Mzila Mthenjane is Executive Head, Strategy and Stakeholder Engagement at Exxaro Resources. He is a mining engineer with more than 20 years’ combined experience in mining and investment banking. This includes seven years in deep-level gold mining at AngloGold Ashanti and Gold Fields Limited in senior mine management and corporate development roles, respectively. Mzila has also worked for six years in investment banking at RMB and Deutsche Bank, and over six years as Executive: Business Sustainability at Royal Bafokeng Holdings and Royal Bafokeng Platinum before joining Exxaro in his current role in May 2013.
GlobeScan Africa Director Anneke Greyling recently interviewed Mzila to gain insight on the value Exxaro puts on stakeholder intelligence to help build recognized leadership in an uncertain world.
What does it take for a business to be successful in South Africa today?
For one, understanding the competencies required to be sustainable and to develop in a sustainable manner. One way of doing this is through “systems thinking.” This is the general sense of your presence in a bigger context – as a company you exist within the context of society. You don’t operate in a vacuum. Therefore understanding that what you do will impact those around you, and that those around you will impact what you do. Having such a perspective is an important skill and competency is one of many pillars needed to build a sustainable business.
Stakeholder engagement is also important, as is the knowledge that you can’t engage with everybody equally all the time. You need to define that part of society that is relevant to achieving your business objectives. That is where the stakeholders come in. A desire to contribute to the improvement and development of the country makes for a successful company.
How do you deliver to the expectations of those stakeholders? That is where business strategy comes in. You define what you want to achieve in terms of the opportunities that you see, but at the same time recognize that there are a number of stakeholder expectations that also need to be met through that strategy. In South Africa, we speak of the triple challenges of inequality, unemployment and poverty – a strategy that contributes to addressing these challenges will make a business in South Africa successful.
Lastly, being “tuned in” as a business leader is crucial to success in any environment. It comes back to the issue of “systems thinking.” As an individual, you have to be tuned in and be aware of yourself as a leader, as a person, how you affect others, and how you are affected by others. This should be extended to the business and the decisions being taken.
Do you think that “corporate” South Africa is tuned in?
It is tuning in, some more than others perhaps. As the South African context is changing, we are seeing sub-communities such as youth, women, NGOs and special interest communities developing and establishing leading and assertive roles in society. Everyone wants to belong to a clearly identifiable sub-community, and be empowered to engage on issues that affect them so that their interests are attended to. Not being tuned in given this changing environment carries the potential for irrelevance.
Local host communities have become a lot more assertive about their issues and how they are being affected. Business is one of the most influential activities in society, so we are being challenged to be more tuned in and to understand community expectations to help effect change.
It is important to respond to change. Focusing on emerging trends, trying to be ahead of the game to anticipate future trends and shape how those trends will impact us – these elements are important and South African companies will be more successful as a result of being responsive to their surrounding environment.
If you look toward the next five to ten years, what would you say will be the top challenge for Exxaro Resources with respect to building a recognized leadership with your stakeholders?
We are a coal company. We produce coal for electricity generation in South Africa. We have ambitions to grow. We do have doubts that we can grow through coal, while recognizing that coal is an important source of energy for South Africa and certainly for the continent. There is an immediate future within which we could continue to survive, but beyond that is where we are paying attention as well in terms of what is next after coal. We are looking for new opportunities beyond coal.
To what extent is Exxaro Resources clear on its role in society?
We are very clear and it is a clarity that evolves all the time. At Exxaro Resources we often talk about how important it is for us to make sure that we keep the lights on because that is the end use and the end purpose of the product that we provide. We recognize the importance of energy availability and its impact on the growth of the economy. Given the challenges that we are facing, economic growth is critical to addressing the issues of inequality, unemployment and poverty as well as diversifying the economy further for resilience.
