Mining Foundations,
Trusts and Funds
A Sourcebook
The World Bank
June 2010
Table of Contents
EXECUTIVE SUMMARY .................................................................................................................... 7
INTRODUCTION ...............................................................................................................................13
PART 1 ................................................................................................................................................15
1) THE MINING SECTOR AND FOUNDATIONS, TRUSTS AND FUNDS ..........................17
A) AN INTRODUCTION TO FOUNDATIONS, TRUSTS AND FUNDS ...................................................19
B) A GROWING PHENOMENON .........................................................................................................21
C) HOW DOES THE MINING SECTOR USE FTFS? ............................................................................22
I) COMMUNITY INVESTMENT ........................................................................................................................ 23
II) GOVERNMENT PAYMENTS ........................................................................................................................ 24
III) COMPENSATION ......................................................................................................................................... 26
D) INFLUENCE OF POLITICAL ECONOMY ..........................................................................................27
E) KEY ATTRIBUTES ..........................................................................................................................28
I) PROGRAMMATIC APPROACH ..................................................................................................................... 28
II) FINANCING .................................................................................................................................................. 31
III) GEOGRAPHIC REACH ................................................................................................................................. 38
IV) PARTICIPATION ......................................................................................................................................... 41
V) GOVERNANCE AND INFLUENCE................................................................................................................ 44
VI) PROGRAMMING FOCUS ............................................................................................................................. 45
VII) TIMING ....................................................................................................................................................... 47
2) A SNAPSHOT OF THE EXPERIENCE FROM PART II CASE STUDIES ........................49
A)
B)
C)
D)
E)
F)
G)
H)
I)
THE IMPORTANCE OF CONTEXT .............................................................................................................. 49
THE USE OF FTFS ...................................................................................................................................... 50
PROGRAMMATIC APPROACHES ................................................................................................................ 51
FINANCING .................................................................................................................................................. 51
GEOGRAPHIC FOCUS .................................................................................................................................. 52
PARTICIPATION........................................................................................................................................... 53
GOVERNANCE AND INFLUENCE ............................................................................................................... 54
PROGRAMMING .......................................................................................................................................... 56
TIMING .......................................................................................................................................................... 56
3) IDENTIFICATION OF LEADING PRACTICE ......................................................................59
A)
I)
II)
III)
B)
I)
II)
III)
POINTS TO CONSIDER - FTF PURPOSES .....................................................................................59
USING AN FTF FOR COMMUNITY INVESTMENT ..................................................................................... 60
USING AN FTF FOR COMPENSATION ...................................................................................................... 60
USING AN FTF FOR GOVERNMENT TRANSFERS AND PAYMENTS ..................................................... 61
POINTS TO CONSIDER - STAKEHOLDER GROUPS .......................................................................62
COMMUNITIES .............................................................................................................................................. 62
GOVERNMENTS ........................................................................................................................................... 63
COMPANIES ................................................................................................................................................ 65
PART TWO.........................................................................................................................................69
INTRODUCTION ...............................................................................................................................71
3
CASE STUDIES ..................................................................................................................................73
A)
I)
II)
III)
IV)
V)
B)
I)
II)
III)
IV)
V)
VI)
C)
I)
II)
III)
PERU .............................................................................................................................................73
FONDO SOCIAL LA GRANJA ........................................................................................................................ 76
ASOCIACIÓN LOS ANDES DE CAJAMARCA (ALAC) ............................................................................... 80
FONDO SOLIDARIDAD CAJAMARCA......................................................................................................... 88
ASOCIACIÓN ANCASH ............................................................................................................................... 93
FONDO MINERO ANTAMINA .................................................................................................................. 100
SOUTH AFRICA, MOZAMBIQUE AND NAMIBIA ........................................................................ 107
ANGLO AMERICAN CHAIRMAN’S FUND ................................................................................................. 110
IMPALA BAFOKENG TRUST ..................................................................................................................... 117
GREATER RUSTENBURG COMMUNITY FOUNDATION ........................................................................ 122
PALABORA FOUNDATION....................................................................................................................... 126
MOZAL COMMUNITY DEVELOPMENT TRUST ...................................................................................... 135
RÖSSING FOUNDATION .......................................................................................................................... 140
PAPUA NEW GUINEA ................................................................................................................. 147
OK TEDI FLY RIVER DEVELOPMENT PROGRAMME (OTFRDP) ....................................................... 151
PAPUA NEW GUINEA SUSTAINABLE DEVELOPMENT PROGRAM LTD (PNGSDP)........................ 158
LIHIR SUSTAINABLE DEVELOPMENT PLAN TRUST ........................................................................... 164
BIBLIOGRAPHY............................................................................................................................. 167
APPENDIX 1 INTERVIEWS CONDUCTED .......................................................................................... 173
APPENDIX 2 FOUNDATIONS REVIEWED (DESK BASED)................................................................ 175
ACKNOWLEDGEMENTS .............................................................................................................. 177
4
List of Figures
Figure 1 Channels for Social and Economic Contributions and Payments ....................................................18
Figure 2 Potential Applications of FTF Model in the Mining Sector.................................................................22
Figure 3 Relationships Between Geographic Reach and Ownership ................................................................ 40
Figure 4 Programming Trends .......................................................................................................................................46
Figure 5 Use of FTFs in Case Studies ............................................................................................................................. 50
Figure 6 Comparison of Development Budgets Across Community Investment FTFs ............................... 52
Figure 7 Influences over Geography ............................................................................................................................. 53
Figure 8 Time Elapsed Between Mineral Production and FTF launch ............................................................ 57
Figure 9 Categorisation Model for Case Studies.......................................................................................................73
Figure 10 Map of Poverty in Peru ..................................................................................................................................74
Figure 11 Structure of Fondo Social La Granja ........................................................................................................78
Figure 12 ALAC Structure .................................................................................................................................................81
Figure 13 Yanacocha Area of Influence and ALAC's Priority Areas .................................................................83
Figure 14 ALAC Governance Structure ........................................................................................................................84
Figure 15 ALAC Co-Funding Mechanisms ...................................................................................................................85
Figure 16 Other Sources of Financing for ALAC (to December 31 2008) .......................................................86
Figure 17 Fondo Solidaridad Cajamarca Structure ............................................................................................... 89
Figure 18 Distribution of Fondo Solidaridad Cajamarca Within Programme Lines .................................90
Figure 19 Intervention Areas for Fondo Solidaridad Cajamarca ......................................................................91
Figure 20 Government Transfer Payments 2006-2009 .........................................................................................94
Figure 21 Canon Received by each Regional Government ...................................................................................95
Figure 22 Regional Government Expenditure of Canon ........................................................................................95
Figure 23 Governance Structure for Asociación Ancash.......................................................................................98
Figure 24 Structure of FMA ........................................................................................................................................... 101
Figure 25 Ancash Department – Definition of Local and Regional Interventions for FMA.................. 103
Figure 26 Anglo American Chairman's Fund Focus Areas by Value in 2008 ............................................. 113
Figure 27 Provincial Giving by Value (2007) ......................................................................................................... 114
Figure 28 Bojanala Region ............................................................................................................................................ 118
Figure 29 IBT Resource Allocations per Programme Area ............................................................................... 119
Figure 30 IBT's Geographic Allocation of Financial Resources ...................................................................... 120
Figure 31 Total Budget per Area for Palabora Foundation for 2009........................................................... 129
Figure 32 Palabora Foundation Areas of Operation - 50 Km Radius ........................................................... 131
Figure 33 Rio Tinto Palabora Mining Company Donations to the Palabora Foundation .................... 133
Figure 34 Mozal Smelter and MCDT Location ....................................................................................................... 136
Figure 35 MCDT Staffing Structure ............................................................................................................................ 138
Figure 36 Mining Regions in Namibia ....................................................................................................................... 140
Figure 37 Areas of Operation for Rössing Foundation ....................................................................................... 145
Figure 38 Papua New Guinea Mines and Potential Project Map .................................................................... 148
Figure 39 CMCA Regions and District Boundaries ............................................................................................... 154
Figure 40 Governance Structure for OTFRDP ........................................................................................................ 155
Figure 41 PNGSDP's Western Province Programmes ......................................................................................... 161
Figure 42 PNGSDP Ltd Board Composition............................................................................................................. 162
Figure 43 Simplified PNGSDP Management Structure ....................................................................................... 163
Figure 44 LSDP Governance and Approvals Structure ....................................................................................... 166
5
List of Tables
Table 1 Drivers of Community Investment by Mining Companies ....................................................................23
Table 2 Comparative Staffing Levels ............................................................................................................................ 51
Table 3 Participation through FTF Governance Structures ................................................................................54
Table 4 Governing Body Composition ..........................................................................................................................55
Table 5 Basic Infrastructure Programmes .................................................................................................................56
Table 6 Relationships between Purpose of FTF and Attributes of Leading Practice .................................60
Table 7 FMA Financial Summary (as at 30 April 2009) ................................................................................... 105
Table 8 FMA Projections (in USD Millions) ............................................................................................................. 105
Table 9 Scorecard for the BBSEE Charter ............................................................................................................... 108
6
Executive Summary
Mining operations increasingly exist in remote parts of developing countries, and
with the combined challenges in public services delivery and development
assistance, this is drawing the mining sector further into catalysing development
at local, regional and national levels. Responding to this multifaceted trend, the
mining sector has increasingly turned to foundations, trusts and funds as
vehicles to share the benefits derived from mineral production with
communities.
This Sourcebook reviews the developing country experience of mining sector
foundations, trusts and funds to date, identifies aspects of leading practice in this
field and provides detailed examinations of fourteen case studies from Peru,
Southern Africa and Papua New Guinea. It approaches this analysis from the
perspectives of the three sets of key stakeholders: communities, companies and
governments.
Foundations, trusts and funds (FTFs) have different structures and vary
considerably in different legal jurisdictions. Recognizing these differences, this
study refers to FTFs as a group representing independent entities with options
for governance to be shared amongst a number of stakeholders.
The question of whether to use an FTF structure, as compared to other models
for benefit sharing, is outside the scope of this study. The Sourcebook assumes
readers are interested in FTF structures and highlights the key attributes
associated with these structures and the benefits and traps mining sector
experience has identified. This study does not advocate the use of FTFs, but
rather provides a review of experience from the mining sector to better inform
decisions in the future.
There are three main purposes for which the mining sector uses FTF structures:
 community investment – voluntary actions or contributions by companies
beyond the scope of their normal business operations;
 compensation – payments made by mining companies to mitigate the
impacts generated by projects; and
 government payments – taxes and royalties as well as other payment
schemes, including voluntary contributions, which exist between mining
companies and various levels of government which are intended for
redistribution to communities through some form of benefit sharing
mechanism.
The reasons for undertaking these three activities are well covered in other texts
and this study is concerned with how FTF structures can be and have been used
by different stakeholders to achieve these ends.
The adoption of an FTF structure is not always within the control of the
implementing party, with some cases now being seen where the establishment of
an independent entity to deliver funding is a legal requirement (the Peruvian
7
Aporte Voluntario scheme is based on this approach). Over and above legal
requirements, FTF structures can present a number of advantages, such as an
increased sense of independence; a clearer path towards sustainability through
the endowing of funds and potentially through sourcing alternative financing;
and opportunities for community participation through representative
governance structures, co-financing and project generation.
To allow comparison ofmining sector FTF experiences, seven key parameters
were identified: programmatic approach; financing; geographic reach;
participation; governance and influence; programmatic focus and timing. There
is no “one size fits all” approach to FTFs for the mining sector, and different
applications of these parameters are to be expected and are seen depending on
the purpose of the FTF, the geographic and political economy context and the
implementing party.
The review of developing country experience conducted as part of this study
identified the use of the following options within these parameters:
 Programmatic Approach – There are two broad programmatic
approaches used by FTFs: grant-making and operational implementation.
Grant-making FTFs tend to have smaller staff complements, as seen with
the Impala Bafokeng Trust which currently has two employees. The
Palabora Foundation, by comparison, uses a predominantly operational
approach, and has a staff of 100 people. Both approaches are used within
the mining sector, with many FTFs using both in the one entity.
 Financing – FTFs vary according to three main financing aspects: funding
structure, sourcing and management. FTF funding structures use either
endowed funds or annual/periodic budget allocations. This financing can
be sourced from companies, communities, governments or a combination
of sources. Funding derived from companies is often based upon an
annual calculation, such as: percentage of revenue (seen in the Freeport
Partnership Fund for Community Development (LPMAK)); percentage
before profit (BHP Billiton use this approach in the Minera Escondida
Foundation); percentage of capital or operating expenditures; or through
an annual negotiation. Community funding often varies significantly and
depends upon the community’s capacity and willingness to contribute as
seen with the Greater Rustenburg Community Foundation. Governments
can draw upon payments made by the mining sector as part of either a)
payments for concessions, licences or land access (as seen in the Las
Bambas and La Granja Social Funds) or b) government accessed royalties,
taxes or fees (as explored in Madagascar). Mixed funding approaches can
see multiple companies donating to the same FTF, or collaboration
between tri-partite stakeholders. The desk based review of mining FTFs
indicated that the majority are initiated and funded by companies.
 Geographic Reach – While the purpose of the FTF is clearly critical in
defining the geographic reach of its programmes, the ownership or
influence exerted upon the FTF may also influence these decisions. Five
levels of geographic focus were identified: mine’s area of influence;
special focus groups; regional; national and international. Where FTFs
are responsible for delivering community development programmes for a
8
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company, their geographic reach is closely linked to the mine’s area of
influence. Approximately half of the FTFs reviewed through the desk
based assessment (33) are directly related to individual mine sites.
Government involvement in an FTF, either through regulation or
influence, tends to increase the geographic scope of the entity to a
regional basis, as has been seen in the Peruvian aporte voluntario FTFs.
Corporate philanthropy FTFs can be seen to operate at a broader
geographic level, such as the nationally focussed Anglo American
Chairman’s Fund.
Participation – Community and stakeholder participation within an FTF
can be achieved through a number of avenues. An extensive stakeholder
engagement process has been used to develop both the Asociación Los
Andes de Cajamarca (Peru) and the Newmont Ghana Development Trust.
Participation can also be achieved through participation in governance
structures (such as IDAP in Mali), including the appointment of a
chairperson from a beneficiary group. Integration of community
beneficiaries into the process of project generation provides another
avenue for participation, as does co-financing.
Governance and Influence – While the governance structure is often seen
as the primary control over an FTF, external influences, unrepresented in
the governance structure (such as Government) can hold the greatest
“influence” over the FTF’s activities.
Programming Focus – FTF structures are being used to implement any
number of different projects, with the basis for programme choices
grounded in the needs of the beneficiaries.
Timing – The establishment of FTF structures to manage benefit sharing
from mineral projects is normally linked to the project development cycle.
Examples are now emerging where FTFs are being developed earlier as
part of the license approval process (Las Bambas Social Fund and La
Granja Social Fund in Peru) and later as part of mine closure planning
(Anum Lio Foundation at Kelian, Indonesia).
To better convey the experiences with FTFs in the mining sector, fourteen case
studies were undertaken in Peru, Southern Africa and Papua New Guinea (PNG).
In each of these areas, mineral production accounts for a considerable
proportion of the national Gross Domestic Product (GDP) and pressure has been
exerted on both governments and companies to generate more than economic
growth alone and to achieve poverty reduction through this sector. The case
studies, while dominated by company foundation models, also include a
community foundation. They cover the different purposes for which FTFs are
typically used, with community investment, compensation and government
payments all being channelled through various cases. The importance of context
cannot be overstated when considering these case studies and for this reason, a
summary of the national setting is provided for each study. The case studies are
highlighted below:
 Peru:
o Fondo Social La Granja – Developed as a Government condition of
the license purchase process for the La Granja copper project, this
9

Foundation was established during the exploration period for the
project;
o Asociación Los Andes de Cajamarca (ALAC) – Established, after a
two-year consultation process, as part of Minera Yanacocha’s
social responsibility programme to promote sustainable human
development for the Cajamarca region. Predominantly using a
grant-making approach, the Asociación has developed
sophisticated methods to monitor and evaluate the development
impacts of its projects and has had considerable success in seeking
external financing;
o Fondo Solidaridad Cajamarca (FSC) – The FSC was developed by
Minera Yanacocha to meet the Peruvian Aporte Voluntario
commitment. Using ALAC as its administration agent, the FSC has
brought significant amounts of additional financing into the
Cajamarca region and has facilitated an increase in Government
spending of canon minero payments;
o Asociación Ancash – Established shortly after commencement of
mining operations, the Asociación was developed to maximise the
sustainable development contribution of the Antamina mine. With
the development of the Fondo Minero Antamina (FMA) to meet
Antamina’s Aporte Voluntario commitment in 2007, the Asociación
was forced to change its role significantly. Following extensive
strategic visioning exercises, the Asociación has developed an
operational niche in tourism, conservation and preservation of
local culture and heritage;
o Fondo Minero Antamina (FMA) – Holding resources of over
USD160 million (as at January 2010), the FMA is channelling
significant funding into the Ancash Department. The FMA has a
large team (over 90 staff) most of whom were recruited from nongovernment organisations;
South Africa, Mozambique and Namibia:
o Anglo American Chairman’s Fund – A corporate philanthropic
grant-making trust, the Chairman’s Fund has been in existence
since the 1970’s and operates at a national level (which makes it
significantly different from others more directly related to a mine
site or area). The Chairman’s Fund is managed by a not for profit
company (Tshikululu Social Investment), originally established by
Anglo American;
o Impala Bafokeng Trust (IBT)–Developed following a significant
black economic empowerment transaction between Impala
Platinum and the Royal Bafokeng Nation, the IBT was established
in part to ensure that non-Bafokeng historically disadvantaged
South Africans (HDSA) also received development benefits from
this transaction;
o Greater Rustenburg Community Foundation (GRCF) – After ten
years of operation, the GRCF is now the oldest community
foundation in Africa. Operating within a region dominated by
platinum mines, it is a grant-making organisation which is using
“asset based community development” techniques in its projects;
10

o Palabora Foundation – This operational foundation has been
implementing projects in the Ba-Phalaborwa communities for over
23 years. It’s focus has shifted considerably over this timeframe
reflecting the changing needs of beneficiary communities, a
dynamic socio-political context and variations in the profitability
of the Palabora mine;
o Mozal Community Development Trust (MCDT) – Established as the
community development arm of the Mozal smelter in Mozambique,
the MCDT is an operational FTF which undertakes all aspects of
community engagement and development for the company.
Ownership and governance of the MCDT remain within the control
of the company;
o Rössing Foundation – Structured as a Trust, the Rössing
Foundation was established in 1978 to provide greater education
opportunities for Namibians. The history of the Foundation is
closely linked to Namibia’s evolving political independence. This
operational Foundation develops programmes all over the country
and more recently has placed significant focus on the mine town of
Arandis;
Papua New Guinea
o Ok Tedi Fly River Development Programme (OTFRDP) – While the
development of OTFRDP has been ongoing for a period of over ten
years, its independent structure was launched in 2010. It is an
operational not for profit company committed to managing and
implementing compensation payments on behalf of the 152
recipient villages, as agreed as part of the Community Mine
Continuation Agreement for the Ok Tedi mine;
o Papua New Guinea Sustainable Development Program Ltd
(PNGSDP) – Created as part of the exit agreement between BHP
Billiton and the Government of PNG, PNGSDP is a not for profit
limited liability company mandated to minimise the impacts of the
Ok Tedi mine closure, which receives 52% of the dividends of the
continued operation of the Ok Tedi mine. High mineral prices in
recent years have generated an endowed fund of over USD1billion
within PNGSDP; and
o Lihir Sustainable Development Plan Trust – The Trust is intended
to deliver the integrated benefit package (IBP) agreed between
Lihirian landowners and Lihir Gold Limited in 1995. The IBP
includes compensation payments, royalties and community
investment projects.
There is no ideal structure for an FTF within the mining industry as each FTF
must respond to the context in which it is established, its purpose and the
interests of its stakeholders. Acknowledging this, ten areas of leading practice
for FTFs have been identified:
 A clearly defined strategic vision, outlining its role as a development actor
in the local environment;
 A single purpose, ie, either community investment, compensation or
government payments, but not a combination;
11
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A representative multi-stakeholder governing body;
An endowed fund to enable sustainability;
High levels of co-financing and collaboration;
Transparent practices and associated accountability;
Efficient administration structures to maximise development delivery;
Flexibility to adapt to changing development practices and operating
conditions;
Incentive schemes to retain high calibre staff; and
Impact based monitoring and evaluation.
Foundations, trusts and funds can be used as mechanisms for the distribution of
social and economic contributions and payments from companies and
governments to communities. They are highly flexible instruments and can be
adapted to suit a variety of situations. Establishment of an FTF can facilitate cofinancing and act as a strong development commitment to beneficiary
communities. Use of an FTF can provide opportunities for representative
governance structures which may not be possible under different conditions.
They also provide opportunities to develop sustainable community development
programmes from the mining sector. When they are applied with a clear vision
and clarity of purpose, with transparency and accountability, and are managed
by highly skilled staff, they can become the success story of a mining operation.
While FTFs are not appropriate in all situations, this Sourcebook provides
examples from a vast variety of experience to assist communities, governments
and companies to consider the role of FTFs within their mining benefit sharing
approaches.
12
Introduction
This research was initiated by the Oil, Gas and Mining Policy Division (COCPO) of
the World Bank to capture the substantial experience in the mining sector with
foundations, trusts and funds as mechanisms for enhancing positive impacts
from mining operations on local, regional, national and international
development. Philanthropic foundations first emerged in the mining industry in
the 1930s and there are now over sixty of these institutions in the developing
world alone1. Despite their prevalence, there have been few efforts to document
and synthesize the experience of these institutions to inform decision-making by
governments, companies and community stakeholders.
Foundations, trusts and funds (FTFs)2 are the vehicles through which
community investment, compensation and government payments related to
mining are increasingly being channelled. While the legal structures of
foundations, trusts and funds can vary considerably; FTFs in general provide a
structure independent of a mining operation with opportunities for governance
to be shared amongst a number of stakeholders. Foundations and trusts are
legal constructs in most jurisdictions, often with specific tax rules. Funds,
however, do not carry specific legal status and typically require either a
Foundation or Trust structure to become independent.
This Sourcebook reviews the range of FTFs currently in use in the mining sector
in developing countries. It includes detailed case studies on FTFs in Peru,
Southern Africa and Papua New Guinea, which highlight the spectrum of
approaches taken when using these structures. The lessons learned from the
detailed case studies are combined with insights gained from existing
development, corporate social responsibility and community investment
literature to provide a summary of the leading practice from global experience to
date. These practices are reviewed from the perspectives of communities,
governments and companies, each of whom can either implement an FTF model
themselves or facilitate their establishment.
Structured in two parts, Part I examines FTFs in the context of the mining sector,
drawing upon a literature review conducted on over 40 mining related FTFs in
the developing world and the experience gained from the case studies conducted
as part of this study. Part II presents detailed case studies on fourteen FTFs in
Peru, Southern Africa and Papua New Guinea.
Decisions taken by companies, governments and communities on benefit sharing
mechanisms for the mining industry raise the question of the role of the mining
industry in achieving broader development goals. The contribution of the
mining industry to development is addressed in other texts, however where
significant role changes are apparent through the use of FTFs these are noted in
this Sourcebook.
1
2
BSR (2010)
Referred to as FTFs henceforth to refer collectively to these types of institutions.
13
Foundations, trusts and funds provide distinct opportunities for mining
companies, governments and communities to better share the benefits accruing
from mining projects. Mining companies, governments and communities
approach this topic from very different perspectives and the opportunities
afforded to one may represent challenges to another. This Sourcebook will
provide useful context and examples for companies, governments and
communities considering the management of social contributions and payments
from the mining industry. There is no “one size fits all” when taking decisions in
this field and through this Sourcebook, interested stakeholders will be able to
better consider the use of an FTF structure and the attributes of that structure
for delivering development through mineral wealth.
14
The future generation living near an exploration site in Guinea (Wall, E)
Part 1
Examining Foundations,
Trusts and Funds (FTFs)
in the Mining Sector
The World Bank
16
1) The Mining Sector and Foundations, Trusts and Funds
On a global scale, the overall increase in the number of multinational
corporations3 has led to a greater presence of private corporations in
communities around the world. This factor, combined with a global decline in
public sector development assistance4 has cast the private sector as an
important player in social and economic development. Increasingly located in
remote areas of impoverished countries, mining operations are highly exposed
to this changing development dynamic.
Beyond geography, the mining industry has a number of characteristics which
draw it into the delivery of development at local, regional and sometimes
national levels:
 Operations often exist in environments where government institutions
may be absent, weak, lacking in capacity or corrupt, leaving gaps in
essential public service provision;
 The social and environmental footprint of mining operations often has
impacts on local communities, requiring compensation and mitigation
programmes;
 The remote location of many operations accentuates the expectation for
employment and economic development within host communities; and
 The enclave nature of the mining industry can limit the “trickle down” of
benefits unless specific social investment programmes are undertaken.
In addition to the factors above, a series of changes in the mining industry have
also caused an increase in the level of and approach towards benefit sharing
from mineral projects in recent years:
 Sectoral Changes - Between 1989 and 2001, more than 75 countries
liberalised their investment regimes for mining, oil and gas exploitation
and privatised state mining companies5. This had the dual effect of
increasing foreign investment by multinational mining companies in
developing countries and reducing the provision of “social wages” for
workers in state-owned companies such as subsidized housing, education
and healthcare. Coupled with technological improvements reducing the
labour needs of mining projects, and an increase in fly-in fly-out
operations, many of the traditional benefits received by communities
have diminished over time and pressure has risen to replace them with
new benefit sharing instruments;
 Operational Drivers – Improved communications access across the world
and an increase in the number of advocacy groups focused on the mining
sector have led to increased community expectations from mineral
developments. These expectations then inform the benefit sharing
Warhurst (2001)
ibid
5 ibid
3
4
17
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
approaches required from a company in order to gain and retain its social
license to operate. Employees have also raised their expectations of the
companies they work for, increasing the focus on corporate social
responsibility within operations;
Corporate Social Responsibility (CSR) Expectations – The growth of CSR
across all industries has led shareholders and affected stakeholders to
review the social contribution of private industry in far more detail than
in the past. Peer performance has also raised the bar for more strategic
and effective community investment with a long-term view of sustainable
development6, and commercial investors also review these commitments
and contributions. These expectations have been captured in a number of
voluntary codes and commitments endorsed by stakeholders in the
mining industry, such as the ICMM Sustainable Development Principles
and the UN Global Compact; and
Mineral Prices – Escalating mineral prices have focussed the attention of
both communities and governments upon the benefit sharing
arrangements in place. Countries with multinational mining corporations
using ad valorem taxation and royalty schemes have in many cases
observed the majority of windfall profits exiting their national borders,
causing a re-assessment of the means by which both production and
profit can be shared.
The mining industry makes social and economic contributions and payments to
communities and governments through a number of channels, as illustrated in
Figure 1. This figure highlights contributions and payments necessary due to the
impacts generated by the project (compensation), those payable as part of the
mineral lease conditions (government payments including taxes and royalties),
direct benefits (employment, procurement, beneficiation (eg diamond industry)
and project infrastructure) and community investments.
Figure 1 Channels for Social and Economic Contributions and Payments7
Implementing employment, procurement and project infrastructure
programmes are within the day-to-day business of a mining company, and are
typically kept within the operational control of the business. Similarly, taxes and
royalties typically follow a specified format, with transactions occurring between
companies, communities and various levels of Government. Greater variation
6
7
ICMM (2005)
Adapted from IFC (2010)
18
exists in the manner through which companies (and increasingly Governments
and communities) manage community investment and compensation
programmes. Four implementation mechanisms for community investment
(some of which can also be applied to compensation) have been defined by the
International Finance Corporation (IFC)8:
 Third party implementation – where a company engages a partner, such
as a local or international NGO, to work with local communities in
designing and implementing projects, or a company supports an existing
initiative being implemented by others;
 Company Foundation – where a company establishes a separate legal
entity (foundation or trust) to carry out the community investment or
compensation programme;
 Internal community relations department – where a company works
directly with communities to design and implement projects using its
own staff; and
 Hybrid model – a model that either uses two or more of the other models
together, or combines elements of both of them.
Identification of the appropriate implementation model depends on a range of
considerations, including: the sustainability of the model chosen, participatory
structures for decision making and governance, multi-stakeholder mechanisms
and partnerships, the building and development of local capacity and ongoing
owner involvement and oversight. The International Finance Corporation’s
Community Investment Strategies Good Practice Handbook provides detailed
guidance to assist businesses to take this decision. Potential reasons for
businesses, Government or communities to choose a foundation model may
include the need for independence between the funding party and the
organisation, the desire to seek alternative external financing, long time horizons
for operation of the organisation or the desire to serve a broader population than
would strictly be defined as the project affected community.
a) An Introduction to Foundations, Trusts and Funds
In general trusts are employed in countries using common law and foundations
are preferred in countries adhering to civil law. Funds can occur in virtually any
jurisdiction as the designation “fund” does not confer a separate legal status, but
is rather a general term which can be used to describe a trust, foundation or a
company budget item. Other relevant distinctions between FTFs include:
 The term “foundation” applies to an institution “used for charitable or
family purposes, while a “trust” is one form such an institution can take”9;
 Foundations, trusts and funds may be closely associated with the
founding actor or actors (such as a mining company) or in the case of
trusts and foundations, may be deliberately established as stand-alone
entities with independent status;
8
9
ibid
Warhurst (2002)
19

The terms foundation, fund and trust are often used loosely in vernacular
conversation, and even in the names given to particular institutions: the
Anglo American Chairman’s Fund, for example, is legally incorporated as
a trust, and the Rössing Foundation is also legally incorporated as a trust.
Structural Elements of Foundations, Trusts and
Funds Commonly Addressed in Legal Frameworks
 Legal processes for establishment;
 Purpose for which the entity may be
established;
 Permissible economic activity;
 Provisions for supervision and management;
 Provisions for accountability and auditing;
 Provisions for amendment of statutes or article
of incorporation or dissolution;
 Tax status of donors; and
 Tax status of the foundation, trust or fund.
Recognizing
that
the
attributes of funds, trusts and
foundations
vary
from
country to country, a series of
typical characteristics for
each mechanism are defined
below:
Trusts – Representing a legal
relationship between the
settler of assets, the trustee,
and the beneficiaries that give
a trustee specific responsibilities, which can make this mechanism less flexible
than a foundation approach. Attributes include:
 Trusts are governed by a Board of Trustees.
 Trustees can be held liable for their management responsibilities and are
required to exercise “all reasonable care” which is a stronger concept,
legally, than other instruments.
 This model often has lower public domain information requirements than
other mechanisms.
 The establishment of a trust is a juridical act, and a trust only secures
‘absolute certainty’ when a court proclaims the trust to be valid.
 A trust may conduct profit-making activities.
Foundations – Often incorporated as legal entities, foundations are relatively
flexible in the activities they are able to undertake to fulfil their objectives.
Attributes include:
 Foundations are separate legal entities that own the assets under their
control although unlike a trust, assets do not need to be transferred to a
foundation.
 The duty of care of a foundation council member is to act in accordance
with the regulations and the law and to act in the “best interest” of the
foundation (less legally onerous than a Trust).
 For a foundation to exist, its Charter must be registered at the Public
Registry thereby establishing it as an entity with juridical personality.
 Typically a foundation will have a management board or some other form
of committee governing its activities.
Two main types of foundation structure exist: company/corporate foundations
and community foundations:
 Corporate/company foundations – Created by companies as separate
legal entities with the purpose of delivering social development projects.
The level of involvement of the company within the foundation structure
varies significantly;
20

