The board approved the Social Impact strategy in November 2022. The process undertaken to arrive at this point manifested the compliance approach to our community development and engagement and confirmed the need and drive to shift to a market-driven approach. While we can claim success, through implementing our SLPs, the compliance approach leaves very little evidence of the investment and development undertaken over a long term.
Compared to a market approach, a compliance focus to community development is short term in its inputs (investment horizon, resource allocation) and expected outcomes (avoid suspension or confiscation of a mining right). This perspective is held by all participants involved in the development and implementation of SLPs. As such, it is not surprising that, in an environment of increasing social distress, community unrest has increased despite a R6.4 billion (R4.0 billion in affirmative procurement) community investment. We limited the impact on business continuity and ensured safety of man and machinery. However, the potential for this negative community sentiment to escalate could negatively impact our ability to succeed with our growth strategies. Our Social Impact strategy is therefore a shift to a multidimensional approach to inputs and expected outcomes. We will continue to address compliance requirements with increased focus and on a larger scale, complemented by discretionary expenditure and collaboration.
Our Social Impact strategy is embedded in the objectives of our Sustainable Growth and Impact strategy
Six funding structures serve as conduits for community donations and sponsorships, namely the Exxaro Chairman's Fund and Foundation, Matla Setshabeng NPC, Amakhala Emoyeni Community Fund Trust (AECFT), Tsitsikamma Community Windfarm Trust (TWFT), Tsitsikamma Development Trust and ESD programme. These funding structures are collectively referred to as Exxaro Group Social Investment Structures, which are funded through various sources such as the revenue generated from BUs and dividends. Some funding is compliance driven, such as SLPs and the dtic scorecard, and others are value-add investments beyond compliance, such as funding from Matla Setshabeng NPC.
|Exxaro receives contributions from BUs and co-investors (suppliers) for the implementation of SLP projects and CSI projects respectively
|Matla Setshabeng NPC receives dividends from a 5% shareholding in Eyesizwe (30.52% BEE shareholder in Exxaro). Matla Setshabeng NPC is a broad-based benefit structure established to fulfil shareholder requirements during formation of the replacement BEE ownership transaction
|AECFT and TWFT receive 2.1% of revenue generated by the windfarms, which must be spent quarterly on socio-economic upliftment and enterprise development projects within 50km of the windfarms
|Tsitsikamma Development Trust, which owns AmaMfengu land where the Tsitsikamma community windfarm is located, has a 9% shareholding in the company and receives dividends distributed to beneficiaries
|ESD programme receives funding from Exxaro, based on 3% of NPAT, as required by the B-BBEE codes. These funds are disbursed as interest-free loans and grants for supplier development (2% of funds in Exxaro's supply chain) and enterprise development (1% of funds outside Exxaro's supply chain)
|Socio-economic development initiatives receive funding from Exxaro based on 1% of NPAT as required by the B-BBEE codes, designated expenditure by the Exxaro Chairman's Fund and Matla Setshabeng Development NPC, voluntary initiatives, and donations to charitable organisations
|Exxaro Mountain Bike Academy receives annual funding from Exxaro to support youth in a programme that helps them complete schooling and develops knowledge and skills that provide employment opportunities in sports
|Concessional land leases to emerging farmers on land rehabilitated or no longer required for mining activities and commercial purposes
|Land packages donated to local government and SMMEs for, among others, human settlements and agricultural areas
We are consolidating and simplifying our governance infrastructure to enable the pooling and application of internal resources and capabilities, and optimising financial management. This will also enhance the delivery of impact at scale.
The social challenges in our communities are vast and systemic, and require a long-term perspective to implement effective solutions. The Social Impact strategy is a proactive response to step up and shift our community engagement and development efforts aligned to our purpose and provide an operating context conducive to achieving our growth ambitions.
Our Social Impact strategy enables us to deliver impact at scale through the following key principles:
Future SLPs will be planned in terms of social impact principles and impact areas in consultation with communities and government when developing municipal IDPs. We are engaging with the DMRE on a similar approach for the REIPPP to adopt a longer-term investment in communities around Cennergi's windfarms. Future mining and renewable energy operations will incorporate social impact principles. Alongside regulatory expenditure, discretionary expenditure continues from the Exxaro Chairman's Fund and Matla Setshabeng Development (primarily directed at complementary projects developed through the SLPs and REIPPP) – for example, where SLP projects develop school infrastructure (as required by the DMRE), discretionary funding will complement teacher development and other related programmes.
Amakhala Emoyeni and Tsitsikamma focus on education and skills development, social welfare, healthcare, general administration, and enterprise development. To ensure transparency and community participation, Cennergi founded the AECFT and TWFT to disburse funds and manage programmes. Community projects outside a 50km radius of the windfarms are funded through Cennergi's CSI budget.
