Powering possibilities through enterprise development | EXXARO

At Exxaro, investment into enterprise and supplier development (ESD) is being embraced and prioritised. The mineral resource company, which has proven its commercial resilience by diversifying its interests into renewable energy, demonstrates thinking that is both strategic and socially aware while remaining mindful of the need to future-proof its business beyond mining. With operations across some of the poorest nodes of the country that traverse the coal belt, Exxaro is well placed to use its influence and footprint to build a socially inclusive business that not only invests in local communities, but leverages its own assets and resources to create new opportunities for the economically excluded.

Exxaro’s broader corporate social responsibility strategy is aligned with the National Development Plan, the Integrated Development Plans of the municipalities in which it operates and the global Sustainable Development Goals. It is committed to being a positive force for social change and economic empowerment.

Following a recent review of its socioeconomic development strategy, Exxaro will continue to invest in education, health, environmental and ESD initiatives, in order to build sustainable communities and create shared value.

Creating shared value

While achieving legislative compliance in accordance with the Mining Charter and Broad-Based Black Economic Empowerment (BBBEE) Codes of Good Practice are important benchmarks for performance, they are not the only driving factors influencing Exxaro’s approach to corporate citizenship. ESD is embedded in the company’s approach to both sustainability and economic empowerment and Exxaro’s performance indicators take an integrated view of success that considers supplier diversity, building sustainable enterprises, driving innovation and achieving social impact in a holistic sense.

Exxaro is regarded as one of the landmark mining companies

that exemplified black economic empowerment from its outset and has been at the forefront of transformation for more than a decade. By applying some very astute lessons on how to develop a socially inclusive enterprise, Exxaro is helping to build sustainable supply chains and emerging enterprises.

According to Lusapho Njenge, manager of Exxaro’s ESD programme, who has nearly two decades’ worth of experience cultivating emerging enterprises and supporting entrepreneurs, the first three years of an emerging enterprise’s life are critical to its future survival. “Investors need to commit long-term support to build systems that not only develop the business but also invest in the person,” explains Njenge. 

Exxaro’s strategic approach to development:

Legislative complianceAll Exxaro’s business practices are aligned with the regulatory framework that governs mining. The ESD programme therefore functions inside the parameters of the Mining Charter, while readying itself for the anticipated revised iteration. Exxaro complies fully with all DTI Codes of Good Practice and aims to achieve a level 3 BBBEE rating by 2020.

A self-sustaining programme | Exxaroassuresfinancial sustainability of the enterprise development programme by offering blended financing options that may include either no-interest loans, low-interest loans, grants and equity options or a combination of all of these. The available ESD fund is currently in excess of R200 million.

Supplier diversity | Underpinned by transformation targets that prioritise black, female and youth-owned enterprises, Exxaro is committed to bringing new suppliers into its value chain that meet the highest level of preferential procurement scores. It also invests in a diversity of suppliers so as to de-risk concentration and an uncompetitive supplier base.

Innovation | Exxaro chooses to invest in emerging enterprises with high growth potential that can rapidly expand, to create broader societal economic returns and employability. It also actively seeks out businesses outside of the mining value chain, in sectors such as agri- services, water solutions or renewable energy, with the understanding that mineral resources are finite and succession planning is key to economic sustainability.

Social impact | By responsibly investing in commodities that can be safely mined while economically empowering people, the company’s success relies on strong collaboration and relationships with its host communities. By focusing on social cohesion and sustainable community development informed through stakeholder consultation, Exxaro aims to have lasting social impact that not only creates employment but improves the quality of lives for its suppliers, employees and communities. 

From finance to farming

Thulani Dube recently benefitted from an enterprise development grant that will help him scale and automate his poultry business. Located in Bronkhorstspruit, Dube has emerged as a highly adaptive entrepreneur who left behind a career in finance to embark on a new path in farming. After a commodity downturn in 2016 Exxaro was forced to offer voluntary retrenchment to some of its workers and Dube was among those affected. Rather than face the discouraging shortage of jobs and an indefinite term of unemployment, Dube used his severance package to purchase a piece of land and set up a chicken broiler operation.

While many emerging farmers feel poultry is a tough market, crowded out by cheap imports and weighed down by high input costs and health regulations, Dube saw only opportunity for growth.

