The coal mining sector in Zimbabwe has been hit hard by the economic downturn and an ailing transport infrastructure. Andrew Pelis talks to Fred Moyo, managing director of Hwange Colliery Company Limited, about the company’s efforts to meet the challenges head-on.
The effects of global economic instability have been far-reaching, yet few places have suffered more in recent times than Zimbabwe. As the country struggles to get back onto a firm fiscal footing, the need for investment in its rich mineral resources has perhaps never been greater.
One company that is very much waiting for the financial corner to turn is Hwange Colliery Company Limited, a coal mining business with a rich history of tradition. Today, the company is big business, headquartered in Harare and with a listing on the Zimbabwe Stock Exchange. It is a component of its stock index, the Zimbabwe Mining Index, and is also listed on the London Stock Exchange and Johannesburg Stock Exchange.
“The first point to note is that we are the biggest coal mining company not only in Zimbabwe, but in the whole Sub-Sahara region,” states managing director Fred Moyo. “We operate as an energy mining company and supply electric products, industrial coal and thermal coal.”
The colliery sits in the western corner of the country and was founded at the end of the 19th century. Mining operations are located near Hwange in the province of Matabeleland North, exactly 100 kilometres south of Victoria Falls. “It is a big area and covers roughly 20,000 hectares,” Moyo says. “The mines date back to the turn of the 19th century and are open cast. We are currently building underground pillars to help renovate some of the mines from the 1920s, to give us more opportunity to mine.”
The company’s history dates back to 1896, with the first coal coming out around 1901. Company production expanded during the 1920s and 1930s, when it was producing up to four million tonnes of coal each year. Following independence, a 750 megawatt power station was installed, which increased production to nearly six million tonnes annually. There has been a decline since about 2003; and due to the dip the company is now producing around two million tonnes each year.
“The big issue is having the right technology and equipment in place to mine,” explains Moyo. “Our main challenge is to bring the growth capacity back to the company but we have to match that with the recovery of our ailing transport infrastructure and economy.”
In recent years, as Zimbabwe entered economically uncertain times, the challenges began to mount for Hwange as the need for reinvestment in modern equipment became apparent. The domestic market has been starved of adequate coal supplies, as the company struggled to tie up operational costs and revenue available to buttress increased productivity. “There are a number of challenges holding us back and foremost is the need to improve and repair the transport infrastructure and our machinery,” says Moyo.
Crossing those particular barriers is currently proving tough for Hwange but the benefits of success will be there for all to see. “We are ideally located on the rail and road networks that link Johannesburg to the Copper Belt,” Moyo explains. “We have excellent rail links for international trade with nearby countries but the systems are now in disrepair and need to be refurbished.
“The rail and steel companies are all quasi-government operations and attempts are now being made to commercialise them,” he continues. “We are also in the market at the moment for financing and will do what we can to help improve the transport system and re-trench parts of the rail track where we can.”
The transport system is far from Hwange’s only commitment. The company is home to the country’s largest training centre of its kind. “We train all allied technical staff as well as providing management training. We have the biggest engineering training centre in Zimbabwe, as well as the biggest graduate training programme,” Moyo affirms.
The company has also invested enormous capital into developing the town (of the same name) to support a good standard of living for its 100,000 residents, many of whom also work for the company. “We are effectively the local authority,” comments Moyo. “Hwange is located very far from other commercial centres and we have to make our employees happy. We have focused on three areas of social responsibility: education, health and sport. By not doing these things, we may not be able to attract good people to work for us.
“We have invested a lot to bring doctors to the area and have also provided a lot of funding for schooling, including our current initiative to provide e-learning. We are trying to link up with broadband service providers at the moment and hope to go live in June.”
The focus on IT extends beyond social responsibility, with the company having recently invested $2 million in new software. “For a company of our size having a reliable resource planner is a must,” Moyo acknowledges. “It will enable us to audit and monitor all of our automated processes and will integrate our systems remotely. Our financial controls are critical, particularly our inventory, over half of which is electronically-driven. As a listed company, it is important that our financial reporting is transparent.” The company’s maintenance contract with suppliers is also electronically linked, meaning that they can look at machines and equipment remotely and give instructions to the company’s maintenance teams from anywhere in the world.
Moyo agrees that lack of finance compromises environmental initiatives but says the industry is now waiting to see the results of the current government review of the Mining and Minerals Act. “We are sure that there will be environmental issues that will come out of this and we recognise the importance of mining rehabilitation; but we need the capital to undertake all the required work.”
News broke in August 2009 of a meeting in Hwange between the company and a high-powered delegation of officials from the Development Bank of Southern Africa and Industrial Development Corporation of South Africa, with discussions concentrated around a $75 million deal to recapitalise Hwange Colliery Company. Opportunities for financing will enable the company to open and establish new coal fields, whilst repairing and re-equipping existing processes.
Moyo feels that the government’s encouragement of mining competition in Zimbabwe is a good thing for the client and the economy but warns of a potential downside. “The problem is that the market is depressed right now and the introduction of small operators may put a strain on the standards of the coal mining sector. It is important that we preserve the twin disciplines of mine rehabilitation and social responsibility,” he concludes.