Selected areas for investment and impact at scale, which will provide for sustainable livelihoods, are:
The SERC, through its statutory provisions, has oversight of community engagement and development. This committee will oversee the implementation of the Social Impact strategy.
The Social Impact strategy is an integrated approach of several executive functions, including human resources, sustainability, stakeholder affairs, and supply chain to maximise its development, impact and sustainability. The executive head: stakeholder affairs, has been delegated with the role and responsibility for integration and execution.
While we developed the Social Impact strategy, we continued implementing prevailing five-year SLPs, REIPPP socio-economic and enterprise development, and other CSI initiatives across the business.
Although our implementation performance on existing SLPs was poor, REIPPP and other CSI expenditure was satisfactory.
The implementation of SLP projects at our coal operations was poor due to factors which were addressed, and which included interruptions to construction processes and poor execution capability. Consequently, the SLP implementation schedule was delayed by 16% compared to a target of 0% and the expenditure was 40% behind compared to a target of 0%. We are pleased with the improvement in the performance of both indicators in the first quarter of 2023.
R13.38 million (2.83%)
|R56.44 million (23.38%)
|R27.5 million (14%)
|CSI (including disaster relief)
R167.93 million (35.54%)
|R57.28 million (23.73%)
|R79.8 million (40%)
|ESD financial contribution
R291.2 million (61.63%)
|R127.7 million (52.9%)
|R55.4 million (28%)
SLP project benefits include:
SLP project expenditure of R13.38 million (2021: R56.4 million) covered some projects in planning and implementation stages as outlined below.
|Total spend to date
|Belfast roads rehabilitation project
|To be handed over to the Emakhazeni municipality
|Kriel/GaNala ESD incubator hub
|Lephalale ECD centre
|Bonginhlanhla school fence
|Marapong sport, arts and culture precinct
|Marapong water reticulation project
|(21 720 youth)
The REIPPP expenditure activities at our renewable energy business performed better, despite the intensity of quarterly expenditure targets to maintain and fulfil licence to operate and related conditions. This business is required to spend 2.1% of quarterly revenue on socio-economic development (1.5%) and enterprise development (0.6%) activities in communities affected by its operations.
Powering Knowledge, Exxaro's learning platform for communities, expanded horizons for 56 learners around Grootegeluk and Belfast in 2022.
We are among South Africa’s change agents, using lessons learned as a founding member of the Impact Catalyst, effecting
meaningful environmental and social transformation across the country.
Cennergi's socio-economic and enterprise development programmes
Total: R10.7 million invested in host communities (2021: R10.6 million), reaching 3 185 people and creating 67 jobs
Total: R13.8 million (2021: R13.7 million) invested in host communities (reaching more than 10 people and creating 276 jobs)
In comparison to 2021 expenditure of R113.72 million, R181.31 million was spent on socio-economic development initiatives, including education, welfare, agriculture development and health.
The Phumulani agri-village community is a resettled community that was relocated during the Belfast implementation project.
The Phumulani agri-village food garden is aiming to create sustainable employment, improve food security and stimulate the local economy with donations from Exxaro (R6.7 million in 2022).
A multi-stakeholder partnership between Exxaro, Siyakhana Growth and Development, the University of Johannesburg and Komatsu, the project is designed to share skills development, sustainable livelihoods, access to markets and social cohesion. Its long-term plan is to create an ecosystem of agricultural productivity for the village. Land donated by Exxaro will generate income streams within the community to help families sustain their livelihoods.
The project began in February 2022 with 10 unemployed community members (aged between 20 and 76) selected for professional knowledge and skills development to operate an organic food garden.
Community members are trained and mentored by the NPO Siyakhana Growth and Development in collaboration with the Centre for Ecological Intelligence at the University of Johannesburg. The NPO is the change agent addressing food security and nutrition while supporting sustainable smallholder enterprise development.
The beneficiaries receive AgriSETA accreditation for soil fertility and nutrition, operating hand tools and basic equipment, and infrastructure and natural resource management (including pest, weed and disease control). Certificates were presented at a ceremony in May 2022.
The project currently has two greenhouse tunnels using a drip irrigation system to conserve water for the food garden. Vegetables are grown organically with manure from the garden waste.
|Lephalale local municipality
|Emakhazeni local municipality
|Lephalale and Emakhazeni local municipalities
|Waterberg, Nkangala and Mogalakwena district municipalities
|Nkangala district and Lephalale local municipalities
|Nkangala district municipality
Cennergi’s AECFT funded the construction of a new ECD centre in the Eastern Cape.
Children and their parents weren’t comfortable in the original centre that needed extensive renovation after a storm.