Community foundations – “An independent, nonprofit, philanthropic
organization working in a specific geographic area which, over time,
builds a collection of endowed funds from many donors in the
community. It provides services to the community and its donors, makes
grants, and undertakes community leadership and partnership activities
to address a wide variety of needs in its service area. A community
foundation is a vehicle for local donors who wish to contribute their cash,
trusts, bequests, or real property to create permanent endowments that
will benefit the community in perpetuity. Using the investment earnings
on each endowed fund, a community foundation makes and builds
capacity within the community to address local needs and opportunities.
Their task is to build substantial, permanent funds from which grants are
made to local charitable and community organizations”10
While the majority of foundations used by the mining sector are company-based
foundations, there are a number of community foundations being developed
either by mining companies or within mining areas.
Funds - Used as a term to describe a mechanism which may be legally defined as
a trust or foundation, or can be used to refer to a designated line item within a
company budget.
Using the general descriptions provided, foundations arguably provide greater
flexibility than trusts, and funds require an implementation vehicle of some sort
to be actioned. The inconsistency in definitions of foundations, trusts and funds
globally, however, illustrates the point that the specific type of instrument is less
important than the defining attributes of the FTF instrument.
b) A Growing Phenomenon
Over the past 20 years, FTFs have become increasingly prevalent in the mining
industry. While philanthropic foundations have existed in the mining sector
since the 1930s11, most FTFs reviewed for this Sourcebook were established
between the late 1980s and the present (2010). Between 1950 and 1980,
approximately five foundations, trusts or funds were in operation, and this had
increased to sixty-one in the developing world alone by 200812, twenty-seven of
which were established since 2000. Furthermore it appears that the growth of
foundations, trusts and funds in the mining industry has exceeded that of other
industries13.
FTFs in the mining industry have not only grown in quantity, but have also
evolved their structures and programme execution tactics.
The Alcoa
Foundation and Phelps Dodge Foundation (now closed) were both established in
the 1950s and used a corporate foundation model to support philanthropic
Wings (2010)
Yakovleva (2005)
12 An additional 20 foundations related to mining operations in developed countries are known to be in
existence but were not included in this study.
13 BSR (2010)
10
11
21
donations to local initiatives across their global operating locations.
The
foundations formed in the 1970s in Southern Africa, by contrast, became major
actors in national development initiatives, in some cases displacing the
government as the dominant social institutions in some areas, as can be seen in
the Rössing Foundation and the Palabora Foundation case studies in Part II of
this Sourcebook. In the 1980s, locally managed funds with targeted objectives
were created, such as the Fundación Montelibano in Colombia which focussed on
providing scholarships for the education of employees’ children.
The last two decades have seen the emergence of a sustainable development
philosophy within foundations, trusts and funds. They have also heralded the
use of FTF models by a broader audience in the mining sector, including the
emergence of community foundations (such as the Greater Rustenburg
Community Foundation case study in Part II) and government mandated
corporate foundations (used extensively in Peru and highlighted in the case
studies in Part II). The past two decades have also seen an increase in the use of
FTF models to manage a greater range of social and economic contribution and
payments channels, in particular compensation and benefit sharing
arrangements with governments (the Papua New Guinean integrated benefits
package approach and Fondo Social La Granja in Peru highlight these trends in
Part II).
c) How Does the Mining Sector Use FTFs?
Based on analysis conducted as part of this study, the vast majority of
foundations, trusts and funds are initiated by companies. Governments,
however, have also played significant roles in facilitating FTF creation and
influencing FTF attributes and management structures. The mining charter in
South Africa, for example, has had considerable influence in stimulating the large
number of trusts within the national mining industry, whereas licensing and land
access agreements have been significant factors in Peru, the Philippines and
indigenous communities in Indonesia, Australia and Canada.
To determine the rationale behind the increased use of FTFs in the mining
sector, it is worth revisiting the channels for social and economic contribution
and payments from mining companies to communities. Figure 2 highlights the
areas of potential applicability for the FTF model and in this section a review of
the benefits of using the FTF model for community investment, government
payments and compensation is conducted.
Figure 2 Potential Applications of FTF Model in the Mining Sector
22
i) Community Investment
While growth in the use of FTFs has been seen in a variety of applications, the
most significant rise is in the use of the model for community investment. The
IFC define community investment as “voluntary actions or contributions by
companies, beyond the scope of their normal business operations, intended to
benefit local communities in their area of operations”14 and note that this is
distinct from a company’s obligations to mitigate or compensate local
communities for environmental and social impacts cased by the project. The
overall company goals of community investment can be summarised as:
 “To establish and maintain positive, mutually beneficial long-term
relationships with local stakeholders;
 To contribute to long-term improvements in quality of life; and
 To help create an environment conducive to investing”.15
The drivers for mining company community investment depend on the
stakeholder, as represented in Table 1.
Table 1 Drivers of Community Investment by Mining Companies16






MINING COMPANY
Social
License
to
Operate
Access to Land
Risk and Reputation
Management
Productivity Gains
Positive Legacy
Company of Choice (for
next project)



COMMUNITIES
Long-term
improvements in quality
of life
Access to opportunities
Community better off
due
to
company
presence




GOVERNMENT
Greater benefit sharing
from private sector
Reduced pressure on
Government for local
community investment
Utilisation of effective
implementation system
held by company
Retained support at
local level for industry
responsible
for
generating
significant
GDP contribution
The choice of FTFs, as compared to the other models of benefit sharing, to
implement community investment programmes in the mining sector is based
upon on a number of advantages identified with this model. While individually
these advantages are not limited to FTFs, the combination can present a
significant benefit to different stakeholders. The use of FTFs can:
 Signal commitment and establish a formal, professional and systematic
approach to development which can in turn help to win and retain social
licence to operate.
 Support long-term, multi-year development projects without necessarily
being tied to annual company budgeting cycles.
IFC (2010)
ibid
16 Adapted from IFC (2010)
14
15
23








Foster stakeholder participation in the management and operation of
community investment programmes. Independent foundation and trust
management and governance structures can provide a more formal
approach to shared decision making and community, NGO and
government inclusion.
Build bridges to other development actors, including the formalisation of
collaboration between a company and other stakeholders through
providing a “neutral” facilitator. This role as a neutral party can also
increase the likelihood of being able to source external funding.
Separate legal liability for the actions of community development
programmes from those of a mining company, thereby minimising
company risk.
Where funds are endowed, FTFs can provide a guarantee of financial
support for development independent of the boom-bust cycle of mining
investments.
Provide financial benefits, such as tax advantages, which may not be
available through other mechanisms of community investment.
Develop long-term institutional knowledge and attract and retain
specialised expertise from the development sector, which can be more
challenging for programmes run internally by mining companies.
Represent a participatory, transparent and accountable mechanism for
investment of revenues in development, particularly in situations where
there may be high levels of corruption or distrust of public and private
institutions.
Provide a clear definition of the types of projects a company is prepared
to invest in, the criteria and components of project financing, the locations
where it will invest and the service providers for implementation.
Foundations, trusts and funds will not be appropriate in all community
investment situations in the mining sector. Negative repercussions for
companies from poor governance or financial controls within an FTF can be
significant, and the application of an FTF model does not in and of itself reduce
opportunities for corruption especially given the potential requirement for
significant up front costs and time investment in developing these structures.
ii) Government Payments
In this Sourcebook, “government payments” refers to taxes and royalties as well
as other payment schemes, including voluntary contributions, which may exist
between mining companies and various levels of government which will be
redistributed to communities through some form of benefit sharing mechanism.
Governments may establish their own FTFs or promote the use of FTFs within
the sector for a variety of reasons, including:
 Bypassing existing structures, processes and politicians to establish direct
channels to beneficiaries;
 Managing mandatory or voluntary funds received from companies
through royalties, taxes or fees;
24


Stabilizing economic contributions from the mining sector to weather
severe fluctuations in commodity prices; or
Transitioning communities/regions towards a sustainable development
path beyond the life of the mine.
There is a wide array of taxes (including royalties), which are used by
governments to derive benefit from the mining industry for the nation. The two
main groups of taxes are in rem and in personam taxes17. In rem taxes include
taxes on fixed costs of production (such as property taxes and import taxes) and
taxes on variable costs of production (such as unit based royalties and sales
taxes). In contrast in personam taxes are charges against some definition of net
revenue, and as such, are tightly linked to the profitability of the mining project.
This distinction in forms of taxation can become critical for a government, and a
host community, when attempting to stabilise the benefits gained from the
mining industry and ensure the host country receives a “fair share” of the
benefits during boom times.
Taxation arrangements for mining projects are agreed in the contract
negotiation period, and typically form part of the legislation permitting the
project to proceed. As such, any changes to the taxation and royalties scheme
generally requires existing contracts with companies to be re-negotiated. Renegotiation of contracts can, however, have negative consequence for investor
confidence in the country.
Given these considerations, governments are increasingly using and promoting
FTF models under a variety of conditions:
 Governments may find that investing a portion of the taxation and
royalties received from mining into a stabilisation fund can help to
balance annual budget and allow the government to plan for longer-term
projects. This approach is particularly relevant where taxation is
strongly based upon in personam taxes, upon which the government can
exert little or no control, and where mining constitutes a significant
portion of the national GDP. Examples of this approach have been seen in
both Chile and Papua New Guinea18.
 Where benefit sharing is predominantly based on in rem taxation,
governments and communities can derive little additional benefit from
windfall profits during mining boom times, potentially raising
community and national discontent with the industry. Rather than
renegotiating contracts to change the taxation basis, some governments
have turned to the implementation of “voluntary contributions” from
companies, and the use of FTF models to manage these contributions for
immediate implementation at the community level.
 Mining projects often exist in areas where government capacity may be
weak or the government may simply be absent. When public services are
inadequate, governments may promote the establishment of a company
FTF model to provide complementary resources to fill in gaps in public
17
18
Otto et al (2006)
The Mineral Resource Stabilisation Fund in Papua New Guinea has subsequently been dismantled.
25

service or extend the scope of services being provided. These
programmes are increasingly being targeted towards capacity building
for local governments. The use of FTFs in this situation may allow a
beneficiary to experience more rapid development than would otherwise
have resulted from government distribution of revenues or
infrastructure due to resource limitations, capacity, political factors and
corruption. Implicit within this model, however, is a blurring of the roles
between the private sector and government, with the potential that
governments may cease to provide support to areas where company
foundations have been established.
In some jurisdictions the negotiation of mineral licenses identifies the
whole “package” of benefits and payments due to communities. This
integrated benefits approach can generate large lumped sums of money,
payable to communities over an extended period of time. This model is
discussed further in the next section, however there are clear advantages
for governments to support an FTF model in these cases to ensure
transparency between government, company and communities.
Where FTF models are being adopted or promoted by governments as part of
improved management of existing payments, significant efficiencies can be
realised. The situation becomes less clear when governments use the
establishment of company FTFs as a means to fill in gaps in public service
provision, or to change the benefit sharing arrangements contractually agreed
with companies.
iii) Compensation
Payments made by mining companies as compensation for social and
environmental impacts can be of considerable size. This is particularly relevant
when compensation payments include both direct cash compensation to
individuals and financing for development projects at the community level over
an extended period of time. Effective management of the financing for these
community projects and time lag compensation payments often lends itself to
the use of a trust structure. In these cases, the compensation payments are
typically kept separate from community investment projects a company may be
undertaking, to ensure there is no confusion between the origins of the financing
amongst the beneficiaries.
The range of payments and contributions received by communities as part of the
agreement for a project to proceed can be vast. The integration of all benefits
and compensation into a single package, known as an “integrated benefits
package” has been applied in some jurisdictions, making it clearer for
community members and landowners to determine the balance of impacts,
compensation and benefits expected from a project. Integrated packages often
have components which require investment over a period of time and again
trusts are often used to facilitate this investment in a transparent manner. The
combination of compensation and community investment in a single trust
vehicle can have unintended consequences, however, as seen in Papua New
26
Guinea where there is a widespread belief that all monies paid as part of the
integrated package are for compensation alone19.
d) Influence of Political Economy
Foundations, trusts and funds vary widely in their specific characteristics and
attributes. In part this is due to differences in the legal and regulatory
frameworks of the jurisdictions in which they are incorporated as described
earlier, however the political economy in which they are created has an even
greater impact.
Beyond establishing their own FTFs, governments provide the regulatory
framework determining the need for and primary attributes of FTFs instituted
by companies, civil society and other stakeholders. The regulatory environment
can shape choices of foundations, trusts or funds, governance structures, funding
approaches, stakeholder participation, programme objectives and geography
and programme execution tactics.
Not all government influence on FTF selection and application is through
regulation, as can be seen in the examples in the box below.
Government Actions to Encourage Use of Foundations, Trusts and Funds
In South Africa, the Broad Based Socio-Economic Empowerment Charter has been a key
driver behind company social investment initiatives. A considerable number of trust funds
have been established to fulfil social obligations as part of the conversion of ‘old order’
mining rights.
The Philippines Mineral Law of 1995 requires that companies obtain consent from
indigenous cultural communities for use of their ancestral lands and that royalties be paid
into a trust fund “for the socio-economic well-being of the indigenous cultural community”.
In 2007, 40 companies and the Peruvian Government signed an agreement to make a
voluntary contribution (Aporte Voluntario) to local and regional funds for the poorest
provinces and regions of Peru. The payment addressed perceived inequities, emerging from
rising commodity prices, between project revenues and anticipated royalty and tax benefits.
The agreement also included company commitments to good management of these funds to
help circumvent bureaucratic difficulties in disbursement and management of royalties to
provinces and municipalities. Xstrata, Rio Tinto and Vale have also established ‘social trusts’
as part of their payments to secure the Las Bambas, La Granja and Bayovar development
projects in Peru.
In Papua New Guinea, land rights agreements, such as those established between
landowners and Lihir Gold have included the creation of trust funds for development
purposes. The Papua New Guinea Sustainable Development Program was created as part of a
divestiture agreement with the PNG Government.
The new Laotian Minerals Law will make Community Development Funds a standard
requirement for investors.
19
Imbun (2007)
27
e) Key attributes
The key attributes of mining foundations, trusts and funds lie not in their legal
structure, but rather in their approach to a number of parameters outlined
below:
 Programmatic Approach;
 Financing;
 Geographic Reach;
 Participation;
 Governance and Influence;
 Programming Focus; and
 Timing.
In this section, each of these considerations will be addressed and examples from
both the global literature review and detailed case studies included where
relevant.
i) Programmatic Approach
The decision on whether to run community development projects internally
within a company or externally is well addressed in the IFC Community
Investment Strategies Good Practice Handbook (2010) and will not be further
addressed in this Sourcebook. Instead this section assumes a decision has been
taken to pursue an FTF model and provides guidance on the approaches
available within this framework.
There are two main programmatic approaches within FTFs: grant making and
operational or implementation approaches. Grant making organisations provide
grants to other organisations whereas operational or implementation based
organisations use their funds or endowment to achieve goals directly. It is useful
to consider these approaches as endpoints on a spectrum as many organisations
use a mixture of both approaches.
(a) Grant making
Grant making foundations provide funds to other development initiatives
already in place or support new initiatives to develop. Grant making is
particularly applicable when there are other development actors already
working – or able to work – with beneficiary communities or when resources are
too limited to support permanent staff. Grant making can help to avoid the
duplications of effort and can support capacity building within civil society to
develop projects themselves.
There is no limit placed upon the geographic focus of grant making FTFs and
these decisions are typically influenced by the broader purpose and goal of the
28
FTF. For example, regional networks as seen with the Greater Rustenburg
Community Foundation (focussed on the Greater Rustenburg region in South
Africa) are applicable given its community foundation basis; while national
approaches used by the Anglo American Chairman’s Fund (operating across the
nation in South Africa) are more appropriate given its corporate philanthropy
role.
Grant making FTFs can transfer financial resources directly to development
projects to support development organisations (sometimes referred to as the
Donor Foundation approach). In most cases grant applications are competitive
and grant making FTFs apply a rigorous process of project selection and
oversight.
Grant making FTFs
Advantages
Disadvantages
 Approach can be applied at any
 Unless strong transparency
level
approach, disbursements may
be opaque and may not reach
 Can become a conduit for funds
the correct beneficiary
from a variety of sources and
beneficiaries
potentially
 Can result in high percentage of
improving the sustainability of
failure unless there are strong
the FTF
project
evaluation
and
monitoring
criteria
and
capable
 Requires a smaller number of
staff
employees
 No direct contact at project
 Encourages
community
level
ownership/initiation of projects
 Significant administrative time
 Creates opportunity for capacity
for small amounts of investment
building (depending on skills
 Size of grants budgets needs to
held by FTF staff)
be appropriate for number of
 May
increase
project
grant applicants
sustainability
 Reputational
benefit
for
company can be diluted
Mitigation Actions
 Pairing financial and technical assistance, especially in communities
where local organisations have limited capacity and experience
 Automated systems for grants evaluations
 Provision of assistance with grants applications
 Partnership with third party for monitoring and oversight of grant
projects
 Clear delineation of funding parties objectives from grant making.
(b) Operational or Implementation FTFs
On the other end of the spectrum of programmatic approaches lie FTFs which
use their funding to implement projects directly. “Operational” FTFs can be
preferable when operated in a region with few development actors and where
the FTF is expected to have a presence for a number of years. Many rural
29
communities where “mining is the only game in town” present situations in
which the operational FTF approach may be applicable, as seen with the Rössing
Foundation (Namibia).
This approach requires more staffing than the grant making approach and
ideally staff will have specific expertise in the development projects being
implemented. It is also more applicable to FTFs focussed on local or regional
development, as staff will need to be able to gain access to all project locations.
Where operational FTFs operate across a broader geographic region they
typically need to establish multiple offices, raising the overhead costs for the
FTF.
The development of an operational FTF often requires significant start-up costs,
including the hiring of a range of development specialists. A company or
community’s ability to absorb these costs at the start of a project may be limited,
leading to a number of operational FTFs being established after the first few
years of project operation.
Operational FTFs
Advantages
Disadvantages
 Can
develop
significant
 Higher overhead costs and
experience of their own
initial start-up costs
 High degree of interaction with
 Time lag from decision to
communities
establish FTF to delivery of first
project
 Clearer
opportunities
for
 Risk of dependency and/or
company
branding
and
connection to social license to
potentially
viewed
as
operate
replicating
the
role
of
Government
 Opportunities exist to seek
external financing if a good
reputation is developed
Mitigation Actions
 Funding commitments should be made in advance to allow longer term
projects to be developed;
 Focus to be placed on capacity building and spinning-off successful
programmes (as has occurred with mixed success at the Palabora
Foundation (South Africa));
 Facilitate community input into project selection and implementation.
Within both the grant making and operational approaches, FTFs may pursue
partnerships with other development actors with similar objectives or with
designated beneficiaries. Potential partners can include government agencies,
local and international NGOs, community based organisations, and other mining
operations. Partnerships can add specific value by a) addressing regional or
national issues that impact and influence local conditions, b) bringing resources
or complementary skills to programmes or, conversely, c) expanding the scope of
successful programmes.
30
Partnerships with local organisations can be distinct from those with large
established national and international development agencies (such as the
implementation partnerships between Fondo Minero Antamina and Caritas and
ADRA in Peru). Partnering with local organisations to build their capacity
requires more resources and a longer timeframe for implementation where a
more experienced partner may have immediate impact.
ii) Financing
There are three key aspects to the financing of an FTF within the mining sector:
structure, sourcing and management. Funding structure, in this context, refers
to the means by which the FTF is financed, be it annually, or through an
endowment fund. There are a number of sources of financing for mining sector
FTS, including company financing, community funding, government funding and
mixed funding. The management of the finances of FTFs can “make or break”
them, incorporating both considerations around corruption and the comparison
of administrative costs to development spending. All three aspects of financing
are addressed below:
(a) Funding Structure
The funding structure for an FTF has significant implications for its long-term
sustainability and its ability to commit to multi-year projects. There are two
main approaches to structuring the funding of an FTF (with a combination of
both often employed):
 Endowment; and
 Annual budget allocation.
Broadly speaking, endowment funding favours FTFs seeking to exist beyond the
period of a mining operation, and budget cycle allocations are better suited to
FTFs established to deliver benefit while a mining project is operational.
The endowing of funds in an FTF supports the long-term sustainability of an FTF,
although for this model to be effective a sufficient sum needs to be endowed and
the time between endowment and total reliance upon the interest cannot be too
short. In endowed FTFs, administrative budgets are often sourced from the
interest derived from the endowed investment while additional annual
contributions are made from a mining operation or other funding parties to
support development projects. Ideally, by the time annual contributions from a
company cease, the endowed fund is of sufficient size to support the
administrative and development project budgets of the FTF for a number of
years post mining. The Papua New Guinea Sustainable Development Program
(PNGSDP) employs both an endowed fund (the “long term fund”) and a
development fund intended for immediate use with the ultimate goal of
continuing to use the long term fund for a minimum of 40 years post closure of
the Ok Tedi mine. Even where the capital of an endowed fund is used as part of
the annual budget for the FTF, having such a fund can make it easier for FTFs to
contribute to or support multi-year projects by providing a funding guarantee.
31
Endowed FTFs are also better protected from price fluctuations and external
influences on the mining industry which can cause annual budget allocations to
vary considerably. Both the Rössing and Palabora Foundations, following
periods of financial difficulty within the mining companies causing a cessation of
payments to the Foundations, instituted endowment funds to increase their
protection from market vagaries. However, for an endowment to be most
effective it should be set up as early as possible, at a time when the cost of money
is highest for companies.
Endowment Funding
Advantages
Disadvantages
 Greatly
enhances
the
 Ideally requires investment of
sustainability of an FTF where
development funding early
administrative
costs
are
where possible, when money is
sourced from the interest
most expensive
generated on the endowment
 Large sums of money can
 Facilitates multi-year project
attract corrupt practices and/or
commitments
poor financial management
 Can
protect
FTFs
from
fluctuations in mineral prices
affecting mining operations
 Potentially provides an exit
strategy for companies when
mining operations cease
Mitigation Actions
 Financial management for the endowed fund should be handled
professionally
 Transparent management of the funds invested and appropriate
reporting of the financial management should be undertaken
 Endowment funds can be established after the first few years of profit
generation from a mining operation, reducing the cost of the money
Financing FTFs through annual budget allocations is common practice and
allows FTF financing to be run through existing budgeting structures for
companies and some NGOs. Providing funding on an annual or budget cycle
basis allows funding to be scaled and modified depending on external factors
affecting the source of the funding. For example, political changes can
significantly alter the allocation of funding to local and provincial governments,
affecting their ability to contribute to FTFs (either at the project or structural
level). Similarly, companies facing adverse mineral prices have the flexibility of
changing their contribution to development projects using this approach.
An annual budget allocation approach can provide a strong driver for effective
monitoring and evaluation programmes as decisions on the success of
programmes are typically reviewed prior to committing the next year’s budget.
The close dependency between the funding source (especially if this is the
mining company) and the FTF can enhance collaboration between the two
parties, although it can also create tension when funding is unavailable.
32
Annual Budget Allocations
Advantages
Disadvantages
 Can drive the development of a
 Potential limiting factor for
strong
monitoring
and
multi-year
projects
as
evaluation programme
commitments can only be made
per budget cycle
 Can foster close collaboration
 Threatens
the
long-term
between funding source and
FTF
sustainability of the company
funded FTFs as entirely new
 Retains flexibility for funding
funding source would need to
sources to moderate their
be found when operation closes.
contributions based on external
influences
 Allows funding to be managed
through existing accounting
systems
Mitigation Actions
 A proportion of budget cycle allocations can be retained to act as a
reserve, allowing FTF to commit to multi-year projects
 Long-term sustainability can be improved through employing capacity
building approaches in all projects, and supporting projects to seek
alternative financing
 Alternative financing sources can be sought and pursued from FTF
inception to reduce dependence on any one project
(b) Source of Financing
An FTF can have a variety of sources of financing, each of which is addressed in
this section:
Company Funding
The most common source of financing for FTFs in the mining sector is from
mining companies themselves. Company funding may be provided through a
number of different mechanisms:
 Centralized corporate budget that makes portfolio decisions to support
operating assets or beneficiaries in various locations;
 Localized company funding that is derived from business or operating
unit budgets; and
 Voluntary or mandatory contributions via the local fiscal system.
For both central and local contributions, one of the key challenges faced by
companies is the determination of the ‘appropriate’ amount to invest. A common
method of addressing this dilemma is the application of set percentage of
revenue payment, as seen in the Mozal Community Development Trust’s 1%
approach.
Percentage of Revenue – Companies typically prefer payments or fees that are
on a before/after tax basis rather than assessed directly on revenues. From a
government or community perspective, production based payments are often
33
preferred as they offer a guarantee of financial contribution regardless of
company profit. Linking contributions to revenue is likely to cause significant
variations in funding as commodity prices swing. To make this model successful,
an FTF needs to employ financial discipline to invest during the boom times to
support operations during the bust. “Corrections” on floor and ceilings on
payments can be introduced to minimise these risks to communities and
companies.
Company
Freeport
Copper
McMoran
Foundation
Funding Strategy
Freeport Partnership
Fund for Community
Development
(LPMAK)
Fund receives 1% of
mine revenues. Total
contributions
since
inceptions:
$242
million.
Funds in
excess of Foundation
approved
budget
placed in provident
fund
for
future
investment
($45.5million as of
end
2006).
Commitment to invest
10% of all future
receipts in long-term
fund.
Management
Structure
Fund is administered
and disbursed by an
organisation
called
the
Lembaga
Pembangunan
Masyarakat
Amungme
dan
Kamoro
(LPMAK).
LPMAK is managed by
Board
of
Commissioners
consisting
of
representatives from
the local government,
Papuan
regional
leaders, leaders from
the Amungme and
Kamoro communities
and
PT
Freeport
Indonesia.
Percentage Before Profit (EBITDA) – As with most companies, it is normally
preferable for companies to fund their mining project expenses before
committing to other financial obligations. By assessing fees on a before profit
basis and allowing companies to deduct their contributions as an expense, this
model can effectively create a burden sharing arrangement between companies
and governments for each dollar spent. The disadvantage of this approach is
that if there is no profit then there are no FTF contributions (unless a minimum
floor is established).
Company
Foundation
Funding Strategy
BHP Billiton
Minera
Escondida
Foundation
Percentage of Minera
Escondida’s
community
investments totalling
1% of pretax annual
profits based on 3
year rolling average.
Total contributions;
over USD 9 million.
34
Management
Structure
Citizen
Advisory
Council
comprising
community
representatives in the
public and private
sectors
and
civil
society
determine
foundation
investment
with
Board of Directors
consisting
of
representatives from
community
and
Minera Escondida
Percentage of Capital or Operating Expenditures – By determining the
community investment value through a percentage of expenditures, this helps to
assure that contributions are forthcoming, and provides a degree of
predictability for companies and FTFs. The contributions can then be treated as
expenses or depreciated in the case of capital. The disadvantage to this approach
is that cost overruns by the company can create an exponential cost if the
percentage is directly applied to the total amounts.
Annual Negotiations – Rather than using a “percentage” calculation, another
approach is to determine the annual contribution from the company to the FTF
based upon an internal company assessment of funding availability. This
approach retains almost complete control within the company, however it can be
seen to be highly opaque, especially in tight financial times. A compromise
approach is to agree a fixed yearly sum as a contribution, however this also risks
raising tension if windfall profits are received and no additional contributions
are made.
Combining a number of the approaches outlined here can “correct”
disadvantages in a specific approach. An example of a combined approach from
Newmont is illustrated below.
Company
Foundation
Funding Strategy
Newmont
Community
Foundation
1% net operational
profit (pre-tax) from
Ahafo South mine
plus $1 per oz of gold
from
Ahafo
(estimated
conservatively at USD
0.5million annually)
Management
Structure
Ahafo
Social
Responsbility Forum
(ASRF) participates in
company decisions,
deliberates on issues
of mutual interest,
determines allocation
of
Community
Development Funds
and elects Board of
Trustee
members
representing
the
community.
Community Funding
Communities or local NGOs may provide funding to company foundations, even
at low levels, in order to establish their direct, vested interested in FTF
outcomes. An alternative is to facilitate minority equity ownership for
beneficiaries directly in the mining project or venture as has been seen in the
Mining Scorecard requirements in South Africa described in more detail in Part
II. One of the benefits of an equity approach is that it puts the beneficiaries on
the same financial footing (proportionately) as the project developer. The funds
(or portions thereof) that they receive can in turn be invested in, or managed by,
the FTF for channelling to local community needs. The disadvantage of this
approach is that the onus of risk is placed directly on the beneficiaries who in
this situation will be subject to the same risks as any investor. Notwithstanding
35
this concern, equity based approaches may offer interesting alternatives for
long-term capacity building, local accountability and development.
Rather than contributing funding to existing FTFs, communities can choose to
use their own funding to develop a community foundation.
Community
foundations rely upon community members to donate to a shared foundation to
advance social development projects within their local area. The community
foundation model is very popular in the United States20 and increasingly is
spreading to other countries with similar philanthropic giving characteristics.
The model has potential application in mining regions due to the often significant
differential in wealth between those receiving mining salaries and the rest of the
community – a differential in wealth is normally necessary for this model to
show success. The Greater Rustenburg Community Foundation (described in
detail in Part II) provides an example of a community foundation in a developing
country mining region. Interestingly, one of the biggest challenges it faces
currently is competition for securing financing amongst other development
actors, including company foundations.
Community Foundations
In 1996, PT Freeport Indonesia (PTFI) committed 1% of annual revenues to Papuan
development via the PTFI Partnership Fund for Community Development. The Amungme
and Kamoro Community Development Organisation (LPMAK) is a Papuan community
organisation formed to manage and implement these funds and uses a community foundation
model. While PTFI has representation in the LPMAK governance structure, the balance of
control rests with nominated community leaders and representatives. Freeport McMoran
Copper and Gold Inc (FCX) is planning A similar community foundation for its Tenke
Fungurume project in Democratic Republic of Congo and supports a community foundation at
its Cerro Verde mine in Peru.
Fundación Sierra Madre (FSM) is the community development foundation for the Goldcorp
owned Marlin mine in Guatemala. FSM was established as a company foundation with plans
to transfer it to a community foundation over time. While FSM was launched in 2003, the
transition has not yet occurred.
The Greater Rustenburg Community Foundation (GRCF) is a community developed
foundation located in platinum rich area of Rustenburg in South Africa. There is no direct
company involvement in the GRCF.
Government Funding
Governments normally draw upon payments made by the mining sector as part
of either a) payments for concessions, licences or land access or b) government
accessed royalties, taxes or fees, to contribute to development projects.
Governments can use these funding sources as an opportunity to initiate a new
government FTF or channel them through an existing FTF mechanism (as a cofounder). In addition, governments can establish fund mechanisms that require
direct company contributions, such as closure bonds and trusts. Finally
20
Graddy et al (2009)
36
government can use purchase payments made through privatisation acquisitions
by private sector mining companies to invest in social development.
EXAMPLES OF GOVERNMENT FUNDING MECHANISMS
Government Operated - The canon minero royalty payment in Peru directs a large
percentage of the Government’s royalties to the region hosting the mineralisation for
development projects.
Government Directed – The Namibian Government is now requiring that all mining
companies establish an Environmental Trust Fund (ETF) to accumulate over the lifespan of
the mining project of a scale sufficient to conduct all environmental obligations associated
with mine closure (Mesik 2009).
Payments for Concessions – 50% of the purchase price of the Rio Tinto La Granja
concession payable to the Government of Peru as part of the privatisation process is to be
invested in an FTF to be used to provide development programmes in the La Granja area
while the project progresses from purchasing to potential operation.
Government Co-Financing – Again in Peru, canon minero financing is being used to support
Aporte Voluntario projects effectively increasing the implementation record of canon minero
monies and at the same time expanding the reach of the Aporte Voluntario commitments.
Mixed Funding
A well-established FTF may enjoy funding from a number of sources, and in
many cases this is used as a criteria of success of FTFs associated with the
mining sector. Such diversity can help to minimize the boom and bust effects
associated with funding derived from mining profits or revenue alone and can be
a key step in developing a sustainable future. Potential funders include NGOs,
governments (as highlighted in the examples above), communities, other FTF
organisations and in some cases other mining companies. Asociación Ancash
(Peru) is now sourcing up to 12% of its financing from external sources.
While co-financing is often set up as an operational goal, it can have unintended
consequences as the individual reputational benefit associated with projects can
be diluted when shared with through multiple partners. This concern is most
relevant when different mining companies work together to support a single
project, as has been the case with Grupo Norte contributing funding to ALAC
projects in Peru (as described in Part II).
Finally, funding may also be derived from activities of the FTF itself where it is
allowed to invest in profit generating activities on the condition that profits are
reinvested in FTF programmes or to sustain its operating and administrative
costs.
(c) Financial Management
37
Establishing and running FTFs involves transaction and operating costs. In the
rush to capitalise on the advantages of company FTFs in particular, there is a risk
of imbalance in the level of transaction/operational costs and direct spending on
social investment projects. A number of the FTFs impose limits on the
“administrative” proportion of spending, for example, ALAC (Peru) limits its
administrative costs to 15%, and the Palabora Foundation (South Africa) has a
limit of 20%. In determining the appropriate level for administrative expenses,
FTFs should consider the comparative “development impact” of a dollar spent
through other mechanisms.
Corruption Risks – In many locations where the mining industry works, the
potential for corruption related to the handling of funds employed in socioeconomic development is present. A number of safeguards can be employed to
minimise this potential as highlighted below:
 Development of clear requirements in the FTFs Charter or Deeds
requiring annual independent third party financial audit by a competent
party and Board of Trustees/Directors review of the resulting report;
 Mandatory incorporation of formal monitoring and evaluation
programmes representative of development sector best practice along
with independent third party evaluation;
 Detailed line item costing for all proposals submitted;
 Deployment of internal company expertise (in the case of corporate
foundations) to review particular aspects of projects/proposals, eg, using
the engineering manager at a mine site to review a proposal for
construction of a school block, including review of materials and labour
quantities and a visit to the construction site during the process of
building the facility;
 Established minimum of two bids for most projects/proposals;
 Incorporation of specific prohibitions on types of projects that will not be
funded by the FTF in the Charter/Deeds of the FTF;
 Frequent field monitoring of funded projects by company personnel who
are competent to observe and investigate these sorts of projects; and
 Prohibition of grants being made to individuals.
iii) Geographic Reach
Defining the geographic reach of the FTF is typically linked directly to defining
the purpose or goal of the FTF and the type of the FTF (company based,
community based or Government mandated). In general, five potential levels of
geographic focus for FTFs can be defined:
 Area of Influence – This is the area defined as being influenced by a
specific mining operation, and is normally identified during a project’s
social and environmental impact assessment. Mapping FTF activities
across a mining project’s area of influence is particularly relevant when
the FTF has been established to implement the company’s community
investments programmes. The Palabora Foundation (South Africa) in its
current format is a good example of this approach;
38

Special Focus Groups – In some situations, FTFs are established to
benefit a subset of the mine’s impacted population or to benefit a specific
group who may not otherwise have received benefits from the project but
who are considered to need special
assistance. Examples of this approach
THE DEFINITION OF “LOCAL”
have been seen in the Philippines with
the establishment of trust funds for Mining companies often struggle with the
indigenous groups impacted by mining definition of “local”, whether it be related to
community
investment,
compensation
projects.
payments, employment preferences or

Regional – Expanding the focus of FTFs Aporte Voluntario scheme, companies were to
and mining sector benefit sharing use existing definitions of local and regional
mechanisms to the regional level was communities within their Department to
whom different levels of project financing
traditionally the remit of governments. would be directed. “Local” communities were
Over and above royalty payments to to receive the majority of the financing, so to
regions, governments have also set up ensure the poorest regions in the Department
FTFs to better coordinate social and received as much new financing as possible
environmental issues in regions, such as Fondo Minero Antamina revised their
definition of “local” to includes these regions
the Mineral Foundation of Goa (India). regardless of physical location.
The Peruvian Government has also been
instrumental in expanding the impact of
FTFs to cover broader regions, through the Aporte Voluntario scheme. A
few companies have now also begun to experiment with regionally
focussed FTFs. Some companies have created foundations that support
all or a portion of their mines within a specific geographical region. The
Rio Tinto Western Australia Future Fund, for example, organises long
term partnerships that address regional development needs in a region
where Rio Tinto operates a significant number of iron ore mines. On a
smaller scale, the Goldfields Ghana Foundation is intended to benefit
communities impacted by the company’s Tarkwa and Damang mines,
while also including support from key suppliers and a separately owned
mine nearby.
Finally, regional approaches can suit community
foundation approaches, as seen with the Greater Rustenburg Community
Foundation (South Africa).

