Kumba flags rise in extortion mafias in mining sector

SA’s largest iron ore producer, Kumba, has flagged a rise in extortion syndicates in the mining industry seeking to unlawfully get a slice of multibillion-rand procurement expenditure by the sector — in a move that the company warns may hamstring production in the sector.

Kumba in its 2023 annual report said there were increasing incidents of activities relating to “unprecedented contractual demands, with extortion, intimidation and threats of violence that may lead to business interruptions”.

The company said it was proactively monitoring the risk and had seen an increase in such incidents and threats at peer companies, related industries and on social media platforms that is a concern for all miners.

“At Kumba we monitor this risk closely at all our operations to ensure that it does not eventuate or have a material impact on the business. Coupled with our procurement and supply chain policy, we have fraud and risk management policies and frameworks in place to ensure that we uphold the rule of law,” the company said.

“We also have a strong relationship with SAPS that enables our security teams to work closely with law enforcement authorities, which provide excellent support to combat crime and corruption at all levels whenever necessary ... we are now working collaboratively on a set of step-change initiatives that we hope will make a lasting difference in resolving the three priority challenges — energy, logistics, crime and corruption.”

SA is still contending with “business forums” that emerged in about 2014 in KwaZulu-Natal and spread throughout the country.

The so-called business forums, which later morphed into full-blown extortion syndicates initially targeted the construction industry, demanding a share of projects or that the company employ specific people or companies. The forums are now known as the construction mafia.

It emerged in February at the Mining Indaba held in Cape Town that the mining sector was now also fending off the mafias looking for a quick buck under the guise of transformation. 

Armed attacks

The mining sector, one of the biggest contributors to the fiscus through company tax and royalties the industry pays to the state, also has to contend with illegal mining. 

The Mineral Council SA says armed attacks on precious metals facilities such as gold plants grew in recent years and reached a peak in 2019 and the beginning of 2020 when the industry experienced 22 armed attacks on mining operations and plants.

The attackers often carried AK-47, R4 and R5 assault rifles.

Kumba, a business unit of mining supermajor Anglo American, said it had good relationships with communities, aided by active community engagement and provision of economic opportunities, infrastructure and services.

In the 2023 financial year, Kumba, worth more than R150bn on the JSE, spent R6.6bn from more than 300 suppliers from its host communities and R22.9bn from BEE suppliers.

Kumba competes in the global iron ore market through its premium product delivery, with its business structured around its two open-pit mines in the Northern Cape.

Kumba, headed by CEO Mpumi Zikalala, has customers in SA, China, Japan, South Korea, the EU, Middle East, North Africa and the Americas.

“We are committed to creating commercial opportunities for local businesses and we’re acutely aware that economic conditions are tough with significant competition for the available opportunities,” the group said.

“To support our policies and enable transparent communication with potential suppliers we have formalised the various local business forums into a single unified structure with elected leadership and clear governance structures and we intend to use this as the preferred engagement platform.”

khumalok@businesslive.co.za