Nearly a year after acrimonious boardroom fights to control Hwange Colliery Company (HCCL) ended, sanity is returning at a helter-skelter pace at the Zimbabwe and Johannesburg stock exchanges-listed firm.
This is despite continued funding problems, low production, use of obsolete equipment and the pending exit of managing director Fred Moyo after the expiry of his contract.
The company’s new board chaired by Harare lawyer Farai Mutamangira has been credited for redirecting the coal mine, which is crucial to the recovery of the country’s battling economy.
Besides Mutamangira, the board comprises of Norman Chibhanguza, Jemmister Chininga, Ian Haruperi, Nkosilathi Jiyane, Siphiwe Mapfuwa, Johnson Mawere, Lucas Nkomo and Valentine Vera.
For more than five years, HCCL has been struggling to recapitalise — a development attributed to its poor financial position that rendered it uncreditworthy.
The company’s role in the economy is of strategic importance. Coal is a vital source of electricity in a country facing a critical energy crisis as a result of the government’s failure in the past 30 years to invest substantially in hydro-electricity and other forms of renewable energy.
HCCL’s resuscitation under Mutamangira’s board has seen an increase in its sales volumes by 1% for the year-ended December 31 2011 compared to the previous year, despite delays in the company’s recapitalisation.
HCCL sold 2 531 620 combined tonnes of coal and coke, slightly up from the 2 510 943 tonnes in 2010.
Profit for the year stood at $3 902 262, almost half of the previous year’s $6 231 723.
In 2005, a proposed $80 million rights issue to recapitalise Hwange failed to take off after the single largest shareholder in the company, British tycoon Nicholas van Hoogstraten, blocked the move, insisting the money should be raised offshore. Zimbabwe was then using local currency.
This spewed boardroom fights between Van Hoogstraten and the government, the majority shareholder in Hwange.
The corporate mudslinging ended last August with the expiry of term of office of the board led by Zanu PF politburo member Tendai Savanhu, who unsuccessfully attempted to tenaciously cling to power.
Then entered Mutamangira’s board, enjoying the backing of Van Hoogstraten and the government.
Sanity prevailed and slowly the company’s performance started improving despite lack of adequate capital to expand.
Mines and Mining Development secretary Prince Mupazviriho told NewsDay this week that the performance of Hwange had immensely improved though it continued to be negatively affected by the depressed economy.
“There has been a dramatic improvement in terms of production from the company,” Mupazviriho said. “As of Friday last week, production was 85% on target. We haven’t experienced any coal shortages at Zimbabwe Power Company.”
The ministry superintends Hwange and is reportedly mulling transforming the coal miner into a parastatal — a move perceived in the mining sector as backward.
Production statistics show that the mining company has gradually increased its output from a low of two million tonnes annually to close to four million. This is against an annual demand of six million tonnes. It is estimated that the colliery is sitting on at least 2,1 billion tonnes of coal reserves.
As part of austerity measures to refocus its operations, Hwange recently retrenched 200 workers to manage its ballooning wage bill and high overheads after adopting of an Enterprise Resource Plan, a system that centralises data through computerisation of all departments into one.
Plans, according to insiders, are afoot to retrench a further 700 employees from its 3 500-strong workforce.
According to John Hollaway, a coal consultant who joined Hwange Colliery in 1967 and went on to work on 400 projects in 36 countries, the colliery was struggling due to the country’s economic collapse and hyperinflation before the introduction of multi-currencies in Zimbabwe’s payment system in February 2009.
Hollaway believed when the country’s economy recovered, Hwange would produce about 10 million litres daily of liquid fuel, enough to save the country $1 billion from energy imports yearly.
Hwange holds a 25% stake in Hwange Coal Gasification Company, a joint venture with a Chinese company Taiyuan San Xing, which has, however, not brought meaningful returns for the company.
The venture is based on a 10-year build-own-operate-transfer arrangement. The Chinese company owns 75% equity. Concerns have been raised in the market if the company was in compliance with the country’s indigenisation and empowerment regulations.