National – Mineral wealth is often ascribed to the nation, and as such it
should not be surprising that a number of national FTF organisations
exist. From a company perspective, national FTFs are typically employed
when a company has a very significant national footprint, and seeks to
contribute (often at a philanthropic level) to national development issues,
outside of the immediate influence areas of its operations. The Anglo
American Chairman’s Fund (South Africa) is a dedicated instrument
through which Anglo American’s Southern African businesses channel
additional grant making in South Africa. Namdeb (Namibia) is a 50:50
venture between the Namibian Government and De Beers which allocated
1% of its profits after tax for donations and grants and is currently
streamlining its corporate grants into a single FTF model called the
Namdeb Foundation. The Namdeb Foundation will utilise a “section 21
company” (not for profit) format and will provide grants across the whole
procurement sources.
39
Under the Peruvian
country21. National FTFs are also pursued by governments, as was seen
in the Papua New Guinean Mineral Resource Stabilisation Fund (no longer
in existence).

International – Utilised by companies with a large global footprint,
international FTFs can provide mining companies with a means to
support charitable organisations in the countries hosting their
headquarters where those countries don’t contain any mining activity.
The Anglo American Group Foundation, established in the United
Kingdom (UK), is now one of the key conduits for Anglo American’s social
investment, representing approximately 4-5% of total group spending on
social programmes, and directing a proportion of this spending to the UK.
The Alcoa Foundation is another example of a foundation serving global
interests. It is governed by the corporate centre with a set of guidelines,
focus areas/strategic themes, and criteria for local activity. Alcoa also
directs all proposals for funding to local Alcoa Foundation
representatives, leveraging global resources and portfolio decisions while
integrating local needs. Alcoa’s portfolio of social investments are
developed with input from regional and business unit teams and
community advisory groups worldwide.
Approximately half of the FTFs reviewed (33) as part of the literature review are
directly related to individual mine sites. Of the remainder, a large number are
trusts which have been created to support broad based black economic
empowerment in South Africa, or to serve either national or global interests. An
additional six FTFs serve more than one mine site, whether regional clusters or
the entirety of global operations. The experience to date would seem to indicate
that the zone of interest for an FTF is defined in part by the ownership structure
of the FTF, as highlighted in Figure 3.
Figure 3 Relationships Between Geographic Reach and Ownership
21
International
•Private Sector
National
•Public Sector
Regional
•Public/Private
Partnership
Area of Influence and
Special Focus Groups
•Private Sector
and Community
Foundations
Mesik (2009)
40
iv) Participation
Community and stakeholder participation within an FTF can be effected through
a number of avenues ranging from formal governance structures through to the
process for project generation. Highly participative models are typically
considered leading practice for FTFs, however the method of participation
remains at the discretion of the owner. High levels of participation can ground
the FTF within a community, enhance its sustainability through a sense of shared
ownership and build capacity amongst its stakeholders. Participation can also
bring with it considerable time constraints, potentially delaying FTF processes.
Five avenues for participation have been identified in this Sourcebook: FTF
design, governance, project generation, co-financing and public reporting. The
participation aspect of each of these avenues is discussed below, with further
detail on the broader considerations around governance provided the next
section.
(d) FTF Design
A collaborative process engaging with a wide range of stakeholders to firstly
identify the needs of the beneficiary community and then develop approaches to
address those needs provides a solid basis for the design of FTF structures.
Depending on the size of the stakeholder group and the group’s experience with
FTF structures in the past, collaboration of this form can take considerable time.
Newmont has undertaken highly participative design processes for both its ALAC
foundation in Peru and in the development of the forthcoming Newmont Ghana
Development Trust. In both cases the design phase has extended over a twoyear period, and has been made possible in part through the pre-existence of
community investment which continued to operate during this design phase
(Yanacocha’s community relations activities and the Newmont Ahafo Community
Development Funds in Peru and Ghana respectively). This timing consideration
may limit the applicability of a highly participative approach to FTF design to
situations where a company or government is already providing community
investment programmes through another mechanism.
Collaborative Forums to Design an FTF
Advantages
Disadvantages
 The greater the participation of
 Cannot be undertaken with
beneficiaries in the design of the
“speed”
or
necessarily
FTF, the greater the sense of
according to the timetable of the
ownership
amongst
the
owner organisation
beneficiary community
 Slow “start-up” of an FTF, most
 Through engaging stakeholders
critically in project delivery, can
in design discussions the design
generate discontent amongst
is likely to better represent the
communities
needs and desires of the
 Can be inappropriate in
community
situations where “quick runs on
41
the board”
critical
are
considered
Mitigation Actions
 Rather than developing an FTF design in isolation to minimise delays,
owner groups may be able to implement an interim community
investment structure, reducing the pressure on the organisation for
immediate implementation and allowing space for collaborative
discussions.
(e) Participation in Governance
Governance is discussed more fully in the next section, however participation
considerations in governance deserve specific attention. FTF governance at its
most simple can be described by the membership of the Board of Directors or
Trustees. The level of participation, ie, inclusion of stakeholder representatives
derived from groups other than the owning entity, on these governing bodies
varies widely. The most participative governance structures are seen in
community foundation approaches, however with the exception of the Greater
Rustenburg Community Foundation (South Africa), LPMAK (Indonesia), and
Cerro Verde Fundación (Peru) there is relatively limited experience of using this
model in the mining sector.
Within corporate or company foundations, participation is evidenced through
the composition of the governing bodies. It is important to note that community
and/or government representation does not necessarily equate to
representation of beneficiaries. For example, the Papua New Guinea Sustainable
Development Program Board while comprising four independent Directors does
not specifically include representatives of beneficiaries from the planned and
delivered projects within the Board structure. Participation can be further
enhanced through the appointment of a community representative as the
Chairperson of the governing body of the FTF, as is described in the Fondo Social
La Granja (Peru) case study in Part II.
Participation and Capacity
High levels of participation of community members in
FTF governance structures is generally considered to
be a positive attribute of an FTF. The benefit of this
participation may be compromised, however, by the
capacity held by community representatives to
contribute to the governing of the FTF. The Integrated
Development Action Plan (IDAP) of the Sadiola and
Yatela mines in Mali employs a highly participative
independent governance structure. This approach has
allowed programmes to achieve considerable
grounding in local communities, but has proved
challenging when developing strategic plans and
planning for mine closure.
42
the
Expanding
representativeness
of
a
governing body can have an
impact on the level of control
exerted by the owning body.
Control and potential time
and resource implications are
typically cited as the most
common
reasons
for
companies to resist greater
community and government
participation in their FTF
governance structures.
(f) Project Generation
The generation of projects for consideration by an FTF can provide good
opportunities for a participative approach. Regardless of whether the FTF
employs a grant making or operational approach, projects can be generated
either internally or externally or using a combination approach. Where FTFs
seek applications either for grants or projects from community members, ideally
guidelines for areas of interest relevant to the FTF will be made available. Where
project selection is undertaken largely internally, decisions may be informed by
social impact and needs based assessments conducted by a mining company as
part of their licensing process.
Involving representatives of beneficiaries in the review process for proposed
projects (possibly through a technical review committee) can help to build
understanding within communities of the strategic interests of the FTF and
applicability criteria for FTF support. The more transparent the review ad
evaluation process is, the more likely decisions taken by the FTF will gain
community support.
(g) Co-Financing
The trend towards co-financing of
projects with beneficiaries is evident
across the development sector. Cofinancing can be undertaken at the
project or FTF level, although is more
likely to be seen at the project level
when
working
with
beneficiary
communities. The contribution from
communities is more often in kind (such
as labour or supplies) rather than a
strict financial contribution.
Paying for Participation
Marlin’s
Fundación
Sierra
Madre
(Guatemala) provides some fully funded
development activities, but for others it
requires participants to pay a small fee for
participation. Through co-investing it is
felt that participants gain a sense of
ownership of the activity and place greater
value upon it.
(h) Reporting to Stakeholders
Building upon the notion of transparency, community participation can also be
achieved through interviewing beneficiaries as part of the monitoring and
evaluation process used and incorporating some of this feedback in an annual
report to stakeholders. Annual reports for FTFs can also generate significant
reputational benefit for companies, however both of these benefits need to be
weighed against the administrative demands of generating the report when
determining its length and presentation.
43
v) Governance and Influence
The governance structure of an FTF is often seen as the primary control over the
FTF. A strong governing body can provide clarity of vision and mission for the
FTF and exert control over all processes to ensure they are undertaken in
accordance with FTF principles.
FTFs require a governing body of some form to be considered separate legal
entities. The composition of these bodies varies from representation from the
owner group only, through to multi-stakeholder bodies representing
beneficiaries, civil society, government authorities and technical experts.
Greater diversity within a governance structure can support a system of checks
and balances with complementary roles played by different partners. Companies
developing FTFs with these multi-stakeholder governance structures can find
they have multiple benefits including the visible demonstration of corporate
responsibility and engagement with stakeholders and potential for leveraging
additional resources in the community via other donors. A summary of the
advantages and disadvantages of a multi-stakeholder representative governance
structure are provided below.
Multi-Stakeholder Representative Governance Structures
Advantages
Disadvantages
 Can retain some level of company
 May not necessarily result in true
control or influence – alignment with
ownership of entity or agenda for
the corporate agenda and reduced risk
beneficiary/stakeholder
 Enhances relevance, effectiveness and
 With clear governance protocols, can
sustainability of foundation by
result in conflicting agendas and
creating beneficiary ownership
priorities
 A consistent approach and centralised
 Typically requires substantial time for
administration can be retained
capacity
building
to
ensure
community participation is effective
 Provides a means of holding
beneficiaries accountable particularly
 Link to company objectives can be
if they participate in decision making
diminished
unless
overall
participation
in
FTF
already
has
broad
 Provides local stakeholders with a
business case “buy-in”
“voice”
 Can be more expensive in the short
 May provide enhanced platform for
term to set up and run given
attracting additional or more diverse
administrative and training costs
sources of funding
associated with additional participants
 Good will credited to FTF may not
attributed so clearly to a company
sponsor
 Interests of supporting donor agencies
are not always compatible with
company’s business interests.
At the opposite end of the spectrum from multi-stakeholder governance
structures are those governing bodies comprising representation from the
owners alone. These FTFs may be simpler to govern, and in the case of company
FTFs, can often fall within company oversight, almost as an additional company
department. High levels of company control can be beneficial when there is a
lack of local capacity and this structure can improve the flexibility to react to
changed environments, in particular the changing economic situation of a mining
44
company. The “owners” approach however allows little or no room for
stakeholder input into governance, unless alternative participation structures
are developed, such as community advisory groups, or technical advisor teams
providing input to governing body decisions. This style of governance is less
likely to support an FTF to become sustainable beyond the closure of the mine.
While the governance structure often conveys the relative influence of different
stakeholders over the FTFs activities, it may not present a complete picture of
“influence”. The best examples of this distinction between governing power and
influence are seen where an FTF’s structure, mandate, vision and existence have
been controlled through regulatory processes however no governmental
representation is evident on the FTFs governing body.
vi) Programming Focus
The mission, vision and objectives of an FTF should be grounded in a deep
understanding of beneficiaries’ needs, owner priorities and gaps in existing
development activities, all of which will guide the programme choices made.
Understanding a beneficiaries’ needs can require a considerable investment of
time up-front, however well targeted programmes, meeting community
expectations and needs are likely to make the investment cost effective over
time.
The timing and location of FTF establishment and implementation can be a
critical variable in determining objectives and programming choices. Common
programming areas focussed on by FTFs in the mining sector include:
 Local economic and business development;
 Health and wellness;
 Education and vocational training;
 Basic infrastructure;
 Employment and income generation;
 Environment; and
 Capacity building of local authorities and community based organisations.
A general programming trend progressing from basic infrastructure, health and
education programmes at inception through to supporting alternative livelihood
projects and a focus on capacity building as FTFs mature can be seen in many
FTFs.
The review of FTFs conducted as part of this research generated the
results illustrated in Figure 4. Within the 41 FTFs reviewed, education, health
and business development programmes were the most dominant, comprising
over 45% of all the programmes across the FTFs (this analysis does not take into
consideration the size of the programmes).
45
Number of FTFs
Figure 4 Programming Trends
35
30
25
20
15
10
5
0
Programmes
APPROACHES TO IDENTIFYING NEED
Company staff knowledge of beneficiaries - For example, the AngloGold Ashanti Fund
(South Africa) uses local area committees of company staff to identify community needs, and
subsequent projects for funding by the centrally managed corporate trust.
Partner knowledge of beneficiaries – Grant-making foundations in particular rely on the
applicant’s knowledge of beneficiaries’ needs. Asociación Ancash (Peru) funds initiatives
generated by local organisations, working groups or other associations. Escondida (Chile)
adopted national government targets for child education as a shared priority and working
closely with the Regional Government of Antofagasta and the Junta Nacional de Jardines
Infantiles (JUNJI – National Kindergarten Board) to meet this previously defined need.
Formal consultation with intended beneficiaries, as part of existing company
consultation processes or separately – The Goldfields Ghana Foundation works with
standing community committees created by the company to facilitate communication
between the company and communities to generate development project ideas. The Inti
Raymi Foundation (Bolivia) carried out a two-stage process involving: 1) diagnosis and
characterisation of its area of action; and 2) a series of community workshops designed to
identify and prioritize infrastructure needs.
Baseline/needs assessment at the regional or local level sponsored by the company,
foundation or government – All of the VALE Foundation’s “territorial development”
initiatives are based on a thorough baseline assessment.
As with all development programmes, monitoring and evaluation of the
programmes being implemented by an FTF is an essential component of
programme management. Many texts have been written focussing on this issue
and in this Sourcebook only considerations pertinent specifically to monitoring
and evaluating FTF programmes are included.
46
Approaches to Impact Measurement

Asociación Los Andes de Cajamarca (ALAC in Peru)
uses a common set of fifteen indicators which are
monitored throughout the implementation of economic
development grant projects and ultimately used to
evaluate effectiveness; these include six impact
indicators: the number of direct jobs created, the
number of people who have improved their technical
capabilities for production, number of new production
activities, sales and value of family assets.

Fondo Minero Antamina (Peru) conducts evaluation
by focus area. Each focus area has impact goals against
which projects are monitored. Goals are designed
using a logical framework model. Common economic
development project indicators include income
generation, job creation, new sales and number of
microfinance loans repaid.

