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8th Annual Investing in African Mining Seminar Monday December 1, 2014

Socio Economic Aspects in Africa Hindrance or Enabler?

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Contents

1.  About Hatch Goba

2.  Socio-Economic Aspects

3.  Supplier Development

4.  Case Study in South Africa

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Contents

1.  About Hatch Goba

2.  Socio-Economic Aspects

3.  Supplier Development

4.  Case Study in South Africa

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About Hatch •  Hatch is Employee-owned •  Serving mining & metals, energy and infrastructure for more than 80

years •  Projects in more than 150 countries •  More than 11,000 professionals worldwide •  More than US$35 billion of projects under management •  EPCM, integrated teams, project and construction management •  Provides consulting, design engineering, technologies, environmental

services, operational services, and project and construction management to the global mining, metallurgical, energy and infrastructure sectors.

•  International reputation for introducing innovative and reliable processes and equipment to client production facilities

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Global Operations 11,000+ staff – May 2013

CANADA St. John’s, Newfoundland & Labrador Sorel-Tracy, Québec Sudbury, Ontario Toronto, Ontario Vancouver, British Columbia Winnipeg, Manitoba

New York, New York Pensacola, Florida Phoenix, Arizona Pittsburgh, Pennsylvania Sacramento, California San Diego, California San Francisco, California Seattle, Washington Tampa, Florida

Antofagasta, Chile Belo Horizonte, Brazil Lima, Peru Rio de Janeiro, Brazil Santiago, Chile São Luís, Brazil São Paulo, Brazil

Newcastle Perth Townsville Wollongong

Adelaide Brisbane Gladstone Mackay Melbourne

AUSTRALIA

MIDDLE EAST

SOUTH AMERICA

SOUTH AFRICA

Amherst, New York Baltimore, Maryland Boston, Massachusetts Buffalo, New York Cleveland, Ohio Denver, Colorado Houston, Texas Millburn, New Jersey

Calgary, Alberta Halifax, Nova Scotia Mississauga, Canada Montréal, Québec Niagara Falls, Ontario Oakville, Ontario Saskatoon, Saskatchewan

CHINA

NEW CALEDONIA

Johannesburg Pretoria Cape Town

London, England Moscow, Russia St. Petersburg, Russia

EUROPE

INDIA New Delhi

Beijing Shenyang Shanghai

USA

Abu Dhabi, UAE Al Khobar, Saudi Arabia Sohar, Oman

Nouméa

INDONESIA Jakarta

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Hatch in Africa Hatch Goba •  Hatch Goba is part of the Hatch Global

Group of companies •  Provide full service to clients in the

mining, energy and infrastructure sectors.

•  1,428 technical and support resources in 8 offices and project and site offices in the region

•  Active in 17 countries on the African continent centred in Southern Africa

•  Full range of services; •  Concept planning, •  Basic and final engineering design •  Project management •  Construction management.

•  Sectors; •  Mining & Metals •  Power •  Public and Industrial Infrastructure

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THERMAL ENERGY

COAL

Our Business Units

NUCLEAR

NON-FERROUS

LIGHT METALS

MINING & MINERAL PROCESSING

INDUSTRIAL MINERALS

IRON & STEEL RENEWABLE POWER

TRANSMISSION & DISTRIBUTION

OIL & GAS

energy

infrastructure

metals

IRON ORE

BUILDINGS & STRUCTURES

ROADS & TRANSPORTATION

WATER AND TAILINGS

INFRASTRUCTURE SERVICES

PORTS AND MARINE TERMINALS

RAIL

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Contents

1.  About Hatch Goba

2.  Socio-Economic Aspects

3.  Supplier Development

4.  Case Study in South Africa

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Public Sector Clients

•  How to service growing urban

population: Housing, Utilities,

Amenities

•  Preventing Social Unrest

•  Funding and Integrating

Budgets

•  Streamlined and Effective

Delivery

•  Geo Political Alignment

Private Sector Clients

•  Product to Market – Gateway

Logistics.

•  Commercial Services to Urban

Population – Retail, Offices etc

•  Meeting socio economic and

environmental needs.

•  Financial Market.

•  Local development – supplier

development.

•  Country risks.

What do our clients need?

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•  Mining has a finite resource. It will come to an end ultimately. •  Have the end objective in mind with respect to socio economic development in mining. •  Create interdependencies with local communities and not dependencies. •  Engage timeously, openly and with honesty •  Capacity to deliver on community and governmental expectations.

Key Considerations

Do it incorrectly and; •  Infrastructure will fall apart. •  Home ownership not transferred to the

community will become worthless and derelict.

•  If local suppliers are not developed as a secondary industry in the mining community, the businesses will fail on mine closure.

•  A dependent society will be created.

Do it correctly and; •  Become part of the local spatial plan and

will be used by the community at large. •  Sustainable home ownership transfer •  Local suppliers will add to the growth

of the local industry. •  An inter-dependent society will be created

Reference: The Socio Economic Aspects of Mine Closure and Sustainable Development: Guideline for the Socio-Economic Aspects of Closure: Centre for Sustainability in Mining and Industry (CSMI) University of the Witwatersrand: January 2010

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Vision for mining

•  Establish a flourishing local economy to provide a diversity of sustainable jobs, that is aligned with broader government planning processes; –  This would include the Local Economic Development Plans and Spatial

Development Plans

•  Effective engagement and participation by local people, groups and businesses, especially in the planning, design and long‐term stewardship of their community –  Take into consideration the mine’s Social and Labour Plan, –  The initial closure plan required in the Environmental Management Plan,

through to the final closure plan as part of the formal closure process.

