Retirement and medical plans

All permanent employees must belong to a definedcontribution retirement fund. By definition these are fully funded with no employer funding liability, and all recognised funds are registered with the Pension Funds Board. These are adequately funded as per the latest actuarial valuations on 31 December 2007 available from the funds.

The rand value of all employer contributions to retirement funds for the year was R166 million (2007: R144 million).

The challenge faced by corporate South Africa remains unresolved in terms of pending legislative amendments that aim to make membership of a national basic retirement fund and medical aid compulsory. Draft legislation is only expected in mid-2009, after which the group will prepare an appropriate action plan.

Medical aid membership is voluntary under agreements for employees in the bargaining units at Exxaro Resources, Exxaro Coal and Glen Douglas Dolomite. At all other group employers and for the management and specialist category of employees, medical aid is compulsory.

At 31 December 2008, Exxaro had 8 038 employees (79,3% of the workforce) who belonged to medical aids with stipulated employer subsidies, representing R51 million (2007: R61 million).

Accredited medical aid funds have been structured to exclude any employer liability for post-retirement medical benefits in respect of either existing or past employees. However, there is post-retirement medical liability for certain employees of Matla Coal as well as Namakwa Sands. The employer liability at 31 December 2008 has been actuarially valued and is appropriately disclosed in the financial statements and in the financial review.

Market presence

Approximately 74% of all employees’ remuneration is based on collective agreements with trade unions determining minimum wages for each grade. Other employees’ remuneration is based on performance and market competitiveness.

Less than 1% of the workforce is governed by sectoral determinations issued by the Department of Labour for farm and forestry workers. Those employed by the company are substantially better off than the minimum requirements stipulated by the Basic Conditions of Employment Act. In all cases, minimum conditions of employment in Exxaro exceed the requirements of the Act.

Distribution of employees per region

Generally residents from local communities are employed at business units, except in areas where specific skills are not available. About 70% of employees at the various business units are recruited from local communities.

INVESTING IN RESEARCH

Preferential procurement practices

Exxaro continues to follow the narrow-based standard for mining houses in reporting expenditure with historically disadvantaged South Africans (HDSAs). Hopefully, this statutory anomaly can be addressed in the mining charter review scheduled for 2009 to deal with confl icting legislation specific to the mining industry (codes of good practice from Department of Trade and Industry (dti) versus stipulations of Department of Minerals and Energy). The availability and capacity of rating agencies verified by the South African National Accreditation system remains a challenge in transforming the supplier industry.

Exxaro has policies, guidelines and systems in place to promote procurement from HDSA companies in the stipulated categories of capital goods, consumables and services. As a group, we have long given preference to companies that demonstrate HDSA involvement, development and support in ownership, management and skills development.

Over the years, we have tracked our performance on procurement from HDSA companies, which indicates good progression from 2004 at 16%, 2005 (24%), 2006 (37%) and 2007 (35%). The target for 2007 was specifically set at 35% to provide for the introduction of the dti’s codes of good practice. The performance for 2008 was a commendable 39% against a target of 40%, infl uenced largely by the transition to the dti codes. In rand terms, this represented R2,36 billion spent with HDSA-owned, -empowered and -infl uenced companies. The target for 2009 is set at 45%.

Close monitoring, tracking and stakeholder engagement continues to ensure strong partnerships with suppliers. Exxaro’s major suppliers are encouraged to transform, and secure accreditation in line with the codes of good practice, but with an indication of their narrow-based status.

In line with Exxaro’s future expenditure, companies that are likely to have increased and longer-term business relationships with the group are viewed as strategic partners for transformation. These suppliers are encouraged to form partnerships with local HDSAs in areas of group operations. We also encourage transformation in areas such as employment equity, skills development, enterprise development and employee share ownership plans.

Accurately tracking spending on suppliers by category – as required by the mining charter – remains an industrywide challenge. The targets shown graphically are annual percentages, and reporting is in line with the current mining charter.

Procurement from HDSA

Preferential procurement targets