The Anum Lio Foundation (Indonesia) employed a set
of community indicators which were measured in
baseline and end-line surveys and could be used by
community and government to continue to monitor
impact after completion of closure programmes.
Monitoring and evaluating the
impacts of development projects
conducted or facilitated through
an FTF will guide the FTF in
recognising changes to the
operational environment, and
allow modifications to strategy to
be made as necessary. These
feedback loops may come
through regular programme
reports from grantees, internal
tracking of key performance
indicators, third party review or
audit, or community feedback
processes.
Community
participation in monitoring can
be one of the most effective
methods of gauging community
sentiment
and
building
community capacity.
vii) Timing
The majority of FTFs are created once mining operations have already
commenced. While this is unsurprising given the lack of project revenues prior
to this time, earlier establishment of FTFs can lend strong support to a
company’s attainment of a social license to operate.
Project Phase
Number of FTFs
Established
Licensing or land access agreements (aboriginal
communities)
Licensing or land access agreements (nonaboriginal communities)
Pre-Operations (exploration, feasibility and
construction)
Operations
Closure
Other (Divestiture, expansion, changes in
ownership, disputes)
5
2
7
12
1
6
An increasing trend of early development of FTFs is being seen, often through
the influence of government expectation and community development
agreements signed as part of the mining contract.
47
Early Inception FTFs
In 2004, Xstrata Copper successfully bid on the option to purchase the La Bambas copper
project in Cotabambas and Grau Provinces in Peru. As a condition of this privatisation
transaction (facilitated by ProInversion, the Peruvian Government’s agency for the promotion
of foreign investment in Peru), USD45.5 million of Xstrata Copper’s payment to the Peruvian
Government was allocated to a Social Trust Fund for the Cotabambas and Grau Provinces.
The Trust Fund was managed by ProInversion and Provincial Mayors with one representative
from Xstrata until 2010 when a civil entity called Las Bambas Social Fund (FOSBAM) was
created to improve fund management. This social fund has been delivering programmes
focussing on regional health, education, infrastructure and development throughout the
exploration period for the Las Bambas project. The Social Fund is supported by Xstrata’s own
sustainable development programmes in the region. More detail on this model is seen in Rio
Tinto’s Fondo Social La Granja case study in Part II.
48
2) A Snapshot of the Experience from Part II Case Studies
Part II of this sourcebook presents fourteen case studies drawn from South
Africa (4), Mozambique (1), Namibia (1), Peru (5) and Papua New Guinea (3).
While mining investment plays a significant role in the national, regional and
local economies of each of these countries, the purposes for which FTF
structures have been applied and the parties implementing them vary
significantly. Some of this variation is related to the company, project and the era
of development of the FTF vehicle, however another part of this divergence
relates to the national setting and the influence of government policy. In this
section, the experiences of these fourteen FTFs are considered using the
framework of key attributes described earlier in Part I.
a) The Importance of Context
To compare the FTF experience of Peru, Papua New Guinea and Southern Africa,
it is necessary to first consider the different histories and political economies in
which these FTFs have developed. While these three areas have long histories
of mining activity, the role that mining is expected to play in development has
changed significantly over time within each region and varies across the regions.
The political economy surrounding these three regions is described in Part II,
with a summary of the different experiences indicated below.
In both Peru and South Africa, the influence of government policy on social
investment in the mining industry is evident. The conditions outlined in the
Peruvian Aporte Voluntario explicitly required companies to establish an
independent entity to manage the new funds and the South African Mining
Scorecard, while not requiring companies to establish an independent
investment entity, is directive in its expectations of social and economic
development deliverables from mining companies.
By comparison, the
foundations, trusts and funds in Papua New Guinea were developed in an
environment with limited formal policy and were responding to changing
stakeholder expectations.
The large-scale mining industries in Peru and South Africa have had considerable
time and experience through which to mature and for society’s expectations to
have risen with regard to the contribution the sector makes to community
development. These expectations are seen in the politicization of mining
projects in Peru in particular. By comparison, Papua New Guinean citizens have
high expectations around compensation payments and these payments often
overshadow or obfuscate community development projects being undertaken.
It is interesting to note that two of the three case studies from PNG have the
management of compensation monies as one of their core responsibilities. In
contrast, in Peru and South Africa the model appears to have been to minimise
49
Figure 5 Use of FTFs in Case Studies
the inclusion of compensation within foundations, trusts and funds so as to
maintain a strict development role.
b) The Use of FTFs
The case studies in Part II illustrate FTFs being used, to some extent for all three
of the channels described previously: community investment, government
payments and compensation (Figure 5).
The majority (9) of the case studies are using FTF models for community
investment purposes. The government requirement for establishment of FTFs to
facilitate benefit sharing has only been seen in Peru to date, although significant
government influence was used to establish one of the FTFs in Southern Africa.
The notion of mixed purpose FTFs, as seen in PNG through the integration of
benefits and compensation into a single package, presents a different approach
to FTF use. While an integrated package is likely to significantly improve a
communities understanding of the full suite of benefits and impacts generated by
a new mining investment, the experience from PNG suggests that it also blurs the
50
distinction between compensation and community investment. Blurring this
distinction in these cases has resulted in development projects and spending
being assumed to be compensation based, loosing the reputational and
stakeholder benefit normally attributed to a company for its community
investment programmes.
While explicit expectations of delivering compensation projects through the FTF
are limited to the PNG case studies, a number of the other case studies also noted
challenges faced when they were established and needed to differentiate
themselves from existing company compensation programmes, as is described in
the Asociación Ancash example. There are no purely compensation focussed
FTFs within the case studies included in Part II, however a number of advantages
of FTF frameworks could be useful in managing compensation funds in future
projects. These advantages include the ability to endow funds payable at a later
date through staggered compensation payments; the independence of an FTF
structure from a mining company; transparent management of funds; and joint
governance of those funds.
c) Programmatic Approaches
The decision between grant making or operational delivery of projects typically
has significant impacts on the staffing size of the FTF. Nine (9) of the case
studies primarily employ grant making approaches, with five (5) primarily
implementing projects directly, although it should be noted that both approaches
are seen within a number of the case studies. The comparative difference in
staffing levels is evident in the examples highlighted in Table 2. While it might
be expected that operational implementation approaches would be more
prevalent in more remote sites where implementing partners are absent, there
are no obvious trends within the case studies linking the selection of a grant
making or operational model to project location (remoteness).
Table 2 Comparative Staffing Levels
Asociación Los Andes de
Cajamarca
and
Fondo
Solidaridad
Cajamarca
(combined)
Asociación Ancash
Palabora Foundation
Ok
Tedi
Fly
River
Development Program
Staffing Complement
Grant Making FTF
20
Operational FTF
6
100
60
d) Financing
Three aspects of financing were discussed in Part 1: funding structure; sources;
and management. The financial structure of an FTF can play a critical role in its
long-term sustainability. Within the case studies developed, four (4) have
established endowment funds, five (5) rely on budget cycle contributions and the
51
remaining five (5) operate with funding commitments over an extended period.
Interestingly, of the four with endowed funds, only one started with this
approach from FTF inception, while the rest have developed an endowment over
time to better manage variable company contributions and to support the future
sustainability of the FTF.
The development budgets of the fourteen FTFs reviewed in Part II vary
significantly. This variance reflects their different objectives and the “channel” of
investment which the FTF is serving. Figure 6 provides an overview of the
relative scale of the FTF budgets (for FTFs which have variable expenditures,
rolling averages were used) for community investment based FTFs. Figure 6
demonstrates that “greater FTF spend” does not necessarily equate to greater
reputation or benefit derived from the FTFs activities, with both ALAC and the
Rössing Foundation enjoying strong reputations.
Millions USD/annum
Figure 6 Comparison of Development Budgets Across Community Investment FTFs
5
4
3
2
1
0
The third arm of financing relates to the management of the finances held by the
FTF. While the importance of limiting administrative overheads was recognised
by many of the case studies, only ALAC and Palabora Foundation formally apply
an administrative cap of 15% and 20% respectively.
e) Geographic Focus
In a number of the case studies, an external party or factor played a major
influence in the selection of the geographic focus of the FTF. For example, the
focus of the Fondo Social La Granja is dictated within legislation associated with
the mineral lease, and the project areas included within the Ok Tedi Fly River
Development Program’s mandate are linked to community agreements made
with Ok Tedi Mining Limited over compensation payments. Using the model
developed earlier in Part I, Figure 7 reviews the range of geographies across
which the fourteen case studies operate. It was been proposed earlier that
Governments would likely play the key role in nationally focussed FTFs, however
52
the experience gathered in Part II demonstrates a stronger connection between
government influence and regional development initiatives. It is also interesting
to note that while company foundations are often assumed to operate at a local
level, focussing on their direct area of influence, five of the nine company
foundations reviewed here operated at either regional or national levels. It
should be noted that the purpose of these FTFs has likely had a far stronger
influence over their geographic reach than their basic structure.
Figure 7 Influences over Geography
International (0)
National (3)
•3 x Company
Regional (6)
• 3 x Government
Influence
• 1 x Community
Foundation
• 2 x Company
Area of Influence (3) and Special
Focus Groups (2)
• 4 x Company
•1 x Government
Influence
The discussion on geography earlier also suggested that the geographic focus of
an FTF would be influenced by its type (community foundation, company
foundation or government mandated contribution). For example, a community
foundation would be expected to operate within a limited area of influence,
while a government mandated contribution may extend to a broader region.
These assumptions are well supported by the experience from the case studies.
f) Participation
Focussing specifically on the governance aspects of participation, Table 3,
illustrates the variation seen within both the size of the governing body and the
representativeness of that body across the fourteen FTFs. The chairmanship of
the governing body, often ascribed considerable power, has been handed to an
external party in three of case studies, and in only two of the case studies is the
governing body comprised solely of representatives of the owning entity.
As noted earlier however, multi-stakeholder governance structures do not
necessarily imply that development beneficiaries have been included in the
structure.
53
Table 3 Participation through FTF Governance Structures
FTF
Fondo Social La
Granja
Asociación Los
Andes
de
Cajamarca
(ALAC)
Fondo
Solidaridad
Cajamarca (FSC)
Asociación
Ancash
Fondo Minero
Antamina
Anglo American
Chairman’s
Fund
Impala Bafokeng
Trust
Greater
Rustenburg
Community
Foundation
Palabora
Foundation
Mozal
Community
Development
Trust
Rössing
Foundation
Ok Tedi Fly
River
Development
Programme
Papua
New
Guinea
Sustainable
Development
Program
Country
Number of
Governing
Body
Members
Peru
3
Number of
Community/Govt
Representatives on
Governing Body
1 (33%)
External
Chairmanship of
the Board
Peru
7
3 (43%)
No
Peru
7
3 (43%)
No
Peru
8
4 (50%)
No
Peru
0 (0%)
No
South Africa
Antamina
Board
9
Not Available
No
South Africa
8
2 (25%)
No22
South Africa
6
6 (100%
Yes
South Africa
5
3 (60%)
No
Mozambique
11
0 (0%)
No
Namibia
10
7 (70%)
Yes
Yes
Papua
Guinea
New
4
Currently 2 (50%)
No
Papua
Guinea
New
7
3 (43%)
No23
g) Governance and Influence
A more detailed breakdown of the governing body composition is seen in Table 4
where the relatively low level representation of government bodies is evident.
This low level representation is interesting given the significant influence
While the Chairperson is the Queen Mother of the Royal Bafokeng Nation (RBN), RBN are 50% owners of
the Impala Bafokeng Trust. 2
23 The chairmanship is held by one of the BHP Billiton appointed representatives.
22
54
attributed to the government in the establishment of these FTFs (four FTFs were
established primarily through government requirement or insistence).
Table 4 Governing Body Composition
FTF
Fondo Social La
Granja
Asociación Los
Andes
de
Cajamarca
(ALAC)
Fondo
Solidaridad
Cajamarca (FSC)
Asociación
Ancash
Fondo Minero
Antamina
Anglo American
Chairman’s
Fund
Impala Bafokeng
Trust
Greater
Rustenburg
Community
Foundation
Palabora
Foundation
Mozal
Community
Development
Trust
Rössing
Foundation
Ok Tedi Fly
River
Development
Programme
Papua
New
Guinea
Sustainable
Development
Program
Number of
Governing Body
Members
3
Number of
Government Reps
Number of Civil Society /
Community Reps
1
7
3
7
2
8
1
4
Antamina Board
9
8
224
6
6
5
3
11
10
7
4
2
7
2
2
Another 3 members of the IBT Governance Structure are from the RBN, however as joint owners of the
IBT they are not considered independent in this case.
24
55
h) Programming
The programming choices seen in the case studies were largely in line with
common practice in community development projects, however the most
interesting aspect of these choices has been their evolution over time. The
development industry has moved away from “bricks and mortar” to capacity
building projects over the last decade or more. As such, it would have been
expected to see a dominance of “basic infrastructure” programmes in the
historical or current programmes undertaken by the older FTFs with a lower
presence in the more recent FTFs. This trend was not supported by the case
studies in Part II, as highlighted in Table 5, with basic infrastructure programmes
making an appearance in even the most recent FTFs.
This trend can be explained in part by the different backgrounds of the FTFs,
with some of those influenced by government being provided with clear
directions on the types of projects which should be undertaken (eg choice of
electrification projects for Fondo Social La Granja).
Similarly, FTFs
implementing compensation programmes may be directed towards
infrastructure projects as part of the agreed compensation packages. In addition
to these specific cases, the construction of basic infrastructure may form an
essential stepping-stone for FTFs when starting to operate in remote and
otherwise under-serviced areas. The Palabora Foundation suggest that it is only
through having completed many infrastructure projects in their past and
meeting basic needs that they are now able to focus on capacity building and
more participative approaches to development.
Table 5 Basic Infrastructure Programmes
FTFs
AACF
Rössing Foundation
Palabora Foundation
GRCF
MCDT
PNGSDP
Asociación Ancash
ALAC
Fondo Social La Granja
FMA
FSC
IBT
OTFRDP
LSDPT
Start Date
1974
1978
1986
2000
2000
2002
2002
2004
2005
2007
2007
2007
2008
2009
Basic Infrastructure
Programmes/Support25
No
No
Yes
No
Yes
Yes
No
No
Yes
Yes
Yes
No
Yes
Yes
i) Timing
A “yes” was recorded where FTFs have supported infrastructure projects during some period and does
not necessarily indicate they continue to support infrastructure projects.
25
56
The vast majority of the FTFs reviewed in Part II were established within the last
decade (eleven of the fourteen case studies). The time delay between
commencement of mineral production and the launch of an associated FTF was
also investigated. Interestingly, there is no real trend evident between the era of
the FTF and the speed with which it was launched after mineral production
commenced, as seen in Figure 8, although the biggest delays were seen in older
FTFs. The increasing trend of launching FTFs in advance of mineral production
was not captured in these case studies. It is also interesting to note that the
three oldest FTFs included in this review are all located in Southern Africa. This
is likely to be both a comment on the historical importance of the mining sector
in this region and a reaction to government policies in place during that time.
2010
60
2000
50
1990
40
1980
30
1970
20
1960
10
1950
0
FTF Start Date
Years
Year of FTF Launch
Figure 8 Time Elapsed Between Mineral Production and FTF launch26
Years between Production Commencing and FTF Launch
Only 11 of the 14 case studies were included in this analysis as the starting dates for 3 were externally
controlled. Those FTFs which were prompted by Government requirement or legislation have been
included.
26
57
3) Identification of Leading Practice
This Sourcebook makes it apparent that there is no “one size fits all” approach to
FTFs in the mining sector, and that the ideal structure for an FTF will vary
depending upon the purpose of the FTF, its operational context and the specific
interested and implementing stakeholder. However, drawing upon the
experience presented in Part I and further detailed in Part II, ten attributes of
leading practice for FTFs in the mining sector have been identified.
At a generic level, leading practice and experience indicates that FTFs should
have:
 A clearly defined strategic vision, outlining its role as a development
actor in the local environment;
 A single purpose, ie either community investment, compensation, or
government transfers, but not a combination;
 A representative multi-stakeholder governing body;
 An endowed fund to enable sustainability;
 High levels of co-financing and collaboration;
 Transparent practices and associated accountability;
 Efficient administrative structures to maximise development delivery;
 Flexibility to adapt to changing development practices and operating
conditions;
 Incentive schemes to retain high calibre staff; and
 Impact based monitoring and evaluation.
Before addressing each of these attributes from the perspectives of the three key
stakeholder groups (companies, communities and government), the applicability
and importance of these attributes is first considered within the context of the
purpose of the FTF. As discussed earlier in Part I, FTFs are used for three main
purposes in the mining sector: community investment, payment of
compensation, and government payments. Table 6 portrays the relative
importance of the aspects identified as leading practice to the specific purpose
for which the FTF is intended, with a deeper shade of red indicating greater
importance. While these lessons are derived primarily from the experience of
company foundations, they are equally applicable to community foundations (as
seen in the Greater Rustenburg Community Foundation case study in Part II).
a) Points to Consider - FTF Purposes
A number of the attributes of leading practice identified above can be considered
to be “good management principles” for FTFs and should be applied to FTFs
independent of purpose. Companies, communities and governments often select
FTFs because of the transparency and efficiency of administration their
structures can provide. Impact based monitoring and evaluation systems are
59
widely accepted as an integral part of development programming and ensure
FTFs can measure their progress in delivering development impact.
Table 6 Relationships between Purpose of FTF and Attributes of Leading Practice27
i) Using an FTF for Community Investment
As can be seen in Table 6, all of the aspects identified as leading practice are
considered highly applicable to FTFs used to channel community investment
from mining companies to communities. This is possibly unsurprising as the
majority of FTF mining experience globally has been derived from community
investment focussed FTFs.
Asociación Ancash, Peru (see case studies in Part II) undertook a strategic visioning exercise
and defined three lines of specialisation: sustainable tourism, local culture, and conservation
of natural resources of the Ancash region. Through clear communication of this strategic
vision, Asociación Ancash has carved out a niche area of specialisation in which they have had
considerable success. This vision has also assisted them to assert independence from the
activities of the company and the Fondo Minero Antamina.
ii) Using an FTF for Compensation
The deeper the shade of red the greater the importance of the attribute of leading practice to the specific
FTF purpose.
27
60
FTFs used for the management and delivery of compensation payments should
draw on these areas of leading practice in a different manner. It would be
unlikely for a compensation based FTF to have success in seeking financing from
other sources. Likewise, FTFs used for compensation alone would be less likely
to need to plan for sustainability and develop an endowment. Compensation
based FTFs would, however, benefit greatly from having a governance structure
incorporating representation from the compensation beneficiaries and from
third party observers.
The experience captured in this sourcebook has highlighted the challenges
associated with FTFs seeking to achieve mixed purposes, such as delivering
community investment and compensation payments. No examples of a pure
compensation based FTF were reviewed in Part II, however the benefits afforded
by FTF structures (such as transparency, independent governance and the
capacity to disburse funds over an extended period) may lead towards this use in
the future.
iii) Using an FTF for Government Transfers and Payments
The use of FTFs for government payments and transfers is closely connected to
the political economy context within a host country. For this reason, the
relevance of the attributes of leading practice identified above will depend upon
the underlying goal for the government transfer and will vary significantly case
by case. The “good management practices” of transparency and efficient
administrative structures are often cited as the grounds for channelling
government payments through FTF structures.
The use of FTF structures for government required contributions or payments
can also encourage co-financing and has been seen to be a successful means of
improving the implementation record of government funding.
The Fondo Minero Antamina (FMA) and Fondo Solidaridad Cajamarca (FSC) Peruvian
case studies (see Part II) have significant development budgets, as laid out in the Aporte
Voluntario legislation. The funding contributed by Antamina and Yanacocha (respectively)
has enabled significant progress to be made in key development areas such as child
malnutrition and other basic needs. This success has been amplified through the pairing of
FMA and FSC funds with previously unspent cannon minero funding available at the
provincial level. In this manner, these FTF structures have contributed significantly greater
value to provincial development than the sum of their contributions.
61
b) Points to Consider - Stakeholder Groups
Foundations, trusts and funds provide distinct opportunities for mining
companies, governments and communities to better share the benefits accruing
from mining projects. These three stakeholders approach this topic from very
different perspectives and the opportunities afforded to one may represent
challenges to another. The perspective of each of these stakeholders is played
out with regard to the ten attributes of leading practice below:
i) Communities
Strategic Vision: Clear enunciation of an FTF’s strategic vision can ensure
communities understand the role it will play in development in their region, and
conversely the gaps which will remain. Communities are better able to generate
projects, proposals or grant requests when this vision is expressed clearly.
Where communities establish their own community foundations, the direction
expressed in the strategic vision may be critical to seeking and accessing support
from community members.
Single Purpose: Community investment, government transfer payments and
compensation can all lead to development projects in a community. Recognizing
which project is derived from which source and more critically which projects
are entitlements (such as compensation) and which are voluntary (community
investment) is made almost impossible if an FTF is providing both at the same
time, leaving communities unsure of what they are “owed”.
Representative Multi-Stakeholder Governing Body: This is one of the key
means by which communities can participate and gain some level of control over
the FTF. For communities to benefit from a multi-stakeholder governing body
approach, capacity building programmes for community representatives may be
needed. To ensure the position is truly “representative”, either an existing
communication system or one custom built for this purpose needs to be used to
pass community considerations up to the representative and pass responses
back to interested community members.
Endowment Funds: Where communities establish their own foundations, the
establishment of an endowment can minimise the foundation resources required
to secure new financing on a regular basis. Endowed company FTFs provide the
potential for sustainability beyond the lifespan of the mining project within a
community, paving a way for community adjustment post mining. Endowing of
funds can however mean a reduced annual development budget to allow the
fund to grow in the early years of an FTF.
Co-Financing and Collaboration: Improved collaboration between development
actors is of significant benefit to beneficiary communities. Co-financing and cocontribution to projects are increasingly being expected from community
62
groups, and this can build the sense of ownership for the implemented project
amongst community members. Excessive expectations in this regard however
may have the opposite effect, turning communities against FTF projects.
Transparent Practices: The monetary value held within some government and
company FTFs can be very significant and transparent practices are expected by
communities to ensure these external actors are managing the money they are
expecting to receive as development projects appropriately. This is particularly
important when FTFs are managing compensation payments. Expectations of
community foundations should be no different, highlighting the importance of
accountability within community foundation structures for financial
management.
Efficient Administrative Structures: Beneficiary communities often see high
administrative costs as “wasted” money, with some believing they could achieve
greater development impact if the resources were passed to them directly.
Communities often see excessive administration costs as mismanagement.
Flexibility: As mining projects develop the development needs and expectations
of communities change, as does their ability and desire to engage in discussions
over FTF strategy. Community forums to re-assess the objectives of the FTF on a
periodic basis will help to maintain community engagement.
The role played by the Palabora Foundation (see Part II) in the surrounding Ba-Phalaborwa
communities has changed significantly since it commenced operation in 1986. Flexibility has
been needed to reflect and accommodate changing population needs, changing political
economy context in South Africa and economic conditions at the Palabora mine. Through
working with community representatives and traditional leaders, the foundation has
maintained its connection to communities throughout these changes.
Incentive Schemes: Personal relationships between FTF
members often develop over time and in some cases are
development programmes. High staff turnover from
opportunities for these relationships to occur, and can
members feeling disconnected from the FTF.
staff and community
key to the success of
FTFs minimises the
result in community
Impact Based Monitoring and Evaluation: M&E programmes addressing
impacts rather than activities provide a superior picture of the success of a
project. The better project success is understood by FTFs, the better the
development impact for beneficiary communities.
ii) Governments
Strategic Vision: Where governments are using FTF frameworks to manage
revenues derived from the mining sector, a clear vision for the use of these funds
can minimise the potential for criticism over benefit sharing from the mining
industry. Clear communication of the intended purpose of the funding can also
63
deter reallocation of the funding within the government and may reduce the risk
of corruption.
Single Purpose: Combining government mandated FTFs funded by company
payments with government royalties and taxes to improve implementation
levels can be a wise move by governments and can generate positive results for
community beneficiaries. In contrast, combining benefits and compensation
awarded to communities from land access agreements can lead to confusion
within communities over the distribution of benefits from government to
landowners.
Representative Multi-Stakeholder Governing Body: Opening up the governing
structure of a government FTF to external parties may build community
goodwill, but can also threaten the control exercised by the government, and
may potentially expose under-spending or poor financial management if these
problems exist. Governments may also be wary of taking a seat on company or
community foundation governing bodies to minimise their accountability for
another body’s actions.
Endowment Funds: The endowing of revenues from periods of windfall gain can
protect governments’ capacity to implement public service needs independent of
the mining cycle. Governments are also likely to support the endowing of
company FTFs to the extent that this mitigates the risk of social collapse in a post
mining community.
Mandated to minimise the impact of mine closure, the Papua New Guinea Sustainable
Development Programme (PNGSDP) is the largest mining FTF in existence. Developed as
part of the exit arrangements of BHP from the Ok Tedi mine, PNGSDP receives 52% of the
dividends paid by the continued operation of the mine, with the vast majority of these
dividends being invested for future use. The bulk of the funds will only be released post mine
closure and are to be used to support development for the next forty years.
Co-Financing and Collaboration: Collaborative projects can be of great benefit
to governments where they assist governments to implement their own
programmes. Governments are also likely to be supportive of combined
approaches amongst different development actors to streamline and increase
the effectiveness of their projects.
Transparent Practices: Seen as both the champion and potentially the downfall
of government FTFs, transparent practices are necessary for government
managed mineral revenues. Tracking revenue flows between different levels of
governments can also improve financial accountability and reduce opportunities
for corruption.
Efficient Administrative Structures: Tolerances for high overheads may be
greater within a public sector FTF if a considerable proportion of the overhead is
linked to public sector salaries. By comparison, governments are likely to be
critical of company FTFs with excessive administrative structures.
64
Flexibility: Political changes and other developments in the country will affect a
government’s priorities and how these are reflected in a government FTF or
supported through a company FTF. Governments use FTFs, in part, because of
the greater flexibility they provide compared to regulatory approaches to benefit
sharing.
Incentive Schemes: To the extent that staff leave company FTFs to join the
public service, this transition would likely be supported by governments,
however, the transfer normally works in the reverse direction. Incentivising
staff to remain at company FTFs can minimise job vacancies developing in
company FTFs, thus reducing the opportunity and demand for government
capacity to move to fill this gap.
Impact Based Monitoring and Evaluation: The scale of programmes
implemented or facilitated through government FTFs can make comprehensive
impact M&E programmes challenging. Simplified impact assessment processes
applied to a subset of projects would yield equivalent information to inform
government priorities.
iii) Companies
Strategic Vision: Clear communication of a strategic vision can assist companies
to establish that which they will and will not support, while also potentially
earning early reputational benefit from commitments made to their host
community. The vision should be reviewed on a regular basis as the operational
context changes around the FTF.
Single Purpose: Combining community investment programmes with
compensation obligations is likely to reduce the value attributed to the
community investment programmes and potentially raise expectations for new
additional programmes.
The Integrated Benefits Package approach in Papua New Guinea (described in Part II) groups
together compensation, royalties and community investment benefits in a single package for
host communities. While this approach provides a clearer picture of the total benefits for
communities, it risks diluting community investment initiatives in the eyes of beneficiaries as
the distinction between compensation and community investment is lost.
Representative Multi-Stakeholder Governing Body: The most efficient means
of deciding on projects and implementing them is often through an owner’s
governance structure.
Expanding the governance structure to include
representatives from multiple stakeholders, including project beneficiaries, is
likely to reduce the speed of decision making and implementation, but long term
will yield more appropriate, more sustainable and replicable projects. Using a
65
multi-stakeholder governing body can also build goodwill amongst stakeholders
and vastly improve the company’s understanding of development considerations
in their geographical focus area.
Endowment Funds: The biggest challenge facing companies when seeking to
endow funds is timing. Ideally funds would be endowed as early as possible in
the project lifecycle, however this is also when money is most expensive to a
company. Endowed funds can protect company FTFs when revenues from
mining projects decline in periods of economic downturn, with operation
budgets potentially being sourced entirely from the interest accrued.
Co-Financing and Collaboration: Seen less as a source of funding and more as a
means to facilitate community engagement, companies are often strong
supporters of community co-financing/co-contribution in their company FTF
programmes. Collaboration with and co-financing from other parties is often set
as one of the goals of company FTFs, however success in this field can dilute the
reputational benefit attributed to the specific company. Companies may need to
consider the administrative costs of seeking co-financing from major
development organisations compared to the development and financial benefit.
Transparent Practices: The financial size of company FTFs can be significant
and as they are often effectively guardians of community funding, it is essential
that they operate using transparent practices. Transparency is considered even
more important when companies contribute to government supported or
mandated FTFs to ensure that funds are being used for their intended purposes
and to minimise any speculation of bribery or corrupt practices between the two
parties.
Efficient Administrative Structures: Highly effective administrative structures
are needed to manage community requests, monitor programmes and train and
retain staff.
Flexibility: Too much flexibility can result in an unpredictable operating
environment for company FTFs and can encourage requests for support from all
quarters. As such a balance between flexibility and vision is often formed
through periodic review of the vision, mission and objectives of the FTF.
Incentive Schemes: Mining companies typically have well developed career
progression maps for engineers and accountants. The career progression for
development specialists working in a company FTF is less straightforward and
needs to be incentivised through exchange programmes with other FTFs, annual
workshops bringing together FTF teams from around the world and
opportunities for training in relevant fields.
Impact Based Monitoring and Evaluation (M&E): A company’s social license to
operate is often supported through demonstration of community development
impact. Impact based M&E programmes can assist companies to explain and
demonstrate this development impact.
66
Asociación Los Andes de Cajamarca (ALAC) has been at the forefront of impact based
monitoring and evaluation for a number of years. ALAC use the M&E indicators to determine
the relevance and impact of activities performed. Feedback is provided to implementing
partners (ALAC is a grant making FTF) periodically so that necessary changes can be made to
project design and implementation.
67
68
Mother and Child Illustrating their New Kitchen in Shiqui, Peru, through FMA-ADRA Programme(Wall, E)
Part 2
Case Studies from Peru,
Southern Africa and
Papua New Guinea
The World Bank
70
Introduction
Companies, governments and communities have been using mining foundations,
funds and trusts since the 1950s. The drivers for the establishment of these
social investment instruments has varied widely, from altruistic community
development driven by mineral profits through to means of managing large sums
of money in a transparent and professional manner. The case studies presented
in this second part of the Sourcebook present a diversity of experience from
three regions: Peru, Southern Africa and Papua New Guinea.
In each of these areas, mineral production accounts for a considerable
proportion of the national Gross Domestic Product (GDP) and pressure has been
exerted on both governments and companies to generate more than economic
growth alone and to achieve poverty reduction through this sector.
Communities in each region have witnessed massive changes to their way of life
during the operational period of mining projects, and in some cases equally
massive changes after closure.
Mining is a significant political issue in Peru and the move towards foundations
or associations, both at company and government levels, has been driven in part
by this politicization. The foundation model is being used to implement a
“voluntary contribution” from companies derived from high mineral prices. In
the absence of this model, such a contribution would otherwise likely have been
implemented as a state tax, and while the management of the funding is
different, its eventual use is in line with the government social agenda, as can be
seen in the Fondo Solidaridad Cajamarca and Fondo Minero Antamina case
studies. The Fondo Social La Granja illustrates a different approach, with the
foundation structure being used by the company and the government to provide
development funding for host communities during the project exploration and
feasibility period following privatisation.
Both Asociación Ancash and
Asociación Los Andes de Cajamarca grew out of operating mines and by the
decision of their operating companies to address social development
considerations in a different manner.
The South African experience highlights the historical context in which social
investment instruments exist. During the discriminatory period within South
Africa, funds, trusts and foundations were seen by some companies as a means to
support disadvantages groups while operating in line with national policy. This
approach can be seen in the Anglo American Chairman’s Fund, the Palabora
Foundation and the Rössing Foundation (Namibia only gained independence
from South Africa in 1991). Democratization has brought with it a strong social
agenda in South Africa, with national government placing explicit social
investment requirements on companies through legislation and through the
negotiation of black economic empowerment transactions.
The Impala
Bafokeng Trust resulted from one such transaction, with significant government
influence over the identification of beneficiaries for the Trust. Government and
companies are not the only groups reacting to social investment needs
71
surrounding mining communities, as seen in the story of the Greater Rustenburg
Community Foundation. While located in Mozambique, the Mozal Community
Development Trust provides an insight into more recent approaches to Trusts in
the region.
Mining has formed the economic backbone of Papua New Guinea since its
independence in 1975. Its impact on the national economy is evident, however
in a number of cases this has come with significant social and environmental
costs. Both the Ok Tedi Fly River Development Program and the Papua New
Guinea Sustainable Development Program have their origins in the response to
these challenges. Breaking from global experience, the Ok Tedi Fly River
Development Program and the in-formation Lihir Sustainable Development Plan
Trust are being used or plan to be used to manage compensation and community
investment funding in an integrated manner.
Each of the fourteen case studies presented here highlight the importance of
understanding their operating context in order to understand why they have
developed the way they have. With this context in mind, and drawing on the
overview provided in Part I, a simple analysis against six criteria has been
provided at the beginning of each case study to provide assistance to the reader.
The six criteria, as seen in Figure 9, are intended to provide a guide to the reader
to the type of foundation, trust or fund they are reviewing, and in no way imply
an evaluation of the institution itself. Mining foundations, trusts and funds can
only be evaluated against the goals they were set to meet, and these vary in each
case and for each of their stakeholders.
The six spectrums that have been used cover:
- The programmatic approach taken by the entity, ie does it make grants or
are the officers of the foundation operating programmes on the ground;
- How is the entity financed? Annual operational budgets present different
options for investment from endowed funds;
- Where does the entity operate?
Within this spectrum, mining
foundations, trusts and funds can target specific communities, such as
indigenous or vulnerable peoples within the mine’s area of influence, or
they may operate across a broader area than the mine affects directly;
- How involved are communities/beneficiaries in the governance structure
of the entity?
- How much influence does the mining company exert over the activities of
the entity?
- How much influence does the Government (at all levels) exert over the
activities of the entity or did it exert over the establishment of the FTF?
72
Figure 9 Categorisation Model for Case Studies
Case Studies
a) Peru
With minerals accounting for over 62% of the country’s exports (just under 7%
of GDP) in 200628, Peru is one of the world’s major mineral producing countries.
The Peruvian mining industry has been significantly shaped by the political
history of the country, both through the nationalisation period under Velasco,
and subsequently through neoliberal economic reforms under Fujimori29. The
neoliberal reforms placed great value upon creating an attractive environment
for foreign direct investment (FDI) and included the provision of tax-stability
packages for foreign mining companies for periods of ten to fifteen years, which
brought significant new investment to the country.
Peruvian law requires that 50% of income taxes and taxes paid by mining
companies to the national government be channelled back to regional (25%) and
municipal (75%) governments. The distribution of mining royalties among
municipalities is defined on the basis of where the minerals have come from,
rather than where the areas of impact exist. Rising mineral prices and increased
production in the last decade have seen exponential increases in the value of
canon minero and royalty transfers rose from S./67 million (USD 23.4 million)in
2001 to S./4150 million (USD 1.45 billion) in 200730. The tax stability packages
applied to the majority of the large-scale mines gained significant attention in the
past decade as mineral prices rose with company profits rising with them. The
Government of Peru considered implementing a windfall tax on operations to
ensure the Peruvian state also benefited from the high mineral prices, however
after extensive consultation it was agreed that companies would pay a
“voluntary contribution” (Aporte Voluntario) for a five year period (starting in
2007) valued at 3.75% of turnover. The combination of high mineral prices
generating significant taxes through the canon minero and the aporte voluntario
contribution has had a large impact on the social investment being carried out by
mining companies in Peru.
Stratos Inc. (2008)
Bury, (2005)
30 Arellano-Yanguas (2008)
28
29
73
While Peru is host to great mineral wealth it is also a land of widely varying
levels of poverty, as can be seen in the Poverty Map from 2006 included in Figure
10. This map highlights the poverty at departmental level, but within each
department there is wide variation across the coastal, urban and mountainous
regions. Most mining projects in the country operate across a range of poverty
environments, with the majority of the minerals being located in the
mountainous regions and infrastructure corridors connecting these often
isolated areas to the coast and major cities.
Equitable distribution of the
benefits of mining within Peru has been and remains a highly contentious and
challenging topic, not aided by weak provincial government mechanisms for
implementation of canon minero received.
Figure 10 Map of Poverty in Peru31
Five case studies have been compiled in Peru. They are the Asociación Los
Andes de Cajamarca (ALAC), supported by the Newmont owned Yanacocha mine,
Fondo Solidaridad Cajamarca (also supported by Yanacocha), the Fondo Minero
Antamina and Asociación Ancash connected to the Antamina mine and the Fondo
Social La Granja connected to the Rio Tinto owned La Granja pre-feasibility
31
Foncodes (2010)
74
project. Each of the Peruvian case studies included in this Sourcebook have
been strongly influenced by the social and economic history of Peru’s mineral
sector. The Government of Peru has played a key role in the formation of each of
the foundations, either directly through legal requirement or indirectly through
low implementation rates of government expenditure in provinces.
75
i) Fondo Social La Granja
The La Granja copper project is located in the district of Querocoto, in the
Province of Chota in the region of Cajamarca. The 3,900 ha La Granja mining
lease is held by Rio Tinto Minera Peru Limitada SAC, which is a wholly owned
subsidiary of Rio Tinto32. The deposit was acquired by Rio Tinto from the
Peruvian Government through a privatisation process in late 2005 and is
currently undergoing pre-feasibility studies.
Establishment, Structure and Purpose of the Fund
Peruvian law requires that companies acquiring so-called “privatisation”
projects pay fifty percent of the purchase price of the project to a social fund
(fondo social) in order to manage the gap or delay between project purchase and
mineral production generating wealth for host communities33. The social fund is
intended to support impacted communities during the exploration and feasibility
stages of a project’s development, with the goal of maintaining/building the
company’s social licence to operate by the time of production. The creation of a
structure where communities and the mining company are partners is intended
to provide experience in working together in a transparent manner.
For each of the major stakeholders, this model presents significant advantages:
 Peruvian Government – Effective expenditure in a mineral rich region,
increasing the likelihood of gaining community support for future
development of the resources. This model effectively transfers payments
from the central government to the regions, supporting the
decentralisation move being undertaken by the government. One of the
key challenges facing the Peruvian Government is the lack of
implementation capacity within municipalities, making it difficult to
invest resources effectively to undertake public work projects without
support from other implementation parties. Through requiring private
sector companies to work with municipalities in order to meet their lease
conditions, this model enhances the implementation capacity of
government at a local level.
32
33
Rio Tinto (2010)
El Peruano (2008)
76


