BHP Billiton on Business’s Role in Promoting SA Foreign Policy: Seminar

FOREIGN AFFAIRS PORTFOLIO COMMITTEE
31 October 2007
BHP BILLITON ON BUSINESS’S ROLE IN PROMOTING SA FOREIGN POLICY

Co-Chairperson: Ms F Hajaig (ANC)

Documents handed out:
The role of Business in promoting South African Foreign Policy A BHP Billiton Perspective

Audio recording of meeting

SUMMARY
BHP Billiton had a number of assets throughout Southern Africa. The company had policies that encourage social capacity improvement programmes, as well as policies centred around Health, Safety, Environment and Community. BHP Billiton, although a large company, also had a ‘Zero Harm’ policy that was for the protection of its employees. The company had abolished the use of hostels and now had started a bond allowance for their employees to encourage formal housing. They made the statement that companies could not invest in countries purely for profit as there was government, civil society and a number of non-governmental organisations that would protest such an investment.

The Committee was concerned by a number of issues, primarily skills transference and the employment of locals. BHP Billiton Board Chairperson, Dr Vincent Maphai, assured the Committee that his company primarily employed locals and that if employees were brought in it was the exception rather than the rule. However, the one thing that was lacking in South Africa was the required skills and the tertiary institutions were not bridging that gap.

Dr Maphai suggested, as a way forward, that a formal forum be created, along the format of an overarching business forum, to assess priorities and mutual strengths. Government would have to lessen its rhetoric of viewing business as an enemy, while business would have to change its attitude of perceiving government as an obstacle. The Committee was interested to gauge the turn-around by government departments in alleviating the obstacles found in the public service and was pleased to see the Departments of Foreign Affairs and Trade and Industry beginning to work closer together. The country had to find a way not only to attract but also to retain investors.

MINUTES
The Role of Business in Promoting South African Foreign Policy: A BHP Presentation
Dr Vincent Maphai (Board Chairperson: BHP Billiton South Africa) began by showing a slide reflecting the world-wide structure of this company, one of the largest in the world. Driven by customer needs, it had interests in products such as petroleum, energy coal, metallurgical coal, manganese, iron ore, aluminum, base metals, diamonds and stainless steel materials. The BHP Billiton Charter was committed to sustainable development. The company also had a ‘Zero Harm’ policy that was central to its company vision. Health, Safety, Environment and Community (HSEC) Governance was integral to the company and was upheld at all their operations and projects. BHP encouraged sustainable development at every level as sustainable development was fundamental to their success and put them in a better position to attract and retain a motivated workforce. An inventory of projects/options was provided.

With regard to South Africa’s foreign policy, BHP Billiton had done a comparison of its values and the focus areas of the foreign policy. The BHP Billiton values were safety and security, integrity, high performance, a win-win situation, the courage to lead change and respect for each other. BHP Billiton had a number of key partnerships and had participated in Joint Parliamentary sittings of the European Union (EU) - African, Caribbean and Pacific groups’ states (ACP) and were the co-chair on the European Union – African business forum.  Dr Maphai gave a graphic explanation of all Southern African assets as well as projects, including more mineral exploration, for 2007.

There were several examples of successful relationships between BHP Billiton and Southern African countries, for instance their relationship with the Democratic Republic of Congo and Guinea that also included a malaria programme. The presenter gave a detailed explanation of the Mozal smelter in Mozambique, another example of a successful relationship. Mozal was also an example of the number of social upliftment programmes BHP Billiton provided to assist with poverty alleviation and eradication. Guinea was also one of the recipients of BHP Billiton’s willingness to create capacity.

BHP Billiton was eager for opportunities for collaboration. The company promoted South Africa as a potential investment destination, and confirmed this with its presence in South Africa and by contributing to the economy. There was mutual reinforcement of the values of transparency and good governance. It also assisted in the leverage of global funding. It was understood that the diplomatic corps was key to understanding policies and opening doors. BHP Billiton has a presence on the ground in many countries and could be a valuable resource for information for Foreign Affairs. The seminar by Parliament was an excellent step and they proposed that a formal forum was needed to understand each other’s priorities and see where opportunities for mutual support might be.

