Corporate Social Responsibility in South Africa and Ghana: a Comparison of Successes, Failures and Futures in a “Developed” and an “Undeveloped” African Country

Corporate Social Responsibility in South Africa and Ghana: a comparison of successes, failures and futures in a â€Å"developed† and an â€Å"undeveloped† African country Few industries affect the social, economic and environmental sectors to the extent that the mining industry does. As minerals development expanded, so the international awareness of its impacts grew. Mining-related legislation, both internationally and nationally, has evolved significantly in the past two decades, actively aimed at ensuring Corporate Social Responsibility (CSR), where companies are held accountable for their actions. In developing countries like South Africa and Ghana that are heavily dependent on gold trade and the associated international investment, the challenge is to ensure that environmental and social impacts of mining are mitigated, that non-renewable resources are converted into national wealth and that mining-generated revenue is claimed and disbursed. In this paper the evolution of CSR in South Africa, a more developed African Nation, and Ghana, a less developed African nation, are compared. Recommendations are made as to potential avenues for CSR progression. The objectives of international mining policy reform have changed dramatically in the past few decades. During the 1970s the aim of mining policy was to increase government control. During the 1980s the aims of reform became to increase investment and to mitigate the socio-economic impacts of mining. This was attempted through the Growth Employment and Reconstruction plan in SA (Fig, 2005), and the Economic Recovery Plan in Ghana (Hilson, 2002). Both plans advocated more privatization, trade liberalization and deregulation. Although the general international trend was to redefine the role of the state, particularly in industrial areas, the adoption of this ambition by African countries has proven detrimental. Biersteker (1990) argues that the reduction of the state greatly reduced its function to govern, particularly undercutting its regulatory ability, its function as a mediator in civil disputes and its ability to regulate and collaborate with the private sector. Campbell (2005) poses that this is because the legislative and regulatory reform adopted by many developing mining-dependent African countries during the past few decades has undermined the role of the state and has proved incompatible with the challenges of the countries concerned. This has impaired the ability of these governments to exert CSR pressure on mining companies. CSR in Africa has grown parallel to these changes in the role of the state, and international mining legislation has had varying impacts on SA and Ghanaian regulations. Despite being based on a non-renewable resource, the main theme in changing international legislation is that of sustainable development, particularly in developing countries in which a large percentage of mining is done by foreign companies. It is, however, the sovereign right of a state to exploit its natural resources. This sovereignty was vehemently upheld by post-colonial developing nations that rely on mineral resources, two prominent examples of which being SA and Ghana. It has become apparent, however, that mining has far-reaching impacts that often have transboundary degrading effects, resulting in international attempts at regulation. CSR in South Africa The formal terms of CSR in SA were originally raised in 1972 and the view taken by many businesses was that they should not have to take responsibility for Apartheid, but should rather improve social standards within their respective businesses. These concepts were formalized in the Sullivan Principles, which were aimed at entrenching non-discrimination in the workplace into the core business activities, particularly in SA-based US companies (Visser, 2005). Although other CSR groups formed, like the Consultative Business Movement, the move away from philanthropy only really became evident after the first democratic elections in 1994, and when the Black Economic Empowerment Programme (BEE) was introduced. The aim of BEE is to promote equal racial ownership, education, training and local economic development. In 2002 the goal for black ownership in the mining sector was set at 26% within 10 years (Fig, 2005). BEE was particularly important in the mining sector, as in order to obtain mining rights, businesses had to meet the requirements of a BEE ‘scorecard’. A number of principles have been introduced to target human rights, a major CSR concern in SA. These include Voluntary Principles on Human Rights and Security and the OECD Risk Awareness Tool for Multinational Enterprises in Weak Governance Zones (Hamann, 2009). Another important milestone was the Kings Report, released in 2002, which outlined the CSR requirements for companies, including â€Å"recogniz[ing] that stakeholders such as the community in which the company operates, its customers, its employees and its suppliers amongst others need to be considered when developing the strategy of a company† (Visser, 2005). It also requires that businesses report annually on their social, transformation (including BEE), ethical, safety, health and environmental management policies. A positive and innovative spinoff of the King’s Report was the introduction of a Kings Index on the Johannesburg Stock Exchange. Companies are required to meet the criteria of the King’s Report in order to list with the JSE, providing a fiscally competitive incentive to adopt CSR principles (Dale, 2005). This progressive legislation forms the beginnings of a seemingly sound CSR framework. But the SA government struggles to maintain the pressure needed to enforce all of its requirements. As in Ghana, SA’s dependence on the mining industry makes the government loathe to confront deviant companies for fear of disinvestment and job losses. Firms often run philanthropic programmes merely as an attempt to maintain â€Å"business as usual†, satisfying the bare minimum for CSR. The lack of government capacity is most prominent in environmental requirements. Many mining companies have introduced more stringent environmental management regulations and have increased CSR spending, but Fig (2005) shows that due to lack of governmental pressure and effective sustainable reporting, many of the claims of these companies do not match their actions. In recognition of its weaknesses, however, the SA government has adopted provision for voluntary conflict resolution within its environmental legislation (Fig, 2005). As an example of a developing country embracing CSR, SA has proven itself relatively forward-thinking and successful. SA is at the forefront of CSR legislation in Africa. It is in the inability to enforce these laws that the clearest CSR similarities, and failures, with Ghana, a less developed African nation, can be seen. CSR in Ghana For the past 1000 years Ghana has enjoyed a thriving gold trade. However, due to political turmoil and changing mining and economic policy, by the beginning of the 1980s the gold-mining industry was virtually