La Granja (Rio Tinto Peruano) – Under this model, Rio Tinto is able to
expand the geographic range of community investment the project can
make during the pre-feasibility and feasibility periods, and in this case it
allows the project to invest in all of the communities within the Choto
District (approximately 12,000 people). This model boosts the likelihood
of achieving and maintaining social license to operate by directing half of
the value of the lease to the local communities, and minimises the risk of
companies becoming overwhelmed by community investment demands
in excess of company capacity during the feasibility stage.
Impacted Communities – The definition of impacted communities is
undertaken by Proinversion and typically the label is applied at a
municipality level. In effect this would be expected to increase the size
of the “impacted population” during the feasibility period, where the
impacts are comparatively minor, and more critically, allows for social
investment from mining projects to commence prior to the
commencement of productive mining. It also moves the risk of
unsuccessful exploration or feasibility studies from the host communities,
to the government, ensuring that communities benefit independent of the
final outcome of the studies.
Programmes
The original legislation mandating the fondo social was unclear on how this
money could be spent and the structure of the management of the fund provided
very limited opportunities for involvement of impacted communities and was
highly constrained by Government process. These constraints and the lack of
capacity within district governments led to very low levels of project
implementation (no projects were implemented during the first three years of
the original structure) and drove a group of mining companies, led by Rio Tinto,
to design and propose a different structure for the Fondo Social, represented in
Figure 11 below.
Within this new structure the State gives money directly to the Civil Asociación,
with annual auditing from external groups monitoring this process. The Civil
Asociación includes representation from the directly impacted stakeholders and
the mining company.
77
Figure 11 Structure of Fondo Social La Granja
Identification and Geography of Beneficiaries
Identification of the directly impacted stakeholders was undertaken by
Proinversion with impacted districts defined in the contracts signed between the
government and exploration companies. Any changes to the beneficiaries of the
Fondo Social La Granja would require a modification to the existing law. Those
districts defined as directly impacted are then incorporated into the Associated
Assembly structure through representation on the Board.
This basis for identifying impacted communities is often quite different from the
process that companies undertake as part of their own social impact assessment
processes. In the case of La Granja, the Fondo Social La Granja targets the district
of Querocoto, with a population of approximately 10,000 people, which is
considerably larger than the communities defined as directly impacted by the
current exploration activities undertaken by the company. In this regard, the
Fondo Social La Granja provides an opportunity for Rio Tinto to vastly increase
the region it is supporting, with projects being targeted to all communities in the
District. Over and above the Fondo Social, Rio Tinto La Granja maintain their
own social investment programmes in the communities immediately
surrounding their exploration activities.
Governance and Ownership
The Board of the Associated Assembly has three members, comprising one
representative from the Municipality (currently the Mayor in the case of La
Granja) who is the President of the Board, and two representatives from Rio
Tinto (this is required by the law). To ensure neither group has dominance in
the Board, an informal agreement has been reached between La Granja and the
78
Municipality whereby the second Rio Tinto representative does not vote. The
President of the Board is elected by the Board’s members on an annual basis.
Financing and Sustainability
The Fondo Social La Granja is financed through the payment of 50% of the value
of the project acquired by Rio Tinto from the Government. The La Granja project
was valued at USD 22 million when Rio Tinto acquired it in 2005, resulting in
financing of USD 11 million available to the Fondo Social between 2005 and
2011. Rio Tinto have applied for an extension to the feasibility period, extending
it to 2016, and as such additional fees will be paid by Rio Tinto to the
Government, half of which will be channelled through the Fondo Social.
The Fondo Social La Granja has assured financing for the duration of the
feasibility studies undertaken by Rio Tinto. It is managed on an operational
budget basis, with no endowment established.
Management Operations/Human Resources
As indicated in Figure 11, an independent company undertakes the management
of the fund. This structure was decided by the Asociación, with the intention
that the management contract be awarded to a company derived from the
District. Technical assistance was sought from the International Finance
Corporation (IFC) to identify a company capable of taking on this role and in
2009 the management contract was awarded to LM Consultores, formed by
professionals from Querocoto. The management team do not receive salaries as
such, but are paid a percentage of the value of the projects which they
implement.
The management team have successfully proposed a strategic plan for the Fondo
Social and a budget for 2010, both of which have been endorsed by the Board.
The first five projects to be approved were for the electrification of communities
within the District, all of which are expected to be completed by March 2010.
Figure 11 also highlights the inclusion of a “control function” within the
structure of the fund. This control function is responsible for controlling all of
the procedures, both technical and financial. The Fondo Social La Granja is
having difficulty recruiting appropriately skilled people to this control function
due to salary conditions which have been kept in line with municipal salaries.
The IFC is now providing additional assistance to develop procedures for
proposals which can be presented to the fund.
Key Challenges
The timing expectations of the Rio Tinto team and those of the Municipality have
not always been the same, leaving potential for tension to arise in the Civil
Asociación. The model may also establish a benchmark of financial contribution
from the project to communities which will be difficult to modify in the future.
79
ii) Asociación Los Andes de Cajamarca (ALAC)
ALAC is a corporate organisation established as part of Minera Yanacocha’s
social responsibility programme to promote sustainable human development for
the Cajamarca region. Newmont Mining Company commenced construction on
Minera Yanacocha in 1992 in cooperation with its Peruvian partner, Compania
de Minas Buenaventura, and the International Finance Corporation. Yanacocha
was the first new large foreign investment in the Peruvian mining sector since
197634.
Located in Cajamarca region, Minera Yanacocha is approximately 35km from the
city of Cajamarca where ALAC is based. Cajamarca region is home to over 1.5
million people, making it the fourth most populous region in Peru. Over 60% of
the population live in poverty, and 73% of the population are living in rural
areas, making it the most rural region of Peru. Outside of the mining activities
associated with Minera Yanacocha and other developments, the major economic
activities in the region are dairy cattle and subsistence agriculture.
Establishment, Structure and Purpose of the Fund
ALAC was launched in 2004, after stakeholder engagement and dialogue over a
two-year period.
At the time ALAC started, the Yanacocha mine had been
operating for a period of 12 years, and the major focus of the community
development activities undertaken by Yanacocha up until that time had been on
the rural areas. Yanacocha had had a mercury spill in 2000 and combined with
community discontent over an exploration permit for Cerro Quillish there was
considerable tension between the company and some community members at
this time. Within this context, ALAC was developed to increase corporate social
investment within Yanacocha’s area of influence, promoting civil society, state
and private sector participation in sustainable development proposals.
Originally intended to be a community foundation, ALAC consulted widely with
key stakeholders in its formation period seeking their thoughts for a community
foundation and endorsement of the proposed model. The community foundation
model had to be changed to one of a corporate foundation shortly before ALAC
34
Bury (2005)
80
commenced operation due to opposition from a small group of stakeholders,
however the highly participative approach was retained.
The development of ALAC was seen as an addition to the community relations
projects being undertaken by Yanacocha, and as such, pressure on ALAC to start
implementing projects immediately was reduced and it was afforded the time
and space to develop its approach in a consultative manner.
The overall
objective for ALAC is “to stimulate programs and projects that, taking advantage
of mining benefits, will generate impacts beyond the operational lifecycle of the
mine”35. The mission is:
“We are an institution that engages the community, government and
private sector to provide capacity building, opportunities generation and
resource mobilization so as to enable Cajamarca’s sustainable
development”
ALAC has a horizontal structure, with four key programme areas, as illustrated in
Figure 12. In addition to the programme areas, ALAC also acts as the
management and implementation body for a number of other projects, such as
the PREDECI36 programme and notably the Programa Minero de Solidaridad con
el Pueblo Cajamarca (PMSC), known as the Fondo Solidaridad Cajamarca. The
Fondo Solidaridad Cajamarca has a different mission from ALAC and is described
separately below.
Figure 12 ALAC Structure
35
36
ALAC (2010)
For more information see www.predeci.org.pe
81
Programmes
ALAC develops initiatives and projects along four programmatic lines:
 Institutional strengthening;
 Education and health quality and equity; and
 Entrepreneurial capacity building.
Each of the programme lines, plus ALAC’s stakeholder relations and
management role for other projects have indicators for success against which
they are measured on a regular basis. ALAC manages these programmes and
uses NGO’s with skills in the appropriate areas to implement them.
This
approach supports the network needed to strengthen collaborative approaches
to sustainable development.
Under the entrepreneurial capacity building programming line, ALAC have
supported agribusiness, development of local suppliers, a jewellery training
college (Koriwasi), housing funding (PROGRESO), medicinal plants for biocommerce, textile handicrafts, and various food products. Until 2008, these
projects had generated over 16000 new jobs, adoption of best practices and new
technologies by over 14,000 people, and 2,000 people had developed new
productive activities. This progress has combined to produce increases in sales
of USD 47 million and USD 20million worth of business and family assets.
The institutional strengthening programmes include close working relationships
with Regional Government and local municipalities, including assisting with
them with institutional modernization, strengthening the Grupo Impulsor
(Driving Group) for Cajamarca’s development, establishment of a strategic
alliance between ALAC and USAID/Peru ProDecentralización and the
development of the Governance and Political Management Programme. Support
for these activities and groups often involves the provision of training for
regional stakeholders with a strong focus on regional planning. These activities
focus on the improving the efficiency of public spending by local and regional
government. The majority of the financial resources available to local and
regional government come from the canon minero, where 50% of the income tax
paid by mining companies is directed to the region (only Yanacocha is
contributing at present in Cajamarca). Since 2008, ALAC has also been working
with grass roots organisations to improve their leadership and empower them.
ALAC contributes to the development of human capital through supporting the
Cajamarca schools network, scholarships and bursaries, an education emergency
project and development of youth entrepreneurs.
Within the emergency
education project alone, over 16,000 children received school supplies, 8000
children benefited from school furniture, 200 schools networks received support
for their school libraries and 500 teachers were trained.
Identification and Geography of Beneficiaries
ALAC now supports projects in many urban and rural zones in Cajamarca,
although in the early days it predominantly supported productive development
82
projects in the rural zones. Figure 13 illustrates the scope for ALAC, with the
green circle representing Yanacocha’s area of influence (predominantly rural),
and ALAC’s focus being indicated by the six red circles, indicating the districts of:
Cajamarca, Baños del Inca, La Encañada, Sorochuco, Huasmín and Celendín. The
broader blue circle indicates the implementation focus of the Fondo Solidaridad
Cajamarca.
Figure 13 Yanacocha Area of Influence and ALAC's Priority Areas
Governance and Ownership
The governance structure for ALAC illustrates a high level of community
participation. At present the owners of Yanacocha retain the decision making
power on the Board (4 votes compared to 3, as indicated in Figure 14). It is
anticipated that this power may shift as ALAC prepares for an independent
future after mine closure.
83
Figure 14 ALAC Governance Structure
Financing and Sustainability
While supported by Yanacocha, co-funding has been a core element of ALAC
since its inception. Yanacocha provides start-up funding for projects, and ALAC
seeks partners to develop and expand successful projects. It is one of the few
mining foundations which has succeeded in diversifying its income sources.
Within the annual budget of approximately USD 1.5million, USD 400,000 is
added to an endowment fund annually, and this will continue until 2022, with an
expected investment of USD 8-10million by this time.
ALAC is one of three social investment mechanisms supported by Yanacocha:
ALAC (USD 1.5million p/a), Fondo Solidaridad Cajamarca (USD 63million over a
five year period) and Yanacocha community relations (approximately USD
3million).
ALAC monitor their administration costs as a proportion of the budget
expenditure, with no more than 15% of expenditure being devoted to this
activity. This close monitoring is likely a factor in their success in receiving cofunding from a variety of sources.
Co-funding occurs at the project level and follows one of the formats outlined in
Figure 15. Where funds are made available through projects awarded through a
tender process, ALAC will provide no more than 50% of the financing. Civil
society and regional government, who partner with ALAC in the financing,
typically propose these projects. Under the direct funding approach, projects are
proposed by ALAC staff and alternate financing is actively sought as part of the
84
project review process. Approximately 100 projects are proposed each year of
which on average 10 receive support from ALAC.
Figure 15 ALAC Co-Funding Mechanisms
The success of ALAC in seeking alternate sources of financing is evident in Figure
16. Co-funders include the Newmont owned development project, Conga, which
is anticipated to commence operations in 2014 in close proximity to Yanacocha’s
operations, and the Fondo Solidaridad Cajamarca (referenced as PMSC in this
figure). Both of these financiers have close associations with Yanacocha and
their support for ALAC could be anticipated. More strikingly, GoldFields, a
competitor mining company also operating in Cajamarca Region, had
contributed over 12% of financing for ALAC projects by the end of 2008. This
collaboration between ALAC and other mining companies has been fostered
through support from Grupo Norte37.
Grupo Norte is a Peruvian organization dedicated to working with regional governments to allocate tax
monies generated by mining for community infrastructure. Members include Buenaventura, Yanacocha
and GoldFields.
37
85
Figure 16 Other Sources of Financing for ALAC (to December 31 2008)38
Total External
Contribution:
USD 747, 288.50.
Conga
24%
GoldFields
13%
Yanacocha
15%
PMSC
28%
IDB
15%
Fondoempleo
2%
BISA
0%
Ferreyros
3%
Management Operations/Human Resources
The team who developed ALAC were drawn directly from Yanacocha’s external
affairs department. This transfer of personnel allowed for a continuity and
understanding of both the company’s interests and the business case for the
foundation while also recognising the external need for a participative
organisation which allowed stakeholders to discuss development in a “neutral
space”. This goal is also evident in the branding of the Association which does
not highlight its connection to Yanacocha. This being said the connection
between Yanacocha and ALAC is widely known and understood, although some
opportunity for confusion exists as Yanacocha and ALAC start to implement in
more overlapping areas and more project funding comes from the Grupo Norte.
ALAC have invested considerable resources in the development of a
comprehensive monitoring and evaluation process which is now considered one
of the leading M&E systems for development projects in Peru39.
Key Challenges
One of the key successes of ALAC may also present one of its key challenges: the
management of co-funding without losing reputational benefits attributable to
Yanacocha. From a sustainability perspective, expanding the source of financial
support is a great achievement, however, it raises the question of whether
reputational benefits for the company will be diluted by sourcing funds from
other sources, including competitor companies working in the same region.
ALAC ‘s role is also under continual evolution as Yanacocha change their
approach to community relations and the Fondo Solidaridad Cajamarca makes
38
39
Adapted from ALAC (2010)
See ALAC (2007) for more details.
86
such a significant contribution to the local economy. This changing environment
requires flexibility within ALAC, while also making it all the more important for
ALAC to remain focussed on those activities on which it has specialist
knowledge.
87
iii) Fondo Solidaridad Cajamarca
The Fondo Solidaridad Cajamarca is the fund developed by Minera Yanacocha to
meet the Aporte Voluntario commitment. Established in December 2006, it is
intended to invest in a strategic public-private alliance to promote participation
from a wide range of actors in the development of Cajamarca.
Establishment, Structure and Purpose of the Fund
The Fondo Solidaridad Cajamarca receives its financing from Yanacocha, and
uses ALAC as the administration agent, while holding its finances in a trust
(fideicomiso). The structure is shown in Figure 17 where MPC refers to the
Provincial Municipality of Cajamarca, the GRC is the Cajamarca Regional
Government, and SC refers to civil society. The CTC defines the operational
direction of the fund and identifies priorities for investment both regionally and
locally. This commission also reviews and validates the eligibility of projects
seeking financing and takes decisions on financial support. The CTC selected
ALAC as the administration agent for the funds and was responsible for
establishing the monitoring and evaluation framework for projects. Of key
importance is the CTC’s role as a facilitator of coordination between public
authorities, Yanacocha and the community for the management of the fund.
The Technical Secretariat (ST) supports the CTC through the management of
financial, legal and administrative matters for the fund.
ALAC as the
Administration Agent is responsible for the administration of the
implementation of the projects and programmes supported through the regional
and local funds.
88
Figure 17 Fondo Solidaridad Cajamarca Structure
Programmes
All of the programmes supported by the Fondo Solidaridad Cajamarca are
aligned to the priorities and investment plans of the local, regional and national
Government. To receive support programmes need to be able to demonstrate
positive impacts, effective investments and sustainability both in terms of
operational expenditure and maintenance. Figure 18 provides an overview of
the programming priorities for the Fondo Solidaridad Cajamarca. Investments
in complimentary projects, basic infrastructure and institutional strengthening
are supporting an increase in the implementation of projects using Canon Minero
in most of the cases.
89
Figure 18 Distribution of Fondo Solidaridad Cajamarca Within Programme Lines
Truth Commission
1%
Nutrition
15%
Education
6%
Health
18%
Institutional
Strengthening
5%
Production
13%
Complimentary
Projects (Regional
and Local)
32%
Basic Infrastructure
10%
The relationship between the Fondo Solidaridad Cajamarca and Yanacocha
continues to evolve. The fund has now started to invest in some of the
programmes implemented by the community relations team at Yanacocha, and
pressure exists for this investment to be formalised into a recurring budget line
item for Yanacocha.
Identification and Geography of Beneficiaries
In keeping with the structure of the Aporte Voluntario funds, the Fondo
Solidaridad Cajamarca has two funds: local and regional as highlighted in Figure
19. The areas highlighted in red are supported under the Local Fund, while
those in green are part of the regional programme. The Fondo Regional receives
26% of the contribution, with the Fondo Local receiving 73%.
90
Figure 19 Intervention Areas for Fondo Solidaridad Cajamarca
Governance and Ownership
The governance structure is best seen in Figure 17. All decisions are consensus
based and the CTC meets on a bi-monthly basis.
91
Financing and Sustainability
The Fondo Solidaridad Cajamarca is financed through 3.75% of Yanacocha’s
gross income before tax. This is expected to amount to approximately USD 81
million between 2007-2011, the period of the agreed Aporte Voluntario
contribution. Through aligning these funds with social programmes prioritised
by the Central Government, and partnering with canon minero projects
supported by the local and regional governments, it is estimated that the
resources of the Fondo Solidaridad Cajamarca have generated additional
investment of USD 193million.
Management Operations/Human Resources
The fund is managed by the ALAC team, as noted in the structure in Figure 12.
Over half of the ALAC staff (20 people) work on the Fondo Solidaridad
Cajamarca. Both the Fund and ALAC more generally apply a model of identifying
grass-roots organisations to implement projects, with the ALAC staff providing a
management and monitoring and evaluation role.
Key Challenges
The Fondo Solidaridad Cajamarca has brought a very significant amount of
additional funding into the Cajamarca Department for a five-year period. The
long-term sustainability of this funding is unknown. Changes to the Aporte
Voluntario scheme could have significant repercussions for the stakeholder
relationships Yanacocha has built both with beneficiary groups and with the
Provincial Government.
The Aporte Voluntario is required to be “new funding”, over and above
commitments already made by Yanacocha and ALAC. Within this approach there
is a lack of clarity however over the extent to which funds allocated within the
Fondo Solidaridad Cajamarca can be used to support projects in line with
Yanacocha’s social licence to operate.
92
iv) Asociación Ancash
The Antamina mine is located in the San Marcos District, in Ancash region and
commenced operation in October 2001. It is a polymetalic operation, with
copper, zinc and molybdenum the major products and silver and lead as byproducts. The mine is located between 4300-4700m above sea level, with a port
located at Punta Lobitos. Owned by four companies (BHP Billiton (33.75%),
Xstrata (33.75%), Teck Resources (22.5%) and Mitsubishi (10%)), the Compania
Minera Antamina is a Peruvian company. In 2009, over 1800 workers were
employed directly, with another 35,000 estimated to be employed indirectly.
Within a year of operation, Antamina had increased the national GDP by 0.8%
and produced more than 30% of the mineral production in the country. During
the past nine years, the GDP of the Ancash region has grown by 6% annually,
with the biggest increases seen in 2001 and 2002 where GDP rose 16 and 17%
respectively due to the commencement of the Antamina mine. The role of
mining (not just that of Antamina) within the Ancash Department is seen in
Figure 20. Figure 20 also highlights the incredible divergence in Government
transfers across provinces depending on their mineral wealth and the
overwhelming dominance of the canon minero within government transfer
payments.
93
Figure 20 Government Transfer Payments 2006-200940
The effectiveness of very significant government resources available to Ancash
through the mining royalty and transfer payments are hampered by the poor
implementation record of provincial governments, as is highlighted in the
following figures. Ancash received the highest level of canon payments in Peru
(as seen in Figure 20), and has the lowest implementation percentage of all
provinces (Figure 22). It should be noted however that even with a poor
implementation rate, the overall value of implemented projects in Ancash still
exceeds that of all other provinces (valued at S/. 310 million (USD 108.2 million)
in 2009)41.
40
41
Antamina (2010)
MEF, (2010)
94
Figure 21 Canon Received by each Regional Government
Figure 22 Regional Government Expenditure of Canon
95
Establishment, Structure and Purpose of the Fund
Asociación Ancash was established in 2002 to maximise the sustainable
development contribution of the Antamina mine. Community relationships had
been challenging during the early years of development and production for
Antamina, hence the Asociación was intentionally separated from the company
in order to better secure external financing and to provide a distinction between
compensation and mitigation actions associated with the mining operation
(undertaken by the community relations team) and community development
activities. This independence was challenged as the Asociación inherited all of
the community development projects (and their tensions), which had been
undertaken by Antamina.
As the ownership of Antamina changed, the approach to the Asociación also
changed. It was semi-reintegrated in 2005 when the payroll for the Asociación
was taken over by Antamina, and has subsequently regained financial
independence. The role of the Asociación underwent a major change with the
establishment of the Fondo Minero Antamina (FMA) in 2007. Prior to this time
the Asociación had invested in all development activities within the area of the
mine’s influence. Following the establishment of the FMA, the Asociación
underwent a strategic visioning exercise and defined three lines of
specialisation:
 Sustainable Tourism;
 Local Culture; and
 Conservation of the Natural resources of the Ancash region.
Programmes
The overall vision for the Asociación is “Ancash, important tourism destination
and promoter of its own development”. This targeted and relatively narrow
approach to sustainable development has been made possible through the
establishment of the FMA, with its focus on improvement of basic living
standards in the region. In the absence of the FMA it is unlikely that the
Asociación would have been able to operate in such a targeted fashion.
The FMA financed a Market Study for the Destination Conchucos, and following
on from the findings of this study the Asociación supported activities to improve
facades and roofs in the main squares of a number of towns to improve their
tourist potential. They have also developed literature supporting the tourism
potential in the area, and provide assistance for various tourism festivals.
The Asociación has supported initiatives to revalue local culture through
working with the National Institute of Culture. Projects have included assisting
artisans to present their products at different summits in Peru and hosting
competitions for sculpture. The most significant contribution to Ancash culture
came with the organisation of the first regional Festival of Ancash Dances
“Tushukushun, gatswakishun, tanikushun 2008” which aimed to preserve,
promote and disseminate the original and traditional dances of the Ancash
96
region. The event included dancers from 15 different provinces, with over 340
dancers and musicians involved in the performances.
The Asociación has supported an array of natural resource projects, all with the
hope of increasing tourism in the region. Projects have included supporting a
paleontological study which to date have identified 21 species of reptiles in the
region and work continues to study the remains which have been found. Studies
are also ongoing investigating the puya raimondii flower species which is
endemic to the high Andean areas in Ancash and is found in both the black and
white ranges.
Identification and Geography of Beneficiaries
Asociación Ancash has a broader geographical reach than the community
relations team of Antamina, and this was one of the principals on which the
Asociación was established. Approximately 5000 people live within the mine’s
area of immediate impact (the focus of Antamina’s community relations
programmes), with approximately 12,000 living in the San Marcos District.
The new vision for the Asociación has refocussed the activities and projects
across a broader area, with projects across Ancash Province now being
supported to the extent that they fit within the three lines of activity outlined
above.
Governance and Ownership
When Asociación Ancash was established, the Board was entirely made up of
representatives of Antamina. As the ownership of Antamina changed, so too did
the governance of the Asociación Ancash to introduce external society onto the
Board structure. The Board now comprises four external and four internal
directors (Figure 23), with the President of Antamina acting as the Chairperson
for the Board.
97
Figure 23 Governance Structure for Asociación Ancash
The interests of the Asociación are represented on the Board through the
Corporate Affairs Manager of Antamina. The individuals selected as external
directors were included for their specialist knowledge to improve the technical
capacity of the governing body.
Financing and Sustainability
The Asociación has a budget of approximately USD 800-900,000 per annum. It
has guaranteed financing from Antamina for a 20year period and is actively
seeking financing from other groups. In 2009, approximately 12% of the funds
available to the Asociación were sourced from groups external to Antamina.
The Asociación has a relatively limited budget when compared to the FMA
(described below) and the Antamina community relations budget
(approximately USD 5million/annum). Through focussing the activities of the
Asociación on just three lines of investment, the Asociación has been able to
achieve significant progress with this budget.
Management Operations/Human Resources
The Asociación employs six people, with a staff member managing each of the
three lines of activity and the remainder undertaking logistics and support roles.
At its inception, most of the staff were drawn from the community relations team
from Antamina, which while providing good continuity and transfer of
98
knowledge, also led to some confusion within communities around the
independence of the Asociación from the company.
Projects are implemented by implementation partners, with the staff of the
Asociación providing strategic guidance and management oversight of the
projects. Projects are typically discussed with local authorities, with the goal of
involving them in the projects, but this involvement is not critical for the
approval of the project. Likewise, the Asociación staff discuss projects with the
FMA staff, and in some cases the Asociación has received financing from the FMA
where projects overlap mutual interests.
The Asociación Ancash has developed an automated Institutional Information
System (AIIS), which monitors and tracks the progress of its projects and
activities. Within this system strategic targets and key performance indicators
have been defined and progress against these targes and indicators is reported
publicly through the Asociación Ancash annual report. Also included within
these annual reports are testimonials of recipients of projects from the
Asociación, such as this one from 2008:
Agripino Guerra – Artisan of Carhuayoc – San Marcos
“ … as an artisan, I have had the opportunity to receive support of the
Ancash Association in December and in the 2008 Independence Day; at the
Fair held in the National Museum, I had good sales; they helped us
commercialise our textiles at the national level in the National Museum. I
would ask my colleagues for a little more determination; people believe that
everything falls from heaven, but you have to make the effort… ”
Key Challenges
Two significant challenges have faced the Asociación Ancash since its inception:
independence and identification of an operational “niche”. Independence from a
company is difficult to maintain if new associations inherit projects from the
company’s community relations function. This is a challenge faced by many
social investment instruments when they start operations.
The second challenge is more specific to the Peruvian experience where the
Aporte Voluntario scheme has added considerable sums to the social investment
budgets for all companies. Within this environment smaller organisations have
in some cases needed to redefine their focus to ensure they weren’t competing or
duplicating the activities of the larger foundations. The niche which has been
formed however may need to be adapted again if the Aporte Voluntario scheme is
discontinued.
99
v) Fondo Minero Antamina
The Fondo Minero Antamina (FMA) was established in 2007, following
negotiation between companies and the Government over windfall profits and
the agreement on Aporte Voluntario. It is intended to contribute to sustainable
development in the local and regional zones of influence for the mine, working in
a complimentary fashion with the State. As noted earlier, Ancash Department
receives high levels of canon transfers from mining, but has a poor
implementation record for these transfers. The FMA brings together private
sector experience in implementing projects and new money to work with local
and regional authorities to improve living conditions in the Ancash Department.
FMA, with the guidance of the Peruvian Government, are directing their
investments towards those development issues which can be challenging to
finance through public finance initiatives, such as child malnutrition and capacity
building of local authorities.
Establishment, Structure and Purpose of the Fund
The Voluntary Contribution (Aporte Voluntario) required companies to commit
between 1% and 3.75% of gross profits to independent social investments,
managed within an independent entity. In 2007, using their voluntary
contributions, Antamina Mining Company established the Antamina Mining Fund
which “now holds resources of USD 163.9 million that are being invested in
projects in the areas of health and nutrition, economic development,
infrastructure, education and institutional capacity building”42.
The finances invested in the FMA remain private finances, with government
exerting only a control function over the FMA on an annual basis. The
government audit comprises a review of a) money spent by the fund, and b) a
check to see that the money spent is broadly in line with Government directed
terms of reference for the fund.
Antamina was the first company to enter into the voluntary contribution
agreement with the Government. From the outset, they established four
programmatic priorities: health and nutrition, education, productive
42
Kilgour (2010)
100
development, and institution strengthening. The FMA reports through to the
company through the Vice President of Corporate Affairs (Figure 24).
Figure 24 Structure of FMA
Vice President of Corporate
Affairs Antamina Mining
Company
Legal
Community Relations
Fondo Minero Antamina
(FMA)
Asociación Ancash
Communications
Director FMA
Manager FMA
Finances, Logistics and Legal
Programmes: Health and
Nutrition, Education,
Productive Development,
Institution Strengthening
and Infrastructure
Monitoring and Evaluation
Programmes
FMA undertook a baseline assessment of the Ancash Department to identify five
sectors which had the potential to become sustainable competitive industries.
Those identified included: Agriculture, Mining, Manufacturing, Fishing and
Tourism. Following this identification, the FMA assessed each industry and the
obstacles preventing it from developing and gaining private sector investment at
present. This assessment identified the importance of improved road, electricity
and transportation networks as well as the need for improved education,
increased education infrastructure and additional health infrastructure. This
assessment, in coordination with the Peruvian Government and the Municipal
Governments led to the identification of the five programme areas defined
earlier.
The FMA has developed five-year objectives for each of its programmes, a
selection of which are shown below:
 Health
o Reduce chronic malnutrition in 20,000 children less than 3 years
of age from 35% to 28%
101




o Reduce the prevalence of anaemia within children less than 3
years of age by 10%
Education
o 20% of students in 150 primary schools improve their knowledge
of fundamentals
o 30% of primary school teachers improve their classroom
performance
Productive Development
o Increase income by 30% for people participating in productive
projects;
o Create 5000 new sustainable jobs;
Institutional Strengthening
o Formulate S/. 450million (USD 157 million) of projects for public
investment, of which S/. 300million (USD 105 million) will
progress through SNIP43 and S/.150milion (USD 52.4 million) will
be implemented
Infrastructure
o Improved access to and quality of telecommunications and
electricity services for 130,000 people
o Improved irrigation infrastructure for 500 hectares of cultivated
land
o Conduct studies to improve road conditions for improved mobility
across 1000km
o Implement 100 social infrastructure projects across 20 provinces.
The largest programme supported by the FMA to date is the Ally Micuy (meaning
“Good Nutrition” in Quechua) health programme addressing child malnutrition.
After operating for two years, a reduction in chronic malnutrition amongst
children under 3 years of age by almost 7% has been attributed to the
programme44. Ally Micuy is being implemented by Caritas in the northern half of
the department and ADRA in the southern half of Ancash. The programme
includes supplements for child nutrition, education programmes for children and
their mothers, provision of improved stoves and training of health promoters (all
volunteers) within each province. After two years, over 31,000 children, 25,000
families and 3,200 pregnant women have benefited from this programme.
Identification and Geography of Beneficiaries
The zone of activity for the FMA includes the whole Ancash Department. The
Aporte Voluntario requires that the majority of the funds made available are
spent in the “local” area, with the remainder going to the “region”. FMA have
applied some flexibility in interpreting these definitions, and have chosen to
include many of the poorest regions of Ancash Department with their “local”
area. The definition of poverty levels used the UN Indicators of Human
Development and the assessment was conducted as part of the baseline study
undertaken at the launch of the FMA. The local and regional distinctions are
43
44
SNIP (Sistema Nacional de Inversión Pública) is the Government investment system.
Chronic malnutrition has reduced from 35% to approximately 28%.
102
highlighted in Figure 25 below. The local fund has received over 70% of the
finances made available to date.
Figure 25 Ancash Department – Definition of Local and Regional Interventions for FMA45
Governance and Ownership
The FMA comprises two private funds: local and regional (as defined in Figure
45
FMA (2010)
103
25). Both funds are managed entirely by Antamina and report to the Antamina
Board through the structure outlined in Figure 24. A technical advisory group
provides input to the project decisions taken by the Board as required. The FMA
is subject to annual audits from the Government, which reviews the rate of
implementation of projects and ensures the projects being supported are
broadly in line with the Peruvian Government’s “mining programme to show
solidarity with the population” which generated the Aporte Voluntario.
Upon commencement of the FMA (2007), Antamina established a Local
Technical Coordination Committee and a Regional Technical Coordination
Committee in the city of Huaraz. These committees receive information and
make suggestions and recommendations on the projects supported by the FMA.
Representatives of Antamina, the regional government and the municipalities of
Huari, San Marcos and Huarmey comprise the membership of the Local
Technical Coordination Committee, while the Regional Technical Coordination
Committee includes representatives from the Ancash Regional Government,
Universidad Nacional Santiago Antúnez de Mayolo (UNASAM), Universidad del
Santa and Antamina. Committee members do not receive a salary, and are
appointed for 12 month terms, after which time they can be renewed or
replaced46. Both committees are chaired by Antamina.
Financing and Sustainability
Monies committed through the Aporte Voluntario have to be new money, which
would not otherwise have been spent on social investment. As such, funds
allocated to community relations and the Asociación Ancash could not be
redirected towards meeting the FMA commitments.
The FMA came into existence as a result of high mineral prices leading to
windfall profits for operating companies. Rather than change the taxation
stability packages under which some of the largest companies were operating, it
was agreed between the Peruvian Government and the companies that a
voluntary contribution would be made by companies for a period of five years
unless the high prices were to drop in the interim. As such the FMA has funding
committed until 2011 and its future will depend on both Government decisions
regarding the extension of the Aporte Voluntario scheme beyond 2011 and the
mineral prices after this time.
The scale of the financing available through the FMA is very significant, as can be
seen in Table 7. Also highlighted in Table 7 is the rate of implementation of
funds made available to the FMA (69% up until March 2010). This rate of
implementation has increased significantly over the past year, with a total of
USD135.5 million invested by end of March 201047.
46
47
FMA (2007)
FMA (2010a)
104
Table 7 FMA Financial Summary (as at 30 April 2009)48
Component
Education
Health
Institutional
Development
Productive
Development
Truth
Commission
Overhead
Total
FMA
%
Commitment
(USD
millions)
39.9
20
43.8
22
77.2
39
Cumulative
Implementation
Implementation Progress (%)
(March 2010)
(USD millions)
19.3
48
33.5
76
54.9
71
26.5
14
19.8
74
0.7
0.3
0.7
100
7.7
195.8
3.9
100
7.4
135.5
96
69
Table 8 provides details of the projected cash flow for the FMA until 2012.
Table 8 FMA Projections (in USD Millions)49
Investment 2007
Initial
0
Antamina
64.3
Contribution
Total
64.3
Received
Total
10
Expenditure
Balance
54.3
2008
54.3
60.2
2009
65.2
39.4
2010
39.4
43.2
2011
11.6
45
2012
21.6
1.5
114.5
104.6
82.6
56.6
23.1
49.3
65.2
71
35.0
21.1
65.2
39.4
11.6
21.6
2
Management Operations/Human Resources
Over 90 people are employed by the FMA, working on the vast range of projects
they are supporting. FMA staff were recruited primarily from NGO’s, and as
noted earlier the FMA is effectively a grant-making foundation, contracting out
the implementation of projects to skilled partners. The FMA attributes a
considerable proportion of its success to the identification of high quality
partners who have experience delivering development projects in Peru.
Key Challenges
Given the vast resources made available through the Aporte Voluntario scheme
there is considerable pressure upon Antamina to spend this money efficiently
and effectively, however this may not be the most effective way of building local
capacity within the Provincial Government to better implement the canon minero
48
49
Antamina (2010)
Sourced from FMA
105
funding. The FMA works with local authorities to pass projects through the SNIP
system to address this challenge, however the test of the skill transfer will come
if and when the scheme ceases.
Both the FMA and FSC are reliant upon the private sector efficiency of
implementing projects ad are using this efficiency to implement projects
normally within the realm of government responsibility. This raises the
potential for a blurring of roles between companies and governments and may
establish long-term delivery expectations of companies in communities.
106
b) South Africa, Mozambique and Namibia
In 2007, mining contributed R136 billion (USD18.4 billion), which equated to
7.7% of the Gross Domestic Product (GDP) for South Africa 50. Over 53 different
minerals were produced from 1414 mines and quarries to generate this
contribution to GDP. The role of the mining industry within the South African
economy extends well beyond its financial contribution, with 3% (approximately
495,000 people) of South Africa’s economically active population employed by
the industry51. The mineral resources are clustered into a subset of the
provinces, with five (north West, Gauteng, Mpumalanga, Free State and
Limpopo) of the nine provinces hosting over 90% of the mining workforce52.
The South African mining industry has undergone significant changes following
the democratic changes of the 1990’s. Discriminatory policies excluded a large
sector of the population from full participation in the industry prior to 1994 53,
and the Minerals and Petroleum Resources Development Act (28 of 2002)
(MPRDA) seeks in part to redress this history. The MPRDA has a number of
objectives for the mining industry, including:
 Promotion of equitable access to the nation’s mineral resources to all the
people of South Africa;
 Substantial and meaningful expansion of opportunities for historically
disadvantaged persons (HDSA), including women, to enter the mineral
industry and to benefit from the exploitation of the nation’s minerals;
 Promotion of economic growth and mineral resources development in the
country;
 Promotion of environmental sustainability of the mining industry; and
 Enhancement of the contribution from holders of mining rights to socioeconomic development of the areas in which they are operating.
The MPRDA now vests all mineral rights with the State and requires that
companies convert their “old order” rights (previously granted under the now
repealed Minerals Act) to “new order” rights. Within the MPRDA was a
requirement that the Minister of Minerals and Energy develop a Broad Based
Socio-Economic Empowerment Charter within 6 months of the act taking effect.
The resulting Broad-Based Socio-Economic Empowerment (BBSEE) Charter for
the South African Mining Industry was ratified in October 2002. The Charter
requires both Government and companies to undertake a number of activities
under the broad topics of: employment equity, migrant labour, mine community
and rural development, housing and living conditions, procurement, ownership
and joint ventures, beneficiation, exploration and prospecting, state assets,
licensing, financing mechanisms and consultation, monitoring and evaluation
and reporting. A scorecard for the BBSEE Charter was developed (and is
DME (2008)
ibid
52 ibid
53 DME (2010)
50
51
107
illustrated in Table 9), and is used to review companies seeking to convert “old
order rights” to new rights within a five-year conversion period.
Table 9 Scorecard for the BBSEE Charter54
Description
Human Resources Development

Has the company offered every employee the opportunity to be functionally
literate and numerate by the year 2005 and are employees being trained?

Has the company implemented career paths for HDSA employees including
skills development plans?

Has the company developed systems through which empowerment groups
can be mentored?
Employment Equity

Has the company published its employment equity plan and reported on its
annual progress in meeting that plan?

Has the company established a plan to achieve a target for HDSA
participation in management of 40$ within five years and is implementing
the plan?

Has the company identified a talent pool and is it fast tracking it?

Has the company established a plan to achieve the target for women
participation in mining of 10% within the five years and is implementing
the plan?
Migrant Labour

Has the company subscribed to government and industry agreement to
ensure non-discrimination against foreign migrant labour?
Mine community and rural development

Has the company co-operated in the formulation of integrated development
plans and is the company co-operating with government in the
implementation of these plans for communities where mining takes place
and for major labour sending areas? Has there been effort on the side of the
company to engage the local mine community and major labour sending
area communities? (Companies will be required to cite a pattern of
consultation, indicate money expenditures and show a plan)
Housing and Living Conditions

For company provided housing has the mine, in consultation with
stakeholders established measures for improving the standard of housing,
including the upgrading of hostels, conversion of hostels to family units and
promoted home ownership for mine employees? Companies will be
required to indicate what they have done to improve housing and show a
plan to progress the issue over time and is implementing the plan?

