Highlights

25% of our workforce have moved from hostel accommodation to single or family units

Five old hostels are being converted to create 1 700 family units by 2014

Harmony has spearheaded a tripartite agreement with national and provincial government to accelerate home ownership.

Material issues

Hostel de-densification process; accommodation and living conditions

Promoting skills development and employment in our communities

Promoting sound and constructive employee relations

Steady progress on employment equity

Projects related to our social and labour plans, and local economic development. These are detailed in Working with our communities (refer to www.harmony.co.za).

The section on Harmony’s approach to sustainability details how we identified our material issues.

In South Africa, the company’s employee complement was 39 266 for the year (FY10: 40 119), consisting of 34 345 (86%) permanent employees and 4 921 (14%) contractors. The slight decrease reflects the closure of Merriespruit 1 as part of realigning Harmony’s portfolio for optimal sustainability.

In October 2010, we closed Merriespruit 1 shaft in Virginia after the failure of a productivity-linked deal with trade unions to continue operations if the shaft did not make a loss (total cost, including capex) for two months, and kept total costs under R250 000/kg. When it became clear that these conditions could not be met, we initiated a formal consultation process with employees (section 189A of the Labour Relations Act) on alternatives to retrenchment. A total of 1 470 employees were affected, but we were able to transfer 1 200 to our growth operations to preserve as many jobs as possible. We were also able to renegotiate affected mortgages with financial institutions to preserve employees’ homes.

In PNG, there were a total of 4 540 employees including MMJV (FY10: 2 478), of whom 1 558 (34%) were permanent employees and 2 982 (66%) were contractors. Contractors at PNG are for construction projects and their contracts expire as these are completed.

Turnover

Four years ago, Harmony initiated a strategy to attract and retain key employees which continued at all operations in FY11. We continue to monitor employee turnover indicators closely, given the challenge of skills shortages in South Africa and the particular need to develop the skills of HDSAs and women for our industry.

Total staff turnover for the year decreased to 10% (FY10: 14%). This has dropped from 18% in FY09, reflecting the success of the company’s range of retention initiatives.

In South Africa, the turnover level was 10% with 3 577 employees leaving the company. The main reasons for separation in FY11 were voluntary retrenchments (31%), dismissals (19%), medical incapacitation (19%) and resignations (14%).

In PNG and Australia, 322 employees (20%) left the company in FY11, primarily due to resignations (62%) and dismissals (38%). A review of remuneration structures in the prior year, coupled with the focus on recruiting more local employees, mentoring and skills development has enabled the company to attract and retain employees during the year.

Turnover among female employees remained low across the group in FY11 at 1% and 13% in South Africa and PNG/Australia respectively. This number is not representative, however, owing to the lower numbers of female employees across the group.

In South Africa, Harmony’s housing strategy has a dual thrust: promoting home ownership and integrating mining communities into local structures.

Core to this strategy is upgrading hostels and the hostel de-densification project. We have made good progress with the hostel project over the past year. This is designed to create privacy in single-sex hostels over the next three years.

In the Free State, the Masimong 5 hostel project was completed during the review period, while the Tshepong project is under way and should be completed during FY12. The hostel occupancy rate was further reduced during the year.

The rise in the number of employees moving into family units or other accommodation was mostly facilitated by an 8% increase in the living-out allowance to R1 400 in September 2010 following the industry-wide agreement. In line with the company’s focus on promoting home ownership, employees who do not reside in company hostels earn a living-out or housing allowance.

To date, 25% of Harmony’s employees have moved from hostels to single or family accommodation, while five hostels are being converted into 1 700 family units by 2014. This project will continue until FY15. By then, 320 units in our North operations (70 at Kusasalethu, 100 at Evander and 150 at Doornkop) will have been converted at a total estimated cost of R46.6 million, while in the Free State, the Unisel and Phakisa hostel upgrades will be completed at an estimated total cost of R12.5 million. The Merriespruit 3 and Steyn 2 hostel upgrades are planned to be completed in FY12.

For all developments, Harmony donates the land, funds the construction of infrastructure such as power and water, manages the project and monitors quality.

As part of the focus on living conditions, Harmony’s catering manager and dietician monitor and audit outsourced measures to ensure a balanced diet for hostel residents.

