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Jul 27, 2012

27/07/2012 (On-The-Air)

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Every Friday morning, SAfm’s AMLive’s radio anchor Xolani Gwala speaks to Martin Creamer, publishing editor of Engineering News and Mining Weekly. Reported here is this Friday’s At the Coalface transcript:

Gwala: Struggling platinum companies are throwing themselves headlong into market development and the stripping out of company overheads.

Creamer: This is a different strategy than we saw with the chrome miners when there was a very big dip in the demand for chrome we saw them just stop production immediately and they sent all their 6 000, with one of the companies, back to school, as it were, to be trained. This is a different philosophy now coming from Amplats, the world leading platinum miner.

They have gone headlong now into platinum market development, because they see that is where they can gain from demand. They have been too Eurocentric and this dependence on Europe has come back to haunt them now, and they are also looking to greater geographic demand, if they can.

But, the biggest thing is that they also suffer from a rich-child syndrome, they were born in times of plenty and their overheads are out of line with many of the other companies, particularly Anglo American Platinum. So they are going heavily into stripping out their overheads, that is before they even think of talking about right sizing the number of people they have got.

They have got 58 000 employees, so it is a lot of people to deal with and they want to deal with this in the correct way. They want to make sure that they are lean and mean before they start possibly downsizing and right sizing their number of people.

This market development is around fuel cells, because the loading of platinum on fuel cells is about four times more then on the autocatalysts and their biggest market is the autocatalyst. If they can go into fuel cells they get a bigger loading and they are also looking at the LED-lighting potential and all the other opportunities.

So, they have been talking to government and over the last few years they have been funding this market development, government as well with R100-million and now hopefully they can accelerate market development to build up demand for platinum. We are desperate for it.

Gwala: In a showcase achievement, South Africa’s biggest iron-ore miner has now paid out a whopping R16-billion to its black economic-empowerment partners.

Creamer: We often hear that BEE hasn’t been a success, but if we go to Kumba Iron Ore we see what a success it has been.

Six years, this company has only been listed on the Johannesburg Stock Exchange for six years – I can remember driving out to Pretoria in 2005 and watching Dr Con Fauconnier and Sipho Nkosi put their heads together and decide how they where going to unbundle those State assets at that time with Iscor.

Then they had overtures from Anglo American, which bought heavily into Kumba. 26% of Kumba was immediately given to black economic empowerment partners and the biggest of those was Sipho Nkosi’s Exxaro.

We see that his company has just benefitted hugely from the dividend flow from Kumba. He is now in a top 20 company in South Africa and also our biggest coal producer.

But if you look lower down at the 3% they gave to the community and the 3% to the workers, that community value now, the shareholding is worth R7-billion. We saw those community shareholders have been able to pay off the loan to buy those shares in four years instead of the expected ten. So they were able to get R500-million cash last year in dividends and we see the dividend flow continue.

Also, if you look at what is happening there in education, I saw one of the nursery schools I went to and it was mind blowing, all from funding from the mine and the BEE deal. Then cascading down from the 3% for the workers, was R2,7-billion that workers could cash in.

Unlike the community, which aren’t allowed to sell the shares, the workers are allowed to sell their shares, they are allowed to realise the value. We saw them do it and we saw 6 000 of them become half millionaires overnight.

Now, they have gone into a next five-year tranche, which has just begun and again they’ve been helped because they got those shares at a discount, which means they are already in the money.

So it is a great incentive for those workers now to stay on for the next five years and to wait and at least get another half million if not more and turn themselves into millionaires. It is an incredible story and there is a lot of financial fitness; they go through training on how to use the money.

The workers who have received the money have paid off their housing bonds, debts and kids education and things like that. They did prime the people as to how they should use the money.

Gwala: South Africa is embracing new building techniques in a bid to beat the housing backlog.

Creamer: We have got this housing backlog. Between 1994 and 2010 we have built 2,9-million houses, which is again not enough, but only 17 000 of those houses where built through alternative building technologies.

In other words advanced building technologies that speed up the building process and cheapen it. So, there has been a reluctance particularly by end-users. The people for whom the houses are being built don’t like anything but brick and mortar.

So, you have got to really convince them and the Eric Molobi Innovation Hub, named after the late Eric Molobi who was on Robben Island for many years and a great activist.

His whole idea was to get rid of the squatter camps and the shacks so he advocated this idea of doing research into alternative building technologies.

Now this is starting at last to come through. You see in the latest tenders being called and I’m looking at one for the Western Cape Government in Delft, they’ve actually said that you must use alternative building technologies.

So they are starting to demand it and we see even with some schools going up now, alternative building technologies are being specified. People who are wanting to test their innovations can do so at this Eric Molobi Innovation Hub.

We see them with their laboratory there. If the person submitting the test has to undertake to pay if it doesn’t comply. But if it complies, then there is no payment to be made. So it does get this through and we see that over the last seven years, they have realised where the faults are.

We see some of the houses if they have gone through because they are cracking up. Others are very robust so you can see that they are starting to get a handle on the alternative building technologies, which will mean faster building, cheaper building and perhaps we can get rid of the whole shack idea and move on to something better.

Gwala: Thanks very much. Martin Creamer is publishing editor of Engineering News and Mining Weekly, he’ll be back with us at the same time next week.

Edited by: Creamer Media Reporter
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