For company provided nutrition, has the mine established measures for
improving the nutrition of mine employees? Companies will be required to
indicate what they have done to improve nutrition and show a plan to
progress the issues over time and is implementing the plan?
Procurement

Has the mining company given HDSA’a preferred supplier status?

Has the mining company identified current level of procurement from
HDSA companies in terms of capital goods, consumables and services?

Has the mining company indicated a commitment to a progression of
procurement from HDSA companies over a 3-5 year time frame in terms of
capital goods, consumables and services and to what extent has the
commitment been implemented?
Ownership and Joint Ventures

Has the mining company achieved HDSA participation in terms of
ownership for equity or attributable units of production of 15% in HDSA
hands within 5 years and 26% in 10 years?
Beneficiation

Has the mining company identified its current level of beneficiation?

Has the mining company established its baseline of beneficiation and
indicated the extent that this will have to be grown in order to qualify for an
54
2009
2014
Y/N
Y/N
Y/N
Y/N
Y/N
Y/N
15%
26%
Y/N
Adapted from RSA (2004)
108
offset?
Reporting

Has the company reported on an annual basis its progress towards
achieving its commitments in its annual report?
Y/N
Companies seeking to gain or convert mining or production rights also need to
submit a social and labour plan. The social and labour plan requires companies
to develop:
 Comprehensive human resources development programmes aimed at
promoting employment and the advancement of the social and economic
welfare of the workers;
 Local economic development programmes focussing on how the mine or
production operation will address the socio-economic needs of the area in
which it operates and the area from where it sources its workforce
(known as labour sending areas), with a specific focus on what will be left
behind after the mine closes; and
 Processes managing the downscaling or retrenchment of employees if tis
should be necessary55.
Through the expectations incorporated in the MPRDA and the Mining Charter,
the South African Government has exerted and continues to exert significant
influence over the scope and shape of social investment programmes within the
South African mining industry. This influence is evident in each of the case
studies included in this chapter.
Mining has been a major component of the South African economy for over a
century. The approach to social investment within the mining industry has
changed significantly over this time, and this evolution can be seen within the
history of some of the cases presented below. Four South African cases are
presented: the Anglo American Chairman’s Fund, Impala Bafokeng Trust,
Palabora Foundation and the Greater Rustenburg Community Foundation. One
case study from Mozambique has also been included: the Mozal Community
Development Trust. While operating under a different legal regime, it provides
an insight into more recent thinking within the SADC region around mineral
resources and their contribution to social and economic development. The
Rössing Foundation from Namibia is also included in this assessment as it was
established during a time period of South African rule in the country and is often
considered one of the most successful FTF experiences in the world.
55
Adapted from DME (2010)
109
i) Anglo American Chairman’s Fund
Operating in 45 countries, exploring in 21, and employing 107,000 people
worldwide, the Anglo American group have a large global footprint56. Every
Anglo American operation supports social investments in their host
communities, using the Socio-Economic Assessment Toolbox (SEAT) to
determine local needs and priorities. In addition to these local investments,
three
dedicated
foundations
supporting social projects also exist: Anglo American Group Foundation
The Anglo American Group Foundation is a global
Anglo American Group Foundation, foundation which was established in 2006 in the UK. It
Anglo American Chairman’s Fund aims to be an effective charitable foundation through
and Anglo Chile Foundation. In supporting organisations which help to create sustainable
2008, spending across the Group on livelihoods both in the UK and around the world. It is
social investment projects was funded solely by Anglo American plc and while
independent of the company, preference is given to
approximately USD 76million, or projects from countries in which Anglo American operates.
approximately 1.1% of pre-tax The Group Foundation supports projects along three lines:
profit57. Work is in progress in poverty alleviation; sustainable development; and capacity
establishing
new
charitable building in governance, health and education. Support has
foundations in Namibia and Brazil been extended to a number of international and national
NGO’s, including: Engineers Without Borders (UK), Care
and Anglo South Africa has founded International UK, Pro-Mujer Peru, The Connection at St
two additional trusts – Epoch and Martins in the Field, Fairbridge, Plan and Sightsavers
Optima – to support investment in International.
Anglo American Group Foundation (2009)
mathematics and science teaching.
The Anglo American Chairman’s Fund is focussed entirely on South Africa.
Established in 1974, it was the first professionally managed corporate social
investment tool in the country. A perception survey conducted amongst 100
NGOs and 100 CSI practitioners ranked the Chairman’s Fund as the top corporate
social investment grant maker in the country for the eighth consecutive year in
200858.
Establishment, Structure and Purpose of the Fund
Anglo American (2009)
Anglo American (2010)
58 Trialogue, (2009)
56
57
110
A chairman’s fund was established in the 1950’s and in 1974 Harry Openheimer
formalised it into the Anglo American and De Beers Chairman’s Fund.
Throughout the 1970’s, 80’s and 90’s Anglo American used this Fund to engage
in community development work to support mostly South Africans
disadvantaged by state policy59. During this time Anglo American became the
largest corporate social investor in South Africa and the largest private sector
contributor to public schooling for disadvantaged children.
Restructuring of the company in 1998 resulted in the establishment of 3
separate entities: AngloGold, De Beers and Anglo American. As part of this
restructuring the Anglo American and De Beer’s Chairman’s Fund was separated
into three independent funds and due to legal requirements, the fund became a
legally autonomous trust, working under an independent board of trustee’s
nominated by Anglo American. Since 1998, the Chairman’s Fund has been
managed by Tshikululu Social Investment, a “Section 21” Not for Profit company
founded by Anglo American.
Anglo American has three main social investment approaches in South Africa:
the Chairman’s Fund, corporate social investment programmes at the local level
implemented by individual businesses and Anglo Zimele. The Chairman’s Fund
operates largely without a direct connection between its grant making activities
and its business locations. It is a national grant making fund, with its focus
aligned to the needs of South Africa rather than the specific needs of its
businesses. Social investment programmes aligned to business needs and within
business locations are managed and funded at the individual business level
within Anglo American as part of the business CSI programmes. Finally, the
Anglo Zimele project, which is the Anglo American Group’s enterprise
development fund, supports emerging black business in South Africa. Since its
inception 20 years ago it has invested in numerous SMEs and provided loans and
equity finance to support start-up or expanding businesses.
The broad mandate of the Chairman’s Fund is to support development initiatives
aimed at transforming the lives of South Africa’s disadvantaged communities. Its
mission is:
“To be the leading corporate donor in South Africa based on an informed
understanding of the country’s developmental challenges and by
maximising our resources to support and add value to practical
interventions, simultaneously addressing urgent social needs and creating
new opportunities”
The Chairman’s Fund seeks to “back champions” through their grant making
activities. As such, the Chairman’s Fund typically provides grants to NGO’s who
in turn provide support to community projects.
Programmes
59
Anglo American (2008)
111
The Chairman’s Fund seeks to support champions in social development across
the country. Within this broad goal, the expenditure patterns from 2008 (Figure
26) indicate a strong focus on education, health, HIV/AIDS and welfare and
development programmes. In many cases, the Fund provides year on year
financing where projects are showing success.
The Rural Schools Programme and the Annual Maths and Science Awards are
two of the Fund’s flagship projects. The rural schools programme, started in
1974, provides infrastructure (mostly classrooms, laboratories and ablution
blocks) for schools in rural areas. Between 2003-07, the Chairman’s Fund
contributed over R30million (USD 4.1 million) to this programme, which was
matched by the Department of Education. The maths and science awards
programme is also run in partnership with the Department of Education and
seeks to reward schools that achieve excellence in maths and science60.
The Chairman’s Fund is supporting the HIV/AIDS sector through partnerships
with organisations pioneering innovative models of support for people living
with AIDS and care for orphans. One of the recipients of grants in this sector is
the South Coast Hospice Association (SCHA) in KwaZulu-Natal which specialises
in palliative care. Over 1000 patients were cared for through an integrated
community based home care programme in 2007 alone. The Fund has backed
the SCHA for over a decade.
Within the welfare and development sector, the Fund supports the African
Children’s Feeding Scheme, which distributes food to 21,000 children daily in
Gauteng townships. Anglo American has supported this feeding scheme for over
30 years. Health projects have included support for the South African Red Cross
Air Mercy Service.
The Chairman’s Fund also supports a broad range of arts and culture projects.
The overall goals of these programmes is to open up the arts to marginalised
communities, nurture home-grown talent, and to highlight and preserve cultural
diversity, national treasures and heritage of the country.
60
Trialogue (2009)
112
Figure 26 Anglo American Chairman's Fund Focus Areas by Value in 2008
Arts, culture and
heritage
8%
Entrepreneurial Policy and
Advocacy
Development
2%
5%
Environment
1%
Welfare and
Development
14%
Health
15%
Education
44%
HIV/AIDS
11%
Identification and Geography of Beneficiaries
The national focus of this grant making foundation is evident in the geographic
spread of its projects, as illustrated in Figure 27. Proposals valued at over
R100,000 (USD 13,500) are discussed by the Board of Trustees before they are
approved. This allows the representatives of each of the Anglo American
business units to exert some influence over the geographical focus of the
projects. Outside of this mechanism, grants are awarded to “best practice
organisations wherever they are geographically situated”61.
61
Anglo American (2008)
113
Figure 27 Provincial Giving by Value (2007)
Governance and Ownership
The Chairman’s Fund is governed by a Board of Trustees who meet quarterly.
The Board comprises nine members, both internal and external to Anglo
American. The Chairmanship was held by the founder, and ex Anglo American
employee, Mr Clem Sunter, until 2009, and is now held by Mr Norman Mbazima
who is the Chief Executive Officer of Anglo American Thermal Coal. Each of the
South African Anglo American business units has a representative on the Board.
Discussion are underway on how best to increase the level of technical
knowledge in the programme areas on the Board, with ideas including expanding
the membership of the Board or developing a formal advisory team for the
Board.
In addition to day-to-day management of the Chairman’s Fund,
Tshikululu also provide strategic advice to the Board of Trustees.
Financing and Sustainability
The Chairman’s Fund is financed on an annual basis by Anglo American
businesses. The value of the annual contribution is linked to the profitability of
the businesses, and in 2008 it was R72.6million (USD 9.8 million). The funds
channelled through the Chairman’s Fund represent only a subset (approximately
25%) of the corporate social responsibility expenditure by Anglo American’s
South African businesses. The bulk of the corporate social responsibility
investment occurs in line with the social and labour plan commitments made by
each operation.
The Chairman’s Fund, while operating with some reserve, has not been endowed
and its future depends upon the continued support of Anglo American
companies. The management contract for Tshikululu Social Investments is
114
valued at 10% of the grants made in a given year (approximately R7 million
(USD 0.95 million) in 2008).
There is no co-funding requirement for projects seeking grants from the
Chairman’s Fund, however, building upon the long history of involvement in
education projects, the Fund’s Rural Schools Programme is jointly funded by the
Department of Education in Limpopo province. Grants can vary in size from
R20,000 through to R5 million (USD 2,700 through to USD 675,000). Projects in
the HIV/AIDS programme area are also sometimes co-funded with government.
Management Operations/Human Resources
Tshikululu Social Investments manages the Chairman’s Fund for Anglo
American. Tshikululu was founded by Anglo American initially to manage the
newly created Anglo American Chairman’s Fund, the AngloGold Fund and the De
Beers Fund in 1998. The creation of an outsourcing model was strongly
influenced by legal requirements associated with the restructuring of Anglo
American in 1998.
Building upon the skills gained through managing the Chairman’s Fund,
Tshikululu has expanded into a successful social investment management
company. In their first decade of operation they managed more than R2billion of
social investments and facilitated funding to over 15,000 projects62. To
undertake this workload, Tshikululu employs a team of approximately 50
employees, and each client (eg Anglo American Chairman’s Fund) has a specific
client relationship manager within that team.
Tshikululu review all the requests for financing and proposals received by the
Chairman’s Fund. On average they receive between 50-60 appeals per week.
Originally designed as a reactive grant making institution, a stronger focus is
now being placed on the programmatic fit of different proposals, and Tshikululu
researches appropriate partners and recipients for Chairman’s Fund finances.
Guidelines have been developed by Tshikululu to direct the applicants in the
type of proposals which are supported. The diversity of social investment funds
managed by Tshikululu allows them to suggest alternate financing options for
applicants if their application falls outside of the scope of the fund.
Grants up to R100,000 (USD 13,500) can be disbursed by Tshikululu staff,
however grants above this amount need to be approved by the Board of
Trustees. The Chairman’s Fund requires audited financial statements from
applicants before approving financing. The Chairman’s Fund is intended to
support NGO’s and community development projects which are already showing
success and it is not to be used to “fix broken organisations”.
The outsourced nature of the Chairman’s Fund could quite possibly go unnoticed
by applicants and partner organisations. Various administrative efforts have
been put in place to ensure applicants and partners know they are receiving
62
Tshikululu Social Investments, (2009)
115
support from the Chairman’s Fund and not from Tshikululu themselves. The
national coverage of grants however can mean that there is no Anglo American
representative at project launches for some projects, and in these situations,
Tshikululu staff will represent the Anglo American Chairman’s Fund.
Key Challenges
The Anglo American Chairman’s Fund outsources its grant making activities to a
now independent group. While the independence of TSI is a success story in
itself, an outsourcing model can raise challenges around the branding on grants
being delivered, and Anglo American is reviewing the reputational benefit it is
receiving from its grant making activities.
116
ii) Impala Bafokeng Trust
The Impala Bafokeng Trust has been in existence since late 2007, following a
significant black economic empowerment (BEE) transaction between Impala
Platinum and the Royal Bafokeng Holdings (RBH). RBH is responsible for the
management and development of the commercial assets of the Royal Bafokeng
Nation (RBN), with the overall business objective of maximising their returns to
enable the RBN to deliver sustainable benefits to the community.
The Royal Bafokeng Nation is an estimated 300,000 strong community of
Setswana speaking black South Africans. It is located approximately 150km
northwest of Johannesburg within the North West Province and co-exists with
some of the largest platinum deposits and mines in the world. The North West
Province comprises four district municipal councils, the largest of which is the
Bojanala covering more than 18,000km2 (see Figure 28). Bojanala comprises 5
local municipalities, with a population (predominantly rural) of 1.25 million.
The RBN population is spread among 29 villages within the Bojanala region.
The RBN has structures almost parallel with local government. In effect, this
gives the IBT a complex mix of traditional and elected government structures to
work with: multiple Municipalities and the Royal Bafokeng Administration.
117
Figure 28 Bojanala Region63
Despite changes to mineral ownership under the MPRDA the Bafokeng retained
their mineral rights as it was deemed they were using the benefits gained from
mining royalties communally. The RBN is comparatively wealthy, and led by
Kgosi Lerou Molotlegi, the RBN has a development philosophy called Vision
2020, which is laid out in the “masterplan”.
Establishment, Structure and Purpose of the Fund
The MPRDA requires companies with “old order” rights to convert them to new
rights within a five-year period. As indicated earlier, requirements for
conversion are outlined in the Mining Charter Scorecard and include 15% HDSA
participation in terms of ownership for equity or attributable units of production
by 2009, and 26% by 2014. In order to meet this requirement the RBN and
Impala Platinum undertook a BEE transaction where the RBN exchanged their
royalties for shares in Impala. The RBN now own 26% of Impala, which makes
them the single largest shareholder in the company.
While this transaction met the requirement for HDSA ownership, it came under
some criticism from Government and others over the exclusion of non-Bafokeng
HDSA communities within the Greater Rustenburg area. The non-Bafokeng
HDSA communities are considerably less wealthy and the Impala Bafokeng Trust
(IBT) was established in part to ensure that they also receive development
benefits from the transaction.
IBT augments the existing corporate social
investment commitments from both RBN and Implats. In establishing the IBT,
63
Taken from IBT (2010)
118
both Implats and the RBN committed to make a total contribution of R340
million (R170million each) (USD 46 million in total or USD 23 million each) over
an 8 year period between 2007 and 2014.
Programmes
Within an over-arching emphasis on the empowerment of women, the IBT has
identified five key areas of focus: education, enterprise development, health,
capacity building; and sport and recreation. Given the relatively short life of the
Trust to date, Figure 29 below indicates both the intended allocation of
expenditure per programme area and the actual allocation to the end of 2009.
Figure 29 IBT Resource Allocations per Programme Area
The IBT have identified specific points of intervention within each of these
programme areas. For example, the IBT is focussing on early childhood
development and has formed a partnership with the Centre for Early Childhood
Development (CECD) in a five-year programme promoting quality early
childhood development in Bojanala District.
Identification and Geography of Beneficiaries
Core to the establishment of IBT is the distribution of mining social investment
across affected communities in the Bojanala District of the North West Province.
As such, an allocation of financial resources across the different social and
geographic regions has been developed for IBT, as seen in Figure 30.
119
Figure 30 IBT's Geographic Allocation of Financial Resources
North West
Province
10%
Bojanala
25%
Royal
Bafokeng
Nation
40%
Greater
Rustenburg
25%
Both Implats and RBN have maintained, to some level, their corporate social
investment programmes both of which specifically target their respective target
audiences. In June 2009, Impala took a decision to formally dissolve the Impala
Community Development Trust (ICDT), with a number of ICDT programmes
flowing across to IBT as a result.
Governance and Ownership
A Board of Trustees, with eight members, governs IBT. The Chair of the Board is
the Queen Mother of the RBN and Deputy Chair is the Group Sustainable
Development Manager for Implats. The remaining six members comprise two
representatives from Implats, two from RBN and two independent experts.
Financing and Sustainability
The R340 million (USD 46 million) contribution from Implats and RBN is
staggered over the eight year period. As of end July 2009, total contributions of
approximately R32 million (USD 4.3 million) had been received by the IBT.
During this same period the total grant expenditure was approximately R22
million (USD 3 million), with a R6 million (USD 0.8 million) operating
expenditure.
The long-term future for the IBT is as yet unclear and the
management team is assuming no further financing will be forthcoming after the
current commitment has been exhausted.
Prior to its dissolution, in 2008 the ICDT spent R41.6 million (USD 5.6 million)
(including R6 million (USD 0.8 million) contributed to the Impala Bafokeng
Trust) on socio-economic development projects in South Africa (FY2007: R31.8
million (USD 4.3 million)). This figure includes an administration charge of R5.1
million to manage the funds. Over 15% of the programmes financed through the
ICDT targeted labour sending areas (both internal and external to North West
Province) as part of Impala’s commitment in its Social and Labour Plan64.
64
Implats (2009)
120
Management Operations/Human Resources
IBT is primarily a grant making Trust, and sees advocacy, research and
facilitating common-purpose partnerships as key to making its grant making
activities meaningful. Unsolicited grant applications have to date not been
encouraged. Extensive consultation and gap analysis comprised much of its first
two years of operation. Strategic advice and assessment were sought from a
number of commercial and not for profit organisations during this time.
The staff component has been very small to date, with only a senior programme
manager joining the Chief Executive Officer in early 2010 to comprise the entire
team. A registered non-profit organisation specialising in financial and social
investment and development had been providing strategic assistance and
programme implementation support to IBT, and financial accounting and
auditing services have also been sourced from external providers.
The team are in the process of developing monitoring and evaluation criteria for
their projects, however at a broad level they plan on reporting to society on
progress against the following indicators in years to come:
- The number of children accessing early learning, and the extent to which
this has contributed to their readiness for school;
- The number of young people finishing school with satisfactory grades,
and how this has enabled them to access further training and work
opportunities;
- The number of people starting and sustaining their own enterprises and
how this contributes to employment opportunities and general economic
wellbeing;
- The number of people who have improved access to healthcare workers
and facilities, resulting in enhanced knowledge and management of
diseases; and
- The number of young people who participate in sport and thereafter
enjoy healthier, active lives.
Key Challenges



The Trust was established not voluntarily by RBN and Impats, but at the
insistence of the South African Government through its then Department
of Minerals and Energy. The commitment of its founders is thus untested;
The IBT has “guaranteed” funding for only an eight-year period. It’s
sustainability beyond this period is unknown.
The independence of the IBT, and the extent to which it will be expected
to be an implementer of Implats scorecard commitments remains a topic
for further consultation.
121
iii) Greater Rustenburg Community Foundation
The Greater Rustenburg Community Foundation (GRCF) serves the North West
Province of South Africa. As described in the previous case study, this area
comprises over 1.2 million people with over 80% of the population rurally based.
In this platinum mining dominated region, the GRCF is a community foundation
mobilising resources for community development.
Establishment, Structure and Purpose of the Fund
In the wake of political changes in South Africa in the mid 1990s, a vacuum was
created in non-profit sector leadership, with many thought leaders joining
Government and corporate organisations. Responding to this challenge, in 1997
a small group started to research ways to secure resources for community
development in the Greater Rustenburg community while the economy was still
booming. Pricing shifts for platinum had made Rustenburg a ghost town in the
past and this group were committed to mobilising sustainable resources to
prevent this from happening in the future. At the same time, the South African
Grant Makers Association (SAGA) were communicating with the Mott and Ford
Foundations about implementing a community foundation model in South Africa.
A decade later, the GRCF is now the oldest community foundation in Africa.
The GRCF was formally established in 2000 and immediately spent two days
engaging with tribal leadership in the Greater Rustenburg area. For community
foundation models to be successful a differential in wealth in the host
community is required. This exists within the Rustenburg area due to the
mineral wealth held by a portion of the population. Community foundations are
resource mobilisers, stewards of public funds, grant makers and facilitators of
community needs.
The GRCF aims to be “an acknowledged, responsive
facilitator of sustainable development, ensuring a stable and prosperous local
economy”65.
Programmes
65
GRCF (2009)
122
GRCF is a local, independent philanthropic grant making and support
organisation. The GRCF approaches grant making through three avenues: annual
community grants made during their annual conference; processing of regular
NGO/NPO applications that are received; and through follow up to Asset Based
Community Development (ABCD) programmes where grants are given to
projects that have been successful and have shown sustainability in order to
allow them to expand.
While initially using the Community Asset Mobilisation Process (CAMP) model,
GRCF is now working with the Coady Insitutue66 to implement the ABCD
approach in its programmes. “ABCD is an approach that recognises the
strengths, gifts, talents and resources of individuals and communities, and helps
communities to mobilize and build on these for sustainable development”67.
The University of South Africa is partnering with the GRCF to support the rollout of this programme across ten different centres. Under the ABCD system
initially there is no funding made available for communities, instead they are
supported to get three projects successfully up and running. Once the projects
are established, GRCF will work with these enterprises and make microfinancing and micro-credit facilities available to them. The GRCF will sit on the
governing structure of all new enterprises until they are sufficiently mature to
become independent (expected to be 3-5 years). While the ABCD programmes
are developmental in nature they are used by GRCF to provide more effective
grant making capability in the communities.
A range of other programmes are also supported by the GRCF, some of which
have been identified by the foundation staff, others are responding to community
requests and the remainder have been designated by family investments.
Guidelines have been developed for potential grantees highlighting the following
aspects in proposals:
 Innovation;
 Building community vitality;
 Building human capacity;
 Broadly shared understanding and vision;
 Sustainability;
 Consistent, tangible process;
 More effective community organisations and institutions;
 Effective resource utilisation; and
 Realistic project objectives.
Grants typically won’t be made to profit oriented organisations, political party
initiatives, Government programmes, religious denominations, individuals or
discriminatory programmes68.
http://www.coady.stfx.ca/
ibid
68 GRCF (2009)
66
67
123
Identification and Geography of Beneficiaries
The GRCF operates within the Bojanala District, which is effectively a 180km
radius from Rustenburg city, where the foundation is based. A number of large
platinum mining companies operate within this area.
Governance and Ownership
Governance of the GRCF is provided through a Board of Trustees, comprising 6
members. The Trustees are representative of the communities being served by
the foundation and include traditional leaders from the Bojanala District.
Financing and Sustainability
Endowing of funds is the primary financial objective of the GRCF. Initially
supported by both the Ford and Mott Foundations through the endowing of
funds for projects and a grant for operational costs, respectively, the GRCF
continues to search for new donors.
In 2001, the GRCF received R1million (USD 135,000) from Impala Platinum
mining company. 50% of this grant was for a pass-through grant while the
remainder was for operational expenses, which made it possible for the
foundation to buy a premises and pay for operational expenses for the first year.
Upon launching the foundation, each of the trustees also contributed donations
from their own personal resources. The GRCF receives considerable passthrough financing from family investments, often with designated beneficiaries.
In 2009, the GRC estimates it brought an additional R52million (USD 7 million)
into the community.
GRCF are actively seeking support from mining companies in the Rustenburg
area. A partnership has been established with the IBT (described above) and
discussions continue with other companies. GRCF see an opportunity to share
their knowledge of the development environment and actors in the Greater
Rustenburg area and their community connections with mining companies
operating in the area to enhance the value of each development dollar spent.
Management Operations/Human Resources
The GRCF team comprises eight full-time employees including a programme
manager, programme officer, community liaison office/receptionist, finance
manager, operations manager, and chief executive officer. The foundation plans
to make more use of community volunteers to expand their programme reach,
and have recently taken on an intern.
Key Challenges
The biggest challenge facing the GRCF is the sourcing of new funds. GRCF are
undertaking a major exercise to better engage with mining companies in South
124
Africa, with a particular focus on those operating in the Rustenburg region. The
community driven nature of the foundation, which makes GRCF unique in the
South African mining sector, can also make it difficult for GRCF to seek financing
from companies due to nervousness around how the funding will be used and
how it will directly benefit a specific company.
125
iv) Palabora Foundation
The Palabora Foundation has been operating in the Ba-Phalaborwa communities
for 23 years. Within this time the political, social and economic context for the
foundation have changed significantly and Palabora Foundation has evolved to
meet the changes.
The Foundation is the sustainable development arm of the Rio Tinto Palabora
Mining Company Ltd (Palabora), a Rio Tinto Group copper and vermiculite
extraction and beneficiation operation. The operation is located in the Limpopo
Province, in the North East of South Africa. Palabora commenced operations in
1956 as an open cut mine, and after extensive studies during the 1990’s
transferred from open cut to underground mining in 2002. Block caving mining
techniques are being used and the underground operation achieved expected
production (30,000 tonnes per day average for a month) in May 2005. Mine
closure is anticipated sometime after 2016.
Establishment, Structure and Purpose of the Fund
Established in 1986, the Palabora Foundation was originally designed to “work
for the upliftment, development and welfare of communities … doing so in
partnership with the communities and other stakeholders”69. The decision to
establish the Foundation was driven both by altruism and a response to the
politically motivated criticism surrounding the company’s continued operation
in apartheid South Africa70. Palabora provided a launching grant of R2.5 million
and the commitment of an annual donation equal to 3% of net profits or a
minimum of R2million (USD 270,000). This commitment was modified in 2001
from which time the operating expenses for the Foundation have been sourced
from interest earned on the Foundation’s investment fund.
The Foundation was established under two constitutions: a General Trust Deed
covering all of the Foundation’s operations and an Educational Trust Deed
specifically covering the education work conducted by the Foundation. The
Trust Deeds were registered with the Supreme Court making the Foundation
69
70
Palabora Foundation (2007)
ibid
126
constitutionally separate from Palabora and exempt from tax and it is registered
as a non-profit organisation with the Department of Social Development.
The decision to make Palabora Foundation an operational foundation was taken
within its first year of existence, effectively establishing it as Palabora’s own
NGO. In developing the project focus of the Foundation, a programme of
research was conducted, including meetings with traditional authority leaders,
township officials, educators, the Department of Education, local community
leaders, Palabora staff and Homeland government leaders. Resulting from these
studies early projects focussed strongly on education at all levels, from early
development centres through to the establishment of the Rixile and Leboneng
Education Centres focussed on upgrading science and maths skills and adult
education. Through acquiring a 500 hectare game farm near Krugersdorp the
Foundation set up the nationally focussed Reef Training Centre which provided
accredited training in construction and motor maintenance industries. While a
highly successful project (over 1500 students graduated the courses per annum)
funding for the project ceased in 1997 due to a decision taken by the Board of
Trustees to limit the work of the Foundation to the Phalaborwa service area71.
Initially based in Johannesburg, the Foundation moved first to Phalaborwa and
then onto Namakgale in 1999. At a similar time Rio Tinto developed
Communities Policy Guidelines which led to increased direct involvement of
Palabora in managing the Foundation. As the Foundation evolved, its purpose
was revised to better capture the enabling and empowering role it could play “to
assist communities to be self reliant”. This was also in keeping with the Mining
Charter and BEE requirements.
The Palabora Foundation believes partnerships are the most efficient way for it
to become involved in social development programmes and projects in the area.
They have partnered with various groups including the European Union, various
departments in the Limpopo Provincial Government, NGO’s, industrial and
commercial operators (including the two mining companies who have also
operated in the Ba-Phalaborwa area), Ba-Phalaborwa Municipality and private
individuals.
After considerable evolution, the strategic objectives for the Palabora
Foundation have now been defined as follows:
 To assist Palabora meet the requirements of the Palabora Closure
Statement;
 To assist Palabora to meet the requirements of government legislation
and policy;
 To assist provincial government to implement education and skills
training programmes in the area;
 To facilitate in partnership with the Ba-Phalaborwa Municipality and
other stakeholders the implementation of the Integrated Development
Plan and the Social and Labour Plan;
 Minimise the impact of HIV/Aids in the community;
71
Palabora Foundation (2007)
127