Four local SMMEs created 57 temporary jobs during construction of the new centre.
|Highlights and challenges of community initiatives
|Municipal capacity building programme
The second phase of the programme, in partnership with the NBI's technical assistance, mentorship and development team and government's CoGTA, mentored permanent senior employees of the Waterberg district municipality. This three-year programme will end in March 2024.
The key successes in phase 2 include potential access to funding as financial management skills improve, enabling the pathway to improving service delivery.
|Our employees were involved in community volunteer projects during working hours. In some areas, we collaborated with the Siyakhana NPO to establish food gardens at schools, and at the Phumulani Agri Village (resettled Belfast community), responding to access to food and nutrition.
|Matla Setshabeng NPC
|Matla Setshabeng NPC delivered high-impact initiatives at a cost of R127 million (2021: R10 million) for 1 171 743 community members.
|We experienced challenges in implementing our SLPs due to poor capacity of local service providers. This resulted in iterations to find replacement contractors, resulting in delays to execute projects. However, we successfully prepared and submitted new SLPs. This entailed extensive stakeholder engagements, calls for proposals from communities and local municipalities, feasibility studies and consultations to conclude applications for new SLPs to the DMRE. We also submitted proposals for Thabametsi (2020 to 2024), Grootegeluk and Tshikondeni (in closure) (2023 to 2027) SLPs at year end. The DMRE approved the Matla (2020 to 2025) SLP in 2022. The submitted SLPs align with our Social Impact strategy, which leverages the work done in the previous SLP cycle in an incremental, sustainable pattern to promote collaborative partnerships for greater impact.
The ESD programme achieved record disbursements and played a role in the achievement of the procurement targets described from page 86. Driven by a higher group NPAT, the programme had to spend a much higher amount within the year to ensure compliance with the dtic B-BBEE codes. Given the high coal prices, the forecast NPAT was much higher than budgeted at the beginning of the year. All efforts were invested to achieve the higher target, however, there were fundamental constraints that prevented us from achieving our ESD compliance goal. Firstly, resource constraints to spend more money and secondly, increasing the volume of ESD funding applications does not improve the number of qualifying applicants. While we reached an annual increase and record disbursement of R291 million, we expect to achieve 9.75 points (65%) out of 15 compared to the target of 13.5 (90%) once the B-BBEE verification for 2022 has been finalised.
Our ESD programme creates wealth, employment and sustainable enterprises for host communities.
Exxaro's ESD initiatives are a crucial component of our socio-economic development response and critical to achieving our strategic objectives. The initiatives provide financial and non-financial support to small businesses in areas where we operate.
Spend: R291.2 million (2021: R127.7 million)
Jobs retained: 1 037 (2021: 243)
The TWFT established an agriculture mentorship programme to ensure the success of funded projects.
This programme helps emerging farmers transition into commercial farming by improving farm management skills and access to markets.
The provincial breakdown of the beneficiaries indicates the ESD programme's objective of focusing on beneficiaries from host communities.
The ESD approvals since programme inception have been a blend between grants and loans, with focus in the earlier years on improving Exxaro's B-BBEE performance from level 5 to level 2. This was achieved and maintained until 2020, where there was a poor pipeline of funding applications due to challenges imposed on SMMEs by COVID-19 and a distressed economy.
ESD loan fund management
We support SMMEs in our host communities beyond compliance.
Tysys Capital Group, a National Credit Regulator licence holder, manages our ESD loan fund, which supports SMMEs in our communities. Tysys Fund Managers invests loan repayments and cash in hand in money markets.
Our investments consistently outperform the short-term fixed-interest (Stefi) benchmark (5.96% against Stefi's 5.65% in December 2022).
ESD non-financial support
Our non-financial support programmes complement ESD loan fund management.
External service providers address entrepreneurs' challenges:
|GIBS contractor development programme
We deliver on our ESD strategy in each SLP area through incubator hubs, which provide three-year programmes for SMMEs.
|Beneficiaries per operation:
Cennergi's TWFT supports NNT Women Poultry, a black women-owned enterprise in Wittekleibos.
With R3.1 million from TWFT as well as skills training, infrastructure, a vehicle, tools, equipment, land clearance and fencing, the enterprise supports four previously unemployed women delivering 2 300 eggs to Nulaid every second week.
TWFT plans to enable the business to expand from 1 620 egg layers to 4 000 by 2024.
Cennergi's AECFT and the Amakhala Bedford Community Fund Trust have invested R5 million in a water solution for Adelaide and Bedford.
The solution includes water abstraction redesign, repair and servicing of existing pump stations, refurbishment of water-treatment plants, storage and pressure management, a centrifugal solids separator, leak management and groundwater augmentation.
