An explosive report by the Alternative Information & Development Centre (AIDC) reveals that Lonmin has for years been moving hundreds of millions out of South Africa through the use of tax havens; transfer pricing and profit shifting.
This was done by setting up ‘daughter companies’ which invoiced Lonmin’s various South African offices, despite the companies doing the invoicing not having sold any metal or running any operations since 1999 and even having no staff in some instances.
These damning revelations show that not only could Lonmin have afforded a R12 500 living wage for miners – a wage denied by an executive who earned twice the amount per day- but also that the company had the financial resources to provide decent work and living conditions to its employees.
Lonmin reportedly continues to deny the allegations contained in the recently launched report, despite the mounting evidence against them. That certain payments to ‘daughter companies’ were not itemised in financial notes suggests that Lonmin purposefully attempted to conceal the transactions.
AIDC Chairperson, MP Giyose compared Lonmin to ‘a child who shoots his parents, then wants sympathy for being an orphan’, as the company has over time sought sympathy through claiming poverty when in fact hundreds of millions were being diverted as mineworkers struggled to make ends meet.
The report titled ‘The Bermuda Connection: Profit shifting, inequality and unaffordability at Lonmin 1999-2012’, was developed as part of Phase Two of the Marikana Commission of Inquiry.
While most commissions of inquiry are either investigative or advisory, the Marikana Commission was set up to be both. This second phase would interrogate issues such as the lived experiences of the rock driller operators, collective bargaining and Lonmin’s obligations to its workers.
On the financial issues however, the focus would be on the competiveness of rock driller operator wages paid by Lonmin prior to the 2012 protest; the affordability for Lonmin of the increases demanded by the rock drillers and the financial capacity of Lonmin to provide decent work and living conditions for its employees.
But the change of the terms of reference of the commission led to only the latter being cross examined. This change also meant that government institutions could not be investigated, which is notable as it is these institutions that should have ensured that Lonmin complied with the Mining Charter, which sets out a social labour plan and “makes provision for the complete elimination of hostels on South Africa’s mines by 2014”.
During the commission, it was found that a shortage of housing had contributed to the events that unfolded in Marikana. In 2012 miners lived in hostels and shacks yet Lonmin’s ‘daughter companies’, Western Platinum Limited (WPL) and Eastern Platinum Limited (EPL), had undertaken to build 5500 houses by September 2011. Only three houses were ever built and with 29 hostels converted, with the conversion displacing around 60 workers out of every 80 as a rebuilt hostel accommodates 20 beds when it previously held 80.
Despite failing to meet their housing obligations and further increasing the number of miners forced to live in informal settlements through a dysfunctional and unfair hostel conversion system, Lonmin was allowed to continue to operate even though the Mining Charter provides that “companies found not complying could face penalties which could include the revoking of a mining company’s licence”.
Speaking at the launch, Advocate Dali Mpofu strongly felt that the report, coupled with what remains a hidden final report of the commission, suggest that a Phase Three of the inquiry is necessary – a phase that should be driven by society. “This phase would go into issues that the commission could not have dealt with”, said Mpofu, adding that “the commission’s report will apportion blame, but the causal chain of historic experiences, land deprivation, the structure of the economy and the migrant labour system need to be understood”.
He further noted that this phase would seek to answer whether anything could have been done before any policeman even had a gun, a sentiment affirmed by AIDC’s report.
The revelations of the report are timely given the growing interest in curbing illicit finance flight which is critical to ensuring that companies like Lonmin are prevented from hiding their super profits overseas, thus plundering the country by avoiding tax; getting away with not paying workers a living wage; not meeting their social obligations and upholding what AMCU’s Joseph Mathunjwa describes as being “an order that undermines dignity”.
As a first step to undoing this order to which Mathunjwa refers, we would do well to find ourselves placing corporate accountability higher on our priority list spurred on by Dick Forslund’s closing lines in the introduction of the report where he notes that; “the report is not guided by any belief that Lonmin Plc is more unequal, negligent or ruthlessly profit maximising than any other mining company. It may well be the opposite. And if this is the case, these findings are of a more damning and generalised application to the mining industry in South Africa as a whole”.