To engage in local economic development and the tourism promotion
initiatives;
To stimulate the local economy through enterprise development
initiatives and support;
To support and promote early childhood education through partnership
funding;
To provide adult based education and training (ABET) to foundation, the
mine employees and the community for the development of basic
numeracy and language; and
To create a sustainable Foundation72.
With this increased connection between Palabora Foundation and the objectives
of Rio Tinto Palabora Mining Company it may be necessary to revisit the
financing mechanisms for the Foundation.
Programmes
The Palabora Foundation works in partnership with communities in the fields of:
 Education (which includes Early Childhood, High School, Tertiary and
Teacher INSET programmes);
 Skills Development;
 Business development;
 Community Health and HIV/Aids; and
 Local Economic Development (which includes Enterprise Development
and Tourism).
The Foundation supports a broad spectrum of programmes, from food
Preparation classes and training in brick-making through to maths and science
advanced teaching for high school students. The operational nature of the
Foundation makes this diversity a significant challenge for its staff, and the
planned budget for 2009 outlined in Figure 31 highlights the range of skills
which are required. The types of projects supported by the Foundation have
evolved during its 23 years. Originally, a significant amount of support was
directed to infrastructure projects, whereas now the focus has shifted to capacity
development projects. Rather than seeing this as a change in policy, the
Foundation considers this approach to have been necessary – without
addressing infrastructure needs immediately, the space would not exist now to
support capacity development initiatives.
72
Palabora Foundation (2010)
128
Figure 31 Total Budget per Area for Palabora Foundation for 2009
Community
Projects Projects
3%
3%
HIV/Aids
8%
Capital
9%
Bursaries
4%
Business
Development
5%
Education
31%
Administration
19%
Skills
9%
Safety
1%
Local
Economic
Development
5%
Early Learning
Centres
3%
Each of the five tribal authorities has a Community Development Association,
and three members of each of these associations and the respective chief’s of
each tribal group meet with the Palabora Foundation in a Community
Development Forum. The Foundation presents projects during these Forum
meetings and those which are endorsed are taken up to the Ba-Phalaborwa
Municipality (local Government) to determine their fit within the agreed
Integrated Development Plan for the municipality. In this manner new projects
are identified and supported by the Foundation. At present Rio Tinto Palabora
Mining Company is not represented in these discussions.
The education programmes are directed to all levels of learners and include
support for learners, teachers and school governing bodies in over 50 schools in
and around Phalaborwa.
Following the success of maths and science
programmes (run through the Rixile and Leboneng Education Centres), in 1998
the Foundation, in partnership with two other mining companies, began offering
the Programme for Technological Careers (PROTEC). The purpose of the
programme is to provide a pool of skilled school leavers who could go on to
study at a tertiary level and could eventually be employed by one of the three
mining companies.
Six month training courses in food preparation, construction carpentry, brick
laying and sewing make up the bulk of the skills development programme.
Recognising that many of the graduates of these programmes will not be able to
gain employment with the mines, graduates are increasingly supported to
develop their own businesses through the Business Development team. The
Business Development team have now recorded over 506 vendors on their
database. This is also inline with the BEE requirements that Rio Tinto Palabora
Mining Company needs to meet.
129
Partnership has been the key element of the health programmes implemented by
the Palabora Foundation. The Ba-Phalaborwa HIV/Aids programmes was
initiated in 2001 and received funding from Palabora, the Limpopo Province
Department of Health and Social Development, Foskor Ltd., Sasol Nitro, Oxfam
Australia, the National Development Agency and the National Lottery. The
Department of Health and Welfare subsequently seconded a Chief Professional
Nurse to run the programme under Foundation management.
Phalaborwa has a bright tourism future, and the Foundation has been
instrumental in developing this potential through the local economic
development and tourism projects. Projects have included the establishment of
a tourism agency in Phalaborwa town, and establishment and continued support
for the Birdlife South Africa (Rio Tinto partners) Birding Route known as the
“Kruger to Canyon”.
Identification and Geography of Beneficiaries
The Palabora Foundation works with communities within a 50km radius of
Phalaborwa. This includes 1 urban area, 2 semi-urban areas and 5 Traditional
authorities. The Ba-Phalaborwa area is home to over 127,000 people, 66% of
whom are under 34 years of age, and 20% of whom live on less than R500 per
month. Figure 32 provides the geographic context for the Palabora Foundation’s
operations.
Rio Tinto Palabora Mining Company’s labour sending areas are predominantly
within the 50km radius covered by the Palabora Foundations activities. As such,
a number of commitments under the Palabora Social and Labour Plan can be
addressed by the Foundation.
130
Figure 32 Palabora Foundation Areas of Operation - 50 Km Radius
Governance and Ownership
The Foundation is governed by a Board of Trustees who meet quarterly to
review the progress of the Foundation. The Board comprises five members:
 3 x Executive Trustees:
o Managing Director Rio Tinto Palabora Mining Company;
o General Manager Rio Tinto Palabora Mining Company; and
o Director Palabora Foundation.
 3 x Non-Executive Trustees - Representatives from the community with
the following backgrounds:
o Education;
o Community Health; and
o Business Development.
The Managing Director of Rio Tinto Palabora Mining Company is currently the
chairperson of the Board of Trustees of the Palabora Foundation. The Board of
Trustees delegates day to day management of the Foundation to the Foundation
Director, supported by the management team and their staff (over 100 people).
The non-executive trustees are nominated by the community and are appointed
for a period of three years, after which time they have to be re-elected. Plans are
being developed to appoint/elect a Traditional Royal Council (Traditional
leader) as one of the non-executive trustees to ensure more effective transfer of
information into Traditional authorities.
131
A Board of Trustees Audit Committee was established in 2003 and provides
regular feedback to improve the corporate governance of the Foundation,
supported by internal and external auditors.
The connection between the Palabora Foundation and Rio Tinto Palabora Mining
Company has varied over its 23 years of operational life. While Palabora have
retained control over the governance of the Foundation since it was established,
the Foundation has at times been operated largely independently of the mine.
Since 2003, the connection between the two entities has been reemphasised
with the Foundation being seen as the vehicle to achieve and implement many of
the commitments made under the companies Social and Labour Plan, Broad
Based Black Economic Empowerment (BBBEE) and Black Economic
Empowerment (BEE) procurement commitments.
Financing and Sustainability
The Palabora Foundation was financed from an annual contribution from Rio
Tinto Palabora Mining Company between 1987 and 2001, amounting to the
greater of 3% of net profit or R2million (USD 0.3 million). In December 1989 a
decision had been taken to establish an Administrative Reserve Fund (now
known as the Endowment Fund) to protect the Foundation’s financial future.
From 2001 onwards the operational costs of the Foundation have been sourced
from the interest on the investment, which is typically R20-25 million (USD 2.73.4 million) per annum. The market value of the Palabora Investment Fund was
R208million (USD 28.1 million) in 2008, with a book value of R179 million (USD
24.2 million)73. The gross budget for projects and programmes for 2009 was
R31.7 million (USD 4.3 million).
Palabora Foundation co-funds and partners with other groups for a number of
their projects, however financing for the Foundation itself is now sourced solely
from the interest from the Endowment Fund. A history of the growth of the
endowment fund since inception is shown in Figure 33.
73
PMC (2009)
132
Figure 33 Rio Tinto Palabora Mining Company Donations to the Palabora Foundation
300000
Rand Value (‘000s)
250000
Market
Value
200000
PMC
CONT
RIB
150000
100000
50000
0
86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08
Year
Palabora Foundation has successfully sourced funding from the European Union
for two of its projects: local economic development and the tourism department.
The Foundation is considered sustainable to the extent that the investment fund
remains endowed. The gross budget for the Foundation, including its projects
and programmes, averages out to R30million (USD 4.1 million) per annum. Of
this, approximately 20% is the management cost of running the Foundation.
The partnerships developed with government are part of the sustainability quest
within the Foundation, however there is some reluctance on the part of the
Government to partner with a Foundation connected to a mining operation.
Management Operations/Human Resources
Given the operational nature of the Foundation it has a large staff quota, with
100 members, of whom 55 were full-time and 55 were part-time contract
employees in 2008. The “operational” approach allows Palabora Foundation to
retain control of the programmes they are implementing. It also allows the
Foundation to pay higher salaries and thereby attract more skilled staff than
would be the case if the programmes were outsourced. The close proximity to all
the project locations (within a 50km radius) also supports this approach as local
knowledge in enhanced and mobilisation costs are zero.
There is no formal external evaluation of programmes conducted at present and
to redress this gap a monitoring and evaluation unit is being established.
133
Key Challenges
The Palabora Foundation has been undertaking almost all of the community
development activities undertaken in association with Rio Tinto Palabora Mining
Company.
This approach has allowed Palabora’s internal community
development skills and efforts to retract and has left the critical task of
stakeholder engagement somewhat floating between the two organisations. The
mine and the foundation underwent a Rio Tinto site management assessment
(SMA) in October 2008. The outcome of the assessment included a number of
recommendations that are specifically addressing this challenge.
The spectrum of programmes supported is vast and is strongly influenced by the
long history of the Foundation. This raises the challenge of how best can a
foundation change its priorities when it has been supporting a programme for a
long period of time?
134
v) Mozal Community Development Trust
The Mozal Community Development Trust is the community development arm of
the Mozal aluminium smelter. The Mozal smelter is located 17km south of
Maputo, in Mozambique. BHP Billiton has a 47.1 per cent interest in the joint
venture. The other partners are: Mitsubishi Corporation (25 per cent), Industrial
Development Corporation of South Africa Limited (24 per cent), and the
Government of Mozambique (3.9 per cent).
With an investment of over USD 1.3 billion, the smelter was the largest foreign
investment in Mozambique’s history. The Mozal smelter was developed in two
phases, with the first phase commencing in 1996, and the first ingot being
exported in 2000. Phase 2 commenced in 2001 and was completed by 2003.
Establishment, Structure and Purpose of the Fund
The Mozal Community Development Trust (MCDT) was established in 2000 with
the specific mission of facilitating projects and programmes to improve the
quality of life of the communities surrounding the Mozal Smelter – an area
known as the Beluluane Industrial Park (see Figure 34), within Boane District.
The trust operates predominantly as an operational trust, with its staff directly
involved in the implementation of projects.
135
Figure 34 Mozal Smelter and MCDT Location74
The decision to establish a trust was in line with BHP Billiton policy which
requires the creation of a trust or foundation (depending on host Government
laws) for sustainable development in each of its operations. These trusts or
foundations are to be supported by the operations with an annual contribution
of 1% of pre-tax profits.
Programmes
The Trust receives between 15 and 20 applications for support on a daily basis,
and relies upon engagement with the local government to identify those projects
which are in line with government priorities. As part of the decentralized
planning process, the Mozambique Government has established consultative
councils at the village level, of which at least 40% of the members are required to
be women. These consultative councils also exist at the administrative post and
district level and are the medium through which community members can
influence the annual Social and Economic Plans prepared at the District Level.
74
Adapted from ECI Africa (2004)
136
Initially the MCDT directed the types of projects they would support, however as
the government planning process has matured they now pass their proposals
through these consultative councils and implement those projects selected in the
Social and Economic Plan for the Boane District.
On average the MCDT implements 50 projects per year. This limit is defined by
the physical capacity of the team to implement projects. The MCDT works
closely with the District and Provincial Governments and often partners with
these authorities on projects. Many of the community infrastructure projects are
physically built by the Trust, with the staffing, operation and maintenance to be
provided by the Government, and this agreement is captured in a Memorandum
of Understanding between the Trust and the Government. The largest projects
supported by the Trust have been in the order of USD 4million, while the
smallest are as little as USD 1000.
From inception, the MCDT identified five key portfolios for programming:
 Micro business development;
 Health and environment;
 Sports and culture;
 Community infrastructure; and
 Education and training.
Mozal and the Trust became well known for their efforts to eradicate malaria
from the smelter area. When the Mozal project commenced development,
malaria was affecting 85% of the population. The MCDT conducted a spraying
programme within a 10km radius of the smelter and contributed funds to the
Lubumbo Spatial Development Initiative, which is a joint venture between the
Governments of South Africa, Swaziland and Mozambique to eradicate malaria in
the region. As part of the programme, training in making bednets as a micro
enterprise has been provided to vulnerable members of the community. By
2010 the malaria rates in the area had been brought down to approximately 5%.
This project is now receiving Global Fund support and MCDT continued to
support the eradication of malaria through bednet projects and awareness
activities.
The Trust has supported education at many levels within the Boane District,
ranging from the construction of primary schools and the provision of bursaries
through to the construction of the Armando Guebuza Technical College. The
Technical College has been completed in stages and is being handed over to the
Government to operate. Many of the teachers teaching at the College were
supported by the Trust to attend capacity building training courses in South
Africa.
Agriculture is considered the sustainable future for Mozambique. As such, and
linked to the resettlement programmes for economically displaced farmers, the
Trust has supported farmers to expand their productivity and adapt new
products. Through renovations made to an irrigation system in Mafuiane, the
2007 harvest of maize was better than had been seen in ten years and resulted in
excess production being sold in city centres.
137
Identification and Geography of Beneficiaries
Mozal define their affected community as anyone living within a 20km radius of
the smelter, which covers approximately 98,000 people. While technically this
would include residents in Maputo, the “line” has been drawn following a
highway marking the entry to Maputo from the south.
Prior to the
establishment of the smelter, approximately 80 families and 650 farmers were
relocated from the smelter site. As the sustainable development arm of Mozal,
the MCDT has targeted a number of programmes towards this audience in
particular.
After 17 years of civil war, Mozambique emerged as one of the poorest countries
in the world. Recognising the needs across the country, MCDT have supported a
limited number of projects in other provinces, typically in partnership with other
actors, including the central government. An example of this approach was seen
when MCDT partnered with CARE International to construct ten rural dams in
the northern province of Nampula in order to stabilise water supplies for
agricultural development and domestic usage.
Governance and Ownership
The MCDT is governed by a Board of Trustees who meet every six months. The
Board comprises eleven members and is the same Board as that for the Mozal
smelter. There are no community members represented on the MCDT Board.
The Board provide oversight to the Trust, and monitor the expenditure of the
trust to ensure that the administration costs do not exceed more than 20% of the
annual budget.
Financing and Sustainability
Upon establishment of the MCDT, BHP Billiton contributed USD 2.5million to the
Trust. There is no endowed fund within the MCDT and the trust is reliant upon
the success of the smelter for its annual 1% of pre-tax profits contribution.
Typically this equated to an operating budget of approximately USD 5milion,
although in 2009 this was reduced by 40% due to the global financial crisis.
Management Operations/Human Resources
The Trust currently has a staffing complement of nine people, although a number
of roles are unfilled at present. Figure 35 illustrates the ideal staffing structure
sought by MCDT.
Figure 35 MCDT Staffing Structure
138
MCDT
Manager
Finance
Coordinator
Assistant
Accountant
Secretary
Social
Programme
Coordinator
Infrastructure
Coordinator
Assistant
Senior Field
Officer
Junior Field
Officer
Assistant
Senior Field
Officer
Junior Field
Officer
The Trust are committed to monitoring and evaluation of their projects and
conduct an internal review of their projects on a weekly basis. Through the
Government Social and Economic Plan, projects are also scrutinised through the
Government system against a range of indicators.
Key Challenges
The MCDT undertakes almost all of the corporate social responsibilities of the
Mozal project, which includes stakeholder engagement. For this model to work
effectively there needs to be excellent communication between the trust and the
company, and recognition within the company of the different speeds at which
companies, local governments and communities operate.
139
vi) Rössing Foundation
Mining is a major part of the Namibian economy, contributing over 12% of the
GDP in 2007. Hosting a variety of minerals: uranium, diamonds, zinc, gold,
copper, fluorspar and salt, the Namibian economy has been somewhat protected
from major price shocks affecting specific minerals. This protection is evident in
the development of a number of new uranium mines around the Arandis region
occurring in the same timeframe as the planned closure of up to eight copper
mines. These new projects will potentially minimise the job losses caused by
these closures. The mining sector in Namibia formally employed over 9000
people in 2008, with an unknown number working in small-scale mines. Mining
projects are focussed in the Karas and Erongo Regions, as seen in Figure 36.
Figure 36 Mining Regions in Namibia75
75
Mesik (2009)
140
Namibia was the last country in Africa to gain independence (1990) and has
been in the process of developing Black Economic Empowerment (BEE)
legislation for over six years, with the financial sector recently adopting
voluntary BEE principles. The draft mining BEE policy, referred to as the
Transformation of Economic and Social Empowerment Framework (Tesef),
would require company ownership of up to 50% to be achieved over several
years for historically deprived Namibians (HDNs), 50% of HDNs in management
cadres, 50% of Board members, 50% of deprived women in top, middle and
junior management and 80% of previously deprived individuals (DIs) in all
permanent staff76. Namibia was evaluated to have the highest level of inequality
in the world in the 2009 Human Development Report77, with a gini coefficient of
74.3, and the Tesef seeks in part to rectify this inequality.
Namibian legislation does not require companies to establish formal social
investment programmes, however a condition recently introduced by mining
authorities requests that applicants seeking a mineral licence must establish a
local empowerment group and present a programme aimed at empowering local
communities through the mining activities.
The Rössing Foundation was established in 1978 by Rio Tinto Rössing Uranium
Limited through a Deed of Trust to implement and facilitate its corporate social
responsibility activities within the communities of Namibia. It is the largest and
oldest mining foundation in Namibia. Rio Tinto Rössing Uranium Limited (RUL)
is located near Arandis, approximately 60km to the east of the coastal town of
Swakopmund (as seen in Figure 36). The mine developed the town of Arandis
for its mineworkers in 1976, the same year that initial production commenced.
Establishment, Structure and Purpose of the Fund
Legally structured as a Trust, the Rössing Foundation was established in 1978 to
provide greater education opportunities for Namibians to order to gain practical
skills that would create better economic opportunities for them. When RUL
started operations, South West Africa was under military occupation from South
Africa and as such the Apartheid policies of South Africa were also applied to
SWA’s citizens. Within this context, RUL needed to demonstrate that it was
being developed not only for profit but also in the interests of the country and all
members of the host population. The decision to establish the Foundation in
1978 was made more remarkable by the operational context in which it was
launched, where RUL was more than two years behind schedule and well over
budget.
The Foundation’s mandate, first defined in 1978, remains largely unchanged and
is summarised below:
 To further the education of all Namibians in order to achieve greater
national productivity and to enhance lifelong learning;
76
77
Weidlich (2010)
UNDP (2009)
141



To encourage the creation and/or to create opportunities for people to
use their education;
To promote the advancement of the living standards of all the people in
Namibia; and
To do any act or thing which, in the opinion of the Trustees, will benefit
Namibia or any or all of its inhabitants.
Supported by an annual contribution from RUL equivalent to 2% of all dividends
distributed to its shareholders after tax, a portion of this contribution was to
form the capital of the Trust Fund. In addition to the Foundation, RUL have a
donations and scholarships programme which supports the uplifting for socioeconomic conditions of the communities in which they operate.
The Rössing Foundation was established to be “as independent as possible”78,
with its own bank accounts and offices independent of RUL. This independence
and the quality of the financial administration systems established by the
Foundation has led to numerous external groups and NGOs donating and
partnering with the Foundation to implement development programmes in
Namibia.
The Foundation applies both a project implementation methodology as well as a
partnership approach. Key partnerships exist with the Ministry of Education, the
Erongo Regional Council, the Ministry of Mines and Energy, the Ministry of
Agriculture, the Ministry of Environment and Tourism, the United States Peace
Corps, Voluntary Services Overseas the University of Namibia and the Arandis
Town Council to achieve the Foundation’s mandate.
Programmes
The programmes supported by the Rössing Foundation have evolved and
changed considerably as the country has changed. As noted in the Foundation’s
30th anniversary publication, “the Foundation’s activities swung from addressing
problems caused by Namibia’s apartheid during the 1980s to the pressing
problems of poverty in the 1990s, and have now become associated with the
Foundation’s role as one of the architects of the country’s future as envisaged in
the official Vision 2030 blueprint for Namibia’s development”79.
The first
decade of the Foundation’s existence saw programmes focussed predominantly
on teaching and training, ranging from literacy programmes to auto-mechanics.
A number of training institutes were developed around the country, a number of
which have subsequently become independent.
The second decade, and post independence Namibia, brought with it tough
financial times for the Foundation, including reduced income from RUL, which in
turn led to a focus on sourcing external funding which proved to be successful.
This period also heralded the launch of major community based natural resource
management programmes (CBNRM) as a means of reducing poverty. The third
78
79
Rössing Foundation (2009)
ibid
142
and fourth decades are delivering a shift towards supporting formal education
systems to support the Namibian Government in its efforts to resurrect the
failing education system.
Following a review in 2006, four areas of strategic focus were identified for the
Foundation:
 Formal Education – focussing on better quality, better teachers, and
better results.
This areas receives approximately 60% of the
Foundation’s resources and more details on these programmes are
provided below;
 Enterprise Development – this include programmes focussed on SME
development, nature conservancy programmes and work with smallscale miners;
 Innovations – including systematic efforts to assist with the sustainable
development of the town of Arandis; and
 Health – focussing on capacities and processes in health care and
prevention at the local, regional and national levels80.
The Namibian school system went through a radical transformation after
independence, with a focus placed on access for all Namibians. While the access
programme was highly successful, the quality of the teaching declined
significantly, despite significant sums of money being dedicated by Government
to address this concern. To respond to this crisis, the Ministry of Education
developed the Education and Training Sector Improvement Programme (ETSIP),
as envisaged in the achievement of Namibia's Vision 2030, and requested the
Rössing Foundation to support them in its implementation. Through this
support, the Rössing Foundation also directly addresses the needs of local
industry, in that high-school graduates qualify for employment, or enter tertiary
education and training institutions. (In 2008 25% of grade 12 graduates from
Kolin Foundation thus qualified for access to tertiary education and training
institutions)81.
In line with the National Policy of Learner-centred Education, the Rössing
Foundation strategy and support to education is based on a learner-centred
approach. The envisaged outcome for all Rössing Foundation support is to
secure quality education that allows all Grade 12 learners to enter higher
education institutions, in preparation for a knowledge-based society. The
Foundation primarily aims to achieve this through two interrelated but
independently driven interventions of learner and teacher support. Through
focussing support on English as the official language, skills in reading,
mathematics, science, and ICT are obtained.
Identification and Geography of Beneficiaries
While not as formalised as the Social and Labour Plans specifically addressing
labour sending areas in neighbouring South Africa, the geography of
80
81
Mesik (2009)
Rössing Foundation (2010)
143
beneficiaries for the Rössing Foundation highlights a close connection between
the home regions of mineworkers and project locations. Namibia is a highly
unequal country, with the majority of the population residing in the north in
poverty and very low population densities seen in the south. Historically the
vast majority of the mineworkers for Rössing were drawn from the northern
areas of the country, from the Oshiwambo and Otjiherero speaking communal
areas. While the location of projects has varied over the Foundation’s 32 years
of operation, Figure 37 indicates the current areas of operation where the
dominance of projects in the northern regions of the country and within the host
Erongo Province remain evident, as does a visual representation of population
density in Namibia.
The renewed focus on Erongo Region is a more recent development for the
Rössing Foundation, catalysed in part by fears of mine closure following the
uranium price slump early in the decade. Arandis had been developed as a
model town, with some of the best living conditions in the country at the time.
Following independence, RUL took the decision to hand the town of Arandis to
the Namibian Government as an independence gift. Following its transformation
into an autonomous local authority in 1992 however, Arandis struggled to cope
without Rössing’s financial and administrative input. Recognizing the potential
impact of mine closure on the town (at that time approximately 1/3 of the
population worked for the mine), the Rössing Foundation set up an office in
Arandis in 2005 and began working closely with the town authority to develop a
vision for the future, encapsulated in the Arandis Sustainable Development Plan.
The main focus of this plan, which has been developed collectively, is to develop
Arandis into a centre of higher learning.
144
Figure 37 Areas of Operation for Rössing Foundation82
The different regions are host to different projects supported by the Foundation.
For example, within the host region of Erongo, projects are mainly focussed on
education, sustainable development initiatives in Arandis, and small-scale
mining. By comparison, in Omausati, Oshikoto and Kunene projects are related
to the community based natural resource management programme (CBNRM),
and in Omaheke, Otjozondjupa and Oshana Regions the focus is on craft
development and education programmes.
Governance and Ownership
A Board comprising ten members, only three of which come from RUL, governs
the Rössing Foundation. The remaining seven members are from public and
private institutions and currently include the Governor of the Bank of Namibia,
the chairman of the National Council, the Governor of Erongo Region, and several
businessmen. The Board meets four times a year and relies upon the diversity
within its membership to provide access and linkages to development activities
across Namibia. Chairmanship of the Board is held by an independent Director,
who was previously the Community Relations Manager at RUL.
Financing and Sustainability
82
Rössing Foundation (2010)
145
The Rössing Foundation is an endowed foundation, receiving an annual
contribution of 2% all dividends distributed to shareholders after tax, or such
greater amount as the Board of Directors may decide. This contribution has
generated over N$120 million (USD 16.3 million) over the past 31 years, and in
2009 alone RUL contributed N$11.6million (USD 1.5million) to the Foundation.
Between 2000-04, uranium prices slumped and RUL prepared close its
operations in 2009. During and leading up to this time the annual contribution
to the Rössing Foundation ceased and the Foundation had to conduct a
significant cost cutting and reduction exercise. From this process two coping
strategies emerged: firstly the Foundation’s efforts were to be refocussed on the
Erongo Region (hosting the operation) and the north-central areas from where
most workers hailed (Ondangwa). Secondly, steps were taken to set up the
Endowment Fund with the goal of continuing the Foundation even if the mine
were forced to close.
Management Operations/Human Resources
The size of the Foundation has varied considerably over the last three decades,
with a current staff complement of 56 people. With a small headquarters in
Windhoek, the majority of staff are located in offices located in key project areas:
approximately 15 people in Swakopmund and Arandis; and 24 in the Northern
regions83.
Key Challenges
The Rössing Foundation has a long history in Namibia which has seen its
activities spread across a vast geographic area. As fortunes have changed for the
Foundation it has needed to reduce and streamline its activities, in cases ceasing
operations in certain areas. The challenge of reducing programmes without
suffering significant negative reputational impacts or worsening the
development situation in the project location has been significant for the
Foundation.
During a period of low uranium prices, the Foundation became the default
community relations arm of RUL. For this transfer of responsibilities to have
been successful, clear new strategies would have been required for the
Foundation and the company, and instead after a period of time, responsibilities
defaulted back to RUL. This transfer did however leave a gap in the community
relations work undertaken with impacted communities around the mine site for
a number of years.
83
Mesik (2009)
146
c) Papua New Guinea
Gaining independence from Australia in 1975, Papua New Guinea (PNG) is a
young country. It is characterised by an unparalleled ethnic and cultural
diversity and is home to over 850 separate language groups. This diversity is
also evident in its geography, comprising a mountainous mainland and over 600
islands.
Papua New Guinea has a long history of mineral development, with mining
activity commencing in 1888, however major multinational mining projects did
not commence in PNG until the 1970s. Despite this history, challenges have been
experienced transferring the mineral wealth into poverty reduction and better
living conditions for Papua New Guineans84. The extractive sector (both oil and
gas and mining) account for on average 25% of GDP, with approximately 15,000
people formally employed in the sector.
The recent history of mining in PNG is punctuated by five major projects:
Bougainville Copper Limited (BCL), Ok Tedi Mining Limited (OTML), Porgera
Joint Venture (PJV), Misima Mines Limited and Lihir Gold Limited (LGL), all of
which influenced the development of mining policy in the country. The location
of these projects (two of which no longer operate85) can be seen in Figure 38. In
order to understand the mining foundations, funds and trusts which have
developed in PNG it is necessary to understand the mineral policy environment
in which they were created and to which they have responded.
Through independence and as the first of these major projects was developing
the PNG Government took the opinion that the mining industry was an
“unsustainable” industry and that the key to generating development from this
sector was to use its wealth to invest in other forms of development which would
not cease “due to an accident of geology”86. The Mineral Resources Stabilisation
Fund had been established prior to Independence with the goal of stabilising the
amount of revenue which came into the government’s annual budget regardless
of mineral price fluctuations. Also connected to this approach was the belief that
mineral ownership rested with the State and that as such the nation, rather than
the host community, would predominantly benefit from the mineral wealth.
World Bank (2008)
BCL and Misima
86 Filer and Imbun (2004)
84
85
147
Figure 38 Papua New Guinea Mines and Potential Project Map87
These approaches began to be challenged during the exploration boom of the
1980s, however the major triggers for the ensuing policy overhaul were rising
tensions in Bougainville and the challenges of gaining local consent for the
Porgera mine to be established in the late 1980s88. The solution to the Porgera
situation was the institution of the Development Forum, which was later
incorporated in the 1992 Mining Act. The Development Forum requires that the
views of “any persons who the Minister believes will be affected by the grant” of
a mining lease be considered prior to awarding the lease. The main outcome of
the Development Forum is the negotiation of a multi-party Memorandum of
Agreement (MoA) between the National, Provincial and Local levels of
Government, the landowners and company which defines the benefit sharing
arrangements, and the roles, responsibilities and obligations of each party.
Following the successful negotiation of the Porgera Joint Venture, many of the
terms developed for that agreement were subsequently incorporated and
further developed into a “Basic Mining Package” which was used as a template
for benefit sharing agreements with other mines, such as Ok Tedi and Misima.
Within this basic package was a shift in the approach to the return of mineral
wealth to host communities, with some of the royalties previously intended for
the Provincial Government instead being directed towards special mining lease
landowners and the Porgera Development Authority. In order to compensate
the Provincial Government for their loss of royalties, the National Government
established the Special Support Grant (SSG) programme transferring some of
their national royalties to the provincial level.
87
88
Chamber of Mines and Petroleum (2002)
ibid
148
This first development under an MoA did not meet all landowner expectations
mainly as a result of the very remote area and limited capacity of Government to
deliver infrastructure in Porgera. The national government, at the request of the
Porgera Joint Venture established a company executed mechanism to deliver
infrastructure in the mine area called the Infrastructure Tax Credit Scheme. The
Tax Credit Scheme initially allowed mining companies to spend up to 2% of their
taxable income on the construction of approved social and economic
infrastructure and to have this counted as corporate income tax already paid to
the government89. This allowance was later reduced to 0.75% of taxable income.
The first MoA was further challenged by landowners seeking to have more
economic activity in the region through cancellation of the Fly-in Fly-out system
and development of township infrastructure at the mine to house all mine
employees. This led to a strengthening of the MoAs for later developments and
inclusion of a Sustainable Development focus in these agreements. Mineral policy
was to evolve further with the negotiation of the Lihir project in the mid 1990s.
The package agreed with the Lihirian landowners was an “integrated” package,
combining both compensation and benefit-sharing components in the one
package. In both Porgera and Lihir, Development Authorities were established
to serve as local level Governments and as vehicles for the utilization of a portion
of mineral revenues for the benefit of their local communities.
By the late 1990s, a World Bank review concluded that the Mineral Resources
Stabilisation Fund had not succeeded in stabilising the national budget and the
Fund was abolished. At the same time, BHP Billiton began to seek an exit from
the Ok Tedi mine and the environmental destruction it had caused, resulting in
the establishment of the Papua New Guinea Sustainable Development Program
(PNGSDP) in 2001.
Today, the 1992 Mining Act regulates mining, although the Ok Tedi mine
operates under its own act. The Mining Act is largely silent on sustainable
development considerations, although a Draft Sustainable Mining Development
Policy has been developed, it is yet to be endorsed. The mineral policy history
provided above highlights the evolution of corporate social responsibility within
the mining industry in PNG. Many of the developments have moved faster than
the legal frameworks regulating the industry, often, in response to stakeholder
demands.
Surveys undertaken in PNG to determine mining community attitudes towards
corporate social responsibility programmes have highlighted an interesting
trend: “most respondents thought the benefits they were getting as [a] form of
CSR activities were anticipated and therefore served as [a] form of compensation
to make up for the seemingly adverse impact of the mines”90. This lack of
distinction between compensation and benefit sharing, also inherent in the
integrated package approach, provides a different operating environment for
foundations, funds and trusts in PNG compared to the other country case studies.
89
90
Filer and Imbun (2004)
Imbun (2007)
149
Three case studies are included in this Papua New Guinean chapter: The Ok Tedi
Fly River Development Programme (OTFRDP); the Papua New Guinea
Sustainable Development Programme (PNGSDP) and the Lihir Integrated
Benefits Package (IBP) and associated Lihir Sustainable Development Plan Trust
(LSDP). Both the OTFRDP and the LSDP Trust were developed primarily to
manage compensation and benefits paid to communities on behalf of those
communities. In contrast, the model for PNGSDP’s establishment is not one
anticipated to be repeated anywhere in the world, and represents a positive
outcome from a difficult situation for all parties involved.
150
i) Ok Tedi Fly River Development Programme (OTFRDP)
Exploration activities began in the Ok Tedi region in 1968, with construction of
the mine commencing in 1981 and the mine starting operating in 1984 with first
production in 1987. The Ok Tedi copper and gold mine is located in the North
Fly District in Western Province of PNG. The town of Tabubil, now hosting a
population of over 9000 people, was developed by the company in an area that
held no more than 700 people prior to the mine’s development. The
shareholders of OTML are: Papua New Guinea Sustainable Development
Programme (52%), Government of Papua New Guinea (30%) and Inmet (18%)91.
In 1990, OTML established the Lower Ok Tedi Development Trust to bring longterm benefits to communities living along the Ok Tedi and Fly River systems.
The Trust covered those villages outside of the Ok Tedi mine lease area who
were not receiving royalty or land lease payments and was operated in
conjunction with the National and Provincial Governments and community
representatives. The Trust received annual commitments from OTML and was
governed by a management committee comprising broad representation (5
positions: 1 held by National Government, 1 by Provincial Government, 1 by a
beneficiary representative and 2 by OTML) and a Board of Trustees (three OTML
management representatives, 1 representative from BHP and two Local Level
Government Chairmen). The Trust was very closely connected to OTML, with
project proposals coming from villages through the OTML community relations
officers. The Lower Ok Tedi Trust resulted from an out of court settlement
between the Lower Ok Tedi people and BHP/OTML when significant
environmental damage (dieback) first became prominent in the area. The
settlement was valued K40 million (approximately USD14.5 million) and
payment was concluded in 200992.
As understanding of the environmental impacts of the riverine damage grew, in
2001, OTML entered into Community Mine Continuation Agreements (CMCAs)
under the Mining (Ok Tedi Mine Continuation (9th Supplemental) Agreement)
Act with communities affected by its operations. Community consent was
This ownership structure was changing at the time of writing.
LOTT, and other OTML community relations initiatives (such as the Highway Village Development
Programme), were superseded by the CMCA.
91
92
151
needed for the mine to continue its operations and this was formalised through
the CMCAs. The Agreements commit OTML to investment and development
payments through 8 Trusts and six mine villages to benefit all people in the 152
mine impacted villages. The eight Trusts each covered a different geographical
area within the CMCA corridor (as seen in Figure 39). Each of the Trusts has to
date invested and operated independently, limiting opportunities for joint and
larger-scale projects.
The large footprint of impacted villages was generated by the Government
sanctioned practice of waste and tailings disposal in the Ok Tedi River. Through
signing up to the CMCA agreements villages were agreeing to compensation for
damage and giving their consent to continued river disposal (with improvements
in tailings management) until planned mine closure.
Establishment, Structure and Purpose of the Fund
To advance the agreements made in 2001, OTML established Village Planning
Committees (VPCs) in all 152 villages. The VPCs identified and prioritised
projects and their submissions were then reviewed by the then OTML Regional
Development Department which had managed the CMCA process. In 2002,
OTML registered the Ok Tedi Development Foundation (OTDF) as “a not-for
profit company to support community development and future generations by
administering the CMCA Trust funds”93, with preferential tax status. It was also
intended to establish a framework for the development of an institution that
could continue to complement government, community and private sector
development initiatives in the Western Province in the lead up to mine closure.
The planned five-year review of the CMCA Agreements in 2007 highlighted
unease within the communities that while OTDF had been established, the CMCA
Trusts were still effectively being managed by OTML. As such, the Ok Tedi Fly
River Development Programme was registered as a new independent entity in
August 2008.
The development of the OTFRDP has in effect been ongoing for 10 years, with
many studies having been conducted during this time advising on its structure
and role. The independent structure will be formally launched in mid 2010, and
a five year detailed business plan is being developed to manage this transition.
The formal vision and mission of the OTFRDP have been defined as:
“Vision - To ensure self-sustainability and improve the quality of life of all
Western Province communities;
Mission – Committed to best practice and wise management of funds and
programmes with emphasis on accountability, transparency, performance
and equal participation in order to realise the development aspirations of
the impacted communities”.94
93
94
OTFRDP, (2010)
ibid
152
The OTFRDP is an operational not for profit company. In addition to the vision
for OTFRDP it inherited some programmes and responsibilities from OTML (food
security and regional engineering). The decision to effectively hand over all
community development programmes to OTFRDP was based in part on the
efficiencies and cost savings achieved by having one entity focus on community
needs throughout the vast impacted area. Given the OTFRDPs independent
status, a fee for service arrangement may need to be developed to address this
situation and to provide an income source for the entity in the future. As the
investments held in each of the eight Trusts reduce it is anticipated that the
OTFRDP will change its structure and purpose to continue providing
development project management services beyond the mine impacted area in
the Western Province.
Programmes
A village census was conducted across all of the CMCA villages in 2007 and
during this time villages were asked to prioritise their main development needs.
A Women and Children’s Action Plan (this plan will receive 10% of the financing
available from the Trust funds) for each of the eight trusts and the mine villages
was also produced around this time. Women from each village were also asked
to prioritise their development needs, which resulted in considerably different
results from the village census (derived from men without much consideration of
the needs of women and children). OTFRDP have elected to follow the priorities
identified by the Woman and Children Action Plan because it used a genuine
bottom up consultative approach and took account of national and provincial
government development plans. Key programme areas of infrastructure, health,
education, rural development and food security have been defined under the
current funding arrangement.
The OTFRDP staffing structure being put in place in 2010 is designed to respond
to the key priorities identified by the CMCA members: predominantly around
food security and health. OTDF has struggled with timely implementation of
projects on a scale sufficient to satisfy demand from CMCA members, and this is
a challenge the OTFRDP has inherited, recognises and is working to address.
Identification and Geography of Beneficiaries
As indicated earlier, the beneficiaries of the OTFRDP programmes are the
villages within the CMCA corridor, as illustrated in Figure 39. The beneficiaries
are expected to change over time as the value of the Trusts is extinguished and
new funding sources are identified.
The OTFRDP is currently located in Tabubil, with field officers scattered along
the CMCA corridor. This is planned to change in 2011 with the head office of the
OTFRDP moving to Kiunga, which is both more accessible to the majority of the
CMCA villages and places the entity closer to the seat of the Provincial
Government.
153
Figure 39 CMCA Regions and District Boundaries95
Governance and Ownership
A number of aspects of the ownership and governance structure for the OTFRDP
were defined in the 2001 9th Supplemental Agreement. Within this Agreement it
was stated that OTDF would have four shares, all of which must be transferred
from OTML to reputable organisations involved in development in PNG before
mine closure. The first of these shares was transferred in 2009 to the Papua
New Guinea Sustainable Development Programme (PNGSDP). It is anticipated
95
OTFRDP (2010)
154
that one of the other shares will be allocated to a CMCA Association (combining
the interests of all CMCAs).
Each shareholder is expected to nominate a Director. Under the current
structure, two of the Directors are OTML employees, one is from the PNG Mineral
Resources Authority and the final Director comes from PNGSDP. In addition to
the four Directors, four non-executive Directors have also been identified
(known as Associate Directors). The Associate Directors do not have voting
rights on the Board however they have sufficient voice at the Board meetings to
ensure the wishes of the Advisory Committee are heard and considered by the
Board. The Advisory Committee was developed to allow for broad community
participation in the OTFRDP, and includes representatives from the CMCAs, the
Council of Churches and the Fly River Provincial Government (as shown in
Figure 40).
Figure 40 Governance Structure for OTFRDP
Financing and Sustainability
The OTFRDP sources most of its administrative and management funding from
OTML at present, with this reliance scheduled to reduce on an annual basis back
to zero by 2013. The operating costs average out to K20million/annum (USD 7.2
million) at present, with plans to reduce this to K15 million/annum (USD 5.4
million). The funds OTFRDP has been established to manage will cease to
receive new investments upon mine closure, with growth only being achieved
through interest on remaining investments.
The 9th Supplemental Agreement resulted in a K1.0bn (approximately USD 360
million) package being agreed between OTML and the CMCA members. The
proportion of this package kept within the Trusts, combined with other funds
155
available combine to approximately K700 million (USD 250 million) to be
managed by OTFRDP by the end of 2013. During the current transition year,
OTFRDP expects to spend approximately K30 million/annum (USD 10.9 million)
on development projects, and to step this up to approximately K200 million
(USD 72 million) over the next few years. OTFRDP is not operating under a time
limit and will spend the development trust funds at the rate that best suits the
beneficiaries.
As OTFRDP transitions from its dependence upon OTML it is researching other
sources of funding and options for a fee for service model for project
management, as applied by major NGOs. In the original conception of the
OTFRDP (as OTDF at that time) it was anticipated that the PNGSDP (described
below) would act predominantly as a source of funding, however PNGSDP is also
implementing projects causing possible competition over funding.
Management Operations/Human Resources
In transitioning from OTML management to independence, it was necessary for
the OTFRDP to review its programme management costs. As part of this process
all staff were made redundant, and approximately 40% were re-hired, all at
reduced salaries. These decisions were taken to improve the cost effectiveness
of the OTFRDP model given the necessity to mange and internalise its
management costs from 2010 onwards.
The OTFRDP has a reduced staff complement of 60 people, split across two
divisions: Regional Development and Support Services. The mandate for each
division is:
 “The Regional Development division identifies, designs and delivers
programmes in partnership with CMCA communities in the North Fly,
Middle Fly and South Fly regions to achieve the development aspirations
of all people in those regions; and
 The Support Services Division ensures that quality programmes are
delivered to CMCA communities through the OTFRDP Regional
Development Division. They employ best practice approaches for
identification, design, management, monitoring and evaluation
programmes; operating within a corporate governance framework that
ensures
prudent
financial
management,
transparency
and
96
accountability” .
The project teams are anticipated to change over time as the programme
priorities are modified.
Key Challenges
The OTFRDP is in effect the custodian and implementer of monies paid to
impacted communities. In this regard its key clients are the recipient
communities, however it is also tasked with implementing some of the
96
ibid
156
companies community development programmes and commitments. This
blurring of roles may be challenging especially when operating in an
environment where expectations are high and considerable time has already
elapsed.
157
ii) Papua New Guinea Sustainable Development Program Ltd (PNGSDP)
The Papua New Guinea Sustainable Development Program Ltd was created as
part of an exit agreement between BHP Billiton and the Government of Papua
New Guinea. BHP Billiton had been the majority owner and operator of the Ok
Tedi mine (52% shareholding) and PNGSDP was established in 2002, when BHP
Billiton divested its shareholding following concerns about the long-term
environmental impact of the mine, and the social and economic repercussions of
this impact. The 52% shareholding was incorporated in Singapore as a not-forprofit limited liability company. Elevated copper and gold prices, and careful
management of funds from the dividends paid by OTML have led to PNGSDP
becoming a very large development agency, with funds expected to exceed USD
1billion by the end of 2010 and continuing to grow until planned mine closure in
2013.
Establishment, Structure and Purpose of the Fund
PNGSDP commenced operations in Port Moresby in November 2002. It is
mandated to support sustainable development through projects and initiatives
to benefit the people of Papua New Guinea, especially the people of Western
Province during the period leading up to and after closure of the Ok Tedi mine97.
As well as being a development agency, PNGSDP is also a substantial PNG
financial institution and joint owner of the Ok Tedi mine.
PNGSDP has two main funds, with different objectives. The Long Term fund
receives 2/3rds of the net income derived from OTML after deducting operating
costs. It is to be invested in “low risk” ventures and can only be accessed for use
after mine closure. The Development Fund receives the remaining 1/3 of the
OTML dividends and is to be used to support PNGSDP sustainable development
programmes in the short term. Between now and mine closure (planned for
2013, although options for mine life extension until 2020 are being studied), one
third of the Development Fund is to be allocated to the Western Province Fund
and two thirds to the National Fund. After Mine Closure, income from Ok Tedi
Mining Ltd to the Development Fund will cease and the Long Term Fund will be
utilised to support ongoing activities of the sustainable development
97
PNGSDP (2009)
158
programme, which PNGSDP is mandated to sustain for a minimum of 40 years
after Mine Closure98.
Programmes
PNGSDP is involved in a wide range of programmes and initiatives across the
country. PNGSDP acts as both a grant maker and an implementation partner
currently, although it is planning on focusing greater attention on contract
management in the future.
The broad programme areas can be described as:
 Community Social Investment Programme (CSIP) – this programme
supports projects which can help communities to meet their own
sustainable development goals. All projects require some contribution
from the beneficiary, either in cash, kind or time.
Projects are
generated both by communities and through research and baseline
studies conducted by PNGSDP project officers. All projects are reviewed
by PNGSDP before receiving support and the CSIP team aim to balance
the projects geographically. This programme supported a K23.5million
(USD 8.5 million) health and education programme in Western Province
in 2008 amongst other projects. Operating within this team is the
Community Sustainable Development Programme (CSDP) which has an
annual operating budget of K6million (USD 2.2million) and supports
projects driven by communities valued at less than K250,000 (USD
90,000).
 Industry Development projects – PNGSDP supports the development of
sustainable industries in PNG. PNGSDP’s role in these programmes is to
act as a facilitator to support new industry operating in a sustainable
manner to develop in PNG. As part of this programme, PNGSDP has
invested in three subsidiary companies, each of which is discussed
below.
PNGSDP has developed relationships with its subsidiary
companies on two levels: both on the basis of an investor/owner and as
a client/project partner or development agency relationship. PNGSDP
nominates one director to each subsidiary Board.
o Cloudy Bay Sustainable Forestry Ltd (CBSFL) – CBSFL is a wood
fibre development and processing company championing
sustainable forestry practices in PNG. PNGSDP acquired 80% of
CBSFL in 2007 and this share will be sold down as the company
improves its financial viability;
o PNG Sustainable Energy Ltd (SEL) – Originally established as a
PNGSDP joint venture with the Snowy Mountains Engineering
Corporation (SMEC), in 2009 agreements were executed for the
Australian energy company, Origin Energy Ltd, to purchase share
assets of PNG SEL previously owned by SMEC.
o PNG Microfinance Ltd (PNGMFL) – PNGMFL is a 48.65% owned
subsidiary of PNGSDP, with the Bank South Pacific and the
International Finance Corporation holding the remainder of the
98
PNGSDP (2010)
159