Reference: The Socio Economic Aspects of Mine Closure and Sustainable Development: Guideline for the Socio-Economic Aspects of Closure: Centre for Sustainability in Mining and Industry (CSMI) University of the Witwatersrand: January 2010

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Contents

1.  About Hatch Goba

2.  Socio-Economic Aspects

3.  Supplier Development

4.  Case Study in South Africa

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Global

Local

Successful Supplier Development (SD) Programs Helped Build Stronger, Broader, Sustainable Local Supply Bases

Skills development

Technology transfer

Capacity expansion financing

“Buy local” incentives / obligations

“Local friendly” packaging strategy

Exports facilitation

Global

Local

SD Program

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But If Improperly Planned or Managed, SD Programs Fail and Instead Lead to Local Value Destruction

SD Programs

Inadequate Quality

Schedule slippages

Owner cost overruns

Operations disruptions

Wasted public / shareholder’s money

Disillusioned, angry

communities

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Hatch Local Supplier Development (SD) Services

SD Program Initiation

Local Supplier Assessment

SD Strategy Design

Local Supplier Improvement

Local Supplier Engagement

SD Program Monitoring

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Example of Local Socioeconomic Development Studies Completed by Hatch

•  Elliott Lake region, Ontario, Canada Ø Regional development plan and implementation program for former uranium

mining area with local businesses, major mining companies, government scientific institutions and university. Worked with small local businesses to develop/ implement business plans

•  British Columbia, Canada Ø With Hatch economist developed provincial, regional and local impacts of new

investments in several industries and how to develop a program

•  Czech Republic Ø Worked with a quasi government agency to identify roadblocks in attracting

international industries to invest in the county and potential policy options

•  Mauritania Ø Assisted mining client to identify the supply segments with potential for

development through a major capital project and design the SD

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Hatch Global Procurement Is Ideally Positioned to Connect Local And Global Suppliers

Local Suppliers

Global Suppliers

Hatch Global Procurement Team

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Contents

1.  About Hatch Goba

2.  Socio-Economic

3.  Supplier Development

4.  Case Study in South Africa

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SUSTAINABLE DEVELOPMENT (SD) Introduction to the Project

•  Hatch Goba is actively involved in a Resettlement Project:

Relocation of 3 400 people

•  Sustainable Development is critical to the success of the Project, the Mine, and the Corporate entity

•  Sustainable Development in the Project focuses on Recruitment, Training and Small, Medium and Micro Enterprises Development

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SUSTAINABLE DEVELOPMENT MODEL: Model provides the basis of Implementing SD

•  Projects related to Environmental and Social Sustainability for example maintenance of solar geysers

•  Skills and Business Development of Small, Medium and Micro Enterprises (SMME)

•  Identification of local contract opportunities

•  Financial Health Awareness

•  Construction Skills •  Tender Processes •  Business Health •  Contracts

Administration

•  Negotiations by SD Manager to ensure employment activities are distributed to local people affected by the project

EMPLOYMENT TRAINING

OTHER SD PROJECTS SMME

DEVELOPMENT

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SUSTAINABLE DEVELOPMENT Project Challenges

•  To Identify sufficient SD opportunities within a short time period

•  To identify opportunities that are sustainable on a long term basis and to be successful after completion of the Project

•  To link identified opportunities with existing SD Programmes •  To meet the local community’s needs •  To align SD with the Project Schedule and Costs

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SUSTAINABLE DEVELOPMENT Recent Press Coverage

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SUSTAINABLE DEVELOPMENT Recent Press Coverage

•  Property value increase

from ZAR 27 million to ZAR 326 million.

•  Single business increase from ZAR 90 k to ZAR 1.2 million.

•  Phase 1 – Dec 2014 •  Final relocation by 2017 •  7 years of consultation.

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SUSTAINABLE DEVELOPMENT Case Study - Key Statistics •  Relocation of the complete community for mine expansion. •  Initial phase includes 71 homes, two churches and guest house business •  Full relocation of:

–  3 400 people, –  500 new homes, –  24 businesses, educational and medical facilities, a satellite police station and related infrastructure, –  seven churches (serving 16 church denominations), –  a town hall and offices –  community centre, –  Social infrastructure inlcuding roads, parks, an environmentally-friendly water, energy and sanitation

supply

•  Extensive consultation process with the community and other stakeholders, •  Value of their properties increase on average more than tenfold •  The difference in rates and taxes and water tariffs paid by client. •  The relocation plan includes training and educational programmes, as well as

small enterprise development. •  Client quote: “We are dealing with people and their homes and will approach

any challenges with sensitivity and empathy,”

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Hatch Local Supplier Development (SD) Organization

Global SD framework Global SD partnerships SD tools SD Best practices SD Knowledge sharing Global client interface

SD local knowledge SD framework localization SD local partnerships Local client interface SD services delivery

SD Regional Teams Board

Sponsor Global Lead

Mgmt Consulting

Commu-nities

Procure-ment

Operational Performance

Learning

SD Core Team

Systems

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For more information, please Contact me at csimmer@hatch.co.za or visit www.hatch.ca

Questions?