Further, for a company that was born out of the country’s transformation agenda, continuing to play a role as a transformation agent is a priority. For Exxaro Resources, it is about how we contribute to a holistic transformation of the country. Firstly, by how we facilitate transformation in terms of Black Economic Empowerment (BEE) and the Mining Charter and perform to the best of our ability in terms of the matrices that have been defined. And secondly, given the nature and the size of Exxaro Resources within the economy of South Africa, continuing with a reliable, safe and cost-effective supply of coal for electricity generation, and thirdly seeking collaborative relationships with government of the countries we invest in for co-investment in transformative projects.
Thinking about your stakeholders, how much are the expectations for business changing?
They are changing considerably. Exxaro Resources and business in general is a major influential economic activity in South Africa and our operations are located in the poorest areas of the country where people are in greatest need. Being the only economic activity in those regions, it is important to pay attention not just to those local host communities but also to government relationships in terms of socio-economic and environmental development. The expectation on business is to maintain a balance on these three issues as well as actively engage stakeholders to develop solutions together.
The challenges facing our country are vast and Exxaro Resources has specific skills and resources that we can apply in partnership with Government to address some of those challenges to effect change and transformation.
What current or future opportunities for stakeholders are you most excited about?
It is important to understand the kind of impact that we can have with some of the projects that we have chosen. Firstly, our expansion projects in the Waterberg with the potential to supply a coal-fired independent power station. We look forward to providing employment benefits and further stimulus to the economy of that region. We are also planning a coal project in the Belfast region. In both instances environmental concerns will be a high priority and proactive engagement with stakeholders has begun to address these issues. The national economic benefits in terms of electricity generation and treasury earnings should also be recognized. We have also completed our 5-year Social and Labour plans. We’ve placed great emphasis on education and infrastructure development programmes as well as impact of these projects. In this regard Exxaro started developing the Social Return on Investment (SROI) indicator with KPMG in 2013/14, which quantifies the level of impact that a project has had on beneficiaries in the form of a ratio. In order to have a positive impact we need to generate a score of more than one and the greater the number above one, the bigger the impact of the project. The community specialists at each mine have been trained to apply the SROI methodology for each LED, SED and SLP project and we are aiming at increasing the SROI threshold ratio to above 5:1.
What excites me about this SROI is that we need to get to a point where the implementation of social development projects is approached in exactly the same manner as mining development projects. The project management body of knowledge is fully applied to mining or other infrastructure projects and there is an expectation of a return. That same approach and expectation needs to apply to social development projects given our aspiration for the kind of difference we want to make. This is where the Exxaro Resources SROI comes in. The Exxaro community development team is now starting with SROI 3, which entails measuring each project with similar rigour as traditional engineering or civil projects.
What challenges or opportunities are Exxaro Resources and the mining industry facing in the next five years?
Firstly, as an industry we are facing lower commodity prices arising from the supply/demand imbalance of commodities which is driven by significant changes in the economic structures of our commodity markets. The companies that will survive this duration will have taken on the challenges and made the necessary changes to adapt to a new operating environment. The mining industry is cyclical and has structural economic issues that must be addressed, which means that prices may not go back to the highs that we have seen in the past five years. From an Exxaro perspective, it is a period of uncertainty which will provide both opportunities and challenges. We’ve successfully implemented an operations excellence programme which is delivering satisfactory results, although over a short period. We continue to review our operating model (to extract inefficiencies) and portfolio of operations and investments to improve value creation. These initiatives will position us for the new business operating environment. It is a period which will also provide a great opportunity to consider the long-term future of Exxaro beyond coal.
Bringing down operating costs to maintain some profit level is a key characteristic of this new operating environment but increasing our engagement with stakeholders such as Government, employees and Unions will continue to be important in order to strengthen relationships and build resilience within the business. We will not cut back on our responsibility and accountability to our communities so our planned social development projects will continue.
What are your future ambitions for Exxaro Resources?
We are already recognized and acknowledged for our performance and contribution to sustainable development and want to continue to make a positive contribution within South Africa. We will continue building on this ambition and play a leadership role both in South Africa and the continent. We are fortunate to be located on the African continent, given the opportunities that Africa offers for a resource(ful) company.