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Leading change towards sustainable green coal mining

Kenneth M. Mathu, Caren Scheepers,
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 Leading change towards sustainable
green coal mining
Kenneth M. Mathu and Caren Scheepers
Kenneth M. Mathu and
Caren Scheepers are
Senior Lecturer at
Gordon Institute of
Business Science,
Business School of the
Downloaded by 115.164.179.125 At 01:42 18 April 2018 (PT)
University of Pretoria,
Johannesburg,
South Africa.
Disclaimer: This case is written
solely for educational
purposes and is not intended
to represent successful or
unsuccessful managerial
decision-making. The author/s
may have disguised names;
financial and other
recognizable information to
protect confidentiality.
DOI 10.1108/EEMCS-01-2016-0007
On 9 June 2015, Phiwokuhle Mhlangu[1], an executive at Mbluyi Coal[2], admired the massive
cooling towers of Kusile Power Station on the horizon, the second-largest, dry-cooling coal-fired
power station in the world [www.eskom.co.za/Whatweredoing/NewBuild/Pages/Kusile_Power_
Station.aspx (accessed 18 September 2015)]. He was on his way to one of his collieries in
Mpumalanga [www.mpumalanga.gov.za.about/province.htm (accessed 18 September
2015)]. Coal mining was the second-largest mining industry after gold in South Africa,
contributing approximately 2.4 per cent of gross domestic product (GDP) [www.indexmundi.
com/facts/south-africa/natural-resources-contribution-to-gdp (accessed 18 September 2015)].
He pondered the dilemma he was facing around influencing mindsets on clean coal
technologies. Mhlangu could not get the morning’s disastrous meeting at Head Office in
Sandton out of his mind. He did not expect the fierce resistance to capital investment in
renewable energy. He thought his business case that he had delivered was built on sound
principles and obvious logic. He showered them with facts, figures and evidence of the
opportunity that green coal offers, and to him, it was obvious why the board needed to invest.
How could he persuade them and get a buy-in to expand his sustainability projects? Mhlangu
swept the sweat from his brow and realized that he was stressed out, overweight and took his
job too seriously. He felt isolated, misunderstood and unsupported in his organization.
He reflected on the larger landscape around sustainability and the various stakeholders’
interests that he had to balance. It was incomprehensible to Mhlangu that their board
members failed to realize the huge reputational risk that Mbluyi Coal was facing through the
lack of treatment of acid mine drainage (AMD). When one of his company’s coal carriers
was trying to pass his vehicle on the narrow road, he noticed to his shock that against his
clear instructions, the load was not covered with the prescribed canvas and the coal was
creating a black trail as it was spilling onto the road. Mhlangu shook his head in
disappointment at the blatantly dangerous conduct of the driver and the lack of care of the
outsourced distribution company.
Mhlangu’s frown even deepened when he thought of the load-shedding and the
consequent chaos he experienced in the heavily congested Sandton traffic that morning.
South Africa’s power-producing utility Eskom was heavily criticized in the meeting for lack
of foresight and timely communication around power cuts [www.eskom.co.za/ (accessed 5
August 2015)]. As an upstream producer of coal for the power stations, Mbluyi Coal was
well positioned to secure lucrative long-term contracts with Eskom. Being 100 per cent
black-owned, a level 1 Broad Based Black Empowerment Enterprise (BBBEE) contributor
according to the Department of Trade and Industry’s codes, they had won a number of
huge contracts (BBBEE Act, No. 53 of 2003, Republic of South Africa, Pretoria, Government
Printers, 2003, p. 16). As a country, South Africa would remain essentially self-sufficient for
its electricity, which meant that coal could look forward to a rapidly growing domestic
demand with lucrative opportunities. However, Mhlangu realized that their lack of focus on
VOL. 6 NO. 3 2016, pp. 1-24, © Emerald Group Publishing Limited, ISSN 2045-0621 EMERALD EMERGING MARKETS CASE STUDIES PAGE 1
 sustainability would pose an important reputational risk to Mbluyi Coal. He could feel the
stiffness in his shoulders, because of the weight he was carrying. He felt that it was
important for Mbluyi Coal to take their responsibility as a corporate citizen seriously and not
to only pay lip service to it.
He thought of the bigger picture, in that the fear of climate change being accelerated by
carbon emissions was forcing coal mines globally to seek clean coal-mining technologies
to maintain productivity and continued health and safety of the employees. These were
stark realities, and Mhlangu found it difficult that the board members could not see his
point.
Mhlangu also contemplated the future of the company and strategic decisions that would
need to be taken, as less than 30 per cent of South Africa’s coal reserves were situated in
Mpumalanga, compared to over 70 per cent in the Waterberg coalfields in Limpopo.
Indeed, the Mpumalanga coal reserves had depleted significantly and were no longer
sufficient to feed the power stations located in the area. The extra coal required to meet the
generation capacity was sourced from Free State, Limpopo and KwaZulu-Natal Provinces.
Mhlangu considered options of expanding their operations to ensure they capitalize on the
opportunities posed by the demand for coal. Nonetheless, he wanted to balance these
expansions with responsible mining and expenditure on health and safety, as well as
technologies towards green coal (Mathu, 2010, p. 125). Mhlangu was touched by the
seminal work of Oasis on sustainability and he was passionate about developing the
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workplace of tomorrow when people and planet really matter (Oasis School of Human
Relations, 2015).