In PNG operations, exploration camps are used while employees are on duty. Employees, however, return to their homes as a work roster enables them to spend significant time at home.

Case study – a home of your own The shortage of housing in South Africa is not news, nor is it a simple issue. Since 2009, the difficulty of securing institutional financing has significantly compounded this challenge. The South African government is doing its best to provide basic houses – the so-called Rural Development Programme (RDP) units – for the lowest-income groups, while institutional financing is really only available for houses in a much higher income bracket. It is the gap in this spectrum that Harmony is attempting to fill for its employees. By offering affordable units initially as rented accommodation with the option to own in time, Harmony is giving many of its people a welcome step up the home-ownership ladder. These houses are being developed on Harmony-donated land, with the company supplying much of the infrastructure and services, quality control and project managing each development to a point of self-management. These mixed-use developments are planned to become self-contained communities, with retail developments, religious centres and schools among the housing units. During the year, in a landmark development, a memorandum of understanding was signed between the Free State provincial department of human settlements, Matjhabeng local municipality and Harmony where the parties agreed to work together to develop vacant mine hostels into community rental units for the state. A deed of donation signed by the municipality and Harmony followed, which allowed for the transfer of land and buildings to the council and release of state funding for the project. Since then, the state has contributed over R53.6 million to the project. The transfer of land is under way after the survey was completed and the legal process should be completed within three months. A separate company, Coreland Property Development, was created to handle project finances and ensure a complete audit trail of cash receipts and expenditure to various stakeholders at the end of the contract. Five local contractors were selected following a transparent tender process for construction work on six clusters, and an electrical contractor and civil contractor have been appointed. Where contractors lacked ability, joint ventures were formed to ensure they have the necessary skills and expertise to meet contracted standards. The project uses ‘green’ features including solar heating, water recycling and domestic-waste recycling to reduce environmental impact. Ancillary buildings will host a church, clinic, nursing school, social project, paraplegic workshop, mini shopping centre and a liquor store and tavern outside the complex. The shopping centre will include a grocer, butcher, takeaway foods, hairdresser, post office, telephone, bank and clothing shop. First residents are expected to take occupation by November 2011. The entire project should be completed by December 2011 for full occupation in January 2012. We are currently establishing the company that will manage the complex under Harmony guidance for two years, after which it would operate on its own completely. Property management and access control systems are being investigated to determine the optimal solution.

Sustainable human settlement

As noted, the Masimong hostel conversion project, aimed at creating 1 600 family units, progressed well over the year. The national and provincial departments of human settlement signed a tripartite agreement with Harmony and Matjhabeng municipality under which the national department has contributed R54 million to date to the project through its community rental unit funding initiative.

We welcome this support given that the initiatives of mining companies such as Harmony are bridging a key gap in the affordable housing market – the gap between state-supplied houses (so-called RDP houses) and bank-bonded units.

In the Free State, mining accounts for the bulk of GDP, and the industry therefore plays a vital role in creating employment. In FY11, 120 young people were recruited from local communities and trained on various mining job skills. Most of these people have subsequently been absorbed into the total workforce as part of the replacement process for natural attrition.

To provide experiential training, Harmony accommodated 24 learners from various universities of technology at different operations in the company. This formed part of their mandatory practical 1 and 2 modules.

Experiential training for HDSA students

Training and development

A key sustainability objective in recent years has been to recruit, develop and retain employees through various initiatives. Integral to achieving this objective is regularly managing the performance and careers of our people. Throughout Harmony, employees are evaluated and rewarded for individual and team performance on input and output for which they are directly responsible. Importantly, however, production bonuses are directly related to safety performance.

In line with Harmony’s goal of investing in the training and development of current and potential employees, and in addition to numerous internal training initiatives, we offer skills development programmes at selected tertiary institutions.

In respect of human rights training, 70% of our workforce had been trained in FY11.

During the year, 23 365 employees (68% of the workforce in South Africa) received some form of training at a cost of R220 million.

In line with our specific focus on the training and development of HDSAs to facilitate transformation, 94% of the employees trained in FY11 were HDSAs, and 12% were women.

Our programmes are tailored around the training and development needs of our people. Disciplines and skills covered in training programmes include mining, engineering, metallurgy, ore reserve management, human resources, occupational hygiene, supervisory development, change management, leadership development and other technical and soft skills training.

