levels, which meant that workers on the lowest job levels would enjoy very few benefits, but in subsequent negotiations Xstrata reduced the categories to three, so that the benefits for those on the lowest job levels improved slightly.
PRINCIPLE
The realities of race in South Africa mean that workers in the C band are mostly members of Solidarity and Uasa and are white. Workers in the B band and A band are mostly members of NUM and other predominantly black trade unions, where metalworkers’ trade union Numsa is the largest. The Numsa members mainly work at Xstrata’s smelter plants.
NUM, Numsa, Solidarity and Uasa are all parties to the dispute, but only NUM decided to strike. It represents 43% of Xstrata’s 12,000 workers in South Africa. Solidarity in particular supports the NUM strike, but is not taking part in it.
It is a matter of principle for the trade unions that the benefits of an Esop scheme, for which a company can obtain BEE credits, must be divided 100% equally. NUM is certainly not the only trade union that feels very seriously about this.
That Xstrata does not understand this indicates a serious level of ignorance. The trade unions argue that it is not really an Esop if the benefits are allocated on the basis of seniority. In that case, it is more of a bonus scheme that is aimed at increasing profitability and productivity.
A company has many other mechanisms for implementing such schemes for encouraging workers to better performance. There are different forms of performance bonus that the management can use for this. An Esop has an entirely different objective.
Xstrata has pointed out that it has obtained enough BEE credits by means of other BEE transactions, such as its partnership with Merafe in the ferrochrome industry and with African Rainbow Minerals (ARM) in the Goedgevonden colliery in Mpumalanga. It therefore does not need the Esop in order to acquire BEE credits.
The question therefore is why Xstrata is so determined to introduce an Esop at all.
Does it perhaps have expansion plans that will result in its existing BEE shareholding becoming diluted? It’s also a mystery how it happened that this issue became a subject for negotiation.
An Esop is a voluntary “gift” given by an employer to his employees for whatever reason. There’s no need to negotiate it – the employer could consult them about it, but even that is not compulsory.
So how did it happen that Xstrata’s Esop became a subject for negotiation for which a strike could be called?
Talks about it started as far back as January, but when no agreement was reached matter was referred to the Chamber of Mines in May to become part of the wage negotiations for the coal industry.
The parties again failed to reach agreement, after which the issue was referred to the Commission for Conciliation, Mediation and Arbitration (CCMA). Only when the CCMA was unable to negotiate a settlement, it issued a certificate in which the commissioner, in this case Kasier Thebide, declared that he could not reach a compromise in the dispute.
In trade union terms, this is known as a strike certificate.
