COVID-19 resulted in a massive scale down of operations in the mining sector, the pandemic has caused supply chain disruptions and these disruptions have had ripple effects on the global economy. South Africa is the world’s largest producer of platinum, chrome ore and a major miner of gold, diamonds and coal. The lockdown restrictions in response to the pandemic have affected the mining industry, which contributes immensely to our country’s GDP. However, despite gradually restarting operations after the nationwide lockdown, there have been some concerns on where the sector should focus its efforts in order to survive in the new “no touch” economy.
Leadership Magazine sat with Arjen de Bruin, Managing Director at OIM Consulting, a Cape Town-headquartered business consultancy that specialises in the mining sector. He gave detailed insight on the current situation and how it is going to change the mining sector, especially considering the fact that, while most mines have been permitted to reopen with a limited workforce and increased safety and hygiene measures, new challenges have arisen in the wake of the lockdown. He highlighted those challenges and what he believes can and should be done to survive in the new economy.
Prior to mining companies being allowed to re-open at 50% capacity and under strict rules in mid April. There were global challenges shaking up the mining industry such as share prices of listed mining companies spiraling downwards, tumbling commodity prices across the industry, Platinum and Palladium prices dropping by more than 40% in April over a period of three weeks. During that time, Anglo American was down by as much as 40%, South African miner Sibanye-Stillwater’s share price lost over 60% in a timeline of four weeks. Impala Platinum also lost a similar percentage, Alta Zinc shut down production at its largest project in Northern Italy.
In Mongolia, Rio Tinto suspended non-essential operations following the country’s first confirmed COVID-19 diagnosis. Anglo American is in the process of demobilising most of the 10, 000 strong construction workforce at its copper project in Peru. There is a halt in capex growth, while capital expenditure for the world’s 20 largest mining companies grew by 12% in 2019 to reach $49.1 billion. We’re now seeing delays in project work and investments being put on hold.
The world’s second largest copper producer in Peru recently announced a 15 day quarantine, this in turn slowing down and halting operations in other companies such as Anglo American, Pan American Silver and Newmount. In South Africa mines opened, following President Cyril Ramaphosa’s address on May 24th, that mining and most other economic sectors would be allowed to re-open fully on June 1, as long as they screened their workers and took other necessary precautions. AngloGold Ashanti shut down its South African mine after 164 workers tested positive for COVID-19.
This extends the threat in deep underground mines, mainly because AngloGold says the vast majority of those who tested positive are showing no symptoms of illness. This is evidence that even though mine workers can be screened, it’s important to note that screening is a process that mainly checks for illness or other symptoms of the virus and has difficulty detecting asymptomatic cases unless they are contacts of someone who tested positive.
The Head of Health at the Minerals Council, Dr Thuthula Balfour told the media in a briefing that the testing of all workers would not be a “panacea” to protect mines. Since a worker who tests negative could be infected the next day, she also added that it would be impossible to test 45, 000 every day. The country has limited testing resources and it would be unfair for the mining industry to monopolise those resources Dr Balfour adds.
The National Union of Mineworkers, recently advised members to refuse to work in any mine where strict measures are not imposed to protect them from the virus. The Union which happens to be one of South Africa’s biggest unions said “Workers cannot be sacrificed for profits during the crisis.”
De Bruin says There’s no denying that the industry faces unique difficulties. “The seemingly overnight drop in commodity prices runs in parallel to the massive decline in the share prices of listed mining companies, offset by a very weak Rand.” This added to the fact that the very nature of mining puts workers at increased risk of exposure to the virus. “There are more than 400 000 people employed by the industry. On any given day, thousands of miners are dropped down underground shafts in crowded cages–making ‘social distancing’ impossible,” he says.
The situation is more manageable for open cast mines, de Bruin admits, where it is easier to adhere to distancing requirements. “Mines within the PGM stable and iron ore also benefit from good stockpiles and global supply chain support. While open cast mines are currently able to resume operations at 100% capacity, deep level mines are increasingly pressed to not only make up for lost output, but to meet production targets while operating at 50% capacity,” he explains.
This has significant cultural ramifications for organisations. “As we play catch up, businesses will naturally reassess how they can minimise costs and streamline efficiencies in an attempt to buffer the impact that lockdown had on output, as well as adjust their processes in response to the new ‘no-touch economy. “Efficiency without a culture change is unsustainable. While strategising, it is critical that companies not neglect their organisational culture. Any existing issues will become exacerbated in the face of the changed context within which we operate, and will become compounded with new challenges,” he says.
OIM Consulting has a proven track record in boosting production capacity through cultural change, headed up by de Bruin and a core management team. The company’s process addresses cultural change, the identification and building of new capabilities, performance assessment, management and improvement, with a pivotal focus on the supervisor as key to sustaining this improvement.
De Bruin believes that mid and senior management need to ask themselves pertinent questions, such as: How do you lead half your workforce, and engage with those who remain home? How do you energise and motivate in a time of fear and uncertainty? How do you communicate and lead?
De Bruin believes that this start-up phase offers an opportune moment for companies to reassess how they are demonstrating their organisational values.
“We need to look beyond COVID-19 and ensure that we have the right culture in place for the right reasons, and consider what capabilities we need to put in place to achieve this. Crisis catalyses change. We can seize the opportunity to create a more dynamic culture, with better capabilities for leadership, devising relevant tools to deliver a more efficient, effective operation,” he explains.
De Bruin feels that the industry is already well positioned to instill and manage the increased safety protocols. “Given the high-risk nature of the work, mines are extremely safety-conscious and are proactive about putting robust protocols in place. They understand requirements such as PPE and have access to rapid response teams and their own on-site hospitals,” he says.
While automation is predicted to accelerate, de Bruin points out that technology is not a panacea. He believes that organisations should recognise that if automation is implemented too quickly without workforce buy-in and familiarity, companies will lose momentum and won’t see the benefit.
“We need to focus on building genuinely sustainable, productive and healthy companies in a post-COVID-19 world, says de Bruin. “We now have the opportunity for a holistic reset, one that should not be wasted.”