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Based in southern Africa, with operations and projects in South Africa and Zimbabwe, Implats is a leading global producer of PGMs. The group’s economic impact is far-reaching.

• In FY2008, the group produced 1.9Moz of platinum, amounting to around 25% of estimated global supply, for use largely in jewellery and autocatalysts.
• The group employed 54 991 people in FY2008 (employees and contractors), making it one of the largest single employers in the mining industry in southern Africa.
• Its capital investment programme – some R30 billion planned over five years – represents a significant investment in the sector and the region.
• Implats has shareholders around the world, including more than 28 000 employees who benefit from the group’s Employee Share Ownership Programme (ESOP).
• The group’s contributions to the communities around its operations, both directly and indirectly, are significant and include infrastructure development, local economic development, indirect job creation, corporate social investment, skills development and other initiatives.

Detailed information relating to the operational and financial performance of the group is available in the Annual Report. Our value-added statement (in the table below) reflects the significant economic value generated by Implats during the year, largely as a result of extremely favourable metals prices. It also indicates the value disbursed by the company to employees, to shareholders and providers of capital, to suppliers, to the state (in the form of taxes) and to communities by way of corporate social investment.

Significant investment

Implats is and has been a significant investor in the PGMs industry, both in developing new and existing operations and in expanding its smelting and refining operations. The group has continued to collaborate with emerging producers as part of its global exploration programme.

In FY2008, Implats spent R5.4 billion on capital to maintain and grow its production. These include four major projects currently being undertaken:

• at Impala in Rustenburg (including 16, 17 and 20 shafts) – R3.4 billion
• Zimplats expansion – R1.3 billion
• Marula’s UG2 operations – R345 million
• Development of Leeuwkop – R145 million
• Mimosa expansion – R144 million.

Over the coming five years (FY2009 to FY2013) Implats has already committed R20.6 billion in capital, R19.6 billion in South Africa and R1 billion in Zimbabwe, to maintain and grow production. Our original target for annual platinum production of 2.5Moz by FY2012 has been impacted by delays to the Leeuwkop and Marula Merensky projects. Annual production 2.5Moz of platinum is now expected in FY2015.

Transformation

Implats recognises and understands its responsibility towards transformation of the broader socio-economic landscape in both South Africa and Zimbabwe and much has been done in this regard. A board committee, the Transformation Committee, is responsible for oversight of objectives and performance in this area. Broadly, the company’s impact can be directed through three mechanisms.

Black economic empowerment (BEE) ownership

Implats has endeavoured to ensure that its BEE partners are drawn from a wide range of groups and, as far as this is possible, to ensure that they are representative of local communities and business interests. Implats’ BEE partners and shareholders are set out below.

• The Royal Bafokeng Nation (RBN), representing more than 300 000 people resident in North West Province, hold a 13.4% stake in the Implats group, making that nation the group’s largest single shareholder. The nation is the historical owner of the land on which a large part of Impala’s operations is located, and the fortunes of both the nation and Implats are intertwined. Together, Implats and the RBN have set up one of the largest private sector corporate social investment vehicles, the Impala Bafokeng Trust (IBT), as an additional benefit to the people residing around Impala Rustenburg.
• Some 28,000 Implats employees (representing about 98% of the workforce) hold a 3% stake in the Implats group through the Employee Share Ownership Programme (ESOP). The ESOP has already delivered significant value to employee shareholders through share price appreciation. Based on the company’s share price at the end of June 2008, the value of the shares held by the ESOP has doubled: from R2.6 billion at inception to R5.2 billion. For the individual employee this represented a rise (as at 30 June 2008) in value from R90 000 to R182 000. While the share price decreased dramatically in the period post year end, this was in line with the company’s peers and is expected to recover.
• Mmakau Mining, a black-owned mining company, Tubatse Platinum, representing local business interests and the Marula Community Trusts, comprising the communities most affected by Marula’s mining operations, together own 27% of Marula Platinum.
• The Bakwena Ba Mogopa Traditional Community hold a 26% interest in the Leeuwkop project.
• Implats’ partner in the Two Rivers project, ARM Platinum, is one of South Africa’s leading BEE companies.
• Implats was instrumental in the establishment of Incwala Resources, a BEE platinum company, that acquired from Implats its entire 27.1% share in Lonmin’s Western and Eastern Platinum mines.

Implats recognises that there is a transformation imperative in Zimbabwe, and is working closely with government in determining the optimal level of local ownership that will still facilitate investment (see the box below).

Ngezi, Zimplats

Indigenisation in Zimbabwe

Empowerment (indigenisation) legislation in Zimbabwe requires that 51% of foreign-owned companies be locally held. New legislation to this effect was passed on 2 November 2007 and was endorsed by the President of Zimbabwe on 7 March 2008. However, the enabling regulations that will accompany the legislation have still to be passed into law.

Implats has plans in place to deal with this change and has specific agreements that will be taken into account once overall compliance with this legislation is reviewed.