Global coal landscape

South Africa was a significant participant in the global coal markets, but not the largest. The
largest producers and consumers were China, USA and India. In terms of coal exporting,
Indonesia was the largest followed by Australia, Russia, USA and South Africa in the fifth
position (Marais, 2015) (See Table I for ranking of coal reserves, production and exports).
South Africa exported high-quality-grade coal and used lower-quality-grade coal in its own
power stations, as they are configured to burn such grade. Figure 1 shows that coal was
the third revenue earner for the country after gold and platinum group metals (PGM).
The mining sector in 2014 contributed 11 per cent of the South African GDP, compared with
manufacturing 21 per cent and other sectors of the economy 68 per cent. Coal provided

Table I World recoverable coal reserves, production and export (dmr 2009)
Reserves Production Exports
Country Mt (%) Rank Mt (%) Rank Mt (%) Rank

Australia 36,800 8.9 5 397.8 5.9 4 252.2 26.6 2

Canada 3,471 0.8 11 68.1 1.0 11 33 3.5 7
China 62,200 15.1 2 2,761.4 40.6 1 47.3 5.0 6
Colombia 6,436 1.6 9 78.6 1.2 10 74.0 7.8 4
India 54,000 13.1 3 521.7 7.7 3 1.4 0.1 11
Indonesia 1,721 0.4 12 284.2 4.2 6 214.4 22.6 1
Kazakhstan 28,170 6.8 7 108.7 1.6 9 27.2 2.9 8
Other 8,716 2.1 719.2 10.6 52.9 5.6
Poland 6,012 1.5 10 143.9 2.1 8 7.8 0.8 9
Russia 49,088 11.9 4 326.1 4.8 5 101.7 10.7 3
South Africa 30,408 7.4 6 252.2 3.7 7 57.9 6.1 5
Ukraine 15,351 3.7 8 59.6 0.9 12 4.32 0.5 10
USA 108,950 26.5 1 1075 15.8 2 74.0 7.8 4
Total 411,321 100 6,796.7 100.0 948.0 100
Source: Annual Report titled: South Africa’s Mineral Industry, 2009/2010 (SAMI) of Department of Mineral Resources, Mineral
Economics Directorate – coal production and exports figures, 2009, p. 56, accessed at www.dmr.gov.za/publications/summary/227-
south-african-minerals-industry-sami/1093-sami2010.html (accessed 8 September 2015)

PAGE 2 EMERALD EMERGING MARKETS CASE STUDIES VOL. 6 NO. 3 2016

 Figure 1 Comparison of mineral production
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77 per cent of South Africa’s energy needs, according to the Department of Energy (2014).
The state-owned utility company “Electricity Company of South Africa” (Eskom) produced
95 per cent of electricity used in the country, and its coal-fired power stations produced
about 90 per cent of electricity generated by the utility (Stats SA, 2015a, 2015b, 2015c,
2015d; Eskom, 2015).
However, there was prominent public outcry to decrease the world’s dependence on coal
as an energy source. Lower usage of coal would reduce greenhouse gas emissions, and
less demand would lower the environmental risk of coal mining. However, as the world
moved away from coal, South Africa would need to consider the implications. The country
depends heavily on the mineral as a source of economic value, employment and energy
(Stats SA, 2014). The mineral’s contribution to overall mining value added rose to 22.5 per
cent in 2013 from 17.4 per cent in 1993. Where PGMs’ contribution during the same period
was 21.0 per cent, gold’s contribution fell to 18.5 per cent in 2013 from 51.1 per cent in
1993. With regards to mineral sales, coal contributed 27 per cent to sales in 2014, followed
by PGMs (21 per cent), iron ore (16 per cent) and gold (13 per cent) (Stats SA, 2014).
In total, 28 per cent of South African coal production was exported. With an estimated 116
years of coal reserves remaining, compared to gold’s 39 years, the mineral was set to
remain a valuable resource for South Africa’s economy for as long as demand remained
(Stats SA, 2014). The coal-mining industry was an important employer. The mining industry
as a whole employed a total of 535,457 individuals at the end of June 2012, of which 38 per
cent were in the PGM, 27 per cent in gold and 17 per cent in coal mining. Employment in