Beyond the needs of our people, we address specific skills issues in South Africa, including adult basic education and training (ABET), and skills development and learnership programmes. To supplement our training initiatives, we have the Harmony Bridging School, leadership and supervisory development, and provide bursaries and study assistance to current and prospective employees.

ABET is being implemented to evaluate the level of basic education in the workforce. Six ABET centres at Harmony run full-time and part-time classes. These centres employed four superintendents, 29 full-time facilitators and 12 on a part-time basis in FY11. A total of 1 219 employees attended ABET in FY11, including classes offered to people in the community, at a cost of R46 million. Since 2007, 2 478 people have completed ABET training in Harmony.

To improve and sustain the pass rate, Harmony has an agreement with a service provider specialising in ABET programmes. This includes supplying learning material, ie learner and facilitator workbooks, setting examination papers, marking and moderating. Results have been encouraging: in the December 2010 examinations, the pass rate rose from 64% to 69%, and in June 2011 it rose again to 73%.

The group also has ABET training at all operations, from level 1 to level 4. Bursaries are allocated to successful candidates in various disciplines, although none were offered in FY11. Since 2002, 32 people have benefited from these bursaries.

Across Harmony, the literacy rate has improved from 25% in FY09 to 61% in FY11.

Harmony representatives actively participate and interact with the MQA on various committees and sub-committees regarding skills and career development for its employees.

Harmony’s Bridging School continues to support mathematics and science education at grade 12 level for previously disadvantaged matriculants. The primary aim is to improve their final results, enabling them to further their studies at tertiary level and ultimately be permanently employed. Some follow the learnership route, increasing the number of learnerships in the company.

In FY11, 20 students were selected to participate in the programme from communities around Harmony operations.

Harmony’s leadership development programme targeted 480 senior employees over four years, beginning in FY10. In the review period, another 120 employees participated in the programme which is facilitated by the University of Johannesburg and aimed at two different management levels: senior and middle. By calendar year end, some 240 Harmony managers will have completed this programme. Feedback has been positive, with good classroom interaction and performance.

The supervisory development programme, which began in April 2009, is facilitated by Maccauvlei Learning Academy. Learners attending this skills programme (72 credits at NQF level 4) are developing team leader and management skills as first-line supervisors such as shift overseers and foremen. Harmony has around 3 000 supervisors and, in time, 50% will attend this programme. In FY11, 107 employees participated.

Through its social and labour plan programme, Harmony has an ongoing programme to provide alternative skills to employees (both current and retrenched employees). This enables people to move beyond Harmony’s business. It also cushions the impact of unavoidable retrenchments for economic reasons or when our mines reach the end of their lives.

The alternative skills acquired give these employees access to employment opportunities in other sectors of the economy outside mining, and promote a culture of self-employment to improve quality of life.

The range of skills provided in FY11 cuts across economic sectors, ranging from building and construction (plumbing, carpentry, roof and finishing, bricklaying, plastering and tiling), manufacturing (brick-making and clothing manufacturing), engineering (basic welding, electrical, electrical appliance repairs, electrical house wiring and motor mechanic/servicing light motor vehicles), hospitality (catering and baking) to information technology (computer literacy).

Of the 538 employees reskilled in FY11, 48% were proxies (dependants of mine employees).

The challenge we face with this programme is to encourage more employees to volunteer in their own time to enrol for courses. To promote the benefits of the programme, our operations are embarking on various initiatives to encourage more employees to sign up.

To address skills needs at Harmony’s PNG operations, mentoring and skills development programmes continued in FY11. These programmes are supporting the company’s objective of retaining employees.

As PNG operations are in their early stages and Hidden Valley has just completed its first year of production, we currently only offer part-time ABET courses. During the year, ten employees attended ABET classes at a cost of PGK443 228. As our PNG-specific training programme is developed, the ABET offering will progress in tandem. In FY11, over PGK3 million (R1.5 million) was spent on training and development.

Due to the ongoing shortage of heavy equipment operators at PNG and MMJV’s obligations to the memorandum of agreement, we began training and mentoring locally recruited employees from the landowner areas of Hidden Valley from July 2010. In FY11, around 30 individuals benefited from this initiative.

Technical training was expanded during the year with the installation of equipment simulators.