company equity. PNGMFL offers a range of business loans for
micro business operations, working capital loans for small and
medium business operators, asset purchase loans for small and
medium business operators and agribusiness loans for farmers
and business operators involved in agricultural support type
businesses. By the end of 2008, PNGMFL were recording nearly
50,000 depositors in the Western Province alone, which had
grown by close to 15,000 since 2006.
Infrastructure projects – A vast number of infrastructure projects have
been undertaken by PNGSDP, with a number of roads in particular
having been built by PNGSDP. At a national level PNGSDP has developed
a partnership with the World Bank to support major projects,
particularly in the area of road and bridge maintenance and
rehabilitation. These projects are in line with the National Government
of PNG’s national infrastructure plan, geared towards improving overall
economic and structural development99.
Transformational Projects - In planning for the eventual closure of the
Ok Tedi mine, PNGSDP is financing work to identify and enable
alternative industries which could replace the economic role played by
OTML in PNG and more specifically within the Western Province. This
work includes supporting the feasibility studies for the mine life
extension of the Ok Tedi mine and for the development of a major port
at Daru. PNGSDP see’s its role as a facilitator, supporting these projects
as much as needed to make them as attractive as possible for someone
else to invest in.
Financial management – One of the key development roles that PNGSDP
has played to date has been the application of a sound investment
strategy to manage the Long Term Fund.
PNGSDP works with a number of partner organisations, and is supporting other
development activities occurring in PNG. As part of this support, PNGSDP is
contributing the greater of either 2.5% of its annual dividends or K21.5million
(USD 7.8 million over a five year period) of project financing to the mine
impacted communities through the CMCA review process.
Identification and Geography of Beneficiaries
PNGSDP’s programmes are intended for the benefit of all Papua New Guineans,
with a particular emphasis on the peoples of Western Province. This approach is
evident in the fund rules which direct a third of the Development Fund spending
to the Western Province.
Western Province is the largest province in PNG and also has the lowest
population. It has a vast and varied geography, covering the mountainous area
where the mine and town of Tabubil are located in the north which receive over
8m of rain per year through to low lying floodplain communities connected only
by river systems in the south. Figure 41, which illustrates a range of the
99
PNGSDP (2010)
160
programmes PNGSDP has undertaken and is considering for future
implementation in the Western Province, highlights the array of beneficiary
communities in the Western Province.
Figure 41 PNGSDP's Western Province Programmes100
100
PNGSDP (2010)
161
Governance and Ownership
PNGSDP is an independent company, (a company limited by Guarantee operating
under a deed of trust) governed by a Board of Non-Executive Directors
(Trustees). The composition of the Board is summarised in Figure 42, with four
different groups appointing representatives to the Board. Different committees
have been established within the Board, such as the Investment and Finance
Committee to oversee the company’s investment policy and guidelines, the Audit
Committee and the National Committee.
The Board has remained largely stable since 2002, with only one change due to
the death of one of the directors. The late director was from the Western
Province and informally acted as a representative of the people of Western
Province (the primary beneficiaries of the PNGSDP projects) on the Board.
Figure 42 PNGSDP Ltd Board Composition
An Advisory Council, comprising up to seven eminent and appropriately skilled
Papua New Guineans, provides the Chief Executive Officer with strategic advice
on sustainable development and integration between the company’s
programmes the overall development objectives of PNG. Members on the
Advisory Council serve for a two-year period and two of the current members of
the Advisory Council are from the Western Province.
Financing and Sustainability
PNGSDP is financed entirely by dividends from the Ok Tedi mine. These
dividends have been larger than was anticipated when PNGSDP was established,
resulting in a bigger, more influential development actor than was expected in
2002. Between 2002 and the end of 2008, cumulative project funding approved
under the Development Fund was close to K400million (USD 144.2 million), and
it is anticipated that the value of the Long Term fund will exceed USD1billion by
the time of planned mine closure in 2013.
The articles defining the role of PNGSDP mandate a life for the Long Term fund of
at least 40 years post mine closure, with no more than 2.5% of the invested sum
to be spent in any individual year. Given the scale of the fund, discussions are
now ongoing to review the potential for an endowed fund to exist in perpetuity.
Management Operations/Human Resources
PNGSDP has a core staffing complement of 70 people, and the basic structure of
the company is seen in Figure 43. While the majority of the staff have been
162
located in Port Moresby since the company started, this is now changing with
greater focus being placed on stakeholder engagement and community relations
in the Western Province. In addition to the core staff, the subsidiary businesses,
PNG SEL, PNGMFL and Cloudy Bay Sustainable Forestry Ltd are majority owned
by PNGSDP and have considerable workforce sizes (approximately 200 for
PNGMFL and 300 for CBFSL).
Figure 43 Simplified PNGSDP Management Structure
The diversity of projects, in scale, location and content, have the potential to
make PNGSDP a difficult company to staff, with skills of investment bankers and
community development specialists needed to work together.
Key Challenges
PNGSDP is a unique company and fulfils a variety of roles:
 It is the recipient of mining dividends but is not responsible for the
achievement of the social licence to operate for the mining company;
 It is a private development actor with greater resources available to it
than any other development actor in the country; and
 It has a mandate for development for 40 years post mine closure, which
provides it with a longer life-span and planning horizon than most
development organisations.
PNGSDP operates amidst great expectation from all stakeholders, in part due to
the size of the funds available and in part from its broad mandate for
development. The lack of beneficiary representation on the governing body can
increase the challenge of minimising this expectation and can make it more
challenging to convey the success of work already undertaken.
163
iii) Lihir Sustainable Development Plan Trust
The Lihir Gold Project is located in New Ireland Province, and commenced
development in 1995, with the first gold pour occurring in 1997. The mine
comprises three interconnected open cut mines on the south-eastern side of the
Lihir Island. The Lihir Group comprises four islands, of which Lihir is the largest,
with a total population of 14,613 Lihirians and approximately 3,700 people from
other parts of PNG and overseas101. The project is 100% owned by Lihir Gold
Limited.
An Integrated Benefit Package (IBP) was defined and agreed between the
developing company and the Lihirian landowners in 1995.
The IBP
encompassed compensation payments, royalties and social development
projects. The IBP was to be reviewed every five years and following the review
which commenced in 2001 and the inability to resolve a number of issues an
update to the IBP was finalised in 2007, which is now known as the Lihir
Sustainable Development Plan (LSDP). A framework for the LSDP has been
developed, although only a proportion of the elements contained with it have
been implemented. The description provided below reflects the intention of the
LSDP and has not necessarily been implemented at this stage.
Establishment, Structure and Purpose of the Fund
From the initial negotiations over the Integrated Benefits Package (IBP), the
Lihirian population have sought to use the benefits from the Lihir Gold Project to
advance the “Lihir Dream”. The IBP was founded upon four objectives:
 “Parallel development – to ensure that development in all villages in Lihir
occurs in parallel with the development of the Lihir Gold Project;
 Balanced development – to ensure that development is balanced in all
villages and wards in Lihir;
 Sustainable development – to ensure that development is sustainable.
That is, that development in Lihir must be able to sustain itself without
being dependent on the Lihir Gold Project; and
 Stable Development – to ensure that development in Lihir is stable. This
must occur in harmony with the Lihir society and not destroy and erode
101
LGLGold (2010)
164
the order and culture that existed in the society prior to the operation of
the Lihir Gold Project”102.
Despite the articulation of these objectives, at the time of the first review, the IBP
was not deemed to be meeting the goals of the Lihirian landowners. The
Nimamar Rural Local Level Government (NRLLG) and the landowners
association (LMALA) recognised that this failure was in part due to the absence
of a plan outlining how the objectives were to be met. This launched the Lihir
Sustainable Development Plan (LSDP), to be financed by the K107 million (USD
38.7 million) over the next five years committed by Lihir Gold Limited as part of
the original IBP agreement. The LSDP uses “the Lihir Gold Project as a stepping
stone”, recognising that sustainability will require undertaking and supporting
non-mining related activities.
Programmes
The programmes areas receiving focus within the LSDP structure are intended to
achieve the objectives outlined earlier. As the LSDP evolves it is anticipated that
broad themes of programming will be identified.
Identification and Geography of Beneficiaries
The beneficiaries identified in the LSDP are effectively the Lihirian population.
Due to the inclusion of on-going and future compensation payments, royalties
and social development projects within a single plan, different programmes have
different audiences. The LSDP revises the definition of “affected area”
communities and includes additional communities over and above the original
IBP. “Affected area communities” will continue to receive extra benefit in the
form of infrastructure development compared to other communities. The key
priorities for these infrastructure projects are: reticulated water, garbage
collection and septic tank emptying facilities, assistance with preparation of
village layout planning, housing assistance and electricity reticulation103.
Governance and Ownership
The Nimamar Rural Local Level Government (NRLLG) has assumed
responsibility for the LSDP. The LSDP contains five chapters, each of which is
effectively “owned” by a different group (owners are indicated in brackets):
 Chapter 1 – Lihir Destiny (NRLLG);
 Chapter 2 – Destruction (LMALA Executive);
 Chapter 3 – Development (Nimamar Special Purpose Authority, NSPA);
 Chapter 4 – Security/Sustainability (Lihir Sustainable Development Ltd
– yet to be registered as a company); and
 Chapter 5 – Rehabilitation (Lihir Gold Limited).
102
103
NRLLG (2007)
ibid
165
Any project seeking financing from the LSDP contributions has to pass through a
detailed approvals process, summarised in Figure 44.
Figure 44 LSDP Governance and Approvals Structure104
Financing and Sustainability
The only known financial contribution to the LDSP is from Lihir Gold Limited.
LGL will pay its contribution directly to the LSDP Growth Account where it will
be invested. Proceeds from the Growth Fund will be rolled over within this fund
and monies will be transferred to the Trust Account when projects are approved.
These transfers will be made on a monthly basis to minimise exposure to
corruption.
Management Operations/Human Resources
The management structure surrounding the LSDP is still in a process of evolution
with a number of “chapter owners” requiring considerable capacity building
support to enable them to undertake their roles.
Key Challenges
The model presented in the LSDP Trust combines compensation, royalties and
community development projects. This combination will make for a coordinated
management approach, however it may present challenges in portraying which
projects were undertaken for which reasons within the community.
104
Adapted from NRLLG (2007)
166
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172
Appendix 1 Interviews Conducted
Date
1 Feb
2010
2 Feb
2010
3 Feb
2010
3 Feb
2010
4 Feb
2010
5 Feb
2010
6 Feb
2010
9 Feb
2010
9 Feb
2010
10 –
11 Feb
2010
10 Feb
2010
Interviews Held With:
Individual
- Mrs Premilla Hamid, General
Manager Public Affairs,
- Ms Jennifer Barsky, Lead
Foundations Representative,
- Mr Nick Cotts, Regional Vice
President Environmental and
Social Responsibility
- Mr Joseph Danso, Community
Development Superintendant
Sarah
Morisson,
Client
Relationship Manager
- Paul Pereira, Public Affairs
Executive
- Mrs Teboho Mahuma, Chief
Executive Officer
- Mr Alcido Mausse, Manager
- Mr Salvador Traquino, Social
Projects Coordinator
- Mr Malesela Letsoalo, Director
- Mr Mark Glanvill, Enterprise
Development
- Ms Jenni Fleming, Programme
Head: Business Development,
- Ms Christine Delport, Chief
Operational Officer
- Ms Lana Lovasic, CSI Liaison and
Communications Manager
Mr
Sebastian
Matthews,
Chairman
- Mrs Sonia Balcazar de MezaCuadra Corporate Affairs
- Mrs Jacqueline Chappuis
Cardich, Lawyer,
- Mr Pablo de la Flor Belaunde,
Vice President Corporate Affairs
- Mr Gustavo Cabrera Sotomayor,
Manager
- Ms Violeta Viega, Executive
Director
- Mr Flavio Flores Acvedo,
Programme Manager
- Ms Rosario Vargas Lucar,
Instititional
Strengthening
Coordinator
- Mr Jose Luis Arteaga Cacho,
Productive Projects Coordinator
- Mr Jose Chang Leon, Manager
Organisation
Anglo American South Africa
Ltd.
World Bank
Foundation,
Fund or Trust
discussed:
Anglo American
Chairman’s Fund
Newmont Ahafo
Foundation
Newmont Ghana
Newmont Ghana
Tshikululu Social Investments
Impala Bafokeng Trust
Mozal
Community
Development Trust (MCDT)
Palabora Foundation
Anglo American
Chairman’s Fund
Impala Bafokeng
Trust
Mozal
Community
Development
Trust
Palabora
Foundation
Greater
Rustenburg
Community Foundation
Greater
Rustenburg
Community
Foundation
Proyecto La Granja, Rio Tinto
Fondo Social La
Granja
Chappuis & Asociados
Antamina Mining Company
Fondo Minero Antamina,
Antamina Mining Company
Asociación Los Andes de
Cajamarca (ALAC)
Fondo
Solidaridad
Cajarmarca, ALAC
Fondo
Minero
Antamina
Asociación
Andes
Cajamarca
(ALAC)
Los
de
Fondo
Solidaridad
173
Date
Interviews Held With:
Individual
Organisation
10 Feb
2010
- Ms Lucinda Visccher Butron,
Manager Social Development,
Banos del Inca
Yanacocha
11 Feb
2010
12 Feb
2010
- Mr Mirko Chang Olivas, Director
General
- Mr Piero Duran Sal y Rosas, Zone
Supervisor
Asociación Ancash
18 Feb
2010
- Mr Todd Clewett,
Operating Office
Papua
New
Guinea
Sustainable
Development
Program
19 Feb
2010
- Mr Musje Werror, General
Manager Business Development
Ok Tedi Mining Limited
19 Feb
2010
- Mr Ian Middleton,
Executive Officer
Ok
Tedi
Foundation
22 Feb
2010
- Mr Borone Isana, Manager
Government Liaison
Chief
Chief
ADRA Peru
Development
Lihir Gold Limited
Foundation,
Fund or Trust
discussed:
Cajamarca
ALAC and the
Fondo
Solidaridad
Cajamarca
Asociación
Ancash
Fondo
Minero
Antamina
Ally
Micuy project
Papua
New
Guinea
Sustainable
Development
Program
Ok
Tedi
Development
Foundation
Ok
Tedi
Development
Foundation
Lihir Sustainable
Development
Plan
174
Appendix 2 Foundations Reviewed (Desk Based)
Name
1
2
3
4
5
6
7
8
Alcoa Foundation
Anglo American Chairman’s Fund
Anglo American Epoch and Optima
Trusts
Anglo American Group Foundation
Anglo Chile EMERGE Program
AngloGold Ashanti Fund and Trust
Antamina Mining Fund
Anum Lio Foundation
9
ARM CSI Trust and Chairman’s Fund
10
11
12
13
Asociacion Ancash
Asociacion los Andes de Cajamarca
BHP Billiton Development Trust
BHP Billiton SEWA India Development
Foundation
The Cerrejon Coal Foundations (Water,
Indigenous
Development,
Progress,
Institutional Strengthening)
Clermont
Aboriginal
Community
Development Fund
DeBeers Fund
Debswana Diamond Trust
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31
32
33
34
35
36
37
Escondida Foundation
Fondo de Inversion Social
Freeport
Partnership
Fund
for
Community Development
Fundacion Falcondo
Fundacion San Isidro
Fundacion Sierra Madre
Gelganyem and Kilkayi Trusts
Goldfields Ghana Foundation
Greater
Rustenburg
Community
Foundation
Hail Creek Wiri Yuwiburra Community
Benefits Trust
Impala Bafokeng Trust
Impala Community Development Trust
Inti Raymi Foundation
Kashansi Foundation
Kestrel
Aboriginal
Development Fund
Kupol Foundation
Community
Las Bambas Mining Project Social
Contribution trust
Lihir Sustainable Development Plan Trust
Lonmin Community Development Trust
Mineral Foundation of Goa
Associated
Company
Alcoa
Anglo American
Anglo American
Country
Anglo American
Anglo American
AngloGold Ashanti
Antamina S.A.
PT
Kelian
Indonesia
(Rio
Tinto)
African
Rainbow
Minerals
Antamina S.A.
Newmont Mining
BHP Billiton
BHP Billiton
NA- Global
Chile
South Africa
Peru
Indonesia
Cerrejon Coal
Colombia
Rio Tinto Coal
Australia
DeBeers
Debswana
&
DeBeers
BHP Billiton
CODELCO
Freeport McMoran
Australia*
Xstrata
BHP Billiton
Goldcorp
Rio Tinto
Gold Fields
-
Dominican Republic
Colombia
Guatemala
Australia*
Ghana
South Africa
Rio Tinto Coal
Australia
Impala Platinum
Impala Platinum
Newmont Mining
First
Quantum
Minerals
Rio Tinto Coal
Australia
Kinross
Gold
Corporation
Xstrata
Australia*
Lihir Gold
Lonmin
Various
Papua New Guinea
South Africa
India
NA – Global
South Africa
South Africa
South Africa
Peru
Peru
South Africa
India
NA- Southern Africa
Botswana
Chile
Chile
Indonesia
South Africa
South Africa
Bolivia
Zambia
Australia*
Russia
Peru
175
Name
38
39
40
41
42
43
44
45
46
47
48
49
50
51
52
53
54
55
56
57
58
59
60
Montelibano Educational Foundation
Mozal Community Development Trust
Musselwhite Fund
Namdeb Social Fund
Newmont
Ahafo
Development
Foundation
Northern Territory Aboriginal Benefits
Account
Palabora Foundation
Phelps Dodge Foundation
PNG Sustainable Development Program
PT Freeport Indonesia Trust Funds
Raglan Fund
Rio Tinto Aboriginal Foundation
Rio Tinto Foundation Zimbabwe
Rio Tinto Western Australia Future Fund
Rössing Foundation
Sadiola Hill & Yaleta Gold Mines
Community Development Fund
Sorowako
Educational
Foundation
(Yasan Pendidikan Sorowako)
Tahltan Heritage Trust Fund
Tampakan Community Foundations
Tintaya Foundation
Vale Foundation
Vale Social Trust
Western Shoshone Educational Legacy
Fund
Associated
Company
BHP Billiton
BHP Billiton
Goldcorp
Namdeb
Newmont Mining
Country
Government
Australia*
Rio Tinto
Phelps Dodge
OTML
Freeport McMoran
Xstrata
Rio Tinto
Rio Tinto
Rio Tinto
Rio Tinto
Morila S.A.
South Africa
NA-Global
Papua New Guinea
Indonesia
Canada*
Australia*
Zimbabwe
Australia*
Namibia
Mali
PT Inco Indonesia
Indonesia
NovaGold
Xstrata
BHP Billiton
VALE
VALE
Barrick
Corporation
Canada*
Phillippines
Peru
Brazil
Peru
United States*
Gold
Colombia
Mozambique
Canada*
Namibia
Ghana
176
Acknowledgements
The preparation of this Sourcebook has been managed by the Oil, Gas and Mining
Policy Division (COCPO) of the World Bank. The team comprised Remi Pelon
(Mining Specialist, Task Team Leader), Gary McMahon (Senior Mining
Specialist), and Gotthard Walser (Lead Mining Specialist).
It was authored by Elizabeth Wall (Shared Resources) who also undertook the
field case studies as well as personal research. Business for Social Responsibility
(BSR) prepared an intermediary research product on mining foundations, trusts
and funds which was drawn upon in Part I, sections a, b and e.
Thanks are also due to all those who provided initial guidance, valuable
documents and comments along the research process, including: Peter Van der
Veen, Glynn Cochrane, Juraj Mesik, Jennifer Barsky, Dafna Tapiero, Debra
Sequeira, Graeme Hancock, John Strongman.
Finally, this work could not have been achieved without the great collaboration
of companies, foundations, civil society, and government representatives who
participated in surveys and face-to-face interviews and who facilitated site visits
around the world. Specific mention goes to all those referenced in Appendix 1
who contributed their time, support and knowledge during the fieldwork aspects
of this study.
Photos on the back cover were taken by Elizabeth Wall and are of (clockwise):
Tabubil from the air, PNG; Community Vegetable Garden Project run by IDAP,
Mali; and Nutrition Programme Poster in Shiqui, Peru.
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