Inspired by his namesake and family totem, Dube (which means ‘zebra’) named his business Zebra Force General Investments (ZFGI). ZFGI Monumental Chickens is the first entity that was created out of this holding company and Dube has imitated the diversified success of his sponsor by expanding into building contracting, carried out under ZFGI Construction.

While he has no technical training in farming, he embraced the new challenge by studying up on farming using online resources. He also completed an MBA at Stellenbosch University to solidify his business acumen. From Exxaro’s perspective, it is likely the quality of the candidate who showed strong leadership, financial literacy and an already operational business, that made for a compelling funding application.

ZFGI Monumental Chickens received an R8.9 million grant for capital expenditure and infrastructure improvements that will enable the business to triple its existing annual turnover of R4 million – provided off-take agreements can be secured.

Modifications to the existing six chicken houses that will automate clean drinking water, heating and feeding for the chicks until they reach their full size, will enable Dube to more hygienically and efficiently increase his brood from 16 900 to 52 000 birds per coop. The investment will also provide solar fencing to secure the perimeter, and contribute to the construction of employee housing for 20 staff members.

“I see many farmers collapsing under the weight of input costs, so if we can reduce our cost burden of electricity by using renewable energy and eventually produce our own chicken feed,we are likely to be more profitable,” explains Dube.

He also has plans to build a new abattoir facility that will further assist in saving outsourcing costs and essentially create a circular economy by selling the chicken manure to fresh produce farmers.

In return for the R8.9 million grant that is being strategically applied to expand the business, Exxaro will be credited with building a commercial-scale agribusiness enterprise that employs 20 people directly and benefits up to 100 people across the value chain. 

From mining graduate to contractor

In the eyes of Moshe Mohutsiwa, a recent recipient of both a loan and a grant, the Exxaro ESD programme has been the stuff of dreams. Mohutsiwa, who is the founding partner of Tshiamo Resources, was recently awarded a 12-month contract to provide mining rehabilitation services at Arnot Coal Mine.

A recent Masters graduate in mining engineering, Mohutsiwa has been working in the mining sector for over 10 years and believes that he would not have been ready to build his business responsibly without the discipline and skills he acquired in employment. Now, operating independently, Tshiamo Resources has grown organically over five years to offer commodity trading services in minerals, consulting services and contract mining. Mohutsiwa is now applying his knowledge in the field to remove mine water, close down shafts and rehabilitate the opencast pit at Schoonord.

While Tshiamo was successful in obtaining a contract worth R18.3 million from Exxaro that will conclude in September 2019, the young state of his business meant a substantial amount of this would have been directed to plant hire to service the project. Funding in the amount of R13.7 million, made up of a no-interest loan of R12.8 million and a grant of R915 000, has enabled Mohutsiwa to purchase a new hydraulic excavator and two articulated dump trucks that will now become working assets of the business – allowing him to secure future contracts more profitably. In return, Mohutsiwa can employ 18 people for the duration of the contract and will likely retain four as permanent staff to operate and service the equipment on future projects.

For Exxaro, the social impact of 18 jobs created is immediate and for Tshiamo Resources, the loan and grant that may never have been secured through a commercial bank because of an absence of historical turnover, has created a motivated entrepreneur. Thanks to Exxaro, Mohutsiwa is well on his way to building a sustainable business that will be profitable in just two years. 

Vision for an empowered future

In 2017, Exxaro had exceeded the Mining Charter requirements by 40%, by procuring 70% of its capital expenditure needs and 80% of services from BBBEE entities. Efforts to empower more people with disabilities through ESD and employment are being strengthened.

Diversity lies at the heart of its sustainability strategy. The rationalisation that a dependency on mining when minerals are a finite resource, with commercial success often largely determined by external factors such as markets and commodity prices, has led to Exxaro investing in other sectors. By leveraging its existing assets such as rehabilitated land, Exxaro is growing its investments in agriculture and the resulting agribusiness value chain, water solutions and renewable energy.

Exxaro has been ramping up its commitment to ESD by improving systems and processes that will make management and monitoring of the ESD fund function better. Enterprise walk-in centres are now available at all mining locations for communities to inquire about opportunities and business support is available to assist with proposals and budgeting. New streamlined processes mean that beneficiaries receive their grants and loans timeously and mentorship support is available for fledgling businesses in need of shepherding. 

Business in Society Handbook, 2018