In addition, we are using almost 50 students from the local university to help in monitoring aspects of geology and environmental management. These activities count towards experiential training and will be expanded in 2012.

The leadership development programme started in 2010 was initially aimed at supervisors at Hidden Valley. During the review period, we continued developing key performance indicators, while management and employee appraisal training began at Hidden Valley for all managers, superintendents, coordinators and supervisors. The key objective of this programme is to equip all line supervisors with team management skills. In the new financial year, formal leadership training will be rolled out.

Employee benefits and salaries at Harmony are governed by legislation or collective bargaining agreements in South Africa. Full-time employees receive more benefits than contractors in South Africa and PNG. Other than salaries, benefits provided to employees include: leave, annual or performance bonuses, housing/housing allowances, home- ownership benefits, funeral fund, medical aid, maternity/paternity leave, disability coverage, life insurance, and provident and pension funds. Share incentive schemes are in place for management. The company is in the process of negotiating an employee share option scheme which would traverse the entire organisation.

Respect for human rights is entrenched in the company’s values and explicitly catered for in human resources policies, charters and contracts of engagement. This is closely monitored by human resources and community engagement managers at operational level.

As a South Africa-based company, Harmony abides by the human rights conventions of the ILO as contained in the South African constitution. In addition, certain human rights requirements are built into contractual arrangements with new suppliers. 100% of suppliers engaged in FY11 have been screened for possible human rights violations including child-labour.

No incidents of discrimination were reported in South Africa or PNG in FY11.

The South African constitution also prohibits forced, compulsory or child labour. None of Harmony’s operations are at risk and no contraventions of these principles were alleged or reported in FY11.

Our approach to collective bargaining is detailed below.

Harmony recognises the right of all employees and contractors to freedom of association and adheres to collective bargaining agreements relevant to the countries of operation.

Labour relations in South Africa are guided by the Labour Relations Act as well as by company and mine-based recognition agreements.

Harmony recognises three labour unions in South Africa: the National Union of Mineworkers (NUM), United Association of South Africa (UASA) and Solidarity. The majority of the South African workforce (86%) is unionised and a further 2% is covered by collective bargaining agreements.

There are long established relationships with organised labour at all the operations and there is no significant risk of jeopardising freedom of association and collective bargaining. Further, Harmony has no exposure to any possibility of forced or compulsory labour due to internal processes and controls.

Harmony lost no production days to labour action during the review period.

Wage negotiations are conducted in a centralised industry forum under the Chamber of Mines. Post year end, a two-year wage agreement was signed, which includes profit sharing, after a five-day strike across the gold mining industry.

• The process of closing Virginia operations affecting 3 800 people. This was completed successfully, and without any industrial stoppages. About 2 480 employees were transferred to other Harmony operations or redeployed to support services.
• Curbing illegal mining activities: the company implemented various measures to curb the activities of illegal miners in Free State operations. These ranged from stricter access controls, limited food and liquids permitted to be carried underground, to more frequent security operations and police action.

The success of these initiatives underlines the effective engagement processes in place and the solid relationship between Harmony management teams and the unions.

• An employee share option scheme for Harmony employees.
• Establishment of a bargaining council for the gold mining industry. This has not been finalised and it is envisaged that it will be concluded by the next round of wage negotiations scheduled for 2013.
• Discussions on co-designing arrangements for the effective use of mining assets are due to start shortly.
• Issues around developing young people living in communities close to mining operations.

There are no active unions at MMJV and Harmony PNG sites. Industrial relations at the Hidden Valley site are currently managed by the employee representative committee (ERC). This ensures regular communication between management and employees through monthly committee meetings. Issues raised at these meetings are recorded and promptly addressed. Programmes to increase the committee’s effectiveness included training and coaching by external consultants. There was no industrial action at PNG during the year.

Harmony’s policy is to recruit local employees as far as possible. However, the company’s policies and procedures ensure there is no discrimination against foreign migrant labour. Foreign labour at Harmony’s operations comprise 27% of the total workforce in FY11 (FY10: 28%).

Legislation and the MPRDA guide employment equity practices and initiatives in South Africa. This legislation promotes equal opportunity by eliminating unfair discrimination and implementing affirmative action for women in mining and HDSAs in management. Harmony has a diversity management programme in place to encourage and embrace diversity across the company.

