Traditional owners high on Rio's agenda
When Sam Walsh
decided to offer every Aboriginal teenager who passed year 10 a traineeship with Rio
Tinto, nervous executives
cautioned him against the move. The fear was it would open the floodgates for a mass of applications, and disappointment.
"I said, 'let's do the numbers'," Walsh recalled. "As it turned out we were not opening the floodgates, the numbers were a manageable 1650, which to me was a seriously good response."
Today, 80 per cent of indigenous apprentices and trainees make it through the company's recruiting system, one that teaches life skills as well, such as personal finance.
There is no obligation on
any of the recruits to stick with Rio Tinto , but the company is Australia's single biggest employer of
"If they stay on and work for us that is fantastic.
"If they do not, then at least they have had a good education and a good background in business behind them," Walsh says.
Walsh is a committed to open and direct engagement with
traditional owners whether in the
Pilbara, Canada or Africa. More importantly, he does not see such engagement as a cost, but an important advantage when it comes to maintaining Rio's
position as the world's most
efficient producer of resources - especially iron ore.
"We are not doing it to
pointscore and I am not doing it because of the competition. I am doing it because it makes good business sense and it is the right and proper thing to do," Walsh told Business Day shortly before he was elevated to be chief executive.
"But we are not the Salvation Army ... there has to be a business case for everything we do."
As head of Rio's iron ore operations - accounting for 80 per cent of the company's annual
earnings - Walsh pushed the
multinational into more meaningful engagement with local communities, striking agreements with five Pilbara traditional
Now that he has ascended to chief executive, Rio will push ahead with Walsh's grand plans.
"I had a vision of us engaging with local communities - a target of 650 Aboriginal employees and $1.5 billion in contracts with Aboriginal businesses - and we have since made seriously good
progress on both fronts."
Walsh's 50-year vision for the Pilbara factors in further indigenous participation. "Rio is the lowest-cost producer, we are a proximate supplier to China, which is where the growth has been occurring, and beyond China there is India and south-east Asia."
Despite hefty fluctuations in iron ore prices Walsh does not see any "bust" looming.
"Rio is continuing to expand operations in the Pilbara. We will move from 290 million tonnes next year to 360 in 2015. I am sure there will be expansion beyond that."
Philosophically, Walsh follows closely in the footsteps of the legendary Leon Davis who, 15 years ago, steered the company (then known as CRA) out of the political quagmire of mining industry belligerence over land rights, land use agreements and the payment of meaningful royalties. Davis opted for negotiation and compromise based on cultural respect.
In the recent ABC Boyer lecture series, Professor Marcia Langton, chair of indigenous studies at Melbourne University, spelt out for the first time the rapidly changing economic landscape for indigenous Australians.
Last year in the Pilbara Rio and Andrew Forrest's Fortescue Metals (FMG) employed 1300 Aboriginal workers and awarded contracts worth $300 million to 52
Walsh defends Langton and her research, which has been attacked by environmentalists and Greens, who allege a lack of research
funding transparency. Wash says her conclusions have led to
profound cultural change within the company. "She is in touch with people on the ground and knows what works. We do not always get it right, there are hiccups from time to time."
Those so-called hiccups include claims by Aboriginal contractors that some lower-ranking managers have resorted to old boys'
networks and racial intolerance to sideline them in the tender process. "Those reports disappoint me, but I am not surprised because we are a very big organisation and it is sometimes difficult to get the message to every individual, even when it comes to safety and care for the environment."
Today, Rio is striving to contain costs through highly sophisticated computerisation that includes driverless trucks and trains and security systems operated from Perth. Latest figures show it is spending $1.6 billion with indigenous contractors in the $23 billion expansion of iron ore production.
No other company comes close, with the exception of FMG, locked in a long-running dispute with the Yindjibarndi people.
Walsh says there is nothing
contradictory about the need to slash costs inflated by the rising price of materials while expanding indigenous involvement; significant synergies exist between both
objectives. "The truth is we are changing the nature of jobs, they are becoming more sophisticated, but we still need people to carry out maintenance and repairs."
Russell Skelton is a contributing editor. Rio Tinto assisted with his travel in the Pilbara.
InvestSMART FORUM: Come and meet the team
We're loading up the van and going on tour from April to June, with events on the NSW central & north coast, the QLD mid-north coast and in Perth, Adelaide, Melbourne, Sydney and Canberra. Come and meet the team and take home simple strategies that you can use to build an investment portfolio to weather any storm. Book your spot here.
Want access to our latest research and new buy ideas?
Start a free 15 day trial and gain access to our research, recommendations and market-beating model portfolios.Sign up for free