Upon completion in March 2023, 5 871 households in the communities of Adelaide and Bedford will have much-needed water. The project also supports two local black-owned SMMEs who have created 26 temporary jobs.
Our affirmative procurement initiatives at operating mines remain above target. We spent R1.1 billion (circa 11.4%) of discretionary procurement compared to a target of 10%, on local SMMEs, thus injecting significant value into the local communities. However, the challenge remains large and we will continue to pursue higher levels of this investment through targeted expenditure and skills development to increase both the volume of expenditure and value per expenditure.
We manage our procurement and supply chain processes in terms of our supply chain sustainability strategy and policy to satisfy the diverse expectations of customers, regulators and investors.
Our strategic objectives include:
Cennergi's share of procurement sourced from B-BBEE suppliers, QSEs, EMEs and women-owned vendors is tracked against commitments and targeted percentages in the implementation agreement between Cennergi and the DMRE.
Tsitsikamma community windfarm and Amakhala Emoyeni are committed to 60% total procurement from B-BBEE suppliers, 10% from QSEs and EMEs, and 5% and 2.5% respectively from women-owned vendors.
Exxaro is fully compliant with the requirements of the B-BBEE codes for preferential procurement. We achieved an overall score of 26.9 (2021: 28.3) against a target of 24.2.
Green procurement means Exxaro aims to purchase products and services that have a minimal adverse impact on the environment. We spent R133 million on green procurement (0.8% of the total procurement spend). The graph below shows percentage spend per green procurement category.
|Procurement from entities with R10 million to R50 million annual turnover.
|Procurement from entities with less than R10 million annual turnover.
|Procurement from suppliers who are at least 51% black owned.
|Procurement from suppliers who are at least 30% black women owned.
|Procurement from suppliers who are at least 51% designated group owned (entities
owned by black youth, black military veterans, black disabled people and black people living in rural areas).
After appointing Khaman Security at Amakhala Emoyeni, Cennergi funded the establishment of a security control room as part of supplier development and the AECFT included the company in the SAICA Enterprise Development programme.
As a mining right holder, Exxaro must meet prescribed targets for procuring mining goods and services from preferred groups by 2023. Our inclusive procurement programme focuses on procuring mining services from black youth and black women-owned companies. We exceeded our target of 37.2 points (2021: 31.5) by scoring 40 points (2021: 40) on the Mining Charter III scorecard.
|Procurement from entities with more than 25% black ownership and at least level 4 on the B-BBEE scorecard.
|Procurement from entities with historically disadvantaged people as majority owners.
|Procurement from entities with black women as majority owners.
|Procurement from entities with black youth as majority owners.
|Procurement from entities with historically disadvantaged people as majority owners.
|Procurement from entities with black women as majority owners.
|Procurement from entities with black youth as majority owners.
|Local procurement and localisation
Our supply chain sustainability policy ensures we increase beneficial participation of black youth-owned SMMEs, which is critical to mitigate youth unemployment in our host communities.
We direct over R1 billion of our procurement spend to local SMMEs. We spent R1 097 million (2021: R1.05 billion) with 246 local black-owned SMMEs (2021: 241).Committed to improving our QSE and EME preferential procurement performance, we also reached the following milestones in our host communities:
We use e-procurement software (Coupa and Innoxico) to reduce the risk of fraud and maintain cost efficiency.We continue driving ethical and sustainable procurement through our:
Cennergi met its preferential procurement targets for 2022 and did not incur any termination points.
Compliance costs are increasing annually. With business risks also escalating, planning for uncertainty requires a trade-off between various risks. Exxaro has a target to achieve a level 1 recognition level. However, the required level of expenditure to achieve this target competes with other interests within the business, such as seeking alternative logistics for our export coal to reach markets and business interruption risk, which also have a demand on available financial resources. Consequently, a decision was taken to maintain the current level 3 recognition level, which is still within compliance, to secure the business in the short term. The aspiration to achieve level 1 remains over the next two years.
The SAICA Enterprise Development programme has achieved the following for Cennergi since appointment in 2021:
The programme provides monthly access to a business and finance coach as well as accounting, back office, tax, human resource management, and Companies and Intellectual Property Commission compliance support.
Recognising the lack of women representation in the community development trust and in marking women's day a celebration, Cennergi partnered with the Bedford Women Forum to host a women's dialogue workshop at Msobomvu Community Hall in Bedford.
Hosted under the theme "what is the role of women in community development", over 100 women and girls attended the event. Invitees included women from SAICA, the Eastern Cape Department of Economic Development and a guest speaker, Dr Tumi Vuyolwethu Nkohla, from CoGTA. Cennergi held another successful women's day event attended by young girls from Walmer high school in Port Elizabeth.
Both events encouraged women to raise their hands high in community development initiatives and every aspect of life.