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Carroll lifts veil on SA mining

Dec 06 2012 13:21 *Jarred Myers

Anglo American CEO Cynthia Carroll has resigned as head of the mining giant. (AFP)

Company Data

ANGLO AMERICAN PLC [JSE:AGL]

Last traded 246.83
Change -5.59
% Change -0.02
Cumulative volume 711347
Market cap 346.91bn

Last Updated: 01/10/2014 at 01:45. Prices are delayed by 15 minutes. Source: McGregor BFA

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EXPLORING the interwoven relationship between South African mining, Anglo American and Cynthia Carroll, I sought to answer three questions: 

  • Where lays opportunity in South Africa in light of current events?
  • What advice do you leave your successor?

Huge opportunities, is how outgoing Anglo American [JSE:AGL] CEO Cynthia Carroll describes the reality in South African mining. 

“With an unsurpassed natural bounty South Africa remains the country with the world’s largest mineral endowment, with resources with an estimated value of $2.5 trillion. 

“However, in order to compete successfully as a country, tough decisions need to be made. 

“Law and order is essential, this applies to society at large: violence and criminality are totally unacceptable and cannot be tolerated by society. 

“This also extends to collective bargaining; employees have the right to decide who they want to represent them, but collective agreements freely negotiated must be observed and not torn up”. 

The economic imperative cannot be ignored. Both countries and companies must be competitive to succeed. 

Carroll is at her most frank in this regard: “Businesses that cannot generate adequate returns ultimately collapse and die. It is the responsibility of management – not just to shareholders, but also to employees – to ensure that companies remain economically competitive. 

“With costs relentlessly rising and margins being squeezed the sector has not been earning adequate returns and in its current form is not economically viable”. 

Paying respect to the economic reality – action will be taken since the position is unsustainable – this will involve businesses reshaping and leveraging technology. This involves making tough decisions. 

Carroll says that the number one question she is asked by investors abroad is “what in the world is going on in South Africa”? 

Her response is perhaps a blueprint for the way forward. 

South Africa will emerge stronger due to this forced unity, she maintains. 

“The industry is not benefitting enough from the players who have delivered world class performance.” This offers a huge opportunity to raise standards. 

But she cautions: “The right foundations and frameworks need to be in place in order to attract investors.” 

It is perhaps reassuring to hear from her that “South Africa has gone through tough times and what has happened is not permanently damaging. 

“We will get through it …and I believe we will be stronger because of the alliances that will have to be built...” 

As a country too, South Africa needs to be competitive and regulatory stability is key to achieving this, says Carroll. “Investors decide based on the perceived reality which can’t be masked by well-meaning reassurances. In order to change the perceptions, the reality needs to change. Again, this involves making tough decisions.” 

It is not going to be easy, she echoes. “We have to take tough decisions, if we don’t do that then there is no future. We are not competitive.” 

“In light of the inflationary environment around labour and the big numbers associated, we will have to enhance productivity and efficiencies and also this involves making tough decisions. 

“The solutions lie in thinking innovatively, embracing technology and actively involving the communities in which we operate. 

“This involves having the right conversations with communities and with the unions and they have to be open conversations. The current set up is not working.” 

Anglo, she says, has taken the lead with initiatives such as Zimele.  Businesses supported by Zimele have created more than 11 000 jobs in South Africa since 2008 and more than 1 000 companies. It is targeting the creation of 25 000 jobs by 2015. 

This model is being acknowledged as a purpose fit solution by both industry and government with several other high profile corporates engaging with Anglo in an effort to imitate Zimele’s success. 

Even more welcome is the news Carroll shares that government has also recently requested Anglo's assistance in partnering in such endeavours. (The cynic in me asks what took so long, the optimist answers, better late than never.

As mentioned earlier, the current forum for dialogue is broken, so it was refreshing to hear that union and business leaders had a working dinner recently to continue the dialogue process. This is all part of the process of genuine trust building where, as Carroll puts it, “you can't be second guessing the guy on the other side of the table”. 

(Your correspondent is reminded how banking legend J.P. Morgan resolved the bankers panic of 1907 by locking the top 120 bankers of the time in his library until they resolved the crisis at 4:45am. Possibly Nkandla could serve as the location in our time.)

Regarding her successor Carroll is lucidly clear: 

She fundamentally believes that the way forward is through active engagement with stakeholders. Building relationships is key to success. She maintains that Anglo is the partner of choice, not because it is the nation’s largest private employer but because of its values and the way it goes about in its engagements. 

Highlighting the complexity in running Anglo, Carroll matter-of-factly says: “We are the most diversified mining company in the world, both with regards to spread and concentration across the portfolio of minerals and metals”. 

“It’s like running nine separate businesses”, she says, “and you’ve got to understand them. 

“Talking more openly with the government and the unions will be key to succeeding for the next Anglo CEO”. 

What’s next for Cynthia Carroll? 

The short answer, she says, is: “I don’t know.” (and I believe her.

What would excite me is continuing to lead in some way, to really have some impact, she says. 

She reflects nostalgically: “Before I joined Anglo I decided not to tell my mother that I had made a commitment, (that I’m) leaving Alcan, where under my leadership we became the world number one producer of aluminum – from a production, productivity and safety standpoint – everything that I could have been so proud of”. 

“Why in the world would you do such a thing,” mother asked. 

Her reply: “Because I believe that I can make a bigger difference in more people’s lives.” 

“And that’s what I would like to do, but I don’t know where that’s going to be”.

 - Fin24

*Jarred Myers is a resources strategist and a guest columnist, all opinions are his own- follow him @JarredMyers

 

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anglo american  |  cynthia carroll  |  mining
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