Pennywise BCL adopts austerity measures

| Friday January 23, 2009 00:00

Mmegi: 2008 closed on a low note against the background of depressed metal prices and a crippling global financial crisis. BCL is adversely affected.

Mphathi: It is really going to be a tough year with us operating below break even. It means we are losing money and we have to use our cash reserves to keep operations going. Normally you invest in new projects to expand the mine's lifespan.

In order to lessen the pain and ensure we survive as long as possible, we have to cut costs. Infact, all the inputs, including labour, which constitutes about 40 percent of our total costs.

At the moment, we are negotiating the coal price with Morupule Colliery. We buy about 100,000 tonnes a year and we are looking for a good price. If it means going somewhere where it is cheaper, we will, but currently Morupule has a better price. Suppliers tend to say costs have gone up, so we must increase prices. As BCL, we have to look at our costs and bring them down. We can't cut salaries, but with fewer people producing more the better for us.

Mmegi: You spoke about job cuts. Do you foresee further job losses if the recession persists?

Mphathi: If the depression deepens, we are likely to respond by looking at some areas. If it becomes totally untenable, we cannot survive at all. Maybe it might be worth closing some of the shafts, but we are a long way from that. 

Mmegi: Is top management going to be affected by the retrenchment exercise?

Mphathi: It is going to affect management, but not top management. It is targeted. We look closely at the work that needs to be done. This retrenchment is coupled with a restructuring of the organisation to make it more efficient. We have re-looked at the structure, and the top structure has been approved by the BCL Board.

We want to make the company work. In the new structure, we have a Divisional Manager responsible for resource planning. It was justified on the basis that we are doing exploration to find new ore bodies (in order to increase the life of the mine).

Mmegi: It is difficult to predict how long the recession will take, but what is the mine's forecast?

Mphathi: The full impact of the depression has not been felt, but it is believed that it will take between 18 and 24 months. However, we discover new things every day, which tends to exacerbate the already fragile situation. Most of it is about sentiment. Business sentiment is that nothing is going to go on and clearly doing business is difficult. 

Mmegi: Your critics could argue that it was not wise to embark on non-productive projects when metal prices were good and your balance sheet was healthy. These projects include building new office blocks and staff houses. Anyway, do you think you can see the recession through? 

Mphathi: One cannot say that they have enough to last a recession when we don't know how long it is. What we have to do is to produce consistently and drive our costs down.

That way we increase our chances of surviving the depression, however long it lasts. All employees should be contributing to cost reduction. We have to improve efficiencies. On projects, yes, they are non-productive projects but they are important to the business. This is about improving company assets.

The value of the company assets increases. If you look at housing, when you recruit prospective employees, they will compare with what other companies offer. If we don't look after these assets, we cannot attract and retain people. Housing is like a benefit; in terms of attraction and retention of skills, it is very important that these houses are in good condition and are of the same standard as our competitors'. This is a head office, and it should compare favourably with that of our competitors like Debswana.

Mmegi: Talking about attracting and retaining staff, you seem to be losing a lot of artisans to your competitors despite investing huge resources in training them? 

Mphathi: When you have not spent money on training, you can afford to offer huge amounts of money because you can poach from other companies. Other mining companies were doubling the salaries of artisans because they did not train them.

They don't provide housing and utilities. I remember one artisan who had left and said he wanted to come back after looking at what he was getting at his new environment.

If small mines started training, their operations would become unviable. We are the only mine with a smelter in Botswana and while other companies can recruit from us, we can't recruit from them in certain fields because of our specialised operations. 

Mmegi: What other issues would you like to clear up?

Mphathi: There is always this view that management does not get on well, with the Botswana Mine Workers Union. We have a healthy relationship where they can criticise us and we discuss. Where they should be supporting us, they do, like they did with the recent retrenchments.

When this credit crunch started and metal prices went down, I sat down with the union and spoke about production costs. They called me to explain how they could assist the business survive this credit crunch.

There is a good understanding of the business drivers and how the union contributes. It is not a case of demanding salary increases, although we are aware that they represent a constituency. We want a strong union that can articulate the concerns of its members.