VOL. 6 NO. 3 2016 EMERALD EMERGING MARKETS CASE STUDIES PAGE 3

 the coal-mining industry rose by 75 per cent between 2002 and 2012, whereas employment
in the gold-mining industry dropped by contrast with 29 per cent over the same period
(Stats SA: Mining industry, 2012).
There were five leading international coal-mining companies which produced 85 per cent
of the total coal production in South Africa. The other 15 per cent of coal production was by
junior miners or BBBEE companies, such as Mbluyi Coal. The five big companies’
production in 2013 were, Anglo Coal (56 Mt), Glencore Xstrata (45 Mt), Sasol (45 Mt),
Exxaro (40 Mt) and BHP Billiton (32 Mt) [www.sanedi.org.za/archived/wp-content/uploads/
2013/08/sacrm%20value%20chain%20overview.pdf (accessed 30 September 2015)].

South Africa’s focus on renewable energy sources

Coal continued to be the primary source for South Africa’s energy supply. In 2010, 67 per
cent of South Africa’s energy supply was from coal, followed by crude oil (15 per cent) and
petroleum products (14 per cent). Nuclear power provided only 2 per cent of South Africa’s
energy supply [www.statssa.gov.za/?p⫽4341 (accessed 8 September 2015)]. Stats SA
highlighted the declining role of the gold-mining industry in South Africa. There were an
estimated 6,000 tons of proven gold reserves remaining, compared to PGM reserves of
63,000 tons, and coal at 30,156 million tons.
During Mhlangu’s presentation to the board, he was emphasizing their major customers’
drive towards lower emissions. He shared the following with the board:
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In pursuit of its sustainability initiative, Eskom’s future plans included, amongst others, that
the future energy mix for Eskom had to consist of renewable energy such as hydro, solar
and wind (Molteno, 2008). The 50 MW Concentrated Solar Plant at Bokpoort in the Northern
Cape Province was to be commissioned in 2015 [www.nrel.gov/csp/solarpaces/project_
detail.cfm/projectID⫽271 (accessed 8 September 2015); www.engineeringnews.co.za/
article/lpg-nitrogen-system-commissioned-for-bokpoort-csp-project-2015-05-15]. Eskom’s
renewable energy strategy was therefore to increase the share of renewable energy in
Eskom’s energy mix by including 1,600 MW of renewable energy in its generation mix by
2025. To achieve this objective, Eskom, in February 2008, announced that it would invest
ZAR 1bn in a 100 MW wind farm on the west coast of South Africa to feed into the national
electricity grid by the beginning of 2010[3]. In March 2008, Eskom and the French
Development Agency signed an agreement for a ZAR 1.14bn loan over 20 years for the
partial financing of Eskom’s wind farm project [www.eskom.co.za/Whatweredoing/New
Build/Pages/SereWindFarmProject.aspx (accessed 14 September 2015)].
Nuclear energy was also part of the energy mix, while not a renewable source of energy,
nuclear had minimal carbon emissions. Eskom is at an advanced stage of research on
underground coal gasification which represented the latest development in clean coal
technologies, namely, carbon coal storage [www.worldcoal.org/coal-the-environment/
carbon-capture-use–storage/ccs-technologies/ (accessed 8 September 2015)]. It was
already used in USA, Canada and China. The CCS technology enabled the power sector
to produce base load power with near-zero emissions [http://insideclimatenews.org/
carbon-copy/18052015/coals-future-facing-three-hurdles-and-steady-decline-projections-
epa-clean-power-plan?gclid⫽CJelufv6h8gCFWjmwgod (accessed 14 September 2015)].
The World Coal Association reported that addressing the challenges of climate change
required having affordable energy, while pursuing access and utilization of available
energy efficient and low carbon technologies [www.worldcoal.org/coal-the-environment/
carbon-capture-use–storage/ccs-technologies/ (accessed 8 September 2015)].
The other major customer of Mbluyi Coal was Sasol and this petrochemical company used
Fischer – Tropsch technology for the coal-to-liquid (CTL) and gas-to-liquid (GTL)
conversion, a process resulting in heavy carbon emissions (Keyser et al., 2006). However,
the company had long-term explicit plans aimed to controlled emissions, minimize waste,
reduced carbon footprints for its products and improved land use and biodiversity.

