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Kenneth M. Mathu and On 9 June 2015, Phiwokuhle Mhlangu[1], an executive at Mbluyi Coal[2], admired the massive
Caren Scheepers are cooling towers of Kusile Power Station on the horizon, the second-largest, dry-cooling coal-fired
Senior Lecturer at power station in the world [www.eskom.co.za/Whatweredoing/NewBuild/Pages/Kusile_Power_
Gordon Institute of Station.aspx (accessed 18 September 2015)]. He was on his way to one of his collieries in
Business Science,
Mpumalanga [www.mpumalanga.gov.za.about/province.htm (accessed 18 September
Business School of the
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2015)]. Coal mining was the second-largest mining industry after gold in South Africa,
University of Pretoria,
contributing approximately 2.4 per cent of gross domestic product (GDP) [www.indexmundi.
Johannesburg,
South Africa. 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
Disclaimer: This case is written well positioned to secure lucrative long-term contracts with Eskom. Being 100 per cent
solely for educational
purposes and is not intended
black-owned, a level 1 Broad Based Black Empowerment Enterprise (BBBEE) contributor
to represent successful or according to the Department of Trade and Industry’s codes, they had won a number of
unsuccessful managerial
decision-making. The author/s
huge contracts (BBBEE Act, No. 53 of 2003, Republic of South Africa, Pretoria, Government
may have disguised names; Printers, 2003, p. 16). As a country, South Africa would remain essentially self-sufficient for
financial and other
recognizable information to
its electricity, which meant that coal could look forward to a rapidly growing domestic
protect confidentiality. demand with lucrative opportunities. However, Mhlangu realized that their lack of focus on
DOI 10.1108/EEMCS-01-2016-0007 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).
Table I World recoverable coal reserves, production and export (dmr 2009)
Reserves Production Exports
Country Mt (%) Rank Mt (%) Rank Mt (%) Rank
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
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.
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.
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.
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.
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.
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.
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Further reading
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