stagnant, and became the focal point in the country’s Economic Recovery Programme in 1983 (Campbell, 2005). Ghana also received assistance from the World Bank, the conditions of which resulted in the elimination of most barriers to entry for foreign investors, including reducing corporate taxes, royalty payments, foreign exchange taxes and import duties. The company retention amounts negotiated by foreign investors were far above average and signify the extentto which the Ghanaian government was prepared to go to stimulate the industry (Campbell, 2005). This also indicates the extent to which the government was and is prepared to turn a blind eye to companies’ exploitation of the country. Liberalized legislation resulted in an approximate 800-fold growth of the predominantly foreign-controlled gold mining industry in the past 20 years. But this growth has been accompanied by very little change in the quality of life of the Ghanaian people. In 2006 the International Council on Mining and Metals claimed that gold mining has not only ‘kick-started† Ghana’s economy, but that many of the large-scale mining companies are â€Å"committed to [CSR]†. In contrast, Hilson (2007) argues locals’ lives have been worsened by the increased use of land, relocations and environmental dilapidation. Because of the lax policies adopted by the government, the nation’s share of the mineral development profits has been minimal. Despite the 40% contribution of total merchandise export earnings that gold-mining in Ghana represents, the contribution to GDP is only 2-3% (Hilson, 2002). Thus the government lacks fiscal control, and as such cannot redirect funds efficiently towards development projects. The most formal adoption of international policy in Ghana was that of the Global Mining Initiative (GMI) in 1998. Ghanaian mining companies claimed that â€Å"a series of dynamic and innovative community development projects†¦ empowering rural communities and improving quality of life† were to be initiated (Garvin, 2009). But others report that the mines are encroaching on indigenous land, resulting in cultural dislocation, poverty, displacement and environmental damage. Promises of jobs and adequate compensation have been broken. This is evident in the relatively small number of Ghanaians employed by mining companies, a mere 20 000, despite the immensesize of the industry (Garvin, 2009). An interesting response to growing unemployment is the intensification of small-scale, artisanal mining, nicknamed the galamsey. The galamseyhave become an important means for support for many subsistence farmers who have been displaced, but their illegal status has led to them being labelled â€Å"hazardous and environmentally damaging† by the Chamber of Mines (Bush, 2008). There is potential for both large and small scale miners to collaborate, as they have different methods and it is uneconomical for one to do what the other does. This has been proven by Goldfields, who have leased small portions of land to groups of galamsey. Most large-scale gold ines refuse to license their unused land for work, so the galamseyare forced to mine illegally in order to eke out a living. Hilson (2007) accuses the large mining companies of supporting a massive military sweep aimed at eradicating the galamsey, which resulted in human rights violations and many forced removals. Instead of taking advantage of collaborative opportunities major mine operators in Ghana have resorted to the most common CSR endeavours amongst extractive mine companies: the building of schools, clinics and libraries. These CSR projects are still predominantly philanthropic and unsustainable. Garvin (2009) determined, through a series of surveys, that although many locals perceived an increase in social welfare, they reported a decline in security, increased crime, cyanide-poisoned water, and other environmental hazards resulting in a lack of useful agricultural land. Notwithstanding the urgings from the World Bank Industries Review, Departments for International Development, the UN, and limited pressure from the Chamber of Mines, most CSR programmes that go beyond philanthropy emphasize the expansion of existing practices such as pig-rearing, livestock and activities. These give little opportunity for advancement, provide little more than subsistence wages and definitely do not contribute to sustainable economic growth (Hilson, 2007). One of the largest problems with CSR in Ghana, and similarly in SA, is the lack of communication between government, companies and public. Mining companies enter into agreements with the national government, paying royalties of 9%, of which 3% go towards community development (Hilson, 2007). These monies pass through many layers of government and administration, and often very little reach the locals they are meant to compensate. Inhabited land is often designated for mining with little or no consent from the inhabitants. Under the Minerals and Mining Act (2006) mining companies are required to compensate displaced people for their crops and use of land, but these payments are still woefully undervalued (Hilson, 2007). Locals value their land quite differently from the value placed on it by mine employees and the lack of communication only worsens these discrepancies. The regulatory and reporting systems in Ghana are very poor, effectively making the situation for many locals worse than that seen in SA. There have been few legal efforts made to legislate mining activities, thus the improvement of CSR practices is dependent on international legislation, NGOs and pressure groups. Changing the CSR Pyramid There are certain drivers of CSR that are significantly different in developing countries than in developed countries like Europe and the US. Existing models must be adapted to fit the individual needs of developing countries. One such model is Carroll's pyramid, consisting of 4 tiers; economic, legal, ethical and philanthropic responsibilities. draw:frame} {draw:frame} {draw:frame} Figure 1: Pyramid models for CSR drivers (adapted from Visser, 2006) Visser advocates thatto adapt Carroll's pyramid to developing countries, economic responsibilities are given the highest priority, followed by philanthropic, legal and ethical. The economic tier represents the need for businesses to not only ensure that direct foreign investment increases, alleviating poverty and unemployment, but that fu rther investment is generated, goods and services produced and stable infrastructure built. Visser argues that the emphasis on philanthropy is necessary because of the dire situation and poor quality of life in many developing countries thathave become reliant on donor assistance. Philanthropy has become ingrained in developing country CSR. The legal responsibilities are of lower priority because the pressure to adhere to legislation in developing countries is less than in developed countries. In order to elicit response, both nationally and internationally, sustainable indicators must be developed allowing more accurate reporting of CSR successes and failures. Efficient and diverse indicators allow for better sustainable reporting and transparency. 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