HWANGE Colliery Company Limited has been in the news recently following a decision by the spouses of the company’s employees to picket at the entrance to the mine site demanding their husbands be paid outstanding salaries. This came at a time when the company is faced with huge operational challenges. Zimbabwe Independent Reporter Nkululeko Sibanda (NS) this week caught up with Hwange Colliery managing director, Thomas Makore (TM), for an interview. Below are the excerpts:
NS: Now that you out of the company’s closed period, what is your current financial situation?
TM: We just came out of a closed period at the end of March when we released our financial statements. And those results, which are public and can be obtained from our website, we published them in the mainstream media on the 29th of March; the results are an improvement from the year 2016. Just to give you some highlights, production improved from just below a million tonnes in 2016 to over 1,2 million tonnes in 2017. Then in terms of sales, we sold 39 million tonnes in 2016 and we have had 54 million tonnes in 2017. In terms of profitability, we are still, unfortunately, in a loss making position. However, we narrowed our losses by 51%, which I think is significant.
So we are in the right direction. We are yet to meet the targets that we have set out and the major reason why we have not met those targets is because we need to be capitalised. We need investment capital as well as working capital.
Our equipment is very old and very obsolete. So we need to re-tool so that we operate efficiently.
NS: What other signals that came out of the reviews you have done as a company?
TM: Another signal is that we are resuscitating our underground operations. We would have wanted to reach full production capacity by the end of last year but due to foreign currency shortages, we could not. However, we have secured foreign currency in the last month or so. Given this, we should be taking delivery of the remaining equipment between May and June so that by July and we will be at full production.
That, to us, is a very important development because that is our high value and high margin product. And then on the open cast side, Motor Engil is mining and we are mining as well. We are ramping towards 350 000 tonnes a month in terms of production by June or July this year.
So the situation of the company, in my view, is on the right track and right trajectory. We are accelerating. I would have loved that the pace is a bit faster but I think there are a lot of things that have to kick in so that we get to our desirable pace.
NS: You spoke about narrowing the losses by a margin of 51%, which is a high margin by any respect. What do you attribute this too?
TM: I think it has been a number of issues. First, production and sales have gone up. Secondly, I think it is the cost cutting measures that we implemented. You will be aware that we put in place a number of measures, one of which was the two weeks in and two weeks out which we did starting in 2016. Third, we also reduced employment costs. We had a lot of benefits at Hwange Colliery which we had to benchmark with a lot of other companies and we saw that we had a lot more of those benefits.
We therefore decided to trim it down to a level that is more comparable with the other players in the industry. On top of that, we reduced the numbers of contractors that are operating on the site and we negotiated the prices for the contractors we needed on site. Those are some of the measures that we did, although there are numerous to mention now.
NS: You made a clear statement that the company needs investments to come out of the woods. What type of investment are we talking about given that a few years back you got new equipment?
TM: I think you may recall that we made a statement that the company needs US$500 million. Of that amount, US$200 million will go towards the re-tooling of the company’s operations. The other US$300 million will go towards the Western Area development programme. That is the capital that we need. It could be in the form of equity from the existing shareholders, or from new investments or partners, it can be in the form of debt from banks or a combination.
NS: You say there has been improvement in production but which is yet to reach the desired levels. What other measures can be put in place to enhance production?
TM: Apart from re-tooling, we have realised there is need to re-train. I think the company’s production levels have been going down and we realise some of it has to do with capacity of the workers. We need to re-align with our culture and productivity so that we are more productive and efficient. We have new players in the sector. The days of a monopoly are long gone. We have to operate more efficiently, competitive and hungry for success.
It therefore means that on the people side, we need to be efficient and have an advantage over the other competitors. We need to ensure that our systems are efficient and that we are using the right and correct Information Technology systems that ensure that we are efficient.
NS: Should the shareholders decide to inject the US$500 million into the operations as you state, what should they expect as a return on investment?
TM: I think I said that we are in a situation where we are trying to turnaround the fortunes of the company. This means we are managing a legacy debt. With that kind of investment, we believe we can yield a return that is similar to other coal-mining companies in South Africa and in other parts of the world. Investors that are in the mining sector know that the return rate can be double digit. That is what we are offering as our rate of return on investment.
NS: We have read reports of demonstrations and picketing at the mine by the spouses of your employees. Government has also expressed concern at what has been happening. What can you tell us about HCCL’s policy towards workers’ remuneration?
TM: First of all, I have always said the most important stakeholders of an enterprise are its employees. And more so, with regard to Hwange Colliery, I give credit to our employees because they have been resilient and loyal to the company, even at the most difficult time.
It is something we are very grateful and thankful for. Having said that, I think it is always important for us to take care of the employees of the company. The scheme of arrangement we entered into last year is an attempt to say we acknowledge we owe our employees what belongs to them and therefore let us put forward a realistic plan to pay them. I am pleased to say that in terms of the scheme of arrangement, we paid the deposit as you are aware in June last year and there was a grace period of six months. From December up to now, we are up to date in terms of the scheme of arrangement.
What we did is because understand that three years is a long time to pay them their money in total, we have said that every employee and former employees will get a minimum of a salary given that there are varying levels of employees and their owing differs.
We want to ensure that they get money to a point that we are able to clear all our arrears.
NS: Now that you paid 7% deposit to your workers, are we likely to see any further payments of that nature in the near future?
TM: In terms of the scheme, we are paying every month equal instalments for the next 36 months. What is also happening is that if somebody is owed US$1 000 or less, we pay that amount at once. As at the end of March, we had paid off 471 employees. As we move forward, a lot of people’s balances will be paid off and they fall off the debt bill because we would have finalized their cases.
NS: It boggles the mind that, on one hand you are saying there are payments that have been made to workers and on the other hand, you have people picketing at the entrance of the mine demanding payments. How does one explain this?
TM: The reasons why the women have been demonstrating is that they are demanding a lump sum payment which we said we don’t have. The decision was that we do a lump sum payment last year and after that we pay equal instalments for 36 months. We have not only stuck to that plan but even more, we have enhanced that plan because we are paying, like I said, a minimum of a salary to everyone, current and former employee.
Ministers have been to the mine to try and say to the demonstrators, “let’s have a dialogue on this matter”. They have said what we can afford as a company is a salary which eventually will reduce the money we owe them to a point that we are able to totally clear the balance.