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Compensation framework

Lungs [illustration] While it is crucial to keep improving our understanding of and expertise in dust management and disease prevention, our aim is to ensure that all former and current mine employees who have contracted occupational illnesses from their employment are adequately compensated.

South Africa has two compensation systems, one governed by the Occupational Diseases in Mines and Works Act (ODMWA) and another governed by the Compensation for Occupational Injuries and Diseases Act (COIDA). Most mineworkers in South Africa are covered by ODMWA for occupational lung diseases, based on a state-determined assessment of whether or not a mine is 'controlled'.

Mining companies contribute certain amounts to an ODMWA-based compensation fund. The certification process, determination of impairment, and processing and payment of compensation are undertaken by the state.

Over several years the administration of the ODMWA fund deteriorated severely. The Working Group has worked closely with the current Compensation Commissioner to address this challenge. This is described in more detail below.

How is compensation currently governed?

ODMWA is more than 100 years old and was last amended in 1994. The Act provides compensation for OLD among current and former mineworkers and employees in controlled “works” only. ODMWA provides for post-mortem benefits for mineworkers if an OLD is found – even if it was not the cause of death. ODMWA pays lump sum benefits based on the level of impairment and does not make any further pension provision.

COIDA was promulgated in 1993. It covers occupational injuries and diseases in all industries, including those in the mining sector that are not covered by ODMWA – for example, noise-induced hearing loss (NIHL).

Source: National Institute for Occupational Health

The operations of the Medical Bureau for Occupational Diseases (MBOD), established in terms of ODMWA, are a government function, although the funds distributed to eligible claimants are sourced from regular employer contributions.

In 2004, our companies initiated a dialogue, with the Department of Health and organised labour, aimed at improving access to compensation for former mineworkers. Out of that was established the multi-stakeholder Former Mineworker Project, which included a pilot programme being rolled out to assist rural hospitals develop the capacity to examine former mineworkers and assist them with compensation applications. The MBOD was part of that project, along with the NUM.

In addition, the Chamber of Mines has provided financial assistance to the MBOD/Compensation Commission for Occupational Diseases (CCOD) to set up ’one stop‘ occupational health services for former mineworkers in Mthatha, Kuruman and Carletonville. The companies involved in the OLD initiative also partnered with the MBOD to launch Project Ku-Riha.

What compensation do sufferers get?

Currently, compensation in terms of ODMWA is a lump sum payment of R105 000 for 2nd degree silicosis and R47 160 for 1st degree silicosis. The combination of silicosis and tuberculosis (TB) is classified as 2nd degree.

The companies are seeking a comprehensive, fair and sustainable solution to the compensation challenges of OLD in South Africa for all concerned.

The companies are actively supporting the multi-stakeholder initiative being championed by Mineral Resources Deputy Minister Godfrey Oliphant to ensure that new employees are covered by the COIDA compensation fund.

The main reason we are supporting this change is that it provides a clean break with the past and ensures that all future employees will be compensated in terms of COIDA, which not only provides superior benefits to ODMWA but also includes an employer indemnity, in line with many other international statutory compensation schemes for occupational diseases. The COIDA fund, which is managed by Rand Mutual Assurance where mineworkers and certain others are concerned, has also been administered more effectively in recent times.

In addition, settlement talks are underway with legal representatives of claimants in the so-called ‘class action litigation’ to ensure that past and present mineworkers, eligible for ODMWA compensation, will also be eligible for an additional payment from an envisaged settlement fund.

 COIDAODMWA
Responsible government department Department of Labour Department of Health
Administration cost Included in levies on employers Borne by the state
Applicability

All employers and industries (including mining)

Controlled mines and works
Cover

All occupational injuries and diseases, excluding six defined compensable diseases acquired in controlled mines and works

Six defined compensable lung diseases in controlled mines and works

Compliance with international norms and standards

Fully compliant and, in some instances, exceeding Non-compliant

Protection for employers against civil actions

Provided (Section 35) None
Medical care For two years or longer under certain circumstances Lifelong subject to certain conditions

Maximum salary on which compensation is based

R312 480 a year R36 000 a year

Benefits

Total temporary disablement

R9 000 per month for a maximum of 12 months, irrespective of cause (any occupational injury or disease) R9 000 per month for a maximum of six months for TB only
30% (or less) permanent disablement

Lump sum equal to 15 times monthly earnings, subject to a maximum and minimum of R218 760 and R54 675 respectively, and for lower percentages, a proportional lesser amount

(For a 55 year old employee with earnings of R144 000 a year, or R12 000 a month, this works out to a R180 000 lump sum)

Lump sum of R47 160
100% permanent disablement A monthly pension equal to 75% of monthly earnings up to a maximum and minimum of R19 530 and R3 733

(For a 55 year old employee with earnings of R144 000 a year, or R12 000 a month, this works out to a monthly pension of R9 000 for life, based on a capital value of R1 350 000 at age of 55)

Lump sum of R105 000

Recent processes

There are three legs to the compensation initiative:

  1. Shifting future employees to COIDA: This not only provides superior benefits for OLDs but also includes an employer indemnity, in line with many other international statutory compensation schemes for occupational diseases. We are engaging with government and labour in this regard.
  2. Improving the administration of ODMWA: The statutory compensation fund governed by ODMWA has been poorly administered for many years. We have been working in co-operation with the Compensation Commissioner brought in to fix it to address administrative issues, as is the Chamber of Mines. The goal is to ensure that all eligible former and current employees receive the compensation to which they are entitled. See also:
    1. Department of Health and eight mining companies partner to enhance compensation system
    2. Project-Ku-Riha-Fact-Sheet
    3. Work done in support of the occupational health compensation system
  3. Settlement Fund: The companies do not believe that they are legally liable for further compensation and are defending the claims against them. However, we do believe that we and the claimants have a common interest in settling this highly complex case that could take 15-20 years to finally resolve through the courts, with continuing uncertainty, and would cost hundreds of millions of rands in legal fees for all sides. Our legal representatives are therefore in talks with the lawyers representing workers who have brought the legal suit with a view to seeking a fair and sustainable settlement. We have in mind the establishment of a settlement fund that will pay eligible claimants a settlement amount over and above the statutory compensation to which they are entitled. Good progress has been made, to the point that, by mid-2017, the six companies announced individually that they were making financial provisions based on their estimates of a settlement cost. As each company has used different methodologies, it is not possible to accurately aggregate the provisions, but the table below indicates the detail of each company’s provisions. In addition, the companies and the claimants’ lawyers applied for and were granted in January 2018 the postponement sine die of the appeal hearing in the Supreme Court of Appeal.
  4. Silicosis and Tuberculosis class action provision by company
CompanyNominal amountDiscounted amountUnstated whether nominal or discounted
       
ARM R417m R330m  
Anglo American     $101 million
AngloGold Ashanti Pre-tax undiscounted amount of $77 million Discounted pre-tax amount of $63 million ($46 million post-tax)  
Gold Fields US$39.5m (R509m) US$30.2m  (R390m)  
Harmony     R 917million (US$ 70 million)
Sibanye     R1,1 billion (US$82 million)