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Economic impact

Economic impact

Gold Fields prides itself on being a responsible corporate citizen with all the responsibilities and obligations that come with this position. In this sustainability report we outline in great detail our programmes in the various areas that are grouped under the heading of sustainable development: human resources; health, safety and well-being; environment; energy and carbon management; supply chain management and material stewardship; and social responsibility and stakeholder engagement.

For many stakeholders – from government to local communities – their interaction with Gold Fields is increasingly being defi ned by the company’s sustainability programme. But what this overlooks is the more important contribution the company makes in terms of economic wealth generation, which has contributed to economic growth and poverty reduction for almost 125 years. We view this aspect as our main contribution to the well-being of the countries in which we operate.

In the fi nancial year under review the economic value Gold Fields has distributed amounts to around R20 billion.

The economic value distribution during fi nancial 2010 is broken down as follows:

  • Almost R10.6 billion in wages, benefi ts and contracts paid to our 46,700 full-time employees and signifi cant numbers of contractors working at our mines;
  • Tax and royalty payments of around R2.7 billion in fi nancial 2010;
  • Procurement spending of over R5 billion;
  • Dividend and interest payments of about R1.6 billion; and
  • Corporate social investment spending of around R150 million.

The economic contribution of our operations in the four countries we operate in – South Africa, Peru, Ghana and Australia – differs widely, led by the estimated three per cent of gross domestic product (GDP) in Ghana, where Gold Fields is the largest mining company. But it is safe to state that in the local communities adjacent to our mines the role of Gold Fields is inextricably linked to their economic welfare.

Mineral wealth to national wealth

Ensuring that mining contributes to economic development and poverty reduction is a critical issue for many countries. The International Council on Mining and Metals (ICMM), of which Gold Fields is an active member, states that over 50 countries are signifi cantly dependent on mining in that the sector provides at least six per cent of exports or plays a critical role in the domestic economy. The recent boom in mineral exports and prices has also generated billions of dollars of extra revenues for governments of resource-rich countries. More is in store given that China’s demand for metals is forecast to grow two to four times over the next 25 years, according to the World Bank.

Past experience has demonstrated that, under the right regulatory and political conditions, mining can provide an important, even critical, contribution to economic growth. Countries like Canada, Australia and South Africa have used their mineral wealth as a springboard to broader economic development.

In a number of mineral-rich countries emerging from periods of chronically poor economic performance, such as Ghana, Mali and Peru – all countries in which Gold Fields is either mining or exploring – mining has provided an important kick-start to growth.

 
South Africa
     
Ghana
 
                     
  Number of employees   43,462       Number of employees   2,514  
  Salaries and contractors (R million)   7,047       Salaries and contractors (R million)   1,462  
  Taxes (R million)   696       Taxes (R million)   1,004  
  Procurement spend (R million)   6,505       Procurement spend (R million)   5,949  
  CSI spend (R million)   42       CSI spend (R million)   58  
                     

An equal number of mining-dependent economies though have underperformed their peers and in some cases the “resource curse” – the over-dependence on minerals and metals for national income – has led to signifi cant damages to non-resource sectors of industry and instability caused by fl uctuating commodity prices. The challenges associated with translating mineral wealth into national wealth are manifold and well documented: mining revenues have been squandered by governing elites, fuelled corruption and, in extreme cases, funded civil wars and trans-boundary conflicts.

The right public policies will defi ne the success of the conversion rate from mining to economic development and solutions to this challenge are increasingly understood. In a recent paper the ICMM listed some of the key policies required:

  • Sound macro economic policies, such as careful management of exchange rates and volatile income tax.
  • Transparency in how mineral revenues are reported and spent.
  • Improvement in state governance.
  • Public investment focused on development priorities.
  • Companies giving priority to local employment and procurement.

Public imposts on the mining industry

The mining industry has to make investment decisions for the longterm and timeframes span into decades not years. The investors who put up the risk capital, often in the billions of dollars, are required to take a long-term view of their investment. Gold Fields, for example, is looking at a more than 40-year time horizon for its South Deep Gold Mine, with shareholders willing to spend well over US$1 billion in bringing the mine to full production.

This long timeframe defi nes the case for sustainable business: an investment can only be recovered by ensuring that the mineral wealth is extracted safely, it benefi ts the communities impacted by the project and does not compromise the environment.

However, despite our solid sustainability track record, we are increasingly witnessing a high, and rising, level of interference in our operations from governments, communities, organised labour and non-governmental organisations in all the countries in which we operate. Mining and mineral rights are viewed as part of the national patrimony and in some cases their ownership has reverted to the state. Increasingly though these stakeholders are also demanding a say in how mining operations are managed and run. The imposts have manifested themselves in a number of ways: higher taxes, such as the proposed Minerals Resource Rent Tax (Super Tax) in Australia and higher royalty taxes in Ghana and South Africa; restrictions and regulations on ownership and requirements to fi ll the socio-economic gap left by inadequate public services.

As we have demonstrated, Gold Fields is both a committed corporate citizen that takes its sustainability responsibilities extremely seriously and a creator of signifi cant economic value to adjacent communities and the countries in which it operates. However, it is equally important that shareholders, who after all provide the risk capital, are rewarded for their investment.

It is vital that shareholders’ demands are balanced with those of our other stakeholders, who in most cases do not provide investment capital. However, at present, the increasing levels of interference from outside stakeholders are threatening the sustainability of many mining operations. If the balance is not restored we fear that future investments in mining projects will be severely impacted; it is understandable that investors would not want to risk their capital in such an environment. The socioeconomic benefi ts that sustainable mining offers would thus be lost to many communities and countries.

 
Peru
     
Australia
 
                     
  Number of employees   310       Number of employees   454  
  Salaries and contractors (R million)   597       Salaries and contractors (R million)   1,526  
  Taxes (R million)   593       Taxes (R million)   388  
  Procurement spend (R million)   1,178       Procurement spend (R million)   3,851  
  CSI spend (R million)   27       CSI spend (R million)   1