South African banks fund mining projects in southern Africa that raise issues over social, environmental, human rights impacts, says new report

Southern Africa Resource Watch, in announcing its report, South African Banks Footprint in SADC Mining Projects, said:

"South African Banks are often key funders of a number of mining companies. Questions abound on the nature of these deals and the lack of transparency that surrounds them. There are concerns about whether banks do due diligence before they fund any mining activities to guide against corruption, social, environmental and human rights abuses that are linked to mining. This report interrogates the funding commitments of South African banks in mining in SADC and considers whether they can do things differently."

The report reviews environmental, social and governance principles used by South African banks; common funding methods for mining projects and banks' decision-making processes; banks' policies on environmental, social and governance issues in their investments - and those policies' effectiveness.  It analyses six cases: Ghagoo Diamonds (Botswana); Geita Gold (Tanzania); Konkola Copper (Zambia); Marikana Platinum (South Africa); Vele Coal (South Africa); Kolwezi Copper (Dem. Rep. of Congo) and makes recommendations on the environmental, social, and governance frameworks for mining investments by South African banks.

Business & Human Rights Resource Centre invited the banks named to respond: ABSA, First National Bank (part of FirstRand), Investec, Nedbank, and Standard Bank.  Responses by Investec, Nedbank, and Standard Bank are below.

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7 May 2017

New report analyses South African banks footprint in SADC mining projects

Author: Open Society Initiative for Southern Africa & Southern Africa Resource Watch (South Africa)

[originally published Feb. 2017]

Mining companies extract minerals from the ground, and their activities routinely give rise to public concerns about the pollution of water sources, adequate land for agriculture, and fair community participation in mining projects. South African law accepts that the directors of corporations such as banks have fiduciary obligations to act in the best interests of shareholders...This paper sets out to critically consider the effectiveness of ESG principles implemented by South Africa’s banks when they fund mining projects in the SADC region...The four major banks (Standard Bank, Nedbank, FirstRand Bank and Absa Bank)...have investment banking divisions, who along with specialist bank Investec Bank are active in the funding of mining projects in SADC...In 2014 Nedbank concluded a US$25 million short-term debt facility to Gem Diamonds Limited to complete the construction of the Ghaghoo Diamond Mine. Nedbank Capital acted as the sole mandated lead arranger for the transaction...Business reports on the mine opening state that the mine is located on the ancestral lands of the Basarwa who were evicted from the area...In July 2015, communities in the four rural villages of Shimulala, Kakosa, Hippo Pool, and Hellen in the Zambian Copperbelt filed a legal suit in the English High Court against Vedanta Resources plc and Konkola Copper Mines (KCM)...Vedanta Resources has a term facility loan of US$820 million from Standard Bank for the Konkola mine...In 2007, in the Northern Tanzanian town of Geita, farmers in the village Mine Mpya village were growing maize, beans, bananas and other crops on land mostly inherited from their parents. These residents were removed by the Tanzanian government to make way for the development of the Geita Gold mine, owned by Anglo Gold Ashanti...ABSA provided gold hedge facilities to the amount of R90 million to the mine...

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Company response
2 May 2017

Nedbank response

Author: Nedbank

Nedbank evaluates mining projects against the International Finance Corporation’s (IFC) (a division of the World Bank) Performance Standards, and Equator Principles.  We take an integrated and risk-based approach to managing environmental and social risk relating to our activity as a financial services provider via Nedbank’s Social and Environmental Management System (SEMS). Key to this approach is compliance with the Equator Principles, an international voluntary framework aimed at ensuring a consistent approach to managing environmental and social risks in project and corporate financing.

The IFC’s Performance Standards require potential financiers to perform, inter alia, a detailed environmental and social review on mining projects using the services of experts.  Nedbank’s approach was to appoint an Independent Technical Consultant (ITC). The ITC’s final report contained no flaws in any aspect of environmental or social compliance relating to the Ghaghoo Diamond Project

Company response
28 April 2017

Investec Response

Author: Investec (South Africa)

Some of the deals mentioned in this report are more than 10 years old. We believe that the commitment as a banking sector to adhering to ESG principles in general has been greatly improved over the past decade. Furthermore, there is a sector commitment through both the Bankers Association of South Africa and from the natural resources sector to follow international best practice over and above what is legally required in ESG lending and investing activities. 

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Company response
28 April 2017

Standard Bank response

Author: Standard Bank (South Africa)

In general, it is a well-balanced report, but we question some of the results and the conclusion. The results based analysis is based on exceptions, rather than the norm. From this, conclusions are then drawn around implementation. This demonstrates a lack of understanding of the scope of Equator Principles (EP) and indeed the banks’ leverage over clients to implement certain ESG practices...For example: on the two transactions Standard Bank is involved in: KCM (water issue): This is a legacy issue which KCM/Vedanta inherited as part of existing operations. KCM is working with the lenders on a clear plan of action to reduce the environmental impact...Lonmin (housing issue): Lonmin has implemented a number of measures as part of its ongoing housing plan having completed the conversion of all hostels into 1908 single and 776 family units. 

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7 March 2017

Mining company responses to issues raised in South African banks footprint report

The mining companies named in Southern Africa Resource Watch's report, South African Banks Footprint in SADC Mining Projects, have responded to the concerns raised:

Lonmin re housing at Marikana, South Africa: Marikana: Lonmin defends housing plan 

AngloGold Ashanti re Geita Gold Mine, Tanzania: Tanzanian farmers displaced by mining live like refugees [includes statements by AngloGold regarding compensation provided]

Gem Diamonds re Ghaghoo mine, Botswana: Gem Diamonds declined to respond when previously asked

Glencore response re Mutanda Mining (Kolwezi),and Katanga Mining, Dem. Rep. of Congo, to Business & Human Rights Resource Centre

Vedanta Resources response re Konkola Copper Mines, Zambia 

Coal of Africa response to previous report re Vele mine, South Africa