Insight
A community trust is an entity that manages
and administers funds for beneficiaries such as a
community. It is a non-profit body.
Independent Power Producer Procurement
Programme (REIPPP) has community trusts
as an equity beneficiary. These communities are
usually in rural areas.
A trust is a preferred option and is usually
formed by large companies that have huge
impacts on the local populations in the
surrounding areas where they are based and
operate. These industries include mining,
forestry, renewable energy spaces as well as the
sugar cane industry.
Specific parties involved include
representatives from the sponsor company and
members of the community. However, there
may also be another funder for the community
trusts that hold equity, such as the Public
Investment Corporation (PIC) or the Industrial
Development Corporation (IDC), in which case,
there will be a representative on their behalf.
Importantly, from a governance perspective,
the board can also include independent
trustees which can be chosen from
independent auditors (as an example), whose
core function is to act as a trustee and to make
sure that the remaining trustees adhere to good
governance and keep the trust objective in
mind when making decisions.
Broad based goals
Not all community trusts are created to
achieve the same outcomes and they operate
in different ways. However, all community
trusts should take into account the needs of
a community, which includes broad-based
socio-economic development objectives. These
goals should be reviewed annually or at least
every three years according to the community’s
changing needs. Moreover, for the trust to be
managed correctly, an Annual General Meeting
(AGM) must take place and documentation
needs be made available to the public.
will also impact the long-term expectation
regarding what the trust may or may not be
able to achieve or assist with. Companies must
also take time to educate the elected trustees.
If the trust is already being established, it
is best to have interim trustees manage the
general setting up of the trust. This will provide
a window period to educate the community
about the rules and governance of the trust,
what it means to be a trustee and what the
trust deed objective is, i.e., the aim of the trust.
Rotational board members
Positive impacts for the
community
Broad-based goals by community trusts are
very important as 99% of community trusts are
set up in rural and impoverished areas. Even if
the equity share is only 2.5%, this can still have
a positive impact on a community of 30 000
impoverished people. These broad-based goals
should include upskilling to allow people to
become more employable.
For example, if one of the projects of the
trust is to sponsor the building of a school,
then the trust should use skilled people from
the community like builders or bricklayers.
They should have side projects that can upskill
workers while working on the project.
Engagement is vital
Where a community trust is not constituted
correctly some community members may have
unrealistic expectations. Often, they are under
the impression that because there is equity
in a company it means that they are entitled
to financial benefits, including immediate
cash pay-outs. Or they may feel that they
have the right to dictate to the leaders of the
community trust as to what needs to be done
with the projects. This behaviour may be the
result of the fact that the community did not
participate in the setting up of the trust and
the fact that they are shareholders is often only
discovered after the establishment of the trust.
There needs to be engagement and
education about the trust prior to its
establishment. This includes ways of engaging
between the respective parties. For example,
community members may have little or no
formal education. The appointed community
facilitators should find innovate ways to
engage with the community members in order
to achieve realistic goals and objectives. This
The trust is normally governed by a board of
trustees and this should include members of
the beneficiary community (in the case of a
community trust). In many instances, however,
this is not the case. In poorly constructed
trust governance structures, individuals who
exercise authority may use the trust for their
sole purpose of personal gain. This equates
to corruption and is a criminal offence. In
order to combat this, regulations and rules of
engagement must be clearly defined, agreed
upon and documented as such by all relevant
parties, this may include the trustees and the
trust sponsor, for example.
It is recommended, specifically for
community trusts, that the trustees should
work for the trust voluntarily in order to curb
corruption and ensure that they are not there
for financial gain. Another suggestion is to
have rotational board members of the trust,
whereby trustees cannot serve on the board for
more than two terms and therefore need to be
replaced every six years. Additional community
members should also be trained in order to act
as “stand-in” trustees, as and when required.
This will allow for continuity and for peer
oversight.
In order for community trusts to continually
provide positive outcomes and work the way
they were intended to, it is important to
implement appropriate governance processes.
Companies should therefore take the time to
educate the beneficiaries and ensure trustees
are rotated regularly. Moreover, in addition
to annual general meetings, trusts must be
reviewed and monitored frequently. This
will ensure all involved will work with one
objective in mind, and thereby limit unrealistic
expectations from arising.
Janine Espin is the managing director at
Economic Development Solutions (EDS).
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[40] MINING MIRROR JULY 2019
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