Discussion
Mr M Ramgobin (ANC) commented that BHP Billiton was an example of South Africa’s transformation, adding that no transformation could be possible without a concerted partnership from all sectors of society. He would Billiton’s response be, given that their focus areas were compatible with the foreign policy options of South Africa, that they intervene creatively and not for the sake of business. Past experience of businesses in Africa showed that they pursue their own interests.

Dr Maphai replied that a common purpose as a country had not been developed. Further, it could be deemed as a failure of post-1994 that issues had not been identified that would unify government and business, regardless of political affiliation. In other countries such as in the United Kingdom and in North America business and labour would know when to close ranks with government. He did not know why this was not the case in South Africa. It could be because government had failed to provide leadership or business could be cynical. Unless these issues were addressed the concerns raised by members would not be addressed. 
 
Mr Ramgobin commented that Africa has become an investment destination for so many international investors. What was BHP Billiton’s response to countries such as China, investing in and importing labour to Africa.

Dr Maphai replied that China was viewed in the same way as BHP Billiton viewed Anglo-American and since China was moving strongly into resources they had also become a competitor. On the other hand, if China wanted to build infrastructure, it would make investment easier. No foreign investor should be allowed to invest unless there were skills transferred.

Dr S Pheko (PAC) wanted to know how different South African businesses were from other international investors, investing in other African countries. By investment he meant that it was profit driven. It did not seem as if other African country had been further developed as a result of investment in that country. He felt that investment should be a partnership between the country and the investment company.

Dr Mapai replied that no company would be able to invest in a country purely for profit as civil society organisations and government would not allow it. The only sustainable option for business would be the win-win strategy that was alluded to in the presentation. Effective public policy had to be in place as well to prevent purely profit driven investors. 

Mr M Sibande (ANC) corrected the order of the acronym appearing in the presentation as it should have been ACP-EU, not EU-ACP. At the inception of the initiative, it was ACP EU as it was an African initiative and not a European initiative

Mr Sibande referred to Zimbabwe and asked what role was business playing in uplifting the economy of that country, in particular poverty alleviation and eradication.

Dr Mapai replied that an investor’s first assessment of a potential investment would be the security of the investment. BHP Billiton was not involved in Zimbabwe as they were simply not interested in the type of assets in the country. No company would work in Zimbabwe and attempt to alter the political situation. It had to be done regionally and nationally.  The only way business could get involved was if the Southern African Development Community (SADC) were to approach business and suggest that it underpin their projects with an investment.

Adv Z Madasa (ANC) commented on the issue of intra-African trade and beneficiation and thought that it was interesting and important since the continent could not move forward without trading with neighbouring countries. He also asked about business forums and whether there were instances that could involve government.

Dr Maphai replied that it was important that in corporate citizenship everyone had to be considered good citizens. It was in the best interest for business to develop a more collaborative rather than competitive relationship. He mentioned that there were several business forums that he continually attends and suggested that perhaps there should be fewer rather than more business forums.

Adv Madasa referred to coal and asked what was the country doing to protect the environment from the harmfulness of coal as an industrial product since developing countries often had to use coal and had large reserves.

Dr Maphai replied that coal would always be popular because it provides energy. He felt the issue was how to use technology to manage the impact coal had on the environment.

Adv Madasa referred to the working conditions in the areas where business invested, especially the mines, and what was being done to improve those conditions.

Mr Sibande was concerned by the issue of Mpumalanga and wanted to know whether the company was involving local resources in their projects in Mpumalanga.

Dr Maphai replied that BHP Billiton had abolished hostels and replaced these with a bond allowance that forced staff to get formal housing. The company only employed from local communities and no longer had migrant labourers. Primarily, locals were employed.

Dr M Sefularo (ANC) wanted to know what was the core contribution of the Departments of Foreign Affairs and Trade and Industry and how they impacted on business.

Dr Maphai replied that as a company, BHP Billiton, does not deal with the Department of Trade and Industry except in respect to its own smelters; it dealt more with the Department of Minerals and Energy.

Mr Sefularo asked to what extent the issues of capacity in foreign affairs and international relations compared to that of South Africa’s trading partners and how did this affect business.

Dr Maphai replied that the most serious problem in investment was capacity. In South Africa, the most developed country on the continent, the required skills were not there. The tertiary institutions were not geared towards providing those skills either. Any business that did not invest in its own capacity training would run at its own loss. Furthermore, he had noted that the success of any country was in the quality of its civil servants. 

