By Mxolisi Hoboyi
In 2005, I joined the mining industry pushing a shovel underground as a general worker. My career grew organically through the years, including me being a shop steward responsible for making sure our rights as mineworkers were protected. Never in my wildest dreams did I imagine that the progression of this career would see me years later as the chairman of mining company Arnot Opco. A coal mine based in Mpumalanga province which supplies coal through a historic supply agreement to one of Eskom’s power stations.
I became chairman of the mine as part of my partner’s and my 50% ownership of Arnot Opco. We lost our jobs at Exxaro in 2015 after the company was forced to retrench workers at its Arnot Mine operations because Eskom had come to a painful decision to disinvest in cost-plus mines. With families to feed, eight of us (former employees) decided to combine our pensions with the dream of taking over Exxaro’s Arnot mine operations.
Our acquisition of the mine was a step towards the big transformation agenda in South Africa, which aims to see the de-racialisation of ownership patterns in the mining industry.
April 2019, Arnot Opco is born
“Exxaro officially hands over Arnot mine to former employees”. This was one of many news headlines at the time, which greeted a transaction described as embodying the spirit of empowerment in corporate South Africa.
Exxaro, one of South Africa’s largest mining houses, had finalised the transfer of Arnot Mine to Arnot Opco, a company owned by former employees, the surrounding communities, and Wescoal (now known as Salungano). This was the deal whose character and spirit finally resembled what the country had been yearning for, real Broad-based Black Economic Empowerment (BBBEE).
“This partnership is the first of its kind in South Africa as mineworkers will own 50% of Arnot. We’d also like to commend Exxaro for seeing this opportunity and making this bold decision,” said Minister of Mineral Resources and Energy, Gwede Mantashe.
Hitting the ground running
Once the festivities were over, our team began the work of getting the mine to work again. Our team was determined and had big plans. We began negotiating a 10-year deal to supply Eskom with 2 million tons of coal per year. This deal was finally inked in August 2021.
When the deal was announced, an Eskom executive was quoted as saying, “The transaction demonstrates that a mining asset curtailed by a major miner can be operated viably in the hands of a junior miner.”
This signalled confidence in us as a team but also allowed us access to a market that would keep our mine running for years to come. This would allow us to employ more workers and help support small businesses in the community of Middelburg. These were all big plans we had hoped for, suddenly coming together.
The value of the coal supply contract was in the billions. An amount of money one normally reads about in the financial news. Amid the celebrations, a trusted friend with years of experience as a mining executive cautioned, “Mhlekazi, don’t be too excited because your troubles have just begun!”
Accusations and disappointment
Fast-forward to February 2022, the joint venture between Arnot Opco and Salungano is thrown into disarray when the latter accused Arnot Opco’s senior management of financial mismanagement.
A preliminary report put together by the Sizwe Ntsaluba Gobodo (SNG) auditing firm is leaked to the media, making damaging and untested allegations that we had been involved in corruption and misappropriation of funds at the mine, allegations we strongly denied. We soon realised that the leak was meant to cast further doubt on the integrity of Arnot Opco senior management.
By September of the same year, the matter was already being adjudicated in court. We, the directors of Arnot Opco, were asking the High Court in Johannesburg to dismiss an application by our joint venture partner, Salungano Group (formerly Wescoal), to place the company under business rescue. Salungano’s application stated that they had secured R150 million to fund Arnot Opco operations.
However, our counter-argument was simple, R250m in funding had been secured to keep the company afloat and that creditors would be paid. However, our “business partner” won the fight to place Arnot Opco under business rescue. That process is still ongoing.
Anti-transformation practices in business not limited to white capital only
The arguments in court revealed a much deeper and sinister plan that we had not prepared for, inflicted by our joint venture partner Salungano Group. A hostile takeover of the company by fellow black partners was now at an advanced stage.
Salungano CEO, Robinson Ramaite, argued that the company was facing liquidation from two creditors for debt that was not serviced. For us, these were baseless allegations because Salungano was the principal operator of the mine, meaning they had line of sight of all financial dealings. In a dramatic turn of events, they placed our CEO on suspension, and two years later she has not been charged of any offence nor faced a single disciplinary hearing. This is in direct conflict with the impression that Salungano has been trying to create about cleaning house.
Recently, we were vindicated by the Business Rescue Practitioner who said that they had found no evidence of wrongdoing against Arnot Opco’s senior management.
The BRP is quoted in his report as saying, “The BRP is continuing to investigate the dealings of the company prior to the commencement date, but have to date, not found or been presented with any cogent evidence of any voidable transactions or misconduct that would require the BRP to take any further steps.”
This, for us, puts paid to the fact that our business partner, Salungano Group, is trying to take over the business by planting a seed of doubt on our capabilities, without a single shred of evidence.
Extrapolating from a research document, it states that one of the reasons joint ventures fail, is because of lack of compatibility. The compatibility difficulties arise when you partner with another business owner who does not have the same values and ethics.
When we signed up to do business with the Salungano Group, we were naïve to think that we all had the same goals in mind. For example, when you look their stated mission on the website, Salungano Group claims that it is committed to the “transformation agenda”. But as evidenced in our case, they have displayed a total lack of commitment to advance this same transformation agenda.
In South Africa’s popular narrative, the so-called white monopoly capital would easily resonate with the Salungano way of doing business, but the opposite is proving to be true. The Salungano Group has inflicted untold suffering to Arnot Opco, deferring a dream of former mineworkers who nearly saw themselves as the true embodiment of Broad-based Black Economic Empowerment.
As we continue to fight for the realisation of this dream, I can tell you that we have drawn valuable lessons from this experience. One could easily claim a Master’s in business administration earned directly from the streets of hard knocks. I knew nothing about a business rescue process, but today I can say that I am an expert.
However, the most painful and perhaps unforgivable experience, is the shame placed upon us publicly (as Arnot Opco senior management), that we are a bunch of corrupt and greedy businesspeople driven by one conviction only, wealth accumulation at the expense of more than one-thousand fellow employees.
Mxolisi Hoboyi is a founding member of Arnot Opco