PAGE 4 EMERALD EMERGING MARKETS CASE STUDIES VOL. 6 NO. 3 2016

 Mhlangu’s main argument was that the procurement processes of these major customers
of Mbluyi Coal had become highly complicated and their preferred supplier lists entailed
adherence to specific sustainability guidelines that Mbluyi Coal was ignoring to their peril.
Mhlangu quoted an economic analyst Marais (2014) who had stated that South Africa’s
reliance on coal for energy was the world’s highest proportion, and it was a proportion that
was unlikely to fall significantly any time soon, not at least until the first new nuclear power
stations came on line. The new nuclear power stations were at Koeberg in the Eastern Cape
[www.eskom.co.za/Whatweredoing/ElectricityGeneration/KoebergNuclearPowerStation/
Pages/Koeberg_Power_Station.aspx (accessed 14 September 2015)]. Moreover, he
pointed out that South Africa had limited hydroelectric potential, which further caused
Eskom could not delay the construction of new power stations if it wanted to reduce load
shedding. Thermal power stations could be built faster than nuclear ones. Solar and wind
power were expensive and only viable in areas remote from the national power grid,
and South Africa could not risk relying on imported power from countries to the north that
have potential for the generation of hydropower.
South Africa was among the initial signatories to the United Nations Framework Convention on
Climate Change (UNFCCC) after the first earth summit in Argentina in 1991 [http://unfccc.
int/2860.php;Unfccc.int/resources/docs/publications/unitingonclimate_eng.pdf (accessed 8
September 2015)]. As a developing country, South Africa was not bound by the UNFCCC, but
the country realized the importance of pursuing the path of sustainable development. The aim
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was to reduce greenhouse gas emissions, benefitting the society and contributing towards the
global campaign for climate change (Datamonitor Eskom Holdings Limited, 2010).
Energy sustainability was a central focus for both public and private sectors and the
legislations provided the government contributed 70 per cent of electricity predominantly
from coal and the private power producers contributed 30 per cent from renewable sources
[www.doe.-irp.co.za//Electricity_Regulations_onNewGenerationCapacity (accessed 9
September 2015)]. The South Africa’s National Development Plan 2030 (NDP) reiterated
the reduction of coal contribution for energy provisions to 55 per cent by 2030 [www.
gov.za/issues/national-development-plan-2030 (accessed 9 September 2015)]. The
government further endorsed in 2013 the Renewable Energy Independent Power Producer
Procurement Programme (REIPPPP) to speed up renewable energy development [www.
gsb.uct.za/files/PPIAFReport.pdf (accessed 8 September 2015)]. A number of renewable
power projects such as wind, solar, biomass, ocean current and fuel cell were lined up.

The business case for a sustainability focus at Mbluyi Coal

Mhlangu’s concern was how to make the coal supply chain, from mining processes,
beneficiation, stockpiling and transportation, at the processing and consumption stages,
green [www.cargill.c.za/en/product-services/coal/index.jsp (accessed 7 January 2016)].
Therefore, managing coal sustainability demanded enactment of green initiatives from the
source to the end of the coal supply chain.
Coal mining impacted the ecosystem, interfering with biodiversity, leading to environmental
degradation (McDonald, 2002). The environmental impacts from coal mining were
expressed as green, brown and social pollution. The “green” denoted the effects on
vegetation; “brown” referred to dust and “social” referred to the noise pollution from
equipment, trucks and others (Limpitlaw, Aken, Lodewiks and Viljoen, 2005).
Eskom consumed approximately 2 per cent of the national fresh water resources, and it
was projected to increase yearly by 14 million cubic meters (Eskom annual report, 2008).
One ton of coal required 200 L of water for beneficiation; hence, dry-cooling system
technology used in the two new power stations Medupi and Kusile that were under
construction provided sustainability for the coal-fired power stations. The availability of a
large volume of water was crucial for the coal-mining processes (Prevost, 2006, p. 17). The

VOL. 6 NO. 3 2016 EMERALD EMERGING MARKETS CASE STUDIES PAGE 5

 Waterberg coalfield in Limpopo Province faced huge water problems, as it was sourced
from Makola Dam outside Lephalale and it was inadequate (Van Vuuren, 2009).
The mining industry was the largest contributor of solid waste in South Africa, producing
100 tons of waste for every ton of metal extracted (McDonald, 2002). The solid waste would
be better utilized as the coal ash from the power stations which was used sustainably for
making building blocks (Vadapalli et al., 2008, p. 1).

