SA loses a friend as Anglo’s Carroll bids adieu

[miningmx.com] – SOUTH Africa lost a great friend when Cynthia Carroll decided to give up her job as CEO of Anglo American.

“American CEOs tend to spin a fine image for themselves while their employment contracts last, but once they’ve received their bonuses and have left, the bugs crawl out of the woodwork,’ a well-known mining chief said to me in confidence when Carroll took over as head of the country’s biggest company.

Coleman Andrews, an American who was head of SAA for four years and left with bags of money, was South Africa’s best example of this style of management.

But with Carroll, the exact opposite happened. She spent so much money and attention on long-term projects that shareholders and fund managers ran out of patience.

When she announced her resignation, fund managers who had invested big money in Anglo shares, pointed to mistakes she had made with capital allocations like the purchase of Kumba shares at high prices, but every CEO makes such mistakes.

The real reason was that it was taking too long for her projects to start showing returns.

Carroll spent lots and lots of time in South Africa, especially to put Anglo American Platinum (Amplats) on a more healthy footing and to develop Kumba’s new mine, Kolomela. Kolomela, which started producing iron ore last year, was the most important mining project initiated and implemented under Carroll’s leadership.

The effort and attention that she put into Amplats yielded less success.

Under her predecessor Tony Trahar, Amplats was positioned as a company that would produce four million ounces of platinum per year – a figure that was hopelessly too high. Carroll tried to bring costs under control by cutting the workforce of 80,000 to just under 60,000, but she couldn’t do much about the fixed costs of the huge processing plants built in Trahar’s time.

She was intensely aware that South Africa’s platinum reserves – 70% of the world’s platinum – are the best chance for South Africa to shore up its young democracy with economic growth and job creation.

She opposed the pressure to close several of Amplats’s older mines around Rustenburg, and even to disinvest out of Amplats, with an iron will. And there was plenty of this pressure – especially as Amplats’s main rival, Impala Platinum, performed much better than Amplats in the upswing from 2003 to 2008.

Now it looks as if a serious slimming down of Amplats will be one of her last jobs before she leaves Anglo in the course of next year. Her successor may even decide to unbundle Amplats entirely out of Anglo and distribute the shares to Anglo’s shareholders.

Unlike BHP Billiton, which has made virtually no new investments in South Africa in the past decade, Anglo invested R173bn in South Africa in the past 12 years and will put a further R22bn into the country in the next two years.

As far as projects are concerned, much of the new investment will be in coal, but Anglo will also make enormous investments in social development of its workforce.

Among other things, it is going to build 23,000 houses for Anglo employees.

Anglo under Carroll understood that it’s not wise to make quick returns on investments in South Africa. The social problems in the country are too serious to ignore – investments in human development, which take longer to yield results, are as important, or even more so, than project management.

CARROLL’S WARNING

Statistics mentioned in her speech at the Pretoria University business school, the Gordon Institute of Business Science in Johannesburg, last week show indisputably that the mining industry’s direct employment figures are relatively low compared with the total workforce, the key driver of the country’s economy.

The industry employs 500,000 people, but indirect employment for suppliers to the mines for example, gives jobs to another 840,000 people. About 13.5 million people are directly dependent on these jobs.

It would have been difficult to miss the underlying message in her speech: that the social problems in the country are much more serious than is generally accepted; that more radical intervention is necessary; and that partnerships between mining companies themselves and between the industry and the government must be much more intense, especially if the country wants to resolve these problems before lawlessness and anarchy forces the country to its knees.

It’s clear that the Marikana massacre will have a serious impact on how things will be done in the mining industry, and perhaps in the economy as a whole. Requests are coming from several quarters that a second commission of inquiry besides the Farlam commission should be appointed to investigate labour relations and social conditions in the mining industry and make recommendations.

Carroll’s comments underline this: the problems are more serious than is realised and the solutions put forward so far that are not up to the task of resolving them.