In this regard, on 31 May 2006, Zimplats entered into an agreement with the government of Zimbabwe in respect of the release of 36% of the group’s mineral resource base in exchange for a combination of empowerment credits of 19.5% and $51 million in cash, or equity in a joint venture, or credits of 29.25% if no cash is received. In return, the company received security of tenure in terms of a special mining lease which will allow for operations of at least 1Moz of platinum per year over a 50 year life-of-mine. Credits for infrastructure development and corporate social investment will also be received.

In line with Zimbabwe’s indigenisation programme, Implats anticipates that a 15% shareholding in Zimplats will be set aside for local ownership.

Preferential procurement

Implats’ procurement policy assists in identifying accredited historically disadvantaged South Africans (HDSA)/BEE suppliers to encourage their development and to ensure that they enjoy preferential status.

Total procurement by the group’s South African operations was R9.5 billion in FY2008, up by 38% on the FY2007 total procurement figure of R6.9 billion. However, total discretionary procurement amounted to R7 billion, up by 29% on the R5.4 billion spent the previous year. The ratio of discretionary procurement to total procurement declined from 79% to 74%, mainly as a result of higher pass-through payments made to legal firms working on the group’s housing estate acquisitions. Discretionary procurement is defined as total procurement less procurement from public sector vendors (rates, taxes), utility service providers (electricity), academic institutions, pass-through payments (medical aid contributions, legal fees) and sponsorship vendors.

In total, R2.9 billion or 41% (FY2007: 38%) of discretionary procurement was spent on vendors with HDSA/BEE ownership of more than 25%. Further, 50% (FY2007:47%) was spent on vendors with HDSA/BEE ownership of greater than 5%.

Where possible, efforts are made to procure goods and services locally, that is, within the province of operation. Local procurement reflected a continuing rising trend, at 58% of total procurement (FY2007: 56%).

The number of vendors with HDSA/BEE ownership of more than 25% with which Implats does business rose again – to 657 from 649 in the previous year.

For the group as a whole, the most significant increase in procurement with HDSA/BEE suppliers was recorded in the area of services, where HDSA/BEE procurement as a percentage of services procurement (vendors with more than 25% HDSA/BEE ownership) rose from 32% in FY2007 to 45% in FY2008.

Internal transformation

This relates to the recruitment, education and training, and development of HDSAs and women in particular and is dealt with under Human Capital.

Impala Rustenburg, Minpro

Basic tenets of Implats’ procurement philosophy

• To secure the most competitive total cost package for the company’s goods and services, giving due consideration to regulatory requirements, quality standards, compliance with commitments, acceptable performance and continuity of supply.
• To promote meaningful supplier relationships through ongoing communication, courtesy, fairness and impartiality regarding all aspects of the procurement cycle.
• To continuously seek, identify, develop and promote historically disadvantaged enterprises and individuals through sustainable procurement programmes without detracting from or adversely affecting stakeholder interest.
• To train and develop procurement personnel continuously and to ensure ethical and transparent dealings with the company.

Corruption and fraud

Implats expects its employees and agents to maintain the highest levels of integrity and ethics. The group has a ‘zero tolerance’ approach to dishonesty, fraud, corruption, theft or misconduct. The group’s fraud policy is supported by a detailed code of ethics, both of which are available on the website at www.implats.co.za. Both comply fully with the Prevention and Combating of Corrupt Activities Act of 2004.

The implementation of these policies and their collective procedures rests with executive and line management. The forensic wing of the Internal Audit function, which is an independent assurance activity, handles all fraud-related issues, while the security function deals with theft and corruption.

There is regular communication regarding Implats’ fraud prevention strategy, with specific emphasis on the role played by employees in reporting misconduct, criminal activities or suspected corruption; and fraud awareness forms part of the group’s training initiatives. Workshops are conducted with senior management to discuss anti-fraud strategies with a view to introducing the best practices to combat fraudulent activities and behaviour throughout the organisation.

Employees, contractors, suppliers and customers affiliated to South African operations are encouraged to report incidents of fraud and corruption to Whistle Blowers, an external, independent service. All calls made to its 24-hour call centre are fielded by multi-lingual operators who are trained to recognise real issues and to obtain relevant information from the informant with the guarantee of confidentiality. The cases are categorised and reported to the chairman and the CEO at the same time. Most are forwarded to Internal Audit, the rest are handled by the CEO himself or sent to line managers for attention. All reports received by Internal Audit are investigated and reports submitted to the executive in whose area of responsibility the incident occurred. The action taken by management is summarised for the Audit Committee.

There was one case during the year where an employee received a final written warning in respect of alleged corruption and one contract with a supplier was not renewed related to corruption-related violations.

In Zimbabwe, employers, suppliers and other stakeholders have access to the external independent services of Tip Offs Anonymous for confidential reporting on fraud, theft, conflict of interest, corruption and any other forms of unethical behaviour. All allegations are reported to executive management and appropriate investigations are undertaken.

Political donations

While the group is supportive of the freedom of association, it is also of the view that it is not the role of the company to involve itself in politics. Implats’ stated policy is that no political donations will be made by the company, either directly or in kind, and this policy was adhered to during the year.

Legal issues

There are no significant legal issues either in progress or pending against the group.

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