Mr Selfularo referred to the issue of regional trading blocs, and asked how competing interests were dealt with. He was particularly interested in BHP Billiton’s orientation towards India, Brazil and South Africa (IBSA) trading partnership.

Dr Maphai replied that trading blocs could be both “an opportunity and a nightmare”. There was competition between countries, however they had to continue to find a compromise in order to work together on whatever investment presented itself.

Ms Hajaig asked, when the decision was made to invest in a country, did business look at the New Partnership for African Development (Nepad) programme that existed in the country and were they able to take the programme forward.

Dr Mapai replied that many businesses did not even know what Nepad was. He felt that that when an investor decided to invest in a country, there had to be issues that the investing company were committed to regardless of who or what they were. He continued that in mining, when the decision was made to mine, the first key decision was a geological one. There had to be the assurance that there actually was something to mine. The linkages with government were done by initiatives by individuals and leaders in business who were informed by the political situation of the country. But the average business person would not be thinking of issues such as the regional imperatives. There had to be mechanisms where national interest was not confused with a form of centralism. Government would have to lessen its rhetoric of viewing business as an enemy, while business would have to change its attitude of perceiving government as an obstacle.  

Mr D Sithole (ANC) referred to an article in Business Day that mentioned a comment made by the Minister of Finance, Trevor Manuel, saying that South Africa should go into trade alone. He noted Dr Maphai’s comment that regional trading blocs were sometimes a ‘nightmare’. He asked what was Dr Maphai’s view on whether South Africa should trade alone.

Dr Mapai replied that he had seen the article and as company policy, BHP did not respond to newspaper reports.

Mr Sithole raised the issue of quality of civil servants and the speed of delivery. Since trade was dealt with by the Department of Trade and Industry and international relations was dealt with by the Department of Foreign Affairs, was South Africa able to provide proper service delivery with regard to foreign direct investment.

Dr Maphai replied that as Chairman of BHP Billiton, he would be dismissed for adopting a purely political stance and therefore could not answer the question. As a retired Chairman of the Presidential Review Commission appointed in 1996 there was a recommendation that the Department of Foreign Affairs should be renamed Ministry of Foreign Affairs and Trade. The logic for this recommendation was that historically, during the cold war, the Department of Foreign Affairs was primarily involved in the gathering of intelligence. In the new order the Department of Foreign Affairs was largely involved in foreign trade.

Mr Sithole commented that the Committee had been given differing views on the reason that business invested in a country; one was that it was not for charity and BHP Billiton stated that it could not be for the sole purpose of profit. He asked for Dr Maphai’s view on this issue. 

Dr Mapai replied that no business would want to make a loss. What he was saying was that business could not be successful if national public policy objectives were not taken into cognisance.

Ms Hajaig wanted to know how Dr Maphai envisaged the formal forum.

Dr Mapai replied that he envisaged using the current business forum format with businesses that were already on the forum yet a looser arrangement. Perhaps at the beginning of the year a clear picture of the objectives could be discussed and each body on the forum could compare objectives. Usually there were structured bodies and little could be achieved. There had to be a mechanism to liberate the strengths of each of the bodies at the forum. As the forum evolves perhaps there could be more specialised bodies.

Ms Hajaig wanted to know if there were ideas on the process forward. 

Mr Sithole suggested that the Committee would deal with many of the issues when they finalised the report on the seminars. Further the Committee had accepted an invitation to go to Mozal and needed to find the appropriate time.  He suggested that as a way forward the Committee needed to pursue issues in the form of a news meeting. They also needed to look at a way to retain investors on the continent. They also had to look at how chain stores affect investment in Africa. A code of conduct had been brought up by the governing party and as a Committee it should be assessed. Turn-around from the public service, specifically the Department of Foreign Affairs, also needed to be gauged as well. Another issue from the previous day that had to be reflected upon was the ‘face’ of investors - one of the causes of resentment by the rest of Africa toward South African businesses. 

Mr Sibande proposed that when visiting Mozal the Committee should include Koeberg.

Ms Hajaig’s closing remarks included that they reflect on a strategy so that big business and government could constructively work together. She noted that the Departments of Foreign Affairs and Trade and Industry were beginning to work closely together on the issue of promoting foreign investment. There were weaknesses in the South African missions that had to be recognised too so that those issues could be resolved.

The Chairperson then adjourned the meeting.