The company reports its employment equity plan and progress to the departments of labour and mineral resources annually.

Harmony’s recruitment, development and retention initiatives are focused on historically disadvantaged South Africans (HDSAs) in line with the original Mining Charter requirement that these employees (including white women) made up 40% of management in South Africa by 2009.

Commendably, given the shortage of HDSA management skills in the country, Harmony improved its employment equity status in management levels over the past year to 41.5% from 40% in the prior year.

Group employment equity in management

In South Africa, 9 218 employees (27%) comprised foreign labour in FY11.

Most employees in Harmony’s talent pools are HDSAs identified as candidates for management-level jobs. These employees are assessed, coached and mentored, and exposed to discipline-specific development panel interviews. These talent pools are presented to senior management and executives at the annual strategic planning session.

Harmony’s social and labour plans (SLPs) make provision for recruiting interns from local communities. These interns – usually qualified, but unemployed – are recruited by Harmony, with the assistance of local municipalities, for one year to gain practical experience. After acquiring workplace skills, deserving candidates are offered permanent employment. Currently, five internship employees have progressed to management trainee ranks and this number will increase significantly over the next few years.

Harmony continues to implement various initiatives to meet its SLP targets and it does so in collaboration with its regional partners.

Women in mining

In line with good practice, the representation of women across the Harmony group in FY11 was 11.5% (3 936 women) (FY10: 12%). At certain operations the 10% target has been exceeded. The group percentage of women in management was 18% and 6% (FY10: 9%) in the core disciplines of engineering, mining, ore reserve management and metallurgy.

Women’s forums were established at every operation in the prior year to ensure their active participation, and to empower women about workplace issues. These forums are also facilitating effective communication between women and management.

There is no difference between salary scales for men and women at Harmony.

PNG
Localisation

Under the ongoing localisation process at PNG, more locally resourced employees (LREs) are being recruited to reduce externally resourced employees (EREs) to around 4% by FY13. In PNG, 118 employees (9%) comprised foreign labour in FY11.

In terms of diversity and equal opportunity, PNG operations are governed by a three-year training plan lodged with the Department of Labour for approval in separate documents for each operation: Hidden Valley JV, Wafi-Golpu JV and the exploration JV.

Under this three-year plan and for the company to have EREs, the JVs are required to ensure that locally resourced employees are continuously trained and succession is managed. The first set of plans was submitted in November 2010 and approved in January 2011.

At Hidden Valley, there is now only one externally resourced employee in the human resources department who is due to be succeeded by a local employee in 2014.

The succession target of less than 4% permanent EREs at PNG is on track. The leadership development programme to run in the first quarter of FY12 will ensure the target is achieved by 2013.

At Hidden Valley the percentage of women has risen to 12%, closer to the national average of 15%. All efforts are focused on achieving the 2013 target of 17%.

Harmony has embarked on a number of local economic development (LED) (refer to www.harmony.co.za) projects in communities around our mining operations and in major labour-sending areas. These include developing small and medium enterprises, school and medical facilities, sustainable human settlement projects such as partnerships in new housing developments and converting hostels into family units.

Case study – effectively developing SSMEs Many initiatives to bring emerging small, medium and micro enterprises (SMMEs) into the mainstream economy have foundered because their owners lack basic business skills – from financial management and accounting to project management and quality control. To address this issue and ensure SMMEs are familiar with tender processes and project stages, Harmony has invested R2.8 million to establish and operate centres that offer concrete advice and guidance. These business development centres are being rolled out in two phases: Phase I establishes the infrastructure and staff, and starts development of a supplier database that complies with the definition of ‘local’ and that are 100% black-owned. The next step in this phase is to match the operational need for services using purchase order requests received from Harmony’s operations with the database of supplier profiles. Where a match is possible, Harmony invites these suppliers to tender. Phase II will see Harmony facilitating the training and development of SMME suppliers from the local community around our operations. A possible service provider was identified and the process of training in marketing, finance, tender processes, productivity and strategic planning will begin in due course. The Soweto and Welkom business development centres are currently in phase I and have 372 local HDSA vendors listed on the database. This list is still expanding, and we were able to place orders with these local HDSA, 100% black-owned suppliers to the value of R6.9 million in the past financial year.