Opportunities and risks at Mbluyi Coal

Mhlangu reflected on his presentation to the board on Mbluyi Coal’s exciting opportunities
and enormous risks that they were facing. The state-owned enterprise Transnet through its
main business unit Transnet Freight Rail, was recovering after constraining the export of
coal for many years by having less capacity to transport coal than the leading coal export
terminal at Richards Bay Coal Terminal (RCBT). Since many years, its capacity had been
60 mtpa (million tons per annum), while that of RBCT was 91 mtpa. However, the recently
achieved 75 mtpa was projected to grow by 30 per cent which would benefit the industry
immensely [www.bdlive.co.za/business/transport/2013/07/31/transnet-freight-rail-to-boost-
export-coal-capacity-30 (accessed 9 September 2015)]. The modifications on the rail
tracks were slow, and Mbluyi Coal had to take this major risk into account in their
projections.
Mbluyi Coal Mining Ltd. held a 4 mtpa port allocation at Grindrod operated Matola Coal
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Terminal (MCT) in Mozambique that had a capacity for 6 mtpa [www.grindrod.co.za/

Company/39/Grindrod-Terminals- (accessed 28 May 2015); www.portmaputo.com/
terminal/coal-terminal/ (accessed 28 May 2015)]. Combined with RBCT’s volume, South
Africa had a capacity of 24 mtpa (Marais, 2005). The lack of rail infrastructure and limited
port terminal capacity would place restrictions on Mbluyi Coal’s opportunity to increase
exports. The issues of nationalization speculations, higher taxation and diminished
collaboration between the state and the industry scared prospective investors (Keeton,
2015).
Over the past 10 years, Mbluyi Coal underwent substantial changes from a junior explorer
to a successful developer of enormous scale. The company culture moved from being
highly entrepreneurial to much more hierarchical and formal, although a lot less traditional
than the huge corporations in the coal-mining field.
In recent years, South Africa’s mining industry experienced radical changes because of the
mine workers’ unions adversely affecting the workers and the communities in the mining
areas. The split of the Union of Mineworkers (NUM) exacerbated mainly by the platinum
mineworkers who formed an Association of Mineworkers and Construction Union resulted
in bloodshed at Marikana Platinum Mine in the North-West Province where 40 people were
killed including 34 mine workers in 2012 [www.mg.co.za/report/lonmin-platinum-mines-in-
chaos (accessed 28 September 2015)].
A cloud of uncertainty hung as the mineworkers, through their new union, rejected the
findings of the government-appointed Marikana Commission of enquiry for the 2012
massacre. This indicated structural problems in labour issues between the government
and the union [www.gov.za/sites/www.gov.za/files/marikana-report-1.pdf (accessed 28
September 2015)]. The South African mining sector was seen as unstable, owing to 2012’s
labour unrest, where the Marikana disaster and poorly orchestrated wage negotiations
formed the pivotal point [www.bdlive.co.za/business/transport/2013/07/31/transnet-freight-
rail-to-boost-export-coal-capacity-30 (accessed 28 September 2015)]. The volatile mining
labour force posed a real risk to Mbluyi Coal and had to be constantly monitored. One of
the reasons for South Africa being perceived as an attractive destination in the past was its
low cost of labour. Labour had subsequently become more demanding in terms of its
remuneration expectations. The country now faced the challenge of semiskilled mining
workers who were earning a higher base income than most university-educated graduates

PAGE 6 EMERALD EMERGING MARKETS CASE STUDIES VOL. 6 NO. 3 2016

 [www.bdlive.co.za/national/labour/2014/11/26/minimum-wage-of-r8500-wanted-for-mine-
workers (accessed 28 September 2015)]. This was exacerbated by the fact that the mining
industry was selected as the most prominent vehicle to deliver the South African
Government’s socioeconomic agenda, resulting in significantly higher socioeconomic
expectations from miners and host communities [www.gov.za/speeches/union-
mineworkers-national-congress-delivered-minister-labour-4-jan-2015-0000 (accessed 28
September 2015)].
The demand for export of lower-grade coal to India boosted the export business (Marais,
2014). Hence, the lower grade coal market increased. South Africa’s power stations were
specifically designed to handle lower-calorific coal and higher ash contents. Mbluyi Coal
and similar producers that provided coal to Eskom were committed to long-term contracts
with stable but relatively low profits. Further, 80 per cent of Eskom’s coal consumption was
derived from these long-term contracts, whereas the remaining 20 per cent was gained at
spot market prices (Marais, 2014).
As the lower-grade coal export market emerged, Eskom was destined to buy coal at market
price which was more expensive. Eskom would not compete with the export market, as
higher prices would translate into higher electricity price to the consumers. However, the
coal exporters appeared to have a thriving trade with the growth in the Indian import
demand and import prices for lower-grade coals started responding to the higher prices of
oil (Marais, 2014).
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Mbluyi Coal had thermal and coking coal assets and potentially two to three collieries, one
as a prospect in Limpopo Province and one fully operational in Mpumalanga with another
prospect in the Free State. They had exciting exploration projects that offered significant
potential growth opportunities. In their annual report, they declared that they are committed
to responsible development and management of their collieries and projects.
Mhlangu was concerned that his company paid lip service to complying with all
environmental regulations. He pioneered a social consciousness around doing the right
thing by minimizing the environmental impact of their mining operations. He wanted to
leave an enduring legacy, especially for the sake of those communities surrounding their
operations. Mhlangu was passionate about contributing to economic growth and
development of his beloved country and the two provinces in which they operated.
Mhlangu’s favourite book and film were called “Cry, the beloved country” of Paton (2003),
featuring the struggle during Apartheid in South Africa. He regularly referred to South Africa
as “his beloved country” based on this inspirational work.

Mhlangu’s specific actions to ensure sustainable green coal

Mhlangu thought back to the launch of the “2030 Green Coal Vision” that they had at the
town hall two years ago. It had been amazing that the Mayor opened the evening with a
speech on the value of Mbluyi Coal for the upliftment of their local community. The Union
representative joined in congratulating their Executive team on their initiatives towards
sustainability and responsible corporate citizenship. He still often wore his green cap to
symbolize their quest towards “green coal”.
Mhlangu wondered whether he was maybe too impatient and whether he had to give more
time for the campaign to sink in and yield results. He thought that the enthusiasm that was
generated through the road shows would last longer and he was disappointed that it had
tapered down. He remembered during his MBA studies at The Gordon Institute of Business
Science (GIBS) of the University of Pretoria that the lecturer had stressed that momentum
management was as important as change management. He considered specific
reinforcement of behaviour that he could orchestrate through the reward ceremonies to be
held the next month, following from the regular measurement of their acid water drainage
(AWD) levels.

VOL. 6 NO. 3 2016 EMERALD EMERGING MARKETS CASE STUDIES PAGE 7

 Mhlangu pioneered a new plant for the coal beneficiation process of removing
contaminants in coal to achieve a quality product using water in a process called wet
separation. The lower-quality coal burned by the Eskom power stations contained 45 per
cent ash (Lloyd, 2002, p. 3). Mhlangu was very excited about a new research he had heard
about – a dry beneficiation process which would revolutionize the beneficiation process of
coal in arid areas which had acute water shortage (Prinsloo, 2009). Luckily, in the
Mpumalanga area, they did not have such an issue with water compared to what their
prospective colliery would have faced in Limpopo. So, from the beginning of the new coal
mine in Limpopo, he intended to introduce the new technology with the dry beneficiation
process.
Mhlangu also spearheaded an initiative around AMD, a common occurrence in
Mpumalanga Lake Region (Copans, 2008, p. 23). Mhlangu explained to the board that
morning that the highly acidic water contained a high concentration of metal sulphide and
salt as a consequence of the mining activity (Manders et al., 2009, p. 1). What he did not
understand was the board members’ lack of interest. He quoted for them from Bell et al.’s
(2001, p. 203) seminal work in the areas that old mine dumps in the coal-mining areas
contained abundance of coal because of poor coal separation processes used in the past.
Those coal dumps were also poorly compacted, allowing air through which support
spontaneous combustion. Subsequently, the water permeation resulted in the formation of
AMD. For example, in the Witwatersrand Basin, it currently discharged 15 million litres a
day of polluted water (AMD) (Copans, 2008). Mhlangu’s research revealed that “the most
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effective way for desulphurization AMD was draining it into wetlands which would act as
filter to remove the heavy metals as they precipitate out of water” [www.sciencedirect.com/
science/article/pii/089268759090131T (accessed 14 September 2015)] (Lang, 2009).
In keeping within the environmental requirements, Mhlangu initiated a project to drain the
water from the colliery into the surrounding wetlands. The company asked him to draw a
project plan for the programme and to provide details of the anticipated reactions from the
surrounding communities. His plan included the cost analysis including the labour input
and additional capital investment to lay pipes in the wetland.
Mhlangu pondered over the carbon pollution emanating from the mining process and
health and safety of workers at their coal underground mine. Mhlangu contemplated how
to convince his colleagues and the management to transform the mine into high-efficiency
low-emissions (HELE). The process would require heavy investment in technology in the
short term, but the returns in the long-term would be high in terms of production capacity,
reductions in carbon emissions and improvement in the level of employees’ health and
safety. The initiative was to render their coal-mining business sustainable. Mhlangu wanted
the board to invest in technology that had many advantages, namely, computer modelling
to provide improved and accurate assessment of stress conditions that affect roof control
in their underground coal mine.
However, major pollution concerns in the coal supply chain were experienced from mining
in the form of dust at excavation and during sortation of coal for beneficiation and
stockpiling. The transportation of coal in uncovered wagon or trucks spilled dust into the
atmosphere. As the company outsourced trucks used at their collieries to ship coal to
the power stations, Mhlanga renegotiated the transport contract with the suppliers so that
the trucks should have canvas covering the shipment to control dust emissions on transit.
The company had to provide extra investment to cover the added costs.
Mhlangu explained to the board members that green logistics aimed to reduce the
excessive travelling which resulted in reduction of carbon dioxide emissions. The
provisional strategy to minimize emissions was route restructuring to shorten the distance
travelled between the coal mines and the power stations. Also, there had to be regular road
maintenance in the coal mining and power stations periphery. The long-term plan was, of
course, to substitute road transportation with rail.

PAGE 8 EMERALD EMERGING MARKETS CASE STUDIES VOL. 6 NO. 3 2016

 “A study conducted by the Council of Scientific and Industrial Research of South Africa
established that South Africa had the highest per capita fuel consumption of 334 liters
compared to the world average of 291 liters” [www.csir.co.za/eia/petrosa-lng2/docs/LNG
%20Import%20MB%20DSR_Binder1_VOL%201.pdf (accessed 28 August 2015)].
“This was attributed to the country’s uneven distribution of industry and population, as the
production sectors and consumers were concentrated 600 kilometers away from the coast
where ports handling raw materials and exports were situated” [www.csir.co.za/sol/docs/
6th_SoL_survey_web_final.pdf (accessed 28 August 2015)].
The problem could be alleviated by the use of rail, as it was cheaper and more convenient
to move heavy loads.
Green logistics is an environmentally responsible system involving sustainable
procurement process of raw materials, product/service processing, packaging, product
delivery, return and disposal (reverse logistics) and uses the three “Rs” concept of reduce,
reuse and recycle [www.recycling-guide.org.uk/rrr.html (accessed 8 January 2016)]. The
greening of coal transportation would involve the use of transportation mode with less
carbon emission; limiting pollution and wastage when loading, unloading and distribution
through innovative packaging; establishing coal distribution centres with facilities to control
dust pollution; and enhancing green management strategy through better-planned
distribution routes.
The green logistics made Mhlangu excited; however, he was confronted with huge
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resistance when he tried to influence his peer, the executive committee member, Jan
Malan. He remembers Jan’s words, “Phiwe, you are worrying too much, just focus on
what you need to deliver and leave the logistics to us to concern ourselves”. Jan Malan
had been with the organization for two decades and did not want Mhlangu to tell him
what to do. Mbluyi Coal operated in silos and each executive member guarded his turf
closely and did not allow interference from other departments. As a result, Mhlangu felt
overwhelmed and despondent about the lack of support, even though his CEO
supported his ideas and initiatives, he needed a broader support base throughout the
organization. The Human Resources’ executive Dipuo Langa at least supported him;
however, she did not have adequate power in the organization to make a difference to
his quests.

Challenges ahead
Mhlangu looked forward to the weekend at the Kruger National Park [www.krugerpark.com/
self-catering/kruger-national%20park/?gclid⫽CJzi3O6XiMgCFQ5sGwod40MD-g, accessed 9
September 2015]. The greenery always assisted him to forget about his concerns and escape
the small-town mentality of his community. He sometimes had enough of the prying in his
affairs. With the mine being the main employer, everyone knew everything about everybody.
For someone who valued his privacy, such prying sometimes got to him.
His current concern was the forecast that indicated that the future of South African coal
mining was in the coalfields of Waterberg, Springbok Flats, Limpopo, Soutpansberg,
Tuli, Mabopane and Venda-Pafuri, where the bulk of South Africa’s coalfields are
situated. “The Waterberg coalfields alone had reserves of about 3.4 billion tons of coal
or 11 per cent of South African recoverable coal” (Prevost, 2006, p. 16). In light of these
developments, he pondered on the opportunity to acquire an open case coal mine in
the Free State. It was indeed a great opportunity due to the fact that “the industry had
R15.5 billion worth of projects underway which could yield about 36 Mt of extra coal
production. Another 63 Mt worth approximately R30 billion was in the final feasibility
stage. It was estimated that about R100 billion would be invested in the industry over
the next decade if targets were to be achieved” [www.chamberofmines.org.za/media-
room/mining-publications (accessed 17 November 2015)]. Figure 2 indicates the South
African coal fields per province.

VOL. 6 NO. 3 2016 EMERALD EMERGING MARKETS CASE STUDIES PAGE 9

 Figure 2 Coal fields in South Africa
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Despite the power outages of 2014/2015, the future for the industry seemed bright with
the commissioning of Medupi and Kusile power stations commencing in 2015. A
number of renewable sources of energy were also destined to come on stream soon.
The cumbersome Mining Act of 2002 MPRDA is being reviewed (www.dmr.gov.za/
publications/summary/109-mineral-and-petroleum-resources-development-act-2002/225-
mineraland-petroleum-resources-development-actmprda.html, accessed 17 November
2015).

Indeed, the journey towards sustainability in the South African coal-mining industry was on
track as stipulated by the NDP 2010-2030 (www.gov.za/issues/national-development-plan-
2030, accessed 17 November 2015), IRP 2010-2030 and the renewable energy projects
being undertaken by the private sector. A research by Eskom for underground coal
gasification was at an advanced stage and two coal-fired power plants were under
construction Medupi and Kusile would use clean coal technology, enabling them to
consume less water and reduce emissions. On successful completion of the underground
coal combustion study, carbon and other greenhouse gases’ emissions would be
immensely reduced, as they would be trapped underground (Eskom annual report, 2008,
p. 59).

As Mhlangu drove into the black dust at the site, he felt excited about new opportunities
to make a difference towards green coal and sustainable coal mining in his beloved
country.

PAGE 10 EMERALD EMERGING MARKETS CASE STUDIES VOL. 6 NO. 3 2016

 Discussion questions
1. Evaluate the context and initiatives of Mhlangu at Mbluyi Coal Mining Ltd. with
regards to:
 Sustainable development.
 Environmental impact of coal mining.
 Securing a prosperous future for the company by capitalising on opportunities and
mitigating risks.
Keywords: 2. Assess the effectiveness of Phiwokuhle Mhlangu’s current strategies to lead the
Organizational behaviour, change, referring to Kotter’s eight steps and provide recommendations.
Stakeholder management,
Environmental management Notes
strategy, 1. Mr Phiwokuhle Mhlangu is a fictitious character.
Corporate social
2. Mbluyi Coal Mining Ltd. is a fictitious coal-mining company with thermal and coking coal
responsibility,
asserts and two collieries, one in Limpopo Province and one in Mpumalanga Province.
Organizational psychology,
Supply chain ethics/ 3. As of May 2015, one South African Rand (ZAR) is approximately 1US$0.11.
sustainability 4. This is a disguised case and the research method is described in the Teaching Note

References
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 Oasis School of Human Relations (2015), 7 Principles to Shape the Workplace of Tomorrow: Developing
the Workplace of Tomorrow When People and Planet Really Matter, Oasis Press, West Yorkshire.

Paton, A. (2003), “Cry, the beloved country”, Charles Scribner’s Sons, New York, NY, available at:
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Further reading
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html (accessed 14 September 2015).

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html (accessed 28 September 2015).

About the authors

Dr Ken Mathu holds a PhD/D-Tech in Business in Management Sciences with a bias
in Supply Chain Management. He has in-depth knowledge in supply chain/logistics
management, operations, procurement, marketing, sustainability, energy and environment.
Trained in the professional application of the Supply Chain Operations Reference (SCOR)
by the Supply Chain Council. He focuses his lecturing and research on Supply Chain
Management: sustainability/green initiative and published extensively on sustainable coal
mining.

Dr Caren Scheepers holds a PhD in Psychology and has extensive experience as

Organizational Development Consultant and Executive Coach. She has been lecturing on
the GIBS MBA Organizational Development and Transformation module for the past eight
years and conducts research on Leadership and Change. She publishes in books,
academic journals, business press and five teaching cases studies with Ivey Publishing.
Caren Scheepers is the corresponding author and can be contacted at:
scheepersc@gibs.co.za

PAGE 12 EMERALD EMERGING MARKETS CASE STUDIES VOL. 6 NO. 3 2016