Effective Planning for Downsizing and/or Closure in Depressed Economic Conditions

By Noleen Dube, CEO of Strategic Development Solutions

The current economic conditions are putting pressure on mining companies and leaving some with no choice but to significantly downscale operations; go into care and maintenance or early closure.   The impact of these decisions on mine workers, the surrounding communities and local economies is immense.  Many communities are highly dependent on mining and the benefits flowing from these operations – both as social investments as well as a market for livelihood and small business activities.

Mining companies typically plan poorly for these downturns – from a socioeconomic point of view – although they recognize that mining tends to be cyclical from boom to bust every few years.  This recognition should compel the industry to plan better and reduce the pain of downsizing on employees, their families and the surrounding communities.

Community dependence is driven by high expectations created by company promises and perceptions of high profits manifested in the perceived lavish lifestyles of mine executives.  Companies entered communities and made promises based on what they think communities want to hear and created a dependency syndrome.  When commodity prices are low and there is

When commodity prices are low and there is a need to scale down or close operations, governments and communities will demand that promises/commitments be fulfilled. Communities have long memories! Where relations are cordial and good, negotiations with communities will yield more reasonable costs of closure or downscaling.  Where relations are tense and little benefit is felt, costs are high. Trust is a key factor in the relationship between the mine and the communities.  A common mistake made by mining companies is the belief that high frequency (and sometimes ‘symbolic’) contact between the company and the communities will build trust. However, establishing

Where relations are tense and little benefit is felt, costs are high. Trust is a key factor in the relationship between the mine and the communities.  A common mistake made by mining companies is the belief that high frequency (and sometimes ‘symbolic’) contact between the company and the communities will build trust. However, establishing high-quality relationships and maintaining them is more effective and results in a social license to operate.

 Stakeholders are looking for benefits from mining in key areas, which should be the focus of engagement:

  • Social development: through supporting the government/municipality’s local development plans for infrastructural development and service provision.

  • Economic development: through interventions that diversify and grow the local economy.

  • Local content / procurement plan/ supplier development: specific targeted efforts need to be made to create opportunities for local business to meaningfully participate in the mining company’s   supply chain and beyond.

 Unlocking the Power of Stakeholder Engagement

How then do we effectively plan and prepare local communities for downsizing and potentially closure?  Good stakeholder engagement is an important key in preparing communities and employees for the downturns in commodity prices. I believe that the power of stakeholders can best be leveraged by:

  • Integrated Closure planning: Mining companies need to increase their efforts for integrated closure planning, which is also useful in times of downscaling operations.  Environmental and infrastructural closure seems to be well planned and done early in the life cycle and so should social closure. This planning needs to not only be in consultation with key stakeholders but truly involve the stakeholders for buy in and ownership of future decisions.
  • Comprehensive Stakeholder mapping and analysis: The first step to engagement is a comprehensive stakeholder mapping and analysis exercise.  Communities are not homogenous and neither are they static! The mapping and analysis needs to be done early on and updated periodically.  It should be thorough and avoid just engaging the “usual” suspects – chiefs, government leaders, prominent women’s and youth groups and the loudest voices.  Employees are a key stakeholder!
  • Engage early:  Engagement is about relationships building which takes time.  To build strong relationships with stakeholders, companies need to begin the engagement early in the project life cycle – from exploration through to closure.  The type of conversations at each stage of the life cycle is different and needs to be appropriate and relevant for that stage. Early engagement builds trust. Communities are generally reasonable and once they have trust, they are supportive even for downscaling and closure as long as commitments are met and benefits are felt.
  • Long term view: When engaging with stakeholders, there should be a long term view linked to the life of mine, and beyond.  This requires mining companies to plan for community development with a 10-30-year horizon and this can be done in partnerships with government, communities, other funding parties to minimize dependence on the mine.
  • Role of government: As part of the engagement process, companies should aim to strengthen the role of government in infrastructure and social development of the communities.  Companies should plug into local development plans and support their successful implementation as government lives on after the mine.  Companies should not take over the role of government.
  • Diversify local economies and skills:  In order to reduce the dependence of mining communities on the mine, efforts should be made to broaden and diversify local economies and skills.  Programs to develop alternative industries in the community and enhance already existing non-mine dependent activities such as agriculture should  be developed and implemented in partnerships with relevant stakeholders.  This will minimize the angst from communities when the mine has to shut down or down size as they will still have other sources of income.  Skills training for both employees and communities should focus on portable skills that can be used in other industries.
  • Monitor social development progress: There should be a monitoring mechanism in place that ensures that development continues even in a downsized or closure phase. There just might be another boom and the company needs to interact with these communities again. Don’t abandon the communities in hard times!
  • Role of mining companies needs to change: The role of the mining company needs to be redefined for successfully increase independence of communities during the slump times.

Companies should become:

  • a facilitator to align decision makers and community leaders behind a sustainable development agenda which is set and led by the government and community.
  •  a promoter of the mining town/locale to make it a preferred investment destination in the region for select value chains as well as support the development of local economic activities that will support growth and diversification of the economy of the town.
  •  a strategic investor and catalyst to help strengthen SMEs and develop linkages between